The media has been increasingly reporting news about power shortages since last September, when the extent of shortage rose from 10 per cent to 30 per cent. Across India, power cuts varied from 8 to 14 hours a day for industries, and weekly power holidays over 2-3 days were imposed. State capitals like Kolkata, Hyderabad and Bangalore experienced 2 to 4 hours of cuts. Even New Delhi was not spared.
It was reported that half the thermal plants in the country had coal stocks which would last only a few days, whereas ideally, they should have had stocks for three to four weeks. Despite the shortfall, ministers of power and coal issued reassuring statements that Diwali would be celebrated with lights. The shortage has eased a little now, but is expected to flare up again during the coming summer. This media attention brings to mind the priorities of those who run the power sector. Borrowing a phrase from P Sainath, it also makes one wonder if there are indeed some who love a good shortage.
Power cuts are not a new development. However, their impact on industry and cities has grabbed attention. The stated reasons for the crisis include heavy rains in coal producing east India, a three day strike in Coal India, a month-long strike in the Singareni coal mines, payment defaults by some utilities to Coal India, privatisation of coal mines not resulting in expected rise in production, rising price of imported coal and annual maintenance of thermal stations.
Shortage of supply is not the only reason which keeps these households in darkness. Though power production increased by 60 per cent in the last decade, rural household electricity access increased by only 10 per cent.
Interestingly, these shortages create business opportunities, especially for products that shouldn't be needed in the first place - invertors, UPS units and diesel generator sets. Diesel, which is subsidised by the government ostensibly for public transport and freight movement, is liberally being used to power malls, air conditioners and cell phone towers.
Then there are free-market promoters who emphasise that government ownership and restrictions on the market are at the root of the problem. The role of private players in the electricity sector has been growing. During the current shortage, the price of electricity in the market shot up to Rs.8 to 11/unit, whereas the average price is Rs.3 to 4/unit. The merchant power plants, which sell in the market, find this shortage an ideal opportunity to make windfall profits. Distress purchases to save standing crops or key industries have more than doubled the price of electricity. Some are using the opportunity to implement quick fixes to increase generation capacity, like making closed door contracts or revising signed contracts.
This reminds one of the 1990s when private independent power producers were promoted because "No power is costlier than 'no power'", meaning that not having power is costlier than any option to generate power, and power capacity has to be therefore increased at any cost.
A couple of issues are of relevance here. First, caution must be exercised while implementing quick fixes, which may lead to irreversible lock-ins and turn out to be bigger problems than the current ones. Ours is a poor country that cannot afford costly mistakes. The Enron fiasco is a case in point. Ordinary people are still bearing its brunt, as power from Enron turned out to be exorbitantly expensive.
The second issue is regarding the misplaced priorities of those at the helm of the power sector, who ignore the crisis in rural power supply. For example, one year ago, Prayas had suggested reserving 2 Ultra Mega Power Projects to remove load shedding in 100 backward districts of the country, taking up a proactive electrification drive to ensure 100 per cent household electrification, and holding public consultations on load-shedding. These ideas have not been implemented.
The current predicament has its roots in the governance crisis in the power and coal sectors. Though there is no quick fix, certain corrective measures can go a long way. These include long term planning, reducing losses, promoting end use efficiency, strengthening rural access programs like the Rajiv Gandhi Grameen Vidyutikaran Yojana, and using regulatory mechanisms to improve governance of coal and electricity sectors. Specifically, steps should be taken to set up a coal regulator. Electricity regulatory commissions should initiate public hearings to identify the causes of the crisis and plan corrective actions.
In these times of growing governance deficit, these are essential steps that the government and regulatory commissions must take. If they fail to
implement these solutions, then they are part of the problem.