Power Outage Politics: Area of Darkness
The rent-seeking model of politics threatens economic growth. Energy security in developed economies is synonymous with national security. India’s political class must recognise that there are no exceptions.
By Shankkar Aiyar |Published: 17th April 2022 07:21 AM |
We will make electricity so cheap that only the wealthy can afford to burn candles. Thomas Alva Edison made this promise in December 1879 as he set up the Edison Electric Light Company. Two centuries later, India’s political class invented the idea of ‘free power’ to electrify vote banks. The wealthy may or may not indulge in candle light dinners, but outages are forcing the poor to burn candles and grope their way through darkness.
Last week, India’s most industrialised state Maharashtra put out a date-wise, district-wise calendar of “load shedding”. An admission of ineptness, it lists where power will not be available — the worst affected are small enterprises, middle class and poor households. Add undeclared outage when inverters go clickety-clack. The parade of fig leaves presented to hide systemic apathy includes unavailability of coal, gas, water and meeting the cost of higher supplies.
Maharashtra is not the only state suffering power shortage. Keeping it company is a growing list including Andhra Pradesh, Tamil Nadu, Rajasthan, Madhya Pradesh, Punjab, Haryana and Telangana. The list is growing. The Central Electricity Authority (CEA) website presents a daily report of coal stocks with power generators. On April 13, coal supply at 79 power generating units was less than what is defined as critical. The CEA power supply report shows that even in March, supplies from every region fell short of need.
It is true that the Russian invasion of Ukraine has disrupted supplies and ramped up costs. It is equally true that the supply mismatch is not unprecedented — just six months earlier in October 2021, India’s economy faced a similar saga of load shedding and outages.
But did that chapter educate/inform the management of the sector? What makes the statistical saga poignant is that India is promoted as a power surplus economy in investment conferences. Reality, though, has a habit of showing up dressed in irony.
This week, Power Minister R K Singh observed that demand for electricity had gone up by eight to nine per cent, could touch 220 GW and that coal supplies have not kept pace. The rise in the demand should have been foreseen given the projections of GDP growth — higher capacity utilisation in manufacturing, revival of the contact economy and services sector and, of course, the rising need to power internet-connected devices in a digitalising economy.
The question which begs to be asked is how this is managed and who is responsible for balancing demand and supply. The answer to the ‘who’ question is located in the oft-repeated statement about electricity being a “Concurrent Subject” — that is both under Centre and States under the Constitution. Effectively, the bipolar disorder ensures that while authority is defined, accountability is shielded in a fog. Typically, the outage of power outlasts the magnitude and momentum of public outrage!
Parochial politics has derailed critical power reforms and left the sector vulnerable to periodic shocks. Sure there is a need for tactical agility to secure supplies during shocks. More important is the urgent imperative for acquiring strategic smarts to recast the economics and the composition of energy mix by inducting policies which disable import dependence and encourage the use of renewables.
The crux of the issue shackling the power sector is economic viability. This calls for input costs to be priced in the tariff and the system engineered to recover the price. For two decades, successive governments have struggled to open up the last mile of distribution to competition so that costs are recovered but State Electricity Boards (SEBs) have resisted.
There is no disputing that the poor and farmers deserve subsidies. The current system benefits large farmers more than small and tenant farmers. Why not use a transparent modern mechanism — meter the usage and enable pre-paid subsidies using Aadhaar-based e-RUPI and charge it to state budgets?
Systemic sloth has detained innovation and transformation. The over 7,500 km-long coastline offers potential sources from tides, waves, oceanic thermal and offshore wind farms — and even a hybrid system incorporating all. India is blessed with over 300 days of sunlight. There is much excitement about solar but the policy suffers from an obsession with mega projects. The narrative must shift from MW to kWh, enabling off-grid solutions.
MSMEs could come together to set up micro generation units but the policy denies them the open access afforded to large corporations. A cost-shared mechanism could deliver off grid solar power to apartment complexes but the net metering model is predatory — surplus power wheeled up by residential units in Maharashtra, for instance, are allowed barely a fourth of median tariff.
The perverse incentive embedded in politics to promise freebies using taxpayer monies has distorted the cost economics of the sector. This is manifest in the finances of the SEBs. No revenues are collected on every fifth unit of power distributed. In December, Parliament was informed that accumulated losses of SEBs were over Rs 5.07 lakh crore.
The rent-seeking model of politics threatens both energy security and economic growth. Energy security in the developed world is synonymous with national security. India’s political class must recognise that there are no exceptions.
Shankkar Aiyar, political economy analyst, is author of ‘The Gated Republic –India’s Public Policy Failures and Private Solutions’, ‘Aadhaar: A Biometric History of India’s 12-Digit Revolution’; and ‘Accidental India’. You can email him at email@example.com and follow him on Twitter @ShankkarAiyar. His previous columns can be found here. This column was first published here.