Power for all—can it be achieved?

Round-the-clock assured power supply programme to kick off with Andhra Pradesh, Delhi and Rajasthan; finances and logistics pose a huge challenge

 
By N Sai Siddhartha
Published: Sunday 28 June 2015

Round-the-clock assured power supply programme to kick off with Andhra Pradesh, Delhi and Rajasthan; finances and logistics pose a huge challenge

N Sai SiddharthaIt was in 2002 that the Union power ministry launched the “Power for All” scheme to ensure quality power for each citizen of India at affordable rates, and to achieve and maintain a GDP growth rate of 8 per cent. At that time 2012 was set as the target date for achieving the same. The goal has not been met and the ministry is now restarting the initiative, beginning with a limited implementation in three states: Andhra Pradesh (AP), Delhi and Rajasthan. The scheme assures 24x7 power supply to domestic, industrial and commercial consumers. Power cuts, except weather related, will not be permitted.

In Andhra Pradesh, the initiative starts on the October 2, and is to be completed in two years. The timeline for other states is still vague. It will cost Rs 54,332 crore over this period to implement the programme in Andhra Pradesh. Delhi has a Rs 7,700 crore blueprint ready for the execution of the programme. Rajasthan has maintained complete silence since the scheme was announced.

Two out of the three chosen states, Delhi and Rajasthan, already have some of the lowest deficit levels in India (0.3 per cent), according to the Central Electricity Authority (CEA). At first, these states seem like low hanging fruit in terms of bridging the gap between demand and supply. But the term “deficit” here applies only to those who already have access to electricity. Out of the three states, Delhi is the only state with 100 per cent electrification. About 400,000 rural households in Rajasthan are still without electricity network. Installing new power lines in the terrain of Rajasthan will be expensive and time consuming. The transmission network in Andhra Pradesh has to be doubled over the next five years and it aims to achieve the electrification of 480,000 unconnected households by 2017.
 
The hurdles


This is where the problem gets even more complicated. Simply providing power lines is not enough. To keep power flowing through the lines is much more difficult.  In fact, most states which have shown a big jump in rural electrification between 2004-05 and 2011-12 have actually recorded a drop in per-capita consumption of electricity and the growth rate of electricity consumption in almost all of these states was less than the national average. Simply providing wires without power does not actually benefit the rural consumers. Just to power up these unconnected households, each state requires roughly 3,000 MW of extra generating capacity to begin with.

The next problem is of finances. The Central and state governments need to make sure that the scheme is financially sustainable. A report by the Power Finance Corporation Ltd. (PFC) in 2013 found that 25 per cent of India’s electricity is consumed in agriculture, but its revenue contribution is as low as 7 per cent, contributing significantly to state utilities’ debt burden. This is mostly because the government promises to compensate the utilities for subsidised power, but in reality, they are never compensated fully. Sixty per cent of the population of both AP and Rajasthan is dependent on agriculture. Segregating agricultural and domestic loads should be done to prevent misuse and increase revenue collection efficiency. A World Bank study done in 2014 stated that utilities lost about Rs. 3.00-4.00 per unit of rural power supplied. The chief minister of Andhra Pradesh also announced the extension of (subsidised) power to agricultural consumers from 7 to 9 hours. Given that the state already faces a revenue deficit of Rs 15,000 crore, and 40 per cent of total electricity is consumed by agriculture, this move is bound to put an additional fiscal burden.

The state electricity boards (SEBs) and distribution companies (DISCOMs) have been at the receiving end of the governments’ largesse. Delhi and Rajasthan discoms currently face under-recoveries of more than Rs 18,000 crore each. In addition, these discoms are also borrowing heavily every year just to fund their daily operations. The Rajasthan and AP discoms had to be bailed out by the Central government in 2012 by issuing bonds under a financial restructuring package. Delhi barely generates any of the power it needs, buys costly power from outside, and yet subsidises domestic consumption. The losses keep mounting for the discoms and the government is forced to bail them out every few years. Providing power without a sound financial plan for the discoms will spell disaster for them. Since most of the new consumers will be rural, tariffs need to be balanced so that the government does not lose money while supplying power and users are not burdened with heavy tariffs.

The power minister stated that state-specific plans to provide uninterrupted electricity to Delhi, Rajasthan and Andhra Pradesh were complete and ready for implementation. “Everything is being finalised. What you read in the newspapers is what I can tell you,” was the comment from a senior official in the ministry of power when asked about the feasibility of the plan.

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