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Power problems

ON MARCH 13, the Power Minister, Mr. P. R. Kumaramangalam, told the Lok Sabha that as much as 35-40 per cent of the power generated was being `lost' because of ``improper accounting of transmission and distribution and technical losses, even as such loss es have been computed at 23 per cent''. He said that theft and pilferage ``at the macro level'' was estimated to be more than Rs. 20,000 crores per annum, and that a large number of thermal units in the State sector were being run at an operational effic iency level of less than 40 per cent, the consequent average annual loss on this account being more than Rs. 12,000 crores. This Lok Sabha statement by the Minister sums up neatly the reason why private participation in power -- which is crucial for the development plans of the sector -- has not made much headway despite the official efforts made in this direction over the past few years.

The issue is serious for at least two inter-related reasons. First, given the current pace of growth in power generation -- particularly the slow pace of growth in the participation of the private sector -- there is a growing fear that a serious shortage is in the offing ``in the near future''. This cannot augur well for the economy when the overall growth rate will have to be consistently higher than 7 per cent if the country is to live up to its reputation of an awakening elephant in an Asia filled wi th transient tigers. As the Andhra Pradesh Chief Minister, Mr. N. Chandrababu Naidu, said in a different context, ``only when there is sufficient power will development take place''. Second, there is no way national power development can be speeded up un less the existing State Electricity Board structure is either dismantled or bypassed. Neither is possible, at least for now.

It is against this background that the June 30 deadline -- set by the Power Minister for independent power producers ``to start off their projects, failing which their licences will be cancelled'' -- needs to be seen. Indeed, over the past couple of year s, a number of deadlines were set for the IPPs; none was able to attain the objective. This is not because money cannot be made by the IPPs from producing and selling power in India but because of their inability to supply the power produced by them dire ctly to the consumer. The power generated by the IPPs is sold to the SEBs, and it is basically the uncertainty surrounding the payment for this supply (which reflects directly the financial weakness of the SEBs) that has prevented projects from seeing th e light of day. (According to reports, while the Central Electricity Authority has till date given techno-economic clearance to 57 private power projects, only eight IPPs have been able to commission their projects.) Clearly, therefore, the authorities w ill have to tackle this hurdle first if things are to move on the power front, the problem being that till now progress on this score has been slower than a snail's pace.

Recently, financial institutions laid emphasis on the implementation of SEB reforms (and monthly letters of credit) instead of opening escrow accounts for going ahead with the financial closure of power projects. On the face of it, this appears to be a s ensible move given the problems being faced with the setting up of such accounts (in Madhya Pradesh, for example, financial institutions have reduced the escrow cover from 2,500 MW to 900 MW). However, as experience has shown, the point must also be unde rscored that talking of reforms in this sector is easier than actual implementation. Ideally, the SEBs should be dismantled, power transmission facilities spun off into separate corporate entities, and independent tariff regulatory commissions set up for private power generation to be given a fair chance to take off. This, in fact, has happened in a number of States but not without attendant problems, as has been the case in Maharashtra and Andhra Pradesh. The crux of the problem seems to be the indivis ibility of power and politics with even reform-minded Chief Ministers falling victim to the political need to ensure the supply of power to farmers and domestic consumers at uneconomic rates.