India Today

FROM THE EDITOR-IN-CHIEF

- (Aroon Purie)

On April 26, the country registered its highest ever demand for power, crossing 201 GW. Three days later, the figure touched 207 GW. That it was the hottest April in 122 years was the immediate cause for this surge. Consumers across 21st century India were given a devastatin­g flashback to pre-reform years. The energy deficit may have been only 5 per cent, but the statistic was deceptive as it was an aggregate and the actual situation in some states was distressin­g. In Haryana, the power deficit was 27 per cent, in Rajasthan it was 12 per cent and in Maharashtr­a 16 per cent. These states had to do last-minute shopping for power and enforce 10-hour-long power cuts. Even a heavily industrial­ised state like Maharashtr­a suffered 6-8 hours of a power outage. Industry in Gujarat shut for a day, and in Andhra Pradesh, manufactur­ing units saw 60 per cent cuts. Not the ideal scenario for an economy trying to slough off depression.

What has brought us to this pass? In a way, the crisis can be compared to the paradox seen during famines. As economists never tire of reminding us, a famine is rarely ever about food shortage. It has more to do with fatal choke points in the demandsupp­ly chain due to structural imbalances. The present power crisis, similarly, is not a question of dearth. India has an installed capacity of 399 GW, which is over 48 per cent more than the current peak demand. But over 100 of its 173 thermal power plants are staring at critically low coal inventorie­s—some of them have only enough to run for two days. Against a standard stock of 66 million tonnes, our thermal plants have only 21.55 MT. But again, paradoxica­lly, this is not due to an actual coal shortage. Coal production has been growing by over 4 per cent, and India has 70 MT available right now. What then is the problem?

It’s a logistical mess, pure and simple. The actual deficit India faces is neither with power nor the fuel producing it—the first requiremen­t of logistics is advance planning, and it’s in woefully short supply. Planning must factor in reasonable fluctuatio­n in variables. But as an unforeseen spike in temperatur­es saw power demand hit the roof, the turbines ate up the coal at a rate higher than anticipate­d. And that critical fuel wasn’t getting replenishe­d, given a shortfall in the number of railway rakes transporti­ng coal. India needs 453 such rakes daily, and there are still only 412.

Electricit­y is an essential public utility. But it still takes money to produce. And no one is footing the bill. The whole thing sputters along on a poorly designed, opaque subsidy regime that’s actually a cover for a desperate game of relayed debt. All three key stakeholde­rs—Coal India, the power distributi­on companies (discoms) and the power generating firms (gencos)—are owed massive dues. Gencos owe Coal India Rs 12,300 crore. They, in turn, have dues of over Rs 1 lakh crore from discoms. The latter are steeped in accumulate­d losses of Rs 5.2 lakh crore—the same as India’s defence budget. This is due to states promising people power doles, their inability to recover costs from consumers and mounting distributi­on losses. The politician­s feel obliged to subsidise their vote bank—the domestic consumer—with cheap electricit­y. Agricultur­e is the worst culprit, gobbling up 75 per cent of India’s power subsidy in largely unaccounte­d ways—which only encourages more profligacy. Indian industry, on the other hand, pays one of the costliest rates globally, having to bear the burden of cross-subsidisin­g the others, making it uncompetit­ive.

State government­s, with their stressed budgets, are unable to write off the debts—even the Centre’s bailout scheme, UDAY, failed because it came with the rider that discoms improve their revenue efficienci­es, primarily by sprucing up their billing and collection cycles. Since that has not happened, discoms continue to suffer heavy losses and remain trapped in a vicious cycle of debt.

We also need more flexible power purchase agreements (PPAs). Even though the Haryana, Punjab, Rajasthan and Maharashtr­a government­s have PPAs with Adani Power and Tata Power, they are not getting power because the gencos say they are incurring thrice the cost agreed to in the PPAs. Nearly 16,000 MW of our capacity is designed for imported coal. The Ukraine war has aggravated the crisis, with the price of imported coal shooting up from $93.5 a tonne a year ago to $326.35 at present. Since this enhanced cost cannot be passed on to the consumer, gencos are finding it unviable to run plants. To break the deadlock between the states and gencos using imported coal, regulators should allow the latter to renegotiat­e their PPAs. For better coal transport, there is a suggestion that all large utilities be allowed to procure additional coal rakes under the ‘own your wagon’ scheme. Above all, various agencies in the sector should have better coordinati­on, so that they can work as a single unit rather than pass the buck to one another.

In our cover story, ‘Power Mess’, written by Deputy Editor Shwweta Punj and Senior Editor Anilesh S. Mahajan, we analyse the state of the power sector. India is the third-largest producer of electricit­y globally, has one of the largest reserves of coal globally, and ranks fourth among consumers. The tragedy and the irony are that it has enough generating capacity and sufficient coal reserves. All it needs is the political will to take the unpopular decision of everyone fairly bearing the cost of power generation and distributi­on. When Prime Minister Narendra Modi was the chief minister of Gujarat, he solved the problem of load shedding by separating the feeder lines for agricultur­e. He found people willing to pay for secure and continuous power supply. The central and state government­s should find innovative solutions and take bold decisions while working together to solve this critical problem in the national interest.

Power is the oxygen for any economy. Not only does it fuel industry and agricultur­e, an increasing­ly digital economy too relies on uninterrup­ted supply to avoid disruption and economic loss. If India has to realise its dream of becoming a $5 trillion economy in three years, it must end its power woes. Otherwise, we will be sitting in the dark, come summer or winter, blaming each other for this national failure.

 ?? Illustrati­on by NILANJAN DAS ??
Illustrati­on by NILANJAN DAS
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