Budget 2013: Need to address electricity and water crisis

Electricity is the fulcrum of economic development. India still faces the challenge of poor reliability and quality of electricity that at times even leads to a blackout situation. Even as availability of power has increased substantially with significant investments on the supply side, demand continues to outstrip supply by 8-12%

Sorry financial state of SEB's

Each state in India is responsible for the generation, distribution and pricing of electricity for its residents. Electricity generation in India is mostly from thermal plants, accounting for 84 % of the electricity generated.

Electricity pricing in India is generally based on an incremental block tariff structure in which the marginal price of electricity increases with the amount consumed. The electricity sector in India is characterized by a system of cross-subsidization between agricultural and domestic users on one hand and industrial users on the other.

The lacklustre performance of State Electric Boards has been a cause of extreme concern. According to a report by Paryas, a prominent NGO working in this area, SEB have been bailed out several time with interest waivers. Pratap Hogade, President, Maharashtra Veej Grahak Sanghatana, says that “the cost of producing electricity should be ideally 82% and losses including theft accounting the remaining 18%. In Maharashtra the losses are nearly 49% (though official figures are lower)”. The Dabhol power plant has topped production and yet the fixed cost remains as a burden added to the consumer. Explains Hogade, “the electricity cost to consumers has doubled between 2008 and 2012 and yet there are talks of increasing rates by another 40%. “

The situation is not much different in other states and this budget needs to address the high cost of electric power. The accumulated loss of all State distribution utilities has been estimated at Rs 240,000 crore as of March 31, 2012. The answers lie in increasing productivity and encouraging lower consumption. For instance, budget could offer Incentives to industrial units and retailers if they can lower consumption. There is also an urgent need to introduce transparency in the electric sector.

Water crisis

The value of water is very different to a housewife in rural India who walks a few kilometres everyday to bring water than to a middle class urban housewife who has easy access to tap water.