Delhi / Raipur, (the
states. news)
The Covid-19 pandemic has affected
lives, livelihoods, businesses and economy. Now thatthe world, including India,
is learning to live with the virus until a vaccine is developed, and
opening the economy and businesses at the same time, it’s useful to look at
some of the key indicators that will help us expedite growth and achieve
the Aatmanirbhar Bharat Mission.
One of the key sectors is Power. During the pandemic-induced lockdown, the
power demand had dipped significantly.
Now the demand is back to normal levels. As India aims at
becoming a manufacturing hub, and producing world-class products for a global market, it’s extremely important that the industry, businesses, apart from the common citizens, are
assured of uninterrupted quality power supply at competitive
rates.
We all know that the power sector is plagued with systemic problems, and
multiple challenges, across the value chain. I would, however, like to
highlight two key points which need urgent
attention and action. The first point pertains to cross-subsidies and the impact they have on the industry, businesses, Power players, and the overall economy. While Power Generators are
known to get tariffs around Rs 2.5 per unit, Discoms sell power to consumers at huge margins, resulting in rates of almost Rs 6–9 per unit for industrial and commercial consumers. There
is a simple solution to address this anomaly: We can enable
the industry to purchase electricity directly from the Exchange over their
usual commitment.
This may sound simple, but the problem is complicated by the concept of
cross-subsidy — where the Discoms charge some customers higher tariffs to
subsidise the cost of electricity for
other types of end-use customers. This results in inefficiencies in the market for electricity, and in its distribution. Initially, it was said that cross-subsidy should be eliminated. Now, however,
there’s a growing view on reducing cross-subsidy. The
National Tariff Policy 2016 stipulated that cross-subsidies among
electricity consumers be capped at 20 per cent of average cost of
supply. A NITI Aayog-sponsored study in 2019 reiterated the point.
However, in reality, states are not known to follow this. In many states, they
are in excess of 50 per cent. Industrial and commercial consumers are thus
enormously burdened, adversely
impacting their competitiveness and productivity. We need to act on this urgently. This is particularly relevant in the present context when Power plants are stressed, and are running at PLF
of around 50 to 55 per cent. The MSMEs cannot afford to buy power being offered to them at Rs 4–4.5 per unit. Industry is thus shut. Power plants are being forced to back down. The
economy suffers. One practical solution out of this impasse is that the industry should be able to buy power from the Exchange over and above their commitment with minimal cross-subsidies,
say, around 25 paise per unit. Power would be then available to them at Rs 2 to 2.5 per unit. From a zero-sum game, it would then become a win-win game for the industry, power players, and
the overall economy. On the policy front, the government’s draft Electricity (Amendment) Bill 2020 proposes to mandate tariff determination on the basis of costs, without factoring subsidies.
The new tariff policy, approved by the Group of Ministers, reportedly discusses the blueprint to reduce cross-subsidies. This will create a level-playing field for the industry.
While the agreement now is to reduce cross-subsidy, we must debate to eliminate
it altogether if we are to enhance our industry’s competitiveness, and
work on the larger issue of ease of
doing business in the country. The second major problem is that while generators get different rates at their end selling electricity at different times of the day in spot exchange, the consumers
have to pay fixed charges regardless of the time of day. This creates huge inefficiencies in the system; they prevent any type of market-determined price-discrimination between different time
bands. Some customers, for instance, might be willing
to reschedule their electricity consumption based on the price being
charged at a particular time. Under the present arrangement, they
have no such incentive as the price remains fixed. This also disrupts the
demand-supply equation. This, then, calls for Time-of-Day (ToD) Metering.
Some states in India do have ToD for industrial and commercial users, while
some are said to be experimenting ToD even for non-commercial
users. Globally, there exist many examples of
dynamic real-time pricing of electricity, like in Sweden, Spain, UK, Denmark and Norway. The incumbent Union Power Minister, R K Singh, has spoken about ToD tariff. A proposal on smart
prepaid meters, which found a mention in the Union Finance Minister’s speech this year, is linked to the ToD regime. The time to announce a nation-wide switch to a Time-of-Day Metering
regime is now. It would help non-commercial consumers and industry alike. The availability of power, power consumption patterns, electricity rates and the overall health of the power sector
have a direct bearing on the nation, the economy, the people and their quality of life. In this extremely challenging period, India is working to expedite the growth process, which will make up
for the pandemic-induced reverses, and help us achieve our long-term objectives, including the Aatmanirbhar Bharat vision. It’s important that the power sector is in good health and contributes
towards this optimally. The two changes that I suggested will work to unlock the Power sector, increase per capita power consumption from 3 KWH per day to 5 KWH and improve the quality
of life of millions and add to the growth momentum, leading to a win-win scenario for all stakeholders.
(Writer is Chairman of Jindal Steel & Power Ltd.) (Blog Address –https://medium.com/@naveen.jindal/unlock-the-power-sector-to-make-bharat-aatmanirbhar- e915752f69c5)
