The irony of power

It can happen only in India. Bengaluru, which boasts the tag of ‘IT capital of India’, suffers a crippling four-hour power cut every day, a state of affairs that prevails in other towns and cities. Ironically, at the same time, power companies are operating their thermal plants at less than two-thirds capacity — and not because of want of coal. It’s because State electricity boards (SEBs) and distribution utilities, given their precarious financial condition, are not willing to contract additional power to meet incremental demand. For the first time, Coal India (CIL), faced with mounting pithead stocks at its mines, is knocking on the doors of prospective buyers to ‘market’ coal. This is a scenario that neither CIL nor Piyush Goyal would have imagined barely a year ago when the minister for power set an ambitious target for CIL to double its output to a billion tonne in five years.

To a certain extent, CIL’s predicament is a result of the seasonal dip in power demand during the monsoon and the ongoing slump in the commodity price cycle, which has impacted demand for coal from steel companies. This trend of seasonally weak demand for power has been amplified by the tardiness of the economy to shake itself out of slumber. Thermal power plants are carrying 25 to 26 days of coal stocks and are unwilling to invest in idle inventory. The optimistic way of looking at this problem is to see it as a short-term issue. As the economy gathers steam and industrial growth revives, the demand for power will increase once again and, along with it, the demand for coal. But what could upset such calculations is the precarious financial position of most SEBs and distribution utilities. With a combined loss of ₹3 trillion, the SEBs, saddled already with outstanding dues to CIL and central power generating utilities, are in no position to buy more of either coal or power.

The problems are mainly on the distribution side which has been affected by populist schemes of free power for ‘farmers’ and rampant theft of electricity, euphemistically called transmission and distribution losses. The propensity of State governments to supply power at subsidised prices to households with the subsidy burden left to be borne by the SEBs/distribution utilities has been unhelpful. The electricity distribution sector is emblematic of our failure to reform in critical sectors. There have been two bailouts of SEBs since the turn of the century and both came to naught with the SEBs going back to their bad ways soon after they were rescued. Despite this, another plan to rescue these entities will be hard to avoid despite the attendant risks. The best the Centre can do is design a scheme that keeps a tight hold on the functioning of SEBs — one that encourages them to raise tariffs to realistic levels, and improves the quality of power supply while checking its theft. We simply cannot afford a situation where consumers suffer from power shortage when fuel is freely available and power generating stations are idling.