Electricity for all by 2009: This was a promise contained in the last election manifesto of the Congress party, which leads the United Progressive Alliance (UPA) that took office in 2004. As the UPA gets ready for another national election, the promise remains a distant dream.
Five years on, chronic fuel shortages are hurting power generation and projects are faltering because of reasons as varied as delayed investment decisions, contractual problems, resistance to land acquisition, geological issues and natural calamities.
The country’s installed power generation capacity is around 147,000MW, but a significant portion of this capacity is idling because of the scarcity of fuels such as coal, gas and uranium. Coal-based power generation accounts for 76,000MW, while the country’s gas-based capacity is 14,600MW, which is operating at 52% efficiency.
“Power projects today are facing a shortage of power and gas. If we had enough gas and uranium, around 9,500MW power generation can immediately enter the system. While the demand requirement is 2.1 billion units, availability is 1.85 billion units,” Jairam Ramesh, former minister of state for power and commerce, said.
To be sure, there’s a silver lining: Thanks to the Indo-US civilian nuclear deal signed in October, India is expected to get uranium supplies, which could boost efficiency at the 17 reactors that are currently operating at 46% capacity because of shortages of the fuel.
The spectre of the Dabhol power project still haunts the government because it is still unable to revive the 2,150MW project, conceived in the 1990s and executed by scandal-tainted US energy firm Enron Corp., which filed for bankruptcy in 2001. The plant currently generates only 600MW in power-starved Maharashtra on account of faulty equipment and fuel shortages.
“Dabhol is symbolic of all what is wrong with the Indian power sector,” said a senior power ministry official who declined to be identified.
India’s track record in adding power generating capacity is unenviable. In the five years to 2007, the country added 20,950MW of capacity, against a target of 41,110MW.
In the five years to 2012, it has a target of adding 78,577MW of capacity, but could miss this by 60% because of shortage of equipment.
“The gap between demand and availability of power at end of the 11th Plan will be worse than at its commencement,” Bharatiya Janata Party leader Arun Shourie recently told the Rajya Sabha, the Upper House of Parliament.
The problems are manifold in the transmission and distribution sectors as well, resulting in huge losses for state electricity boards, or SEBs. The SEBs of Andhra Pradesh, Gujarat, Karnataka, Rajasthan, Haryana, Punjab and Maharashtra depend on subsidies, which, in some instances, are as high as 25% of the annual power revenues accruing to the state. Around 40% of the power generated is lost because of inefficient transmission and distribution.
The litany of woes doesn’t end there. Two of the government’s most ambitious energy schemes—the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) for rural electrification and Accelerated Power Development and Reforms Programme (APDRP)—are way behind schedule.
“What to do? The funds were not sanctioned on time, which led to these delays. With so many stakeholders involved, there have been differences of opinion,” said a power ministry official who didn’t want to be named.
APDRP, meant to upgrade the distribution system, minimize transmission and distribution losses, improve metering and assign responsibility for realization of user charges, has not been able to bring down the losses to 15% by the end of 2007, as originally targeted in 2000-01.
RGGVY, which had a target of providing electricity to 125,000 villages and connecting 23 million below poverty line (BPL) households across the country by 31 March, has been faltering. As on 15 January, only 55,000 villages had been electrified and 4.5 million BPL families connected.
Union power minister Sushil Kumar Shinde admitted RGGVY is facing some problems. ‘The assessment report (for the scheme) was late, which resulted in the late disbursal of funds by a year. The targets will be achieved by next year.”
The downturn in the global economy is expected to hit the energy sector further as private developers struggle to raise funds. According to the power ministry, the government expects to face a Rs4.51 trillion funding shortfall in adding generating capacity during the 11th Plan.
On the fuel front, the ministry of petroleum and natural gas has done little—apart from reducing petroleum product prices to appease the electorate—to push hydrocarbon production. India’s oil marketing companies will end 2008-09 with losses of Rs1.03 trillion. The figure would have been almost 60% higher had global prices of crude that peaked at $147 a barrel in mid-July not dropped to the present levels of around $40.
“It was the most challenging time in the history of the Indian energy sector because crude oil prices went to a historical high,” petroleum and natural gas minister Murli Deora said.
The government still kept fuel prices low, helping consumers, he said. “We thought about dismantling administered price mechanism but decided against it as any future increase in crude oil prices would have affected the consumers,” Deora said.