MP: How an energy deficit state became one that sells power to other states

  • Padma Shastri, Hindustan Times, Indore
  • Updated: Jan 29, 2015 19:59 IST

In 1955, the city of Dewas, located 35 km from Indore, had a small diesel-powered plant that supplied electricity only from 6 pm to 12 every night. The plant’s supervisor, a junior engineer, was treated like royalty because he sometimes extended power supply for a few hours at the request of local residents for festivals and weekly fairs.

“The supervisor was treated like a God as he held the key to power supply,” recalled PL Nene, a former chairman of the Madhya Pradesh Electricity Board (MPEB) who was once a trainee engineer in Dewas.

A litre of diesel, which cost 75 paise, produced four units of electricity, and the plant ran through one to two drums of diesel in a day. Compare this to December 8, 2014, when Madhya Pradesh’s energy utility supplied 9,800 MW of electricity to its consumers – which, according to MP Power Management Co Ltd MD Manu Srivastava, was one of the highest figures for a single day last year.

Between these two extremes were decades when Madhya Pradesh grappled with power outages as authorities tried to meet the burgeoning demand for energy.

Things began to change in 2004-05, when the state began implementing a policy that combined an aggressive scaling up of electricity generation with procuring power from the central pool and private producers. In a decade, Madhya Pradesh has gone from an energy deficit state to one that sells power to other states. Several factors contributed to the turnaround.

The state government stepped up the generation of electricity from its own sources. State-run MP Genco, which produces both hydropower and thermal energy, increased production by more than 22% in the past six years.

At the same time, the state began producing electricity through joint ventures with the National Hydroelectric Power Corporation in which Madhya Pradesh’s stake is 49%. The Indira Sagar project, Omkareshwar project and Sardar Sarovar project are examples of such joint ventures.

The state government also procures energy from the National Thermal Power Corporation, a central sector body. Since 2008, the state began procuring energy from private players, including business enterprises that produce electricity in their campus to meet their own needs and sell the rest to the government.

In addition, the state developed renewable energy sources. The private sector 130-MW solar plant installed at Neemuch last year is the largest of its kind in India. There are also solar plants of 2 MW to 25 MW in areas like Khilchipur, Susner and Rajgarh and the state has encouraged the production of wind and bio-mass energy. Though the supply of energy has improved in the past decade, questions are now being raised as to why Madhya Pradesh took more than 50 years to ensure electricity is available 24 x 7. Experts say it could be due to lack of political will.

In the four years preceding 2004, MoUs were signed for installing power plants with a capacity of 8,000 MW but less than 1,000 MW was supplied.

“Before 2004, the state government didn’t assure private players that it would purchase their electricity. Nor did it give counter-guarantee to the bank that it would repay the loan of private companies, with whom it had power purchase agreements, if they fail to pay,” said RS Goyal, a former chairman of the Electricity Consumer Grievance Redressal Forum.

“Government didn’t allow depreciation earlier,” revealed ex-additional MP State Electricity Board superintending engineer RC Somani. “If a person sets up a 1-MW plant costing Rs 9 crore, he can show depreciation of (machinery) worth Rs 4.50 crore for income tax return. This means the income tax department will not consider Rs 4.50 crore as his income and impose tax on it," he added.

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