New electricity bill provisions, if implemented, will only worsen situation

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By: C N Deshmukh

An electric power crisis is being predicted in India. And at a time when the installed generation capacity is more than the maximum demand. The reason can be traced to the policies pursued by the Government since1990.

Today, 75 percent of the total generation capacity is thermal, based on coal. Take the example of Maharashtra. The installed capacity is 24000 MW. Of this, MahaGenCo, the public sector corporation responsible for generating of electricity, has installed capacity of 13602 MW, out of which, 10170 MW is coal based thermal generation. The NDA Government allowed private companies in generation business by enacting Electricity Act, 2003.These private players were not only allowed thermal generation, but were allowed to erect their thermal power plants right next to coalmines. Their total installed capacity is 8500MW.

The same policy is being followed throughout the country since the enactment of Electricity Act, 2003. It must be mentioned here that Electricity Workers unions, affiliated to AITUC, have opposed Electricity Act, 2003 right since its inception. Com. A. B. Bardhan, President of All India Federation of Electricity Employees and Engineers (AIFEE), had warned of the crisis this policy will lead to. The MahaGenCo has hydro generation capacity of 2500 MW, which is a source of the cheapest electricity.

Electricity Act, 2003 continued to be amended under intense lobbying by the private capital that had started business of electricity generation. The worst for public sector generation was introduction of “Merit Orders Dispatch (MOD)”. This provision mandated that the Electricity Distribution Companies had to buy electricity from the generation company offering the cheapest rates. Sounds very User-friendly, but the conditions in electricity generation did not offer level playing field: companies belonging to Adani, Reliance, Nippon had been awarded land next to coal mines. They had coal transportation cost almost nil, while those belonging to MahGenCo, were erected in various regions such as Paras, Bhusaval, Nasik, Parali, which, except for the Chandrapur plant, had to incur heavy coal transport costs. The new private plants have modern, efficient machinery and workers are kept on contract basis to keep labour costs minimum whereas the MahGenCo plants are old, have less efficient machinery and the workers in those plants are permanent with decent service conditions.

Consequently, electricity from MahGenCo plants is costlier than private plants. Therefore, when the demand was less than the production capacity, MahGenCo plants had to be shutdown. Even today, the MahGenCo plants have to be shut down frequently. This uncertainty of operations is killing the MahGenCo thermal plants, which cannot be turned on or off like hydro generation facilities.

The experience of the power purchase agreement (PPA) with Enron does not seem to have taught these policymakers anything. Not only in Maharashtra, but all over the country, PPAs are being entered into with these private generation companies, without estimating if the electricity is really needed, obviously due to “political reasons”. For example, if total demand in Maharashtra is 15000MW and the PPAs are for 20000MW, the generation companies have to be paid for the extra 5000MW as Fixed Costs, without even buying that electricity! Thousands of crores of rupees are flowing into the coffers of these private sector generation plants through this mechanism. The unsuspecting consumer, who was enticed with supply of cheap electricity to begin with, is saddled with this “Fixed Cost”, one of the main reasons for costly electricity. This is the price he has to pay for the promise of “No load shedding in Maharashtra“! People ask, then, why is the electricity cheaper in Delhi? The simple answer is that such crony PPAs are not entered in Delhi so far. But this is going on merrily all over the rest of the country. Kerala is an exception: electricity generation, transmission and distribution are still under one Electricity Board, which, because of their coordination, offers electricity at reasonably cheaper rates, as compared to other states, to its consumers. In short, without studying the seasonal demand pattern of electricity, PPAs are entered into and the end-user is asked to foot the bill.

This has led to increasing backlog of unpaid electricity bills, aided by wanton electoral promises. In Maharashtra, this amount has ballooned to Rs.72000 crore. Now, ostensibly to rectify the situation, Electricity Bill, 2021 is proposed with further dose of privatisation. It will impact the common man and the agricultural sector adversely and severely. That is why the Electricity Workers and the Samyukta Kisan Morcha are opposing this bill tooth and nail. Electricity Act 2003 was enacted ostensibly to make Electricity generation, the basic need of the people, self-sustaining and to expand the public sector further.

But through the Electricity (Amendment)Bill 2021, the Central Government seeks to throw open the generation sector to private parties for higher profits. The electricity crisis is deliberately being built up as a justification of bringing in this latest amendment to the Electricity Act. Consequences will be this essential commodity going beyond the reach of the common man and the Farmers. Consequences will be farmers without means to irrigate their farms. Farming will become impossible for them. Yet, why is the amendment being brought in? The answer is closely connected to the three hated Farm Laws. What is the genesis of the present electricity crisis?

As explained above, 75% of electricity generation in India is coal based thermal generation. The required coal is sourced from the Navarathna PSU, Coal India or imported from Australia or Indonesia. The price of imported coal has doubled from Rs.4000 per metric ton to Rs.8000 within one year. In every State in India, DisComs have huge recoverables from the consumers. In Maharashtra the figure has reached Rs.72000 Cr. So is the case with every other state.

Consequently, DisComs owe a lot of money to the GenCos, who, in turn, find it difficult to pay for the coal required. Usually, GenCos stock up coal to last for 4 to 5 months prior to the monsoons. This year the rainfall has been 125% of the normal. It has drenched the coal stocks. Even the coal production from the mines is held up. The other reason is that due to Covid-19 pandemic and the lockdown during the past year and a half, all normal activity had come to a halt, thereby reducing the demand for electricity. The policy makers have wrongly estimated that the demand will remain low in view of the anticipated third wave of the pandemic. But the possibility of this third wave is receding, lockdown restrictions are being eased. In Maharashtra, since 7th October, 2021, almost all restrictions have been removed. Activities have resumed. The demand for power has gone up

The usual annual October Heat has added to that demand. Therefore, inspite of the generation capacity being more than the overall peak demand, the coal shortage is bound to lead to load shedding all over the country. Alternate sources of power account for only 25% of the capacity. It is only to be expected that private generation companies will see an opportunity in this situation. Adani has a supply from his Australian Coal Mines. Most of the private companies are situated near the coal pit-heads. They have received their Fixed Costs and received their bills from Escrow accounts. They could, therefore, build up their stock of coal. They have thus positioned themselves for the kill. The PSU generation companies will of course be blamed for the ensuing price rise as well as for load shedding and/or outages!

It is the Employees and Officers on the field who will have to face the brunt of people’s ire, opportunist political leaders, who have themselves created this mess in the role of policy makers. It may even lead to law and order situation. The ordinary consumer is not aware of these details. He is interested in getting assured supply of electricity at cheaper rates. But it is certain that electricity charges will also go up like cooking gas cylinders and petrol as also diesel. Once they go up, there is no guarantee they will come down in future. The State/ National Regulatory Commissions cannot be depended upon. They are proxies of the Corporates!! (IPA Service)

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