No power to fire India's development dreams
Power being the backbone of industrial development, progressive second-rung reforms and creation of a healthy investment climate must be undertaken without further delay. Atul Sehgal writes.india Updated: Nov 20, 2013 23:09 IST
Recently, the State-owned Coal India Limited (CIL) inked fuel supply agreements (FSAs) with 156 thermal power plant developers for the supply of coal. This news came close on the heels of another event which had brought to light the sorry fact that thermal power projects worth over Rs 50,000 crore had been delayed as on December 2012 due mainly to blockage of mines caused by the 'coalgate' scam.
The country is in the throes of a power crisis. Thermal power, which accounts for nearly 65% of total power generation, is dependent on coal. With the supply of coal choking, the Centre went into fire-fighting mode and declared, in May, that the CIL would be signing 173 FSAs with thermal power producers for about 78,000 MW of capacity.
On paper, the signing of FSAs appears good. But is it going to be translated into commercially viable thermal power generation on a long-term basis?
While implementing the power sector reforms set in motion by the Electricity Act 2003, the government had left many loose ends. The power development programme progressed through steps and pauses, the duration of pauses being too long to deliver the benefit of a few progressive steps taken.
The 11th plan power generation capacity addition target of 78,000 MW could be achieved only to the extent of 53,992 MW, a shortfall attributable to choked coal supply.
In 2012, there was no initiative by the Centre to address the problems of coal supply for the new thermal power projects. In 2013, even after signing of the FSAs for thermal power plants under development, extensive coal sector reforms are yet to take place.
About 13% of the thermal power plant generation is based on gas, and power plants are unable to run beyond 50% capacity because of the non-availability of gas at the required price.
In a country where the regulatory mechanism covers the power sector but not the coal sector, there is a need to set things right on the commercial aspects of the industry.
The government must ensure that power procurers and distributors get the due revenue. To do this, power pilferage must be stopped and dues recovered through hard, punitive arrangements.
There is a need to reform the coal sector. Hardly 25% of domestic coal reserves have been tapped in the country. The private sector is keen to invest in power generation and distribution and also coal mining but is hamstrung by the current policy paralysis.
Power being the backbone of industrial development, progressive second-rung reforms and creation of a healthy investment climate must be undertaken without further delay.
Atul Sehgal is a senior power sector professional
The views expressed by the author are personal