The jettisoning of the legislation and all the institutions that were created after independence was justified on huge private investments coming into the industry. In the last decade very limited investments have come, that too only in the most profitable sectors in the power supply industry resulting in either high tariff or higher losses to the electricity boards. The imbalances in the investment in the various sectors particularly in transmission coupled with a weak politically and bureaucratically dictated regulatory mechanism was the cause of the recent grid failures.
Unlike in the past, where comprehensive fuel - energy policies were formulated for the country and plans in the entire energy industry were based on that, today the policy is formulated and modified to suit investor requirements. The consequence is acute shortfall in coal and natural gas and unrealistic and dangerous plans for nuclear energy.
The Shunglu Committee report on which latest bailout package is based has recognised that tariff increases are an absolute necessity so that the Discoms can meet their revenue expenditure fully and the revenue realization must be sufficient not only to meet the operating expenses but also the debt servicing liabilities such as payment of interest and repayment of loan.
However, Shunglu Committee made a major mistake by assuming that the only way to reduce Transmission & distribution losses was through franchising. Punjab has successfully reduced AT&C losses by 4% in last three years. PSEB Engineers had suggested a way out to reduce losses.
Electricity Distribution Franchisee started from Bhiwandi in Maharashtra has now spread in almost all states of the country. Franchisee model has created more problems than solutions. Instead of increasing revenue of Discoms franchisee is not clearing dues of electricity purchased from them.
In power generation sector, the private power producers have given the Chinese big thumbs up, by awarding most of their contracts to them. Do the Chinese really make better equipment than Bharat Heavy Electrical Limited (BHEL)? However, despite BHEL units having better efficiency parameters, the demand for Chinese products isn't showing any signs of a slowdown.
This is where cost and implementation - the two major considerations of Indian power producers - come into play. The Chinese equipment is highly subsidized and is decidedly cheaper and is therefore preferred by some over BHEL, efficiency criteria notwithstanding. The performance of Yamunanagar and Khedar power plants is an eye opener.
Government should agree that expediting capacity addition target and reducing AT & C losses involves challenging task which cannot be handled by generalist IAS bureaucrats. Only experienced power engineers at the helm of affairs would entail faster decision making which is requirement of time.
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