Wednesday, June 17, 2015

Govt scheme for 24x7 power still in nascent stage

The National Democratic Alliance (NDA) government's ambitious plan to provide 24x7 power to households by 2019 was announced well before the Union government could even prepare a detailed blueprint or tot up an estimate of the costs involved.

More than six months after the government announced it would electrify entire India by 2019, plans for only three geographies are ready - Delhi, Rajasthan and Andhra Pradesh.

The scale of the challenge the government has set itself to achieve in four years is nothing short of astonishing. It will have to provide an connection to roughly 80 million households that are still not connected to the grid (2011 Census). Then it will have to ensure the connections actually buzz with uninterrupted power that reaches 246.7 million households.The government can take some solace from the fact that substantial connections provided between 2011-14 will lower the targets to be met in four years.

  • Rs 1.27 LAKH-CRORE
    to be invested by to raise output to
    1 billion tonnes by 2019-20
  • Rs 10 LAKH-CRORE
    push for renewable energy
    for transmission and distribution systems
  • Plans for only three geographies have been drawn up — Andhra Pradesh, Rajasthan and Delhi
  • Nine states’ plans expected to be ready in three months, remaining by December

To put this in perspective, between 2001 and 2011, an additional 61.6 million households got access to electricity. The government will have to more than double the rate of electrification to cover the remaining by 2019.

This is not just a logistical challenge. It has large fiscal implications. Andhra Pradesh, for example, has to provide connections to only 1.6 million additional households in four years - it is already 92 per cent electrified. It requires an investment of Rs 54,332 crore to connect these households and provide 24x7 power to all. By contrast, Rajasthan, which has to provide connection to an additional 3 million households, requires approximately Rs 78,500 crore. Costs for just these two states add up to Rs 1.33 lakh crore. But Rajasthan envisages adding more renewable power than the state will need (9,615 Mw) at an additional cost of Rs 67,000 crore.

The government's promise is to provide reliable supply to all consumers, except agriculture, which according to the two states' plans, will get 6.5 to nine hours of power a day by 2019.

Then there are states such as Uttar Pradesh and Bihar. The connections previous governments added in the entire country in five years will have to be added in just these two states in four years. Put together, 36 million houses in these two states were without power, according to the 2011 Census.

To map out reaching the national target, sources in the say, CRISIL, Mecon and Deloitte have been hired as consultants to draft the remaining 26 states' plans. In three months, these consultants will finalise three states' plans each. The officials insist that the remaining states will be ready by December, leaving the government with about three-and-a-half years to fulfil the promise before the general elections in 2019. The total investment required by all states, along with the additional central funding and private investment needs, would give an indication of the cumulative costs of achieving the 24x7 target. That will take at least another six months to be put together.

The power ministry did not reply to a detailed questionnaire from Business Standard, which included queries on the total cost calculations and estimations, if any, done so far to achieve the 24x7 electricity supply target.

Over the past few months, the government had announced some estimates of how much the grand scheme would cost and what it would entail.

Coal India (CIL) would have to increase its production to one billion tonnes annually from 494 million tonnes in 2014-15 - requiring a 15 per cent annual rate of growth. Last year, CIL ramped up production by about 6.9 per cent, though in the previous five years the average annual growth has been only 3.5 per cent. CIL would need to more than double the growth it achieved last year to achieve the target set by the government. For this, Coal Minister had estimated investments of Rs 1.27 lakh crore.

Goyal has also suggested that an investment of Rs 10 lakh crore would be required in the renewable energy sector to ramp up solar power from to 100 GW by 2022 and wind to 60 GW - at a growth rate that no country has achieved so far. At the beginning of 2014, India had installed 2,631.93 Mw of solar power projects and 21,136.40 Mw of wind power.

To upgrade the transmission and distribution systems, he has said Rs 1 lakh crore is needed over four years. In contrast, the had prepared a 20-year plan to ensure a country-wide transmission network as the backbone of the 24x7 power supply system. This, the authority assessed, would cost Rs 2.6 lakh crore. Goyal and the government have assured funds should not be a problem.

Considering the power sector is one of the most indebted today, the government has its task cut out. The total debt burden on the power sector is pegged at Rs 4.70 lakh crore, according to Business Standard's analysis. Accumulated losses of the distributors - state electricity boards - are Rs 3 lakh crore, according to the government.

These macro numbers will eventually have to be reconciled with the state-specific plans still being fleshed out.

In a three-part series, Business Standard looks at how the government is gearing up to meet its promise of power for all. The second part will look at the two plans that are ready and available publicly - those of Andhra Pradesh and Rajasthan - and how generation of power will have to be dramatically ramped up in four years

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