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Vol. 6 | Issue 5 | Aug 2012

COVER STORY 
power sector political will
 
WAITING FOR GOD
The common man is angry and does not know where to turn. The country’s power sector is in a perpetual reforms mode. He is demanding action. Power has become the lifeline, essential to basic services like water, transport, education and health. Clearly, the nation needs a recharge. For whom are we waiting?
 
by Naresh Minocha
 
POWER is essential. The two things most essential perhaps are power and speed among other things.” So said Prime Minister Jawahar Lal Nehru while advocating self-reliance in core areas at a meeting of the National Development Council (NDC) held on November 9, 1954.
 
Fifty-eight years later, both electricity and speed in government’s decision-making process have become non-essential. What has become essential instead is the media-orchestrated, NGOs’ campaign against innumerable power projects. The war against electricity generation projects often gets legitimacy due to favourable comments or verdict from judiciary.
 
The opinion leaders don’t care if the country’s trade deficit and current account deficit gets aggravated due to surging imports of coal and gas. The fact that such imports imply sacrifice of job-creation opportunities in these natural resources industries is also not their concern.
 
As for the speed cherished so much by Pandit Nehru, the word ‘speed’ has been substituted with policy paralysis, inaction or delays in the present government. The speed in resolving multiple and complex problems in the electricity sector is certainly missing.
 
The power sector thus remains in perpetual reforms mode with several programmes failing to solve the basic problems in all segments of the sector. It is very difficult to keep track of the many committees that have discussed the same problems and recommended same or similar solutions over the years. And basic problems such failure to achieve targeted cut in power transmission and distribution (T&D) losses, desired hydel-thermal power generation mix and mismatch between investments in generation, transmission and distribution have persisted for decades.
 
For instance, the target for bringing down T&D losses set at 18 per cent for 1982-83 recommended the by Rajadhyaksha Committee on Power in 1980 remains unattained.
 
As electricity is a concurrent subject under the Constitution, States have either partly implemented or stalled some of the well-conceived reforms, including the ones embodied in the Electricity Act 2003. A case in point is open access in transmission and distribution, patterned on the lines of seamless movement of telecom traffic from one network to any other network.
 
Open access in distribution has remained a non-starter except in certain parts of Mumbai where household customers are free to ditch existing distribution company (discom) and opt for another without any change in electrical connection/wiring. Some of the States have also stopped power generation companies (gencos) from selling power outside the State on grounds that the States themselves are facing power shortages.
 
The Centre neither has the aptitude nor the political will to implement an integrated energy policy, which is so crucial for energy and food security. It is happy contriving piecemeal solutions to the problems that keep multiplying like insects. An instance in point is the Presidential directive to Coal India Limited (CIL) in March this year to sign 20-year fuel supply agreements (FSAs) with power project developers for aggregate capacity of 50,000 megawatt.
 
The directive was necessitated by CIL’s reluctance to concur with the decision by the Prime Minister’s Office’s on this issue that factored in the fact that CIL would have to import coal to honour FSAs. Why did the PMO not think of issuing a Cabinet directive to the Ministry of Environment and Forests to avoid delays in grant of multiple and separate approvals to coal mining projects?
 
History of black outs
Article
Millions affected
Location
Date
670
India
2012-07-30/31
100
Indonesia
2005-08-18
97
South and southeastern Brazil
1999-03-11
87
Central, south and southeastern Brazil and all Paraguay
2009-11-10/11
55
North America, northeastern
2003-08-14/15
55
Italy
2003-09-28
30
North America, northeastern
1965-11-09
 
The delays can become a subject of history only if Prime Minister Dr. Manmohan Singh asks for a single window-clearance for all power projects that currently require separate environmental, forest, wildlife and coastal regulatory zone and pollution control board approvals.  
 
Some of the Government’s disjointed initiatives run counter to one and other. The objective and vision of “Reliable, adequate and quality power for all at reasonable prices” gets countered by the Central advisory to the States to ensure that fuel price increases are regularly passed on to consumers through tariff hikes. The Government should in fact stop using the term ‘reasonable prices’ as it is next to impossible in the energy sector. 
 
The reasonable pricing of electricity has become a mirage with governance deficit forcing the industry to rely heavily on expensive imported coal and gas. It is indeed bizarre to find coal pithead-located power plants resorting to coal imports and companies proceeding with setting up of imported coal-based plants in coal belts.
 
The fuel crisis has been compounded by the fact that naphtha, a substitute fuel for gas turbines, is exported in shiploads because it is expensive to use in power and fertiliser plants. The price of naphtha was deregulated in the 1990s, whereas the price of gas is part administered and part ‘market-driven’ with plenty of government interventions thrown in. Similarly, the price of coal is decontrolled on paper since the year 2000 but the Government does intervene as it did in January this year when it ordered CIL to put on hold the switchover to import parity-cum-gross calorific value (GCV) based coal pricing.
 
The Government also perpetuates cost inefficiency by protecting the public sector monopoly over non-captive mining and merchant sale of coal. It is also protects the railway’s monopoly over rail transportation of coal.
 
New technology adoption moves at slow pace
INDIA has moved at a bullock cart’s pace in adoption of new technologies that have the potential to substantially reduce usage of coal in power plants, use of electricity in different consumer entities, loss of power from the transmission and distribution networks. Similarly, the adoption of new technologies in extraction of coal has not proceeded fast either.
 
Large-scale adoption of new technologies in the entire energy spectrum right from power generation to smart grids and to LED bulbs can easily wipe out the shortages of both coal, gas and electricity. The Government has to adopt a carrot-and-stick policy in all segments. Such a regulatory framework has lately been introduced in some segments under the Energy Conservation Act 2001.
 
A case in point is the ‘Perform Achieve Trade’ (PAT) launched by the Bureau of Energy Efficiency (BEE) under the National Mission for Enhanced Energy Efficiency (NMEEE).
 
PAT is a market-driven system for enhancing the cost effectiveness of energy efficiency initiatives in Energy Intensive industries (EIIs) through certification of energy savings, which can be traded. PAT requires EIIs to attain a reduction of Specific Energy Consumption (SEC) from their baseline SEC within 3 years beginning 2011-12.
 
Usage of coal is, however, a big-ticket area where adoption of new technologies such as ultra critical boilers, integrated gasification combined cycle (IGCC) power plants, underground and surface gasification of coal, etc., can make a big dent on moderating demand for coal and enhancing power generation per unit of coal. The resulting reduction in pollution can be considered as the icing on the cake.
 
The Indian power sector’s transition from sub-critical boilers to super-critical boilers has been slow but has gained momentum during the last five years. The Government has not yet ordered a ban on installation of sub-critical boilers nor has it unveiled any plan for ushering in ultra critical boilers.
 
The term ‘critical’ refers to a thermal state at which a material (water-steam in the case of boilers) loses distinction between its liquid phase and gaseous phase. The production of steam at very high pressure and temperatures improves energy efficiency.
 
Coal consumption is 4 per cent lesser in a supercritical boiler as compared to sub-critical boilers that currently form the base of thermal power plants in the country. Similarly, energy efficiency is 5 per cent higher in latter.
 
To achieve substantial cut in coal consumption, India must take a big leap into ultra supercritical boilers. As put by MIT energy expert James R Katzer in a paper titled ‘The Future of Coal-Based Power Generation’ presented in September 2007, “moving from sub-critical to ultra-supercritical generation reduces coal consumption by over 20 per cent per unit electricity generated. Obviously, the higher the efficiency the lower the CO2 emissions per unit electricity generated.”
 
Coal gasification, whatever the technique, is the key to promoting most efficient use of coal especially the one that cannot be mined or is too expensive to mine.
 
India has moved at snail’s pace in coal gasification due to doubts about the operational capability of equipment to process high-ash coal. This concern can easily be solved by unveiling a policy for joint ventures between technology providers and Indian companies.
 
At least a beginning can be made by creating a framework for setting up imported coal-based IGCC plants in coastal areas. IGCC plants generate more electricity than any other plant because they employ both gas turbines and waste heat-based steam turbines. Similarly, the Government should prod other imported coal-based plants to incorporate ultra-supercritical boilers.
 
In fact, the carrot and stick approach is instrumental in adoption of expensive technologies on a large scale as is borne by the case of renewable energy.
 
The central and state power regulator’s diktat to procure specified percentage of electricity from renewable energy plants has given a big push to solar, wind and biomass plants. Such an approach is also facilitating reduction in equipment prices and renewable power tariffs.
 
As noted by a Government-commissioned study on ‘Competitiveness in the Coal Sector’ released in February 2012, “Railways subsidises passenger traffic with coal freight, whereby making the ‘delivered price of coal 2-4 times the pit-head price of coal in states such as Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Goa, Karnataka, Kerala, Tamil Nadu, Western UP and Delhi.”
 
If integrated energy planning was followed, then railways should have faced cut-throat competition from transmission lines that can haul power from coal pithead-based power plants to demand centres, thereby reducing the need for coal transport to power plants in demand centres. Similarly, coal slurry pipelines can dispense with rail transport. Implementation of an integrated energy policy would have triggered competition between coal, gas and naphtha. It would have hastened introduction of clean coal and efficient technologies such as coal gasification and integrated gasification combined cycle (IGCC). 
 
Latest List of 32 thermal power plants with ‘critical coal stock’ of less than seven days
 as prepared by the Central Electricity Authority
 
1
Rajghat
Due to less receipt of coal during the month of June 2012
2
Mahatma Gandhi
Inadequate availability of indigenous coal
3
Kota
Due to less receipt of coal during the month of June 2012
4
Suratgarh
Due to less receipt of coal during the month of June 2012
5
Unchahar
Due to higher generation
6
Anpara 'C'
Due to inadequate allocation of indigenous coal during the month.
7
Dadri (NCTPP)
Due to less receipt of coal during the month of June 2012
8
Rosa
Due to inadequate availability of indigenous coal
9
Satpura
No import
10
Sanjay Gandhi
Due to less receipt of coal during the month of June 2012
11
Kordi
Due to less receipt of coal during the month of June 2012
12
Khaparkheda
Due to less receipt of coal during the month of June 2012
13
Parli
Due to less receipt of coal from MCI. during the month of June 2012
14
Dahanu
Due to higher generation
15
Kothagudem
Due to higher generation
16
Dr. N Tata Rao
Due to higher generation
17
Ramagundem
Due to higher generation
I8
Simhadri
Due to non-supply of coal for unit 4
19
Bellary
Due to non-supply of coal for unit 2
20
North Chennai
Due to less receipt of coal from MCL
21
Muzaffarpur
No import
22
Kahalgaon
No import
23
Bokaro 'B'
No Import
24
Mejia
Due to non supply of coal for Unit-8
25
Durgapur Steel
Due to less receipt of coal during the month of June 2012
26
Talchar
Due to higher generation
27
Bandel
Due to higher generation
28
Kolaghat
 
29
Bakreswar
Due to less receipt of coal during the month of June 2012
30
New Cssipore
Due to less receipt of coal during the month of June 2012
31
Farkka
Due to inadequate coal availability in linked mine of ECL (Rajmahal)
32
Kodarma
Coal supply yet to start by CIL to commence the generation
 
For want of speed and holistic approach to solving problems, India has remained a power-impoverished nation. This is in spite of abundant availability of coal and water to generate a robust mix of thermal-hydel power to provide power for all and jobs for all. India ranks poorly when judged by the norm of providing the public with ‘moderate access to energy’. The World Coal Association (WCA) has defined this norm as electricity generation capacity of 200-400 megawatt (MW) per million of population. The report titled ‘Coal – Energy for Sustainable Development’ released in April 2012 notes that India currently has an installed capacity of around 130 MW per million people. The United States has 2826 MW capacity/million persons. Europe has 1733 MW/million persons. Even South Africa, which is a BRICS country, with 800MW/ per million people is way ahead of India. WCA report says: “The latent demand for electricity is huge. An estimated 400 million people in India still lack access to electricity. By 2030 this is only expected to fall to 300 million.”
 
Providing access is useless if villages are denied supply for more than 12 hours a day on average across the country. The Power Ministry’s reply to a question on electricity supply shows how short-sighted its vision is. Answering a question in the Rajya Sabha on May 21, 2012, the Minister of State for Power stated that the Centre obtains prior commitment of the States under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) for providing daily electric supply for a minimum of 6-8 hours in the RGGVY villages. Mere access to electricity is an entrapment for industries that are forced to shed labour and leave machinery idle for many days in any given year. Several States have, in fact, applied breaks on industrial development in particular and economic growth in general by resorting to savage power cuts.
 
For want of speed and holistic approach to solving problems, India has remained a
 Power impoverished nation. This is in spite of abundant availability of coal and water to generate
a robust mix of thermal-hydel power to provide power for all and jobs for all.
 
The CEA’s latest monthly report on the power situation in June 2012 carries a two-page table on power cuts in different states that can numb any development economist. Take the case of power famine-like situation in Tamil Nadu. The report says: “On June 1, 2012 - 40 per cent power cut in respect of high tension and Commercial consumers. 2 hour load shedding for Chennai (between 0800 to 1800 hrs), 4-hour load shedding (between 0600 to 1800 hours) for urban and rural areas. One-day power holiday for industries apart from regular Sunday holiday. From June 2, 2012, 40 per cent power cut in respect of high tension and commercial consumers. One hour load shedding for Chennai (between 0800 to 1800 hrs), 4-hour load shedding (between 0600 to 1800 hrs) for urban and rural areas. However, there was load shedding up to 3360 MW during peak hours (951.918 MU for the month).”
 
The country faced an energy shortage of 73,236 million units ( MU) (8.5%) and a peak shortage of 12,031 MW (9.8%) in 2010-11. Amidst this pathetic situation, the Union Government has stopped making noises about its target of providing power to all by 2012. This goal was originally to be attained in 2010 as recommended by the NDC Committee on Power that submitted its report under the chairmanship of Sharad Pawar in September 1994.
 
This target is actually Utopian if we keep in view the need for 24-hour supply of power to the estimated population of 122 crore, which will swell to 143.1 crore in 2025. The demand for electricity outpaces installation of generation capacity due to population explosion and massive scope for economic growth. The projected demand will straightway double from 1,52,746 MW in 2011-12 in the next five years, which requires a capacity addition of more than 1 lakh MW in the 12th Plan, says Estimates Committee quoting the 17th Electric Power Survey. The country can neither marshall the resources to meet such gigantic requirements nor the fiscal strength to scale up the subsidy bill to supply free/dirt cheap electricity to the poor masses and to the agriculture sector.
 
It is no wonder then that the 12th Plan Working Group on Power has recommended a 59-point charter of reforms to achieve the Government’s objective of “power for all” without setting any new timeline.
 
In its report submitted in January 2012, the Group points out the utilities are facing dual challenge of meeting the increasing demands of consumers as well as maintaining their own financial health. Achieving the vision of “reliable, adequate and quality power for all at reasonable prices” will thus necessitate grant of incentives and aid to the industry.
 
And fresh incentives and subsidies are in the works. Under the National Electricity Fund (NEF), the Government would provide interest subsidy for over 15 years at an estimated outlay of Rs 63,750 crore from the NEF. The amount of Rs 22,000 crore has been estimated for the 12th Plan under NEF, assuming an average interest subsidy of 5% p.a.
 
It is anybody’s guess as to whether more allocations, more schemes and more reforms would help the Government achieve the crucial objectives of the National Electricity Policy (NEP) that was unveiled in 2005.
 
NEP’s unachieved goals include providing access to electricity to all households in next five years, meeting power demand fully by 2012, creating adequate spinning reserve (standby grid power generation capacity), supplying reliable and quality power in efficient manner at reasonable rates and providing minimum lifeline consumption of 1unit/household/day as a merit good by year 2012.
 
The worsening socio-political discord even on basic necessities such as electricity would keep electricity out of reach for crores of people. As put by the Pawar Committee way back in 1994, “Unless there is a political will on the part of the country as a whole, to improve the power sector, so vital for the economy and prosperity, it is clear that the economic development of the country may face an inevitable crisis and setback.” g

 

Comments :-
NK Goyal
Tuesday, August 14, 2012
Very good article. Mr Naresh Minocha is my old friend. what is his email id Me NK Goyal, Chairman/President TEMA/CMAI, www.cmai.asia

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