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Home News Power Sector News APPROACH TO 11TH PLAN - Comments on Power Sector

APPROACH TO 11TH PLAN - Comments on Power Sector

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UPA Government  Power policies effect power generationThe vision of UPA government on 11th plan can be contained in a nut shell as follows. “The 11th Plan provides an opportunity to restructure policies to achieve a new vision of growth that will be much more broad based and inclusive, bringing about a faster reduction in poverty and helping bridge the divides that are currently the focus of so much attention. The first steps in this direction were initiated in the middle of the Tenth Plan based on the National Common Minimum Programme adopted by the Government. These steps must be further strengthened and consolidated into a strategy for the 11th Plan.”
The suggestions to fulfill this vision are briefed in the approach paper as given below.

First Page

”Work done in the Planning Commission and elsewhere suggests that the economy can grow between 8% and 9% per year on a sustained basis provided appropriate policies are put in place. With population growing at 1.5% per year, this would ensure that the real income of the average Indian would double in ten years. It is also possible to adopt policies that will ensure that this growth is broad based, benefiting all parts of the country, and especially the rural areas. This must be accompanied by a major effort to provide access to basic facilities such as health, education, clean drinking water etc., to large parts of our population which do not have such access at present “

General Criticism
It is true that if the steps to implement the NCMP are further strengthened, the real income of people at large will be improved which will provide a relief to their sufferings. But the faith of the UPA government in NCMP has become doubtful after two years of it’s rule. Even though few positive steps have been taken for the implementation of NCMP,the UPA government was showing conscious disregard to it’s vital and sensitive commitments to the people of India thro’ NCMP as briefed elsewhere in this issue.

In this back drop of governance for the last two years by UPA government, the song of further strengthening of steps to implement NCMP is to pull the wool over the eyes of the people. Under the reign of neo-liberal policies, the economic growth rate between 8%-9% may double the income of few, but will not double the income of majority of Indian population. This campaign of a mirage is based on the doctrine of “trickling-down” effect.

The approach paper suggest that the investment in infrastructure including power generation , transmission and distribution will need to increase from 4.6% of GDP to 7%-8% in 11th plan period and claims that half of increase in investment (6%) should be in infrastructure to achieve this goal. The paper also suggest an aggressive effort to promote Pubic – Private Partnership (PPP) since public sector resources are scare .Eying this, Model Concession Agreements (MCA) are being designed that constitute a stable policy and regulatory regime where private capital derives greater comfort and seeks least possible risk premium ! Now the cat comes out of the bag! The basic infrastructure development including strategic sectors like electricity which is the basic responsibility of a government of the developing country is handing over to profit haunters in the label of PPP on the pretext of resources scarcity.

While fallacious propaganda is being launched on the resources crunch of the Government, pro-rich policies are pursued by them for mobilizing the resources, as very correctly alleged by left parties as follows:

“The Left Parties had made a range of proposals on resource mobilization to the Government earlier this year. The focus of the proposals was on four areas from where additional resource mobilisation is eminently possible: (a) taxing the speculative capital gains made in the capital market by reintroducing the long-term capital gains tax and raising the rate of the STT (b) rationalizing the myriad tax exemptions and incentives being enjoyed by the corporates, especially exporters, which are nothing but subsidies to big business (c) increasing the rate of the wealth tax and introducing an inheritance tax with a suitable exemption limit so that only the rich come under their purview and (d) increasing sales tax/VAT on luxury items consumed by the rich. Unfortunately, these proposals were virtually rejected as a prescription for a “confiscatory taxation regime”, despite the fact that the Left Parties far from suggesting any increase in the income tax burden on the salaried middle class or increased excise duty on domestic producers, did not even ask for an increase in the corporate tax rate which was slashed in Budget 2005-06.”

So it becomes clear that the cry of resources crunch is only an eye wash to hide the neo-liberal pro-rich policies.

Second Page

On suggestions of electric power development

The approach to electric power development is to be read as a part and parcel of the overall approach of the government mentioned above.

Left parties supporting the NCMP were consistently demanding a review of Electricity Act -2003.Many of the state governments expressed their strong protest against the emasculation of state’s power enshrined in the constitution thro’ implementation of Electricity act 2003. Many state governments accepted these souring prescriptions of the international money lenders due to the allurement of the fund in the form of grant and soft loan. Electricity employees of the country are vehemently opposing the implementation of EA-2003 experiencing the deterioration of technical, financial and service performance of the utilities formed subsequent to the unbundling of EBs. The failure of capacity additions in 8th ,9th and 10th plan are the serious aftermath of these policy pursued during the last on and a half decade. Affordability, accessibility, availability and reliability of power are being reduced drastically as a result of the implementation of this act and connected policies. Very critically these ground realities were expressed to the government by the representatives of the employees and engineers unitedly.Ignoring all these response from the people of India, the approach paper very proudly announces that several institutional changes which were needed to make the power sector efficient and more competitive, such as EA-2003, formulation of National Electricity Policy and Tariff Policy, Formation of CERC, SERC& Appellate Tribunal, had been made. With out any sign of correction of these policies, the approach paper simply laments “shortage of power and lack of access continues to be a major constraint on economic growth. “Urgent steps are to be taken to reverse the above power related deleterious Act and policies to fulfill the commitments in NCMP while approaching 11th plan.

The capacity addition proposed is 60000MW to achieve the targeted overall growth rate of the economy to the tune of 8%-9% which is almost double of the tenth plan target. The following action programme for establishment of new generation capacity and reducing cost of power is proposed in the approach paper:

i) Availability of fuel such as coal or natural gas for new power plants must be assured;
ii) A national consensus on royalty rates for fuels and compensation for host states also needs to be worked;
iii) Long term finance should be made available to lower capital charge;
iv) The presently provided guaranteed rate of post tax returns for CPSUs should be lowered to reduce cost of power and augment resources of state power utilities.
(v) An efficient inter-state and intra-state transmission system of adequate capacity that is capable of transferring power from one region to another;
(vi) An efficient distribution system which alone can ensure financially viable expansion;
(vii) Rehabilitation of thermal stations through R&M to augment generating capacity and improve PLF;
(viii) Rehabilitation of hydro stations to yield additional peaking capacity;
(ix) Improving supply side and demand side efficiencies to effectively lower primary energy demand by 5-7% during the 11th Plan period;
(x) Ensuring use of washed coal for power generation; and
(xi) Harnessing captive capacity to support the grid.
The above proposals need revisions and/ or reversals and/ or additions.

By reducing the project cost, fixed charge of electricity in the two-part régime can be reduced. A major factor in the project cost is power equipment cost. Price of equipment can be brought down if we follow a policy of bulk manufacturing of equipment after standardization instead of ordering units of diverse size from different manufactures on a piece-meal basis. This will provide economy of scale. The underutilized capacities of indigenous equipment manufactures can be made use of for achieving this, which will make the Indian economy also vibrant. This will also enable to control the net outflow of foreign exchange. This very important aspect is discarded in the approach paper.

In the present day requirement of thermal installed capacity, the mineable coal reserve will be available for the next 40-50 years consumption. Being this as the factual position, efforts are to be made to import coal based on long term agreements as far as possible at fixed prices. As % of our power plants are coal fired, this policy will enable fuel security by keeping intake of our coal in the present rate. Similar steps are required for import of LNG also. Special consideration may be given in the pricing of all fuels used for power generation by reducing the import duty and local taxes which has a sizable bearing in cost of power and consequently on all sectors of economy. When cost reduction of power and fuel security is brought to the cross hairs, a special approach is required in the utilization of renewable energy sources rather than the usual slogans in the approach papers.Amoung renewable energy sources, thrust is to be given for hydel resources. Environmental obscurantism is gathering strength rather than environmental protection. Touching the forest area, constructing a dam for power projects etc are considered as sin in such an atmosphere. Many vested interests are playing behind the screen. Policies are to be evolved to deal with such environmental issues.

Third Page

Special attention is to be paid for R&D in the equipment manufacture to generate power from solar energy and wind energy to reduce the capital investment in such projects without subsidy. The existing plants run with naphtha are to be switched over to NG/LNG.

The approach paper itself agrees that the AT&C loss still remains at an average rate of 40%.The neo-liberal policy pushes were propagating this can be contained by privatisation of distribution which was exposed as a wishful thinking by this time. Now the losses are monitored in the form of AT&C losses. This is to be segregated for proper monitoring and reduction of losses. Reduction of commercial loss only means the accounting of the unaccounted consumption. Real reduction in losses can be achieved only thro’ reduction of technical losses ie. T&D losses. Strengthening of T&D system for it’s optimal use come to the fore in such scenario. Suitable plans are to be evolved for introducing the best practices of T&D loss reduction incorporating commercial incentives. Policies are also to be evolved for curbing the the alarming commercial loss also with a participative programme with the employees and consumer. The multiple licensees in same area of distribution, as prescribed in Electricity Act can only worsen the state of affairs and lead to an inefficient distribution system.

The approach paper is keeping a loud silence in lowering the guaranteed rate of post tax return to IPPs while the same is suggested to CPSUs to reduce the cost of power. The proposal is welcoming and should cover both private and public sector making suitable amendments in tariff policy which advocates for an increase in guaranteed post tax return.

Mega power and Ultra mega power policies are to be reviewed and corrected when approaching 11th plan

ü To obviate hurdles in capacity addition by de-linking it with distribution privatisation.
ü To avoid the increase in cost of power by privatizing the ultra mega projects where the bidding for selection of the promoter is expected to be derision.

There is substantial shortage during peaking hours and surplus during off- peak hours in many parts of the country. Such a context prompts pumped storage system as a viable option to reduce peak shortage.Extention schemes of existing plants & RMU schemes of the old plants are to be taken up with more emphasis with the support of least cost funds.

ERCs are preparing to introduce intra-state ABT regime. So for ensuring optimal utilization of resources and uninterrupted services to satisfy the growing demand of the growing economy, the net work infrastructure has to be strengthened and mordernised utilising SCADA at various levels.

Programmes are to be evolved in 11th plan to introduce IT enabled services at least for billing, cash collection, accounting, other areas with consumer interfaces, inventory control& human resources management to increase efficiency and to obtain consumer satisfaction.

The approach paper also agrees that RE work under RGGVY programme is a big faiure.The package was declared as result of the struggle against the EA-2003 where in the state and central government is fudging from the responsibility of RE. But this was designed to suit the privatisation of power sector by separating the loss making areas, incorporating turn-key system for construction and franchise system for further maintenance of the village/Kara which are to be done away with . This was done with out consulting the states, as in many cases, and understanding ground realities. The result will go from bad to worse if proper corrective measures are not taken both in the case of Act-2003 and RGGVY package. The target during this plan was to electrify 10415 villages and the achievement is only 6714.Cost of the project sanctioned is Rs.62.41 billion and that released is RS.15.61 billion.

A patriotic approach to 11th plan is the need of the hour to develop the self- reliance of the country. Eying this, the approach is to be remolded as far as power sector is concerned incorporating the above suggestion along with the following:

· SEBs to be further strengthened with the participation of employees in management.
· CEA to be further strengthened as a truly federal body.
· Scope of REBs to be further expanded and enriched
· Strengthen the Navaratna Companies participating in the power development programme, by stopping all divestment measures, improving their management with the participation of State Governments and employees at the Board level and improving their accountability to the National Parliament.




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