In the era of central planning, based on CEA's forecasts, inter-temporal dynamic programming methods were used to determine the optimal location, mix, phasing, etc, for total cost minimisation while meeting the demand and minimising the cost. But in the era of liberalisation and globalisation, both the very existence of CEA and its forecasting exercise have become anachronistic, since the thrust of power generation has shifted from the Centre to private sector and market. Central planning is replaced with decentralised decision-making by various private sector generators responding to invitation for competitive bids. The focus has shifted from planning to risk mitigation of both the demand and payment risks. However , since the Planning Commission and CEA still exist - no department in our government suffers any obsolescence they carry on merrily with five-year plans and power survey exercises , as if nothing has changed in the world.
There are broadly three actors in this drama. The state electricity boards or their mutants, with the private generators now added to the tamasha; the CEA and its regional variants and the Planning Commission. The SEBs typically make the highest forecast, since demand is de facto supply to them. The CEA/REAs tone it down a bit since they have less vested interest for a higher forecast. The Planning Commission brings it down further since it applies the funds constraint also, unlike the two other entities . Now, of course, funds constraint is a bigger conjecture, since part of it is assumed from government and multilateral lending agencies like the World Bank, and part of it from private sector and capital market.
Broadly the EPS Committee employs what it calls the ‘partial end use' method for large consumers like industries and consumers consuming more than 1MW and trend method for smaller consumers. The planning commission uses input-output analysis. The difference is that while the input-output analysis captures both direct and indirect demands, the end use analysis is simpler but leaves out the indirect demand. But the major flaw in both methods is that it assumes that output is produced by a fixed number of inputs, without taking into account the incentive impact of price.
Forecasting the final demand vector in an ambience of changing sectoral composition is a bigger challenge. For instance, presently service sector is growing very fast, thanks to liberalisation and globalisation . But predicting their share in future is a difficult task. The committee makes adjustment for power cuts by adding them back to demand, but does not make the more important adjustment of how much would have been the power demand had there been no cuts at all. (The difference in this case is that more industries would have come up if they had knowl edge that power would be available ). Of course the unannounced interruptions, which are as much or even more than the announced ones, are not taken into account.
In terms of the power survey forecasts, there is a continuing paradox. That is the forecast has always been more than the actual requirement , and yet even this actual requirement has never been met, the deficits being of the order of 5-6 % in energy terms and 10-12 % in peak demand terms.
Thus the comparison between the EPS forecast and actual, shown in the accompanying table, is a meaningless one, as that actual does not correspond to the actual consumption. It is interesting how these ‘actual' figures for energy requirement and peak load are arrived at; certainly not by measurement alone, but in addition by calculation and interpolation. In other words, planning has consistently failed to match the supply to demand.
Recently a joke was circulated in the internet ; it showed pictures of cities of the world at night; London, Rio de jeniero, Singapore, and lastly Bangalore. All others were glittering; in the place of Bangalore, there was a black rectangle , due to power cut. After 10 years of the so called reforms, we are not able to get uninterrupted power supply. Meanwhile, the 18th EPS goes on, never mind if you still do not get power. One is reminded of Churchill's famous quotes: ‘however beautiful the strategy, one should occasionally look at the results' .
Source- V Renganathan -Economic Times