S N Roy on tariff traumas

S N Roy on tariff traumas
S N Roy

Government and the media are blaming the Independent Power Producers (IPPs)for running away, but the problem is not with them. How can IPPs invest andhow can the banks lend them the funds unless they are sure of returns? Thereforms process in the power sector will increase the number of playersmanifold, but it will also multiply disputes. Development of a power systemhas to be done in an integrated manner, has a long gestation period andnecessitates comprehensive data of past and projections for the future.Multiplicity of agencies will complicate the process of data collection.

State governments are in the process of dividing the states into segments inorder to privatise distribution. However, this leaves many questionsunanswered. Do we have enough agencies with relevant experience? Is themoney available with the private Indian companies enough to take over thedistribution in major part of India? What is the alternative if adistribution company fails in one area? Such a distribution company is sureto work with a profit-motive and may ignore the unremunerative rural areas.During the last four decades, the government had taken many decisions toremove subsidies but has not been successful due to political pressures.

Power supply to agriculture and the domestic sector continues to besubsidised by the industrial/commercial users. Whereas the sufferings ofsuch consumers have crossed all boundaries and industries are switching overto captive generation in a big way, the decision makers are yet to realisethe consequences, what to say of analysing it or finding the solution.Load factor (the ratio of average load to maximum load in a month ofdifferent categories of consumers) is yet another area of neglect that haswide repercussions on the cost of power supply. Whereas major industriesprovide very high load factor, it is quite low for domestic/agriculturalconsumers due to large variation in their demand depending upon the time andweather.

Generation, transmission and distribution systems need huge investments, anda major part of the expenditure (like interest on loans, maintenanceexpenditure etc) is of a fixed nature, irrespective of the load factor. Thusthe lower load factor proportionately increases the per unit cost of powergeneration and supply. As a cumulative effect of the above factors, realcost of power supply by the SEBs to the domestic consumers may be more thandouble the cost of supply to major industries while the average tariff maybe just the reverse with the industrial sector paying higher to subsidisethis sector. Under such circumstances, exodus of industrial consumers fromthe clutches of SEBs is not surprising and is fueling the losses of SEBs.

Supply of power to about 12 million tubewells and a large number domesticconsumers under `Kuteer Jyoti' continues to be unmetered. Whether so much ofenergy is actually consumed by them or not, SEBs are accounting for 30-50per cent of total power supply to them despite the fact that most of themare getting power supply for limited hours only. With reported technicallosses of about 22 per cent and unmetered supply of 30-50 per cent, the realbillable energy is only 40-50 per cent of total power available with them.Metering the power supply to such consumers, billing and realisation arestupendous tasks and continue to be neglected. This is high time thatdecision makers take notice of these warnings. If disparity in the tariffand unaccounted losses continue, there will be nothing to stop furtherexodus of industrial consumers from the net of SEBs.

The author is the former chairman of CEA