Blackouts call for electricity sector reforms, tariff hikes: Moody’s
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While the massive power grid failures on consecutive days last week occurred during monsoon season when power demand is usually low and when hydro power plants are running full steam with brimming dams and there is lower demand for irrigation, it brought to the fore the precarious demand-supply situation the country is dealing with.
Unlike other countries, India does not have a reserve margin to cover spikes in power demand, and peak demand often outstrips supply by 10 per cent, the Central Electricity Authority says.
1. The country faced an estimated power generating loss of 24 billion units in FY2012 due to inadequate coal and gas supply. Another 11 billion units were lost due to transmission constraints and plant shutdowns.
2. NTPC, India’s largest power producer, is way behind schedule in its plans to increase generating capacity to 50 gigawatts (GWs) by the end of the 11th five-year plan, which ends in 2012, and to 75 gigawatts by the end of the 12th five-year plan, ending in 2017. NTPC estimates it can only achieve generation capacity of around 40 gigawatts by the end of 2012, and 67 gigawatts by the end of 2017. Delays in receiving equipment, acquiring land and obtaining coal linkages from Coal India are the main reasons.
3. Transmission and distribution losses have declined to an estimated 22 per cent in financial year 2012, but are still unacceptably high compared to other developing countries such as China, where the figure is just 6 per cent.
4. The mismatch between the selling price and the cost of production of electricity in India is a big structural challenge. State electricity boards have been selling power for less than the cost to procure and deliver it. This is preventing cost recovery across the value chain, and is also impeding investment. There’s a gap of Rs 1.23 per kilowatt hour of electricity sold.
5. State governments reimburse state electricity boards a portion of their under-recoveries, which are estimated to cross Rs 48,000 crore in fiscal 2012.