Thursday, August 16, 2012


Power generation failed to keep pace with economic growth

Around 600 million people mostly in north, east and northeast India could not immune themselves from the massive power failure, which is touted as the biggest failure of the decade. Whatever be the cause – be it a failed power reform or a tired UPA's abandoned former mantra of development – the big banner media coverage of the power grid failure is only a continuation of common man's daily struggle. Th e power outage to them is only a few hours of excess than other days, as it is a perennial problem in most parts of India.

The bottom line of the problem is the poor showing of the State Electricity Boards and dearth of reforms in power distribution that can portend a situation of losses touching up to 1.2 per cent of India's nominal GDP by March 2014. With no effort to stem the crisis, the losses rose in FY 2010 to 0.9 per cent, a significant jump from 0.6 per cent in FY 2006. Th e losses are accumulating because the power generation has failed to keep pace with our economic growth. It is paradoxical that electricity generation has experienced a draw-down in the liberalised era from its previous period. In the period 1980-81 to 1990-91 the power generation grew by impressive 124 per cent, only to be blunted by the ill-effects of much reduced growth in the next decade by mere 58 per cent, and then followed by an augment of 75 per cent in the first decade of this century. Accordingly, a similar consumption trend prevailed.

The populist government largesse has put the SEB's under siege with a combined debt of Rs 200,000 crores. Th ere are states, like Punjab, which provide free electricity to the farmers, raises important policy questions. Where are these subsidies coming from? Shockingly, it's not coming from states' exchequer – which should have been the case – but from the coffers of SEBs – turning them into junks that cannot be easily salvaged. Even in the farm sector, the consumption proportion is falling (31.4 per cent in 1998-99 to 21 per cent in 2010) because of frequent power cuts and erratic supply. Th erefore even with the free gift s rolled out, the farmers and the farm sector remains in the same pedestal. Further, annual power theft of Rs 30,000 crores buries the chances of power revitalisation and recovery of the SEBs. India's failure trail had started from 1951 itself (from the time India declared its energy policy) and it would be surreal to know that China have increased its power generation more in last five years than what India could do ever since 1951! Our policy makers must be held accountable for the power plants lying idle because of dearth of fuel. In fact, more than 10,000 MW capacities of power plants have taken a back seat because there is no fuel. Consequently, year after year India falls short of its target production and capacity. It faces, on an average, peak hour deficit of about 13.5 per cent compelling it to buy power from Bhutan.

In spite of India's high-sounding goals of increasing power generation, its implementation and capacity building have let the nation down. Th e stonewalling is done mainly due to bureaucratic entanglements, fund misappropriation, and environmental impediments. India's main driver of power production viz coal is in short supply causing further delays in its endeavour to capacity enhancements. It is, in fact, one more category of governmental dysfunction. And in the aftermath of the recent blackout, policy makers need to realise that there is long way to go before we can be called a great power.


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