electric field Suffers from several problems: over-reliance on dirty coal (including its dirty cousin, lignite), slow production of domestic coal, despite having the fourth largest coal reserves in the world, heavy reliance on imports, inadequate transmission capacity, grid congestion and abandoned electricity and revenue, technologically inefficient distribution grid leading to yet more discarded electricity and revenue, persistently under-utilisation of capacity, ever-increasing dues to power generators by power distribution utilities, low per capita electricity Electricity consumption, and subsidies that encourage wasteful consumption of electricity and deplete groundwater while discouraging the potential in power use.
But the biggest problem is what is known as anemic Gross Technical and Commercial (ATC) Losses, At the turn of the century, it used to be as high as 50%. In other words, half the electricity produced was not paid for. ATC losses should really be called gross theft and less investment loss.
In any given power system, about 3% of the generated electricity is lost during transmission, i.e., bulk transfer from the generating station to the distribution utility, where step-down transformers, a series of them, are used to step down the voltage. goes. Standard household electricity of 220 volts. More power is lost in the distribution phase. A technically efficient system can stop losses up to high single digits. So, how did India achieve atc loss of 50%?
Distributed electricity bill will have to be paid. Bill has to be paid. Many states take pride in providing free electricity to their farmers. Now, free electricity is not the same as unmetered electricity. You can meter the electricity consumed by each farmer, ask them to pay the bill and reimburse them the bill amount. In such a situation, only the farmer will benefit from the electricity subsidy. When the connection is without a meter, almost anyone can draw a line from the pump house to their small industry and avail free electricity. This is why electric arc furnaces in northwest India produce some of the most energy efficient steel in the world: their electricity bills are zero.
Protection of electricity theft is considered a moral duty of a politician in most parts of the country. When electricity theft becomes common, the poor cook who consumes electricity finds themselves at a competitive disadvantage compared to those who take advantage of the power theft politicians indulge in.
In theory, state utilities are expected to make explicit provisions for subsidies to be given on the supply of electricity to certain segments of the population. The state government is going to give them budget allocation for subsidy. This is seen more in violation than in behavior. Theft and unpaid subsidy subvention eat away at the utility’s financial ability to meet its costs. The utility gets exhausted because of the generator and accumulates losses.
From time to time, the central government has tried to persuade state governments to take the tab on behalf of state power utilities, set up mechanisms for power producers to clear their dues and improve utility finances. In 2000-2001, the government launched the Accelerated Power Development Programme. It worked well, for a time. The losses and arrears increased again. The government launched the Accelerated Power Development and Reform Program in 2003. Philosophers can attribute great power to words. The Ministry of Power thought that adding the word rectification to the failed APDP would work magic. The firm belief of Indian politicians that they have to continue to patronize power theft and sub-utility performance defeated philosophy and magic. In 2008, the government launched a prefix, revamped, to the APDRP scheme. More money went to upgrade systems, pay dues, and encourage state distribution utilities to make improvements and collect realistic electricity charges. The political will was still missing. In 2013, the government launched the Integrated Power Development Scheme. The final result did not change with the change in program plan.
Government changed; Modi government took over. Inexplicable bits of alphabetical clunkiness went out from the revamp menu. The abbreviated UDAY scheme for the Ujjwal Discom Assurance Yojana, which did more financial engineering to bill every unit of power sold and collect every rupee bill, to compensate for the still missing political will. Under UDAY, state governments took over the arrears of state power utilities, shifting their debt burden to themselves. The euphoria remained, the enthusiasm did not. That was in 2015.
State utilities continue to build up losses and arrears to power producers 6 trillion, in 2021 as per ICRA report. Hence, the government has come up with a new, result-linked reform plan, wherein all electricity meters are to be replaced with prepaid digital meters.
According to the government, the ATC loss has come down to 19 per cent. But the fiscal deficit continues to grow. The electricity sector needs, more than anything, the cost of producing and supplying electricity, as well as surpluses through tariffs, and the political will to strictly enforce those tariffs. There may be some initial resistance, but eventually, people will happily pay for assured, quality electricity instead of suffering from frequent power cuts and fluctuating voltages that kill appliances that run on electricity.
The political economy encourages the presence of giveaways, subsidies and welfare which eat into its ability to provide sustainable welfare. The power sector, along with other sectors, needs a dose of genuine political courage to tell consumers the shocking truth, hey, electricity costs money, and the consumer has to pay. People pay for the WhatsApp videos they watch by paying decent money for the smartphone and data plan. They will also pay for power, if only politicians will let them.