Power Minister RK Singh believes that there is no free lunch. In an interview, he told TOI that state governments would have to pay the subsidy if they were promised free electricity to voters. In any case, it eats up the allocation that used to go towards building hospitals and roads, he says, adding that the reforms undertaken in recent years will help clean up the sector. Part:
The power sector is often seen as backward since the 1991 reforms. Is this a fair assessment?
Today we have surplus capacity, while the peak demand has reached 2 lakh MW. We electrified more than 28 million homes ahead of deadline in the world’s largest universal energy access program. We have achieved a single synchronized national grid. Considering the size, it is unique in the world. Multi-pronged action has improved supply from about 12 hours in rural areas in 2015 to over 22 hours in 2021. For urban areas, it is 23 hours 30 minutes. We have addressed the issues of accessibility and availability. Some disruptions are due to disturbances in the distribution system or because discoms (distribution companies) do not have the money to buy power.
Several steps have been taken to improve the distribution. States have sought more funds to strengthen distribution and a new scheme has been approved. The challenge was to make the whole system viable. The implementation of the letter of credit system and improved demand has largely relieved the stress on the production companies.
We have also undertaken structural reforms helping discoms clean their books and bring in more discipline. As a result, the line loss has come down from 25 per cent in 2014-15 to 21.8 per cent. Gencos’ dues have come down to Rs 32,000 crore from Rs 65,000 crore a year ago.
Every few years, the sector comes under stress and relief packages are announced. How long will this continue?
This time around, we’ve made several checks and balances. Funding is conditional on deficit reduction and operations improvement. And, surprise, surprise, every state has agreed to it. We are emphasizing on commitment on loss reduction with pre-paid meters for new connections, proper accounting of subsidies, mandatory energy accounting and a calendar before funds are released.
What progress has been made on giving consumers more choice?
Earlier, attempts were made to privatize government discoms. This meant replacing the government monopoly with a private monopoly. We have offered to delicense the distribution. Government companies can continue to operate, but they need to compete. If their service is good, the consumer will keep going or else they will migrate. We have consulted the states twice and barring one or two none of the states have opposed the plan. We have finalized the proposal for cabinet after that. This will reduce the scope of any irresponsible management practices as only skilled players will do well.
Last week, a NITI Aayog The report cautioned that the perceived benefits of carriage and material separation may not be fully passed on to consumers without regulatory and tariff reforms.
What we have proposed is that the regulator will set a ceiling tariff and companies need to compete on tariffs and services. The system is structured in such a way that it encourages competition. The regulator will look at discretionary costs and work on a trajectory to reduce costs by eliminating non-prudential costs. The shareholder has to bear the loss in the interim. The return on equity will be decided to determine the tariff. The state can fix the cost of supply and reduce it for certain consumer groups and be responsible for subsidies.
How do you ensure that government discoms don’t switch to another BSNL or Air-India?
Only state governments can ensure this by adopting prudent policies. If a state is in a position to give subsidy of Rs 5,000 crore, they should limit it there. States are over-committed most of the time. They need to ensure that government departments pay. They have to ensure the efficiency of the discoms. Today, the national average for billing is around 84%, while it is around 94% for collections.
Politicians give free electricity before elections. Has power become a political weapon?
That is the tragedy. You educated people like Mr.Arvind) Kejriwal (Delhi CM) is saying that he is giving free electricity. When a politician says that he is giving free electricity, he is not paying from his own pocket. It is the taxpayer who is paying for it. The policies governing this sector should be rational and separate from electoral politics. If the state government has to provide free electricity, they will have to pay for it. Either the consumer pays or the state government does not want the consumer to pay, he will have to pay as per the law. If free electricity is to be paid for in the state budget, it means very little money for roads, hospitals, schools, etc. It is the choice of the state. Some states are paying salaries after a delay of 14-15 days, which is unimaginable.
The power sector is often seen as backward since the 1991 reforms. Is this a fair assessment?
Today we have surplus capacity, while the peak demand has reached 2 lakh MW. We electrified more than 28 million homes ahead of deadline in the world’s largest universal energy access program. We have achieved a single synchronized national grid. Considering the size, it is unique in the world. Multi-pronged action has improved supply from about 12 hours in rural areas in 2015 to over 22 hours in 2021. For urban areas, it is 23 hours 30 minutes. We have addressed the issues of accessibility and availability. Some disruptions are due to disturbances in the distribution system or because discoms (distribution companies) do not have the money to buy power.
Several steps have been taken to improve the distribution. States have sought more funds to strengthen distribution and a new scheme has been approved. The challenge was to make the whole system viable. The implementation of the letter of credit system and improved demand has largely relieved the stress on the production companies.
We have also undertaken structural reforms helping discoms clean their books and bring in more discipline. As a result, the line loss has come down from 25 per cent in 2014-15 to 21.8 per cent. Gencos’ dues have come down to Rs 32,000 crore from Rs 65,000 crore a year ago.
Every few years, the sector comes under stress and relief packages are announced. How long will this continue?
This time around, we’ve made several checks and balances. Funding is conditional on deficit reduction and operations improvement. And, surprise, surprise, every state has agreed to it. We are emphasizing on commitment on loss reduction with pre-paid meters for new connections, proper accounting of subsidies, mandatory energy accounting and a calendar before funds are released.
What progress has been made on giving consumers more choice?
Earlier, attempts were made to privatize government discoms. This meant replacing the government monopoly with a private monopoly. We have offered to delicense the distribution. Government companies can continue to operate, but they need to compete. If their service is good, the consumer will keep going or else they will migrate. We have consulted the states twice and barring one or two none of the states have opposed the plan. We have finalized the proposal for cabinet after that. This will reduce the scope of any irresponsible management practices as only skilled players will do well.
Last week, a NITI Aayog The report cautioned that the perceived benefits of carriage and material separation may not be fully passed on to consumers without regulatory and tariff reforms.
What we have proposed is that the regulator will set a ceiling tariff and companies need to compete on tariffs and services. The system is structured in such a way that it encourages competition. The regulator will look at discretionary costs and work on a trajectory to reduce costs by eliminating non-prudential costs. The shareholder has to bear the loss in the interim. The return on equity will be decided to determine the tariff. The state can fix the cost of supply and reduce it for certain consumer groups and be responsible for subsidies.
How do you ensure that government discoms don’t switch to another BSNL or Air-India?
Only state governments can ensure this by adopting prudent policies. If a state is in a position to give subsidy of Rs 5,000 crore, they should limit it there. States are over-committed most of the time. They need to ensure that government departments pay. They have to ensure the efficiency of the discoms. Today, the national average for billing is around 84%, while it is around 94% for collections.
Politicians give free electricity before elections. Has power become a political weapon?
That is the tragedy. You educated people like Mr.Arvind) Kejriwal (Delhi CM) is saying that he is giving free electricity. When a politician says that he is giving free electricity, he is not paying from his own pocket. It is the taxpayer who is paying for it. The policies governing this sector should be rational and separate from electoral politics. If the state government has to provide free electricity, they will have to pay for it. Either the consumer pays or the state government does not want the consumer to pay, he will have to pay as per the law. If free electricity is to be paid for in the state budget, it means very little money for roads, hospitals, schools, etc. It is the choice of the state. Some states are paying salaries after a delay of 14-15 days, which is unimaginable.
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