Vantage point

Tuesday, May 09, 2006

This Sucks!!

There is a power crisis all across the country. Maharashtra, the most industrialised state, has been reeling under severe power-cuts for a few years now. There are two main reasons for it. One, the fact that the government-run monopolistic electricity board has not added any additional capacity in the last 15 years. Second, the fact that 35-40% power is lost or stolen.

The illogical, dogmatic and even stupid opposition to any type of opening up of the power sector is frustrating. One example that demonstrates how the powers that be are pig-headed in their ignorance and arrogance is the way the CII's proposal regarding Pune's power has been treated.

Pune, which houses several manufacturing and software companies, faces a daily power shortage of around 100 MW. The CII came up with a very well-devised and imaginative proposal a few months back. Their proposal was submitted to the government a couple of months back, well in time before the summer started, since summer is when power demand is at its peak.

What the CII had to say was very simple. There are several manufacturing units in and around Pune which have captive power plants(CPPs), i.e in-house facilities to generate power. This power is used to supplement the power they get from the state electricity board. They have a lot of surplus capacity in these CPPs. The excess capacity is around 100 MW, which is the shortage being faced by Pune. The CII proposes that the companies will use their CPPs at full capacity, and thus not draw 100 MW from the state electricity board, which can then be supplied to the citizens of Pune.

The CPPs run on diesel. So all the CII asks is that these companies be compensated for the extra cost they will incur by running these diesel CPPs. No profit no loss. Just compensation.

Now if this extra cost is to be recovered from the consumers, the rates would have to be hiked by 34 paise per unit consumed. The MERC proposes a graded plan. Under this plan, the smaller/poorer households, which will consume less than 300 units of power, not be charged at the extra rate. The households consuming more than 300 units should pay 34 paise per unit and the government should subsidise the sub-300-unit households, and pay the money from its own pockets.

And what is the grand amount of this subsidy? A piffling 30 crore rupees for the entire year.

Yes! If the government allows this plan and agrees to shell out 30 crores for the whole year, then there will be no load shedding in Pune. Households consuming less than 300 units a month, will not pay any extra charge. Households consuming more than 300 units will pay 34 paise extra.

Let me put these numbers into perspective.

300 units per month. My house in mumbai, which is a 1BHK with a TV, fridge, a comp which is on 24 hours, and fans in each room, consumes on an average 200 units a month. My house in Pune, similarly equipped also consumes about 200 units. Most middle class households in Pune do not have an AC since nights are not hot. So most middle class and lower middle class households would be consuming less than 300 units and will shoulder no extra burden.

Houses and shops consuming more than 300 units will have to pay 34 paise per unit. i.e if you consume 500 units, you pay 170 rupees extra. If you consume 1000 units, you consume 340 rupees extra. Note that to have a power consumption in excess of 300 units, the house would have to be big and/or have AC etc. For such a house/shop, even 340 rupees a month would be a paltry sum.

The government subsidy of 30 crores. To put this into perspective, if I recall correctly, the time lost due to interruptions and adjournments in the last parliament session cost us 40 crore rupees.

So the CII proposal seems like a win-win situation right?


Look at some of the objections put forth by politicians and NGOs -

Representatives of political parties suggested the power saved due to captive generation by some companies could be directed to the rural areas of Pune district as the load shedding problem there was much more severe there than the city.

Member of Legislative Assembly Girish Bapat, while expressing his dissent, said "Industry should treat the matter as a corporate social responsibility initiative and should bear the additional cost out of their own profit. If the industry can provide food, water, clothes as a donation in the situation of draught and other natural calamities, why not power," Bapat asked.

Calling the proposal 'anti-consumer', social activist Vivek Velankar asked MERC to review the efforts taken by MSEDCL for controlling power theft. "As per the data made available by MSEDCL the collection against power theft is just Rs 50 lakh while the reports on loss due to power theft show the figure of Rs 1.50 crore. Thus, MERC should examine the anti-theft initiatives of MSEDCL," Velankar added.

It is due to such objections, and a lack of initiative on the part of the government, that the CII proposal has been lying around for so long. The CII is making a very sensible, practical and yet simple point

Pradeep Bhargava, former CII chairman, said CII and other companies involved do not intend to make any profit out of this project. For us this would be a major landmark in public–private partnership.

"We are ready to pay extra charges for railway ticket under 'Tatkal' scheme and there are several other examples of similar kind, then why we are not ready to pay additional cost for our necessity," he asked.

"We have requested the government to reduce sales tax on diesel used for CPPs so as to bring down the power generation cost. If there is any other effective option we are ready to adopt the same," said Pramod Chowdhary, chairman CII.

I hope better sense prevails and this proposal is implemented.

Facts and quotes given above taken from these news sources -
Tackling load shedding, Pune industry body shows the way
NGOs oppose CII`s captive power plant
MERC lowers tariff for uninterrupted power
News link from Sakal(marathi)