Sunday, 13 Oct, 2024
Why is the power sector facing the same kind of crisis even ten years after that disastrous grid collapse?
On July 30, 2022, Prime Minister Narendra Modi launched a slew of projects of the National Thermal Power Corporation and made the assertion that more than 1,70,000 MW of power capacity had been added after his government came to power in 2014. He also made a veiled criticism of some opposition parties by claiming that “Rashtraneeti” is more important than “Rajneeti”. What most media commentators and professionals forgot while reporting this event was what happened on July 30 ten years ago. The entire northern grid collapsed, leaving about 400 million Indians without power-a record in the history of the world. That record was broken the next day as virtually the whole of India faced blackouts, affecting more than 600 million Indians. History was on the verge of being repeated this summer as extreme heat wave conditions triggered a massive jump in demand for electricity. It was some deft management and some luck that prevented disaster.
The moot question is: why is the power sector facing the same kind of crisis even ten years after that disastrous grid collapse? In fact, it is not ten years. About 20 years ago, the Union Government had passed an electricity reform bill in the Parliament to make the power sector financially viable and strong. That did not prevent the power sector from slipping into crisis every year as state electricity boards simply went bankrupt. The Narendra Modi government launched the ambitious UDAY scheme in 2015 to revive bankrupt state electricity boards. Much was expected of it. But nothing much has changed. According to data released by the Power Finance Corporation, accumulated losses of state electricity utilities rose from Rs 4.37 lakh crores in 2017-18 to Rs 5.08 lakh crores in 2019-20. The stark and simple reason is the inability of the utilities to recover costs as governments keep announcing subsidies and free electricity. Their bankruptcy creates trouble for power generation companies and the vicious cycle goes on.
As the accompanying chart will indicate, the crisis in the power sector could deepen over time and reach unmanageable proportions. India is no longer a poor, developing and low income country. Thanks to sustained economic growth in the last two decades, the Indian consumer now has the income and the purchasing power to demand and buy more goods and services. Electricity happens to be one of them. The per capita consumption of electricity was a 884 KwH in 2012-13 when the northern grid collapsed. By 2019-20, the pre pandemic year, per capita consumption had gone up to 1208 KwH despite a growth in population and despite GDP growth rate slowing down considerably to just 4% in 2019-20. As the Indian economy recovers, demand for power is rising rapidly again. The big question is: can perennially bankrupt utilities keep pace anymore with rising demand?
