The Hindu Business Line : `Time to address grim power situation in the North'

The acute power shortage in Northern India and the extreme heat of the season together bode a grim situation on the power and waterfronts to the hapless citizens even as the Centre is reported to have directed the eight States of the region not to overdraw power from the grid particularly in the light of the burgeoning demand-supply mismatch.

No sooner the Delhi Government announced the new guidelines a couple of days ago than it had to bow down to pressure from traders and industrialists to recant its earlier decision to load-shedding in commercial places.

Committee formed

The authorities appear to be in the dark in fixing a solution to the perennial power shortage as conflicting pulls and pressures and politics impede sound commercial decision for ensuring recovery of reasonable charges from the supply of power.

Reports doing the rounds suggest that the Government has constituted a panel to seek sources for purchase of power form neighbouring countries such as Bhutan, Bangladesh, Pakistan and Nepal, even while asking the panel to examine whether privatisation is an answer to all the problems plaguing the power sector.

Any inkling to this thinking is not far to seek as the medium and long-term outlook of the economy would critically depend on how swiftly a pragmatic and workable solution to the bottlenecks to growth could be found. Infrastructure and power supply are decidedly the principal pillars as is borne out by the Economic Survey 2005-06 which pegged GDP losses due to electricity shortage at a staggering Rs 3,00,000 crore.

Energy experts contend that unless the authorities ensure that pricing of power is resolved by competition between suppliers by a well-knit regulator, the situation would turn from bad to worse in the coming days. Demand management like load shedding could only be a part response to a full-blown crisis when the average transmission loss in Delhi is estimated at 40 per cent.

If this is plugged, they say, the national capital would have more than 1,000 MW of power for use and collections of discoms (distribution companies) would swell by that amount. This would also have an echoing effect in reducing the pressure on discoms to go in for tariff increases periodically, citing the growing high cost of generation and distribution.

Data gleaned by the Power Finance Corporation show the commercial losses of power utilities, which includes losses due to theft during 2004-05 were Rs 22,129 crore. No wonder at a recent meeting convened by the Prime Minister on review of selected action points of the Mid-term Appraisal of Tenth Plan, it was pointed out that aggregate technical and commercial losses (AT&C) in the power front could realistically come down to around 20 per cent over the next two to three years if distribution transformer level accountability is introduced and staff incentivised with carrot and stick.

Tariff pattern

It is no secret that the power tariffs are structured on the basis of industrial and commercial users cross-subsidising agricultural and domestic power consumption. The agricultural sector is supplied un-metered power and the farmers disburse a highly subsidised lump sum based on the declared horsepower of their pumps. This has led to a zero marginal cost of power, encouraging inefficient use and over exploitation of ground water.

The Expert Committee on Integrated Energy Policy under the chairmanship of Member, Planning Commission, Dr. Kirit S. Parikh, plainly put that the tariff structure fostered incentive to the high paying consumers to pilfer power under the cover provided by unmetered power.

"The habit of staling power is now widespread. A vested interest lobby has been created and what is euphemistically called AT&C losses remain stubbornly high. While some State governments partially compensate the SEBs for subsidy to farmers and other specified consumers, AT&C losses have to be borne by SEBs. An effective way to subsidise farmers and certain other consumption categories that gives them incentive to use power efficiently and that arrests pilferage is very critical for a healthy power sector", the Committee justifiably asserted.

It is time the authorities acted upon the weighty words of counsel before the power shortage blows the fuse of the economy, deflating the pervasive feel-good factor powering the bourses!