Infrascape 2013 | Power distribution needs significant reform intervention

Anil Sardana, Managing Director, Tata Power Company Limited

India has suffered a slowdown due to weak industrial growth. There is an immediate need to improve the macro-economic environment to accelerate the pace of reforms. As the year 2012 ends and the New Year rolls in, the existing troubles need immediate resolution.

Challenges: The challenge as one sees compared to the previous years is deteriorating, coal supply on one end of the value chain and poor financial outlook of Discoms where the losses have been increasing to levels far higher than the previous years.
Despite huge coal reserves in India, the domestic power sector is facing coal shortages and has resorted to imports to meet its requirements. This shortage may result in increasing stress on assets that are already built by private players.

Lack of environmental and regulatory approvals in relation to acquisition of land compounds lead to a delay in capacity addition. Non-availability of adequate financing on applicable terms also adversely affects the project execution. This shortage has stranded gas-based power projects with a combined capacity of around 18,903.5 MW, accounting for only 9.13 per cent of the total generation capacity. The government should evolve a robust energy security policy for the country and also issue advisory to all State Regulatory commissions to plan bulk supply procurement in line with the basket of fuels that meet IndianÂ’s energy security needs.

Setbacks: The distribution segment caters to 200 million consumers with a connected load of 400 GW, comprising one of the largest customer bases in the world. However, high financial losses and the debt burdens of the distribution companies are hampering the electricity distribution segment in India.

Though the cost of generation has steadily increased due to high fuel prices, State Governments, due to political considerations, have not permitted their distribution companies (discoms) to revise their tariffs. This is a matter of great concern as the buyer of merchandise has to be solvent and efficient, failing which the fiscal health of all associates in the value chain will get impacted and it would lead into vicious and unviable circle of uncertainty.