"Too much sanity may be
madness and the maddest of all, to see life as it is and not as it should be."
-Miguel de Cervantes (Spanish,
1547-1616)
Word for the day
Pre-prandial (n)
Before a meal, especially
before dinner, e.g., pre-prandial prayer.
(Source: Dictionary.com)
Malice towards
none
The Allahabad High Court
order regarding the education of children of government employees etc. is bound
to ruffle many feathers.
The moot point is whether the
government should take this as an opportunity to reform government run
education institutions or a challenge to their authority and freedom?
Fix the priority first
A recent CRISIL report on Indian power sector has highlighted many
interesting facts, besides adequately flagging the distress and pain that the
sector is facing.
The intimidating data about the indebtedness of the sector and the
consequent pressure on lender's asset quality is well documented and has been
widely discussed. The fact of falling demand of power and consequent
underutilization of installed capacity has also been in news recently.
However, what has not been discussed prominently is the issue of
gap between unmet power needs and actual consumption demand.
The CRISIL report highlights that about 25% of the power produced in the
country (valued at Rs850bn) is lost due to inefficiencies of the transmission
and distributions system whereas the rural parts of the country face an average
power cut of 6hr daily. This is when the consumption demand for power has been
on average 9% lower as compared to the power availability.
In statistical terms, it is estimated that if the installed capacity of
1,65,000MW operates at 70% PLF, the entire base deficit of power would be wiped
off making India a power surplus nation. However, the fact remains that
millions of household in the country are still without a power connection. And
even those who have a power connection consume very low amount of electricity
due high cost or erratic supply.
An average Indian consumes about 1000kwh of electricity annually.
This compares with appx 13000kwh for US residents and 3457kwh for China.
Under these circumstances, the conventional strategies to reform
power sector may not be sufficient, in my view. The government may need to
beyond the usual - hike tariff, recapitalize discoms, cut AT&C losses -
this time.
In my view, to find a sustainable solution to the problem, the
government should first fix the priority from the following:
- Revive discoms - hike tariff, renegotiate PPAs, reduce AT&C losses, etc.
- Protect producers - renegotiate PPAs to pay higher prices, ensure adequate fuel supply, restructure debt at favorable terms and encourage fresh investment.
- Protect consumers - 24x7 uninterrupted power supply to all at reasonable price.
- Protect lenders - allowing lenders to takeover troubled projects, renegotiate PPAs and run these projects professionally.
After fixing the priority, the government should find out what
would be the best way for implementation:
- Nationalization of troubled power projects;
- Privatization of state owned discoms; or
- Internationalization of power sector by completely de-regulation and participation of global players.
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