June , 2022
11:39 am

Dr. Rajiv Khosla

In less than six months, India is again battling with an energy crisis. States like Andhra Pradesh, Gujarat, Maharashtra, Jharkhand, Bihar, Haryana and Uttarakhand are reeling under long power cuts. A K Jain, Coal Secretary recently said that shortage of electricity may be attributed to the low stocks of coal at power plants, increased power demand due to economic recovery in post-Covid period, early onset of summer and rise in the price of gas and imported coal in addition to a sharp fall in electricity generation by coastal thermal power plants. He justified that it’s not a coal crisis; rather a power demand-supply mismatch.

Before we discuss whether reduced electricity supply is an outcome of the coal crisis or not, we need to pay heed to Jain’s justifications with respect to increased demand for power due to recovery in the economy and early onset of summers. These lame excuses speak volume about the failure of government agencies to analyse and forecast properly the likelihood of events expected to take place in future. Who doesn’t know that when an economy recovers from a recessionary phase, the demand for sources of energy i.e. petrol, diesel, gas, electricity, etc. goes up? When the weather got warm in the month of March itself, thereby indicating an early onset of summers, why didn’t the government pay heed to the warning bells. Fire-fighting by pressing the panic button and taking emergency measures like cancellation of 1100 trains till May 24 to facilitate movement of coal rakes or turn on massive load shedding in rural, urban and industrial areas by different states has only resulted in problems for the public and businesses. Eventually, in a few weeks from now, the Power Ministry, the Coal Ministry and Railways will try to pass on the buck to each other for this crisis and then the government will put a silken bandage on the festering sores by announcing some lucrative package to diffuse the situation. However, after a few months, again the power crisis will remerge. The need of the hour is to weed out the problem from its roots.  

It is astonishing that despite being the world’s second largest coal producer, the third largest electricity producer and home to the fifth largest coal deposits, having high installed capacity (395 GW) vis-à-vis peak demand for power (207 GW on 30th April 2022) and plant load factor at nearly 60%, India is facing severe power shortage. So much so, the Central Electricity Authority recently reported that 54 of the 165 thermal power plants had less than 10% of the coal stock. The actual cause of this problem can be traced from a book entitled ‘Ethical Dilemmas of a Civil Servant’ written by former Coal Secretary, Anil Swarup wherein he has categorically pointed out that three players viz. discoms, power generating companies and Coal India Limited are collectively responsible for the power crisis. Deplorable financial health of the discoms prohibit them from making payments to generating companies which in turn fail to clear the dues of Coal India limited for coal supplies.

Pertinently, the outstanding dues of discoms to generating companies stand more than `1.21 lakh crore as of date. Among the central public sector generating companies, the National Thermal Power Corporation owes an amount of `5000 crore from discoms, whereas in the private sector Adani Power has the highest overdue of `25000 crore. Likewise, generating companies too have to clear an outstanding amount of almost `8000 crore of Coal India Limited from where they procure coal. In this episode, Coal India appears to be a scoundrel who in the event of non-payment by generating companies reduces supply of coal to them and make common people and businesses bleed. The natural question that arises here is why the central government does not intervene and actively make efforts to rectify the condition.

Of course, the central government under PM Modi had been making efforts from time to time to dissipate this crisis situation. Under the Ujwal Discom Assurance Yojna (UDAY), in 2015, states were made to take over 75% of the outstanding liabilities of discoms. Yet the scheme instead of bailing out the discoms, embattled the finances of states. Further, during the first wave of the pandemic too, in May 2020, the central government announced `90,000 crore (later increased to `1.35 lakh crore) liquidity infusion for discoms by way of economical loans through Power Finance Corporation (PFC) so that gencos could be kept afloat. In spite of these efforts, the situation keeps on deteriorating day by day.

Both the states as well as the central government are equally responsible for this worsening situation. To the extent state governments are concerned, they make promises during polls that they will be providing free or subsidised electricity to agriculture, industries and/or households etc. without analysing any costs or benefits. State governments of Tamil Nadu, Punjab and Telengana are accused of making such pledges. In case of many other states, since the state governments intend to protect the consumers from paying the market price of electricity, hence they direct the discoms to provide subsidised electricity to the consumers, to be reimbursed to them sometime in future. Similarly, boards and corporations in many states are yet to clear their power dues to discoms. Hence, these delayed payments reflect upon the liquidity of the discoms which fail to make payment to the generating companies resulting in power disruption, thereby leading to the use of diesel sets which eventually produce the merchandise at much higher rate thus neutralizing the power subsidy offered.

As far as the central government is concerned, it may be blamed for keeping the coal sector in doom. The government is utilizing Coal India Limited only as a cash cow to mint dividends. Coal India is continuously remaining unsuccessful to start new coal mines. Many coal projects got blocked at different stages of implementation owing to land acquisition, environmental or forest cover clearances. It is even thwarting the private miners to bid for new coal mines. Pertinently, no bids were made for 48 mines out of 67 up for auction in the year 2021, as the private investors feared problems in obtaining environmental clearances.

Not only the magnitude of the problem is now made complex (by the governments), rather the solution(s) offered to cobble it up are so myopic that they end up accentuating the predicament further. RBI in its Report on Currency and Finance 2021-22 stated that electricity pricing may be completely deregulated on the lines of petroleum product subsidies. Is it justified that the public be roped in to bear the additional burden of electricity tariffs for the dues not cleared by the public sector units? Further, how this solution can clear the pending dues of discoms, generating companies and Coal India Limited is not clarified.

In another case, the central government by invoking Section 11 of the Electricity Act has mandated all imported coal-based projects to generate power at full capacity by importing coal. Pertinently, of the 17,600 MW imported coal plants in India, only 10,000 MW are operating due to the high price of imported coal at $140 per tonne because of the Russia Ukraine war. The million-dollar question is that even if generating companies manage to attain the coal at high prices from the international destinations, will the increased cost of electricity generated by bringing this coal be passed on to the consumers?

Last but not the least; the central government has also directed the state-run Power Finance Corporation. (PFC) and Rural Electrification Corporation (REC) to offer short-term loans to stressed power plants using imported coal to help them restart production. But akin to such measures taken in the past, it will also prove to be a temporary measure that cannot offset the problem of non-payment of arrears that may arise again in future to haunt the power sector.  

Solution to this problem comes from both the short term as well as long term measures. In the short run, cost needs to be pulled down by addressing the leakages and theft of power, besides taking away the power subsidy from the rich and wealthy. Power subsidy is required to be highly focused and directed towards only the vulnerable and marginalised sections of the society.

Long term solution calls for the development of such power projects that use renewable sources of energy like solar, wind and water. There is a good capacity to generate electricity in hill states like Himachal Pradesh, Uttarakhand, and Jammu and Kashmir by erecting dams on snow-fed rivers passing through these states. Only a suitable plan with its flawless execution can help the Indian economy tide over the power crisis permanently. A stitch in time can only save nine in future.   




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