Power Today |
 
 
Editorial | March 2012

Stop controlling demand

Many state governments need to wake up to a new supply-driven era in power.

The supply chain in the power industry seems to be in the jeopardy of spinning itself into a spiral stemming from regulatory hold-ups in linkage and bad collection. Private power generation companies are licking their wounds from bad deals and low market prices, while the discoms have taken refuge under the government umbrella while blatantly showing losses. The government-government nexus would be interesting to an outsider, but to us, it is typical: the state governments makes losses, the central government-promoted nationalised banks continue to lend on the basis of sovereign guarantees, and as a result, the Centre itself has deemed itself powerless, so to speak. Thankfully, and at least ostensibly, all this is set to change as banks—under instructions, surely, from top authorities—have clamped down on the states.

As a result, Tamil Nadu, the state with a supremely benevolent (read: populist) government, having held the dubious (or widely appreciated, depending on whom you ask) record of not having raised tariffs for 16 years, is reeling under a completely expected power crisis. It is the same government that has supported the nuclear protests in Kudankulam. Now Tamil Nadu’s cities including Chennai face up to six hours of power cuts a day.

It is interesting that load shedding, or demand-side management, has been an accepted and convenient norm in India. On the one hand, ruling parties are reluctant to hike tariffs, but no one seems to be interested in quantifying hours and money lost due to load shedding. On the other hand, we are fast discovering new challenges on the supply side—the latest being that in order to meet a Prime Minister’s Office (PMO) directive to ensure 20 years’ supply to the power industry, Coal India needs to produce 220 mt more. But the company says there is little chance that this can be achieved, given the paradoxical environmental hurdles to coal mining. The directive from the PMO has come on the heels of PMO Principal Secretary Pulok Chatterji’s meeting with power company executives, who urged him to intervene in issues that ranged from gas allocation to coal availability and pricing.

The political assumption by many states that hiking tariffs will be bad for elections has never been proved. Farmers have volunteered to pay higher prices for better service, and Gujarat has already taken the lead by starting to build a separate T&D infrastructure for the agriculture sector. Economics can be inconvenient for politics, it seems, and now, Tamil Nadu plans to establish a UMPP at Udangudi with imported coal. While immediately convenient, most stakeholders of coal in India will argue against any coal import, given uncertain international pricing.

The answer to demand is supply, not restriction on use. Such rationing is detrimental, draconian—or archaic—and reeks of the raj of the Indian Airlines monopoly era. “Demand side management” happens to be just one of hundreds of examples where the solution stares our governments in the eye, and we have rejected them mainly out of fear of change. The Open Access, PPP and other new and measures are the right steps and must be implemented with seriousness.

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