Powerplay

The grim power scenario in India needs to be addressed before the country can join the frontline nations of the 21st century

Ranjit Bhushan Delhi

Can a country be regarded as a frontline nation without electricity? While the Manmohan Singh government must be congratulated for putting energy on the national agenda during the first two years of the United Progressive Alliance (UPA) regime, there is now growing concern that India’s power sector, which is central to its developmental plans, has not responded to economic liberalisation in the same way as have other sectors such as Telecom and Information Technology. Backward infrastructure, inability to increase substantially capacity addition, slippages and delays in implementing hydro and thermal power projects, cash-strapped state electricity boards (SEBs) and little money to invest in infrastructure and a long gestation period for returns characterise the sector. Unscheduled power cuts and industrial breakdowns in many states are only symptoms.

In the modern world, growth of real gross domestic product is the driving force behind the demand for electricity. Thus, a nation's capacity to generate and distribute electricity is an important indicator of its level of economic development and future prospects for economic growth. Currently, India's capacity to generate electricity from all sources is about 123,000 MW. India expects to connect about 5,600 MW of new capacity to the grid in 2006. By comparison, China's installed generating capacity is in excess of 500,000 MW. US's generating

capacity is about 993,500 MW. In terms of actual generating capacity, China is expected to catch up with the US by 2010.

In recent years, increased social spending on the part of the central government, to provide for its growing population, has left the electricity sector with insufficient funds for the capital expenditures needed for the modernisation and expansion. In India, as in many developing countries, the power sector is plagued by untenable tariff structures, based on favouritism and subsidies rather than return on rate base and cost-of-service concepts. Consequently, cost recovery is almost nonexistent. The notion of charging users or the typical economic incentives that make western-style, regulated power utilities work more efficiently is conspicuously absent. The implementation of electricity tariffs based on the cost of service would go along way in resolving the SEBs’ financial worries. Moreover, financial solvency would also make the sector attractive to external capital and perhaps alleviate some of the current shortfalls of infrastructure investments.

As an outcome of supplying farmers with electricity free of charge, electricity usage has been skewed heavily in favour of the agricultural sector. Between 1990 and 2002, on average, agriculture consumed about 28 per cent of electrical output. However, independent observers say that government's statistics were too low for several reasons, with the actual figure being closer to 40 per cent, for electricity metering of individual users in rural areas of the country is virtually nonexistent because of the lack of meters. The industrial sector's share of electricity usage for the same period averages about 38 per cent. Thus, many industrial companies attempt to generate their own electric power because of lower costs and greater reliability. As a result, the share of electricity consumption of the industrial sector, as reported by the government for the 1975-2002 period, fell from roughly 62.4 per cent to 33.3 per cent. The share of electricity used by households same period increased from 9.7 per cent to 24.7 per cent.