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The power sector attracts the largest number of investments in the country. As of March 2009, it accounted for 34 per cent of the total investments in all projects that have either been proposed or are being implemented.
Electricity is a key infrastructural sector that merits this large share in investments. But, it also merits a much better management than what it gets.
The Planning Commission continues to set targets for additional generating capacities to be created during Plan periods.
These, however, are rarely met. The public sector continues to play the most important role in the industry. Privatisation efforts have met with only partial success. We have a National Electricity Policy that aims to raise the per capita availability from 704 units in 2007-08 to 1,000 units by 2012.
Our energy policies implicitly continue to encourage greater consumption (and correspondingly, emphasise the creation of greater power generating capacities) rather than the efficient utilisation of energy resources.
Even within the area of increasing the additional capacities to generate power, there is a stronger emphasis on announcing large projects rather than completing the previously announced projects in time.
Thus, the Economic Survey points out, the target for additional power generating capacity for 2007-08 was initially fixed at 16,335 Mw, which was subsequently reduced to 12,039 Mw and, the final capacity created was 9,263 Mw. The target for 2008-09 was 11,061 Mw and the achievement 7,530 Mw.
The Economic Survey lists many reasons for the delay in implementing power projects. Interestingly, land acquisition or land-disputes do not figure in this list for thermal power projects -- most of the projects are thermal power projects. Finance-related issues or issues relating to clearances do not figure anywhere at all. All the reasons listed for the delays relate to project-management. Clearly then, we need greater accountability for these delays.
The Centre for Monitoring Indian Economy capex database lists several power projects that are scheduled to be commissioned in 2009-10. A whopping 21,997 Mw of power-generating capacity is scheduled to be commissioned in the year. But, here we encounter a problem in definitions.
Only in the power sector is a project commissioned not considered a project in operation. There is a specific term for that -- it is called 'monitored capacity'.
Projects commissioned need to graduate to the level of 'monitored capacity' to be productive. Such a concept has been introduced in this industry only recently. As a result, we now know that the additional productive capacity created in 2008-09 was not 7,530 Mw as stated earlier, but a much lower, 3,454 Mw.
Now, of the 21,997 Mw capacity that is scheduled to get commissioned in 2009-10, only 14,069 Mw is scheduled to graduate to the 'monitored capacity' level during the year.
This is a significant gap between a project that is completed and the one that is not operational. Possibly, better management should be able to bridge this gap and thereby, reduce the power shortages in the country.
But, the problems of capacity creation do not stop here. Apparently, there is an unstated understanding at various levels that there will be slippages in the creation of new capacities during 2009-10 -- as there have been in the past. The capex database reflects the views of the companies that implement projects.
In the case of the power sector, apparently, these views are slippery. So, the analyst at CMIE who tracks the power sector believes that the country will not see a capacity creation of either 21,997 Mw or 14,069 Mw in 2009-10.
In CMIE's Industry Analysis Service, Sonal Bhatia writes "We expect slippages in completion. We expect an additional 'monitored capacity' of only 7,730 Mw during 2009-10. Most of the additional capacity is expected in thermal units". She comes to this conclusion after discussing the capex database in detail with people who are in the know of the industry.
What is incredible is that none of the specific projects in capex are identified as the ones that will not be commissioned. Yet, there seems to be some consensus around that there will be slippages and the additional capacity-creation cannot be too far from half what has been stated by the companies implementing the projects.
If the additional monitored capacity created in 2009-10 is indeed around 7,730 Mw, then it would be over twice the monitored capacity created in the earlier year. While we may celebrate this, it is as astonishing as it is deplorable that so much of potentially-ready capacity cannot become productive.
Less than one-third of the target set for additional capacity for 2008-09 was achieved. Only half of the additional capacities commissioned during the year became productive. In 2009-10, the expectation is that only one third of the additional capacities that are scheduled to be commissioned during the year will be available for power generation.
Gujarat, Rajasthan and West Bengal top the states (in that order) in terms of additional power capacities being added during 2009-10. All of them are scheduled to add a little over 1,600 Mw of 'monitored capacity'. Maharashtra and Orissa will add a little over 1,400 Mw each. But, the expectation is that these numbers are more likely to halve.
A little less than half the additional power-generating capacities are expected to come up in the private sector. Of the top ten projects expected to be commissioned, five are in the private sector. This includes Sterlite's 600 Mw Jharsuguda project, Raj West's 135 Mw Jallipa Kapurdi project and Torrent's 382.5 Mw Akhakhol Sugen project.
In the public sector, the Nuclear Power Corporation is expected to commission one unit of 1,000 Mw at its Kundankulam project and three more units adding up to 660 MW. However, there is a high probability that these may slip.
Solving the power generation problem in the short-run does not seem to be a problem of getting finance or of acquiring land or of obtaining clearances. The problem seems to be entirely in the realm of better management and coordination.
Finally, and quite orthogonally, solving the power shortages problem is not a problem of only increasing generation. It is also the one of shifting the policy bias in favour of efficient utilisation of energy resources.
The author is Managing Director and CEO, CMIE
