Distribution continues to be the weakest link: PK Pujari, power secretary

Mythili Bhusnurmath, Consulting Editor, ET NOW in a discussion with PK Pujari, Power Secretary on the good, bad and ugly in the power sector. Edited excerpts


Mythili Bhusnurmath: Mr Pujari, power sector is one area where even the ease of doing business, given the great deal of credit for obtaining electricity is concerned, we have actually moved up 25 ranks and from a situation of deficit we have moved to surplus. But it is not as if power problems have been solved in any way. Power, electricity is out of GST. So all power plants will be in even a worse situation than they are today, NPAs will rise. What can we do about the power sector, you have the problems with discoms, but UDAY is not going to be an answer, UDAY is the third attempt at getting the discoms to behave? Ultimately unless tariffs are increased and that is a political economy question, so what can we do to the power sector?

PK Pujari: See when you talk about power sector you look at three segments; one is generation, now today we are in a position where we have got sufficient capacity for generation. I mean, if any demand picks up there is no constraint as far as supplying power or generating power is concerned, there is sufficient capacity today. There is sufficient capacity about 5000 megawatt in the pipeline and a lot of renewal is coming. So generation is an area which we have more or less tackled at least in the medium term till 2022.

What we have been focussing is the transmission because if generation is in one place and the load centre keeps changing, we should be able to transmit power quickly. The problem that we had, the congestion in the southern region where we were not able to evacuate power though there was demand and it was available somewhere else. The huge investment that government has made in the last two years and the capacity that we have added had made it possible to transfer power from one region to another region so that is possible now.

The investment is going to go up in the future because we want to bring in renewable energy into the system to ensure that power can be transferred from place A to place B as and when required. The third segment is the distribution segment.

So distribution segment is an area which is the weakest link, we agree. UDAY is much different from what we tried earlier. It is not a bailout package. First of all, UDAY is an optional scheme. Being an optional scheme also most of the state governments have adopted it and they have taken over the liability of the discoms and taken the responsibility to make sure that the discom operate in a operationally profitable way. Otherwise the losses of the discoms will be counted against the fiscal deficit of the state government.

Mythili Bhusnurmath: But how many states have increased the tariffs?

PK Pujari: Two issues; if you look at the tariff increases in the current year, except for four to five states everybody else has increased the tariff. Now you may ask question saying that the tariff increase is not commensurate with the cost of generation but the discoms are having problems because of two reasons; one is the AT&C losses are high. Secondly the cost of generation is high because the delivery cost is high and thirdly the internal debt burden that they were carrying. Now debt burden issue has been addressed. We are really focussing on reducing AT&C losses, on an average at the national level it is about 23-24%, we intend to bring it to 15%. It is not an easy task. It cannot be done at a macro level, it has to be done at the disintegrated level.

We are getting into the micro part of it, helping the discom and the state government to take action so that is the only solution. As far as the cost of generation is concerned, thanks to the coal ministry which has improved the quality of the coal and because of the flexibility we are given in rationalising the linkages the cost of generation has come down.

Due to coal rationalisation, the cost of generation for NTPC which constitutes about 47000 megawatt of power, has on an average has come down by 35 paise. The specific consumption of coal has come down that means they require now less coal to generate one unit of power and that benefit goes on to the.... So if you look in the six months that it has happened the gap between the average cost of supply and average cost of revenue of the discoms is coming down. It will not come down in one day, it will take some time, we are monitoring closely and definitely the discoms we hope by the end of the current financial year or by the middle of next financial year will at least break even.

Mythili Bhusnurmath: So can we be confident that there will not be a subsequent bailout of any of these discoms? This is the third bailout. Will there be another version of it?

PK Pujari: There is no bailout, in this scheme Government of India has not given a single farthing. What has happened is that we told the state governments you cannot keep distance.

Mythili Bhusnurmath: But we did that under the FRS programme also in 2013 we did exactly the same thing, the state governments took it on to their books?

PK Pujari: We said that you take over and we allowed the banks to finance the losses. Here we have mandated saying that banks will not finance the losses that means the discoms are forced to generate internal revenue. Today the discoms are in a tight corner because the banks are not financing the losses. That means they have to generate enough revenue to run their business or if they fail the state government has to come out and fund them. So the responsibility of the state government is there. Normally the complaint that comes saying a lot of free power is being supplied, the state government now has to think twice before they actually take a decision on that.