Recharging the power sector

It is apparent that India can achieve neither fiscal stability nor energy security unless it reduces its dependence on imports.


India’s honeymoon with low oil prices could be nearing its end. Prices have already climbed from a low of $45 to $60 per barrel—should the recovery continue, oil may surge all the way back to over $100.

So far, soft oil prices have helped India tame inflation and drag CPI down to below 5%, other than narrowing its trade deficits despite the dwindling exports. But all that could change quickly if the spurt in oil prices continues. This is because 35% of India’s energy needs are met by oil and gas and these two fuels alone account for over 40% of its total import bill.

It is apparent that India can achieve neither fiscal stability nor energy security unless it reduces its dependence on imports. The obvious way to do that is to turbo-charge the development of locally-available energy resources, both fossil fuels and renewables.

Although the Modi government has taken some steps to kick-start India’s floundering power sector, there is still a long way to go. And the signals must start showing right now, with the forthcoming budget. Here is a top-ten ‘must-do’ list for the government.

Revive hydro

This sector has suffered from years of neglect owing largely to policy inertia. As a result, our installed capacity for hydro power is 40,000 MW as against a total potential of 150,000 MW. The history of India’s hydro sector is marked by a trail of projects that never took off or are stalled. Since hydro is extremely capital-intensive, it is important for the government to take the lead and invest in large projects and open the way for the private/PPP sector to develop relatively smaller projects through enabling policies and a transparent process.

Go for coal gasification

The government must give a strong policy impetus to the exploration and production of coal-bed methane. We must pursue both surface and under-the-ground modes for gasification of coal. Coal mines need to be allocated exclusively for the production of gas much like China has with impressive results.

Waste energy management

Special incentives, including liberal financing, needs to be offered to encourage companies to harness this emerging source of energy—an approach that will serve both the Make-in-India and Swachh Bharat objectives

Privatise distribution

Since distribution is critical for the well-being of the energy sector and its sustainable growth into the future the government must set up a time-bound plan for transferring the ownership/management of power distribution to private/PPP entities.

Modernise distribution

Inefficiency and transmission losses have driven India’s power sector to the brink of financial sickness. Revival will entail both standardisation and a large dose of automation.

Expedite PPAs for sale

After the coal mine allocation issue is done and dusted, the government must ensure that long- and medium-term PPAs are quickly signed; otherwise, power companies could collapse under the weight of huge underutilised capacities.

Bail out stalled projects

The government should set up an empowered committee to take the steps necessary to re-start the development of stalled power projects including, if necessary, their acquisition by NTPC or private companies.

Lower debt-equity barrier

Given that power and energy projects require massive amounts of investment this needs to be done to ensure that competent private sector investors are able to entry the fray.

Coal-based power plants typically operate at a Plant Load Factor (PLF) of 85%. The relative figures for wind and solar projects are 25% and 15%, respectively. Therefore, at least for the foreseeable future, renewables can be expected only to compliment, not substitute, coal-based power generation.

So far, India has achieved a total capacity of just 250,000 MW as against an anticipated demand of about 800,000 MW over the next 15 years. Government policies must recognise that expansion at this humongous scale cannot be achieved by the public sector alone and will require active participation of private and PPP players. It must, therefore, build on its promising start and accelerate the whole process of renewal and revival. The budget will give vital cues on how the new government means to navigate the sector at a time when it is marooned in a sea of doubt.

Comment:

On Saturday the finance minister Mr.Arun Jaitley will present the budget.In my point of view,the main focus of the budget will be on Infrastructure.Recharging the power sector is the most prominent 
point to develop the economy of India.In India,Power sector is not performing as per the capability,
The installed capacity is still around 2,54,000 MW.The Indian economy is growing at a rapid rate.To match up with the economy,the power sector should also grow at rapid rate.The main hurdle in power sector is the land acquisition.So,government should expedite on giving land to the power sector projects.
In case of renewable energy,India has much wider scope in solar projects.The solar rooftop project can be game changer of the Indian Power sector.So,lets hope for the best for upcoming budget on 28th february.