Calcutta Notebook


Prime Minister Narendra Modi recently reviewed the progress of making electricity available 24x7 hours to all the households of the country. It was brought to the notice of the PM that sickness of the State Electricity Boards (SEBs) was preventing the reach of electricity to millions of households. Power generation companies are generating power but it is not reaching the households because the SEBs are not willing to buy the same. Electricity is available in market at about Rs 3 per unit today. The SEBs are selling electricity generally around Rs 6 per unit. They could purchase the same at Rs 3, sell more electricity at Rs 6 per unit and make a good profit. But they are resorting to load shedding instead of buying electricity and supplying the same. On the one hand consumers stay in the dark; on the other hand electricity plants lie idle. There is a glut in the electricity market today. The connection between the producer and consumer of electricity has snapped. It is like the hungry man looking at the vegetable market from across the fence.

Reason is that SEBs are inflicted with large-scale pilferage. About one half of the electricity is sold on the sly or pilfered. They also cannot recover the billed amounts. According to one estimate, the SEBs are able to recover only about one half of the billed amounts. The problem of making electricity available to the people, therefore, is not availability of electricity. It is available aplenty. Problem is that SEBs are unable to manage their distribution. The glut in the electricity market at present, therefore, can be said to be a result of the SEBs not being able to buy and sell it. But there is a bigger problem behind this.

Let us say the SEBs become efficient and they start supplying electricity to the consumers efficiently. Will the demand increase then? Not much. Load shedding is mainly done in areas that do not have political or economic clout. Uninterrupted supply of electricity to these "poor" areas will not lead to much increase in demand because they do not have much purchasing power. Secondly, large industries are increasingly installing captive power plants. The installed capacity of captive power plants doubled in last eight years. An owner of a paper factory told this corespondent that it costs Rs 2 per unit to generate power in his factory in comparison to Rs 6 per unit that it costs to buy from the SEB. There is a mad rush to establish captive power plants. These large consumers are to create most demand for electricity. Therefore, the demand for electricity will not increase much. Thirdly, the power that is pilfered by officials of the SEBs does not disappear into thin air. It still meets the demand of the consumers. Only difference is that the payment is obtained by officials and not the Board. Thus reduction of pilferage will not lead to increase in demand. Rather, it only will shift the demand from the black to the white market. In truth demand will increase, say, by about 10 percent if the SEBs start meeting the latent demand.

Actually, there is not so much demand for electricity. A study done by The Energy Research Institute assessed the Willingness to Pay for electricity among urban consumers at about Rs 6 and among farmers at about Rs 3. The price of electricity for urban consumers has already reached this price of Rs 6. Hence all the demand is already being met. Conclusion is that India is already producing all the power needed; and making the SEBs efficient will not change the situation much.

The noise in the media that there is a huge shortage of electricity is actually a hype created by the electricity mafia operating from the offices of the Central Electricity Authority (CEA) which manages the electricity scenario of the country for the Ministry of Power. The CEA routinely forecasts an increase in demand of electricity at about six to seven percent every year. These are deliberately hugely overestimated.

TERI has found at primary energy growth rate was at 4.4 percent per year during the period 1997-2019 and 3.6 percent during the period 2020-2047. The International Energy Outlook 2002 predicted a growth rate of 3.6 percent per year during 1997 to 2020. Environment Agency of the Government of Japan assessed the primary energy consumption growth rates for India at 3.9 percent per year till the year 2025. Yet, CEA has predicted a higher increase and encouraged establishment of large numbers of power plants that are not actually required.

The SEBs are not behind. They deliberately indulge in load shedding to create an artificial shortage of electricity so that the government enables them to buy more electricity and enables them to indulge in yet more pilferage. Take the example of Maharashtra. The State was routinely projecting shortage of 6,000 Megawatts of electricity. Then one morning they said no load shedding will be done. So "where did the shortage go?" Conclusion is that there is no real shortage of electricity.

CEA and other front organisations of the power generation lobby routinely refer to the low power consumption in India compared to other countries. The CEA reports per capita electricity consumption of 13227 units per year in the United States and 3298 units in China; against 819 units in India. It is implied that India needs to increase generation to come at par with these countries. The logic is warped. Every country has to adopt lifestyles that are suited to its own factor endowments. Saudi Arabia does not seek to consume water at par with Brazil. The fact is that India has limited coal reserves. Hydropower imposes huge environmental impacts on the poor people. Nuclear power would make the nation dependent on imports of uranium. The way forward for the people is to reduce electricity consumption. Improvement of quality of life does not necessarily require increase in consumption of electricity. Having lunch under a banyan tree may provide a better quality of life than having the same lunch in an air-conditioned dining room.

It is a good sign that the Prime Minister is committed to making 24x7 electricity available to the people. The problem is not generation. The problem is that people do not have the purchasing power to buy electricity. More generation will thus only add to the surplus. It is time that an explanation is called from the officials of CEA as to why demand is not increasing as predicted by them.

Vol. 48, No. 19, Nov 15 - 21, 2015