by Hiranmoy Roy and Anil Kumar
The expectations of the power sector from Union Budget 20013-14 must be formed on the basis of its present status. Therefore, an examination of the present status of the power sector is of special importance. The electricity generation capacity in India is the fifth largest in the world. India is also the sixth largest consumer of electricity, and accounts for 3.4 per cent of the global energy consumption. Over the past thirty years, the country's energy demand has grown at an average of 3.6 per cent per annum. During the financial year 2011-12, the highest ever capacity addition of 20,501 MW (thermal, nuclear and hydro) was achieved (CEA). A capacity addition of 17,956 MW during the year 2012-13—comprising 15,154 MW of thermal, 802 MW of hydro and 2000 MW of nuclear power—has been envisaged.The giant PSUs in the power sector plan to invest Rs 50,000 crores in various projects although the private sector has been stymied by fuel scarcity and distribution losses. A major chunk of these investments will come from internal and extra-budgetary resources of the PSUs while the government will pump in close to Rs 10,000 crores through gross budgetary support. India's largest power producer, the NTPC, and the inter-State major power grid will bring in over Rs 40,000 crores of investments in 2013-14.
The Power Ministry has also proposed an outlay of Rs 37 crores for the Central Electricity Authority (CEA) for various initiatives of strengthening its institutional framework. Sixty-three per cent will be spent on new and ongoing projects while twentynine per cent is on renovation and modernisation, and the rest is on renewable energy projects. The overall investment required for the power sector in the 12th Plan is about 12 to 14 lakh crores of rupees. The investment pattern should focus on generation, transmission and distribution segments in order to achieve balanced growth in the power sector.
As per the the Shunglu Committee Report on the power sector, in the coming five years, the Distribution Franchisee model is expected to grow manifold, thereby improving the power distribution scenario of the country. The Shunglu Committee has also recommended 255 towns listed for the Distribution Franchisee scheme for distribution of power based upon the highest Bulk Support Tariff (BST) which is on the verge of acceptance by the Government of India. Fourteen Pilot Projects are already in action under the Smart Grid programme. As per the Report, even the best States of the country in terms of electricity generation and distribution need to increase their tariff by a margin of five per cent to 20 per cent.
However, the previous year came with hopes and good news in terms of revenue as many distribution utilities saw hikes in the electricity tariff.
The year also saw the biggest ever bailout-cum-debt restructuring package proposed from the government for the distribution utilities—an amount Rs 1,90,000 crores. The last date for acceptance of this proposal has been extended to March 31, 2013. In the medium term, few States are likely to make progress in distribution reforms by moving towards Multi—Year Tariff (MYT), Time of Day (ToD) metering and intra—State Availability Based Tariff (ABT).
India's Installed Generation Capacity stands at 210,951.72 MW as on December 31, 2012. Out of this installed generation capacity, 120,873.38 is through coal, 18,903.05 through Gas, 1199.75 through DSLs, 4780.00 through nuclear fuel, 39,339.40 through hydro and 25,856.14 is coming from the Renewable Energy Sources (CEA).The transmission network comprises of about 98,367 circuit kilometres of transmission lines at 800/765kV, 400kV, 220kV and 132kV EHVAC and +500kV HVDC levels and 160 sub-stations. A new transmission line of 1200 KVhas become operational in India recently, whereas the highest transmission voltage level in China is only 1100 KV. The transformation capacity is about 1,57,158 MVA as on January 31, 2013. This gigantic transmission network spread over the length and breadth of the country is consistently maintained at an availability of over ninetynine per cent (PGCIL).
Coal availability has emerged as one of the biggest problems in the power sector as can be understood from the fact that there was a 11.6 billion unit shortfall in power generation during 2011-12 due to shortage of coal (CEA).Gas availability for the Indian power sector is very low. Therefore, no new projects on gas based generation will be possible before 2015-16 (as there is a possibility of the LNG terminal in the western coast coming up only after 2015-16). There are also problems of land acquisition for thermal and nuclear power projects. Nuclear power projects are facing steep challenges from the environmental point of view, particularly after the recent accidents in Japan.
The previous year marked a dark patch in the history of the Indian power sector as one of the biggest blackouts hit the country leaving more than 600 million people in darkness (although this has happened for the first time in this decade). The implementation of Open Access is still a huge challenge for the power industry. The industrial customers still face problems pertaining toaccessingtheir choice of suppliers due to the restrictions (such as invoking Section 11/108 of the Electricity Act 2003) imposed by several State governments. There has been increasing dependence on the Chinese equipment by private players due to low costs though there is a question-mark on its quality. Hydro-power projects are still facing risks on account of factors such as political and environmental protests, delay/cancellation of environmental clearances, delays in land acquisition, poor infrastructure, tunnelling delays, geological surprises, contractual and procurement issues, shortage of skilled manpower, difficulties in evacuation of poweretc.
The power sector is moving towards a competitive market structre. There are three basic policies adopted in this regard. First, the establishment of a Power Exchange which functions as an electricity market and an unofficial force behind rate settlements for other projects. Second, tariff based international biddings are vogue in all areas of generation, transmission and distribution where projects are awarded on the basis of best financial and economic parameters like rates etc. Third, there is open access in transmission and distribution which are there theoretically but practically not significant. Many PSUs like the NTPC have signed MOUs just before the tariff based bidding; these are not forcing market-driven pricing.
Now the power sector is actuallymoving from production-oriented power business towards market-driven power business. On the basis of its present status, the power sector expects a major shift in reforms, policies and incentives that encourage investments in power generation and transmission for its rapid growth from the forthcoming Union Budget.
Dr Hiranmoy Roy teaches Power Sector Economics in the University of Petroleum and Energy Studies, (UPES), Dehradun and Prof Anil Kumar is a Professor and the Head of Department, Power Management, UPES.