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Itís so rosy! Canít be true?

When brownouts and blackouts are every day events and 35 per cent of Indian households do not have access to electricity, the draft National Electricity Plan (NEP) unveiled by Central Electrical Authority in December, 2016 appears to be too good to be true!

Itís so rosy! Canít be true?

It is not clear how during the next 10 years power sector will be rosier with more surplus generation and with no need to construct coal power plants. 

Some vital statistics of India’s power sector are provided in the graphic 1. Peak load deficit which used to be above 9 per cent before 2013 has come down to 3.2 per cent and is likely to disappear as per the NEP. Similarly energy demand deficit which was 8.7 per cent has fallen to 2.1 per cent. These astounding numbers which contradict the ground reality of unreliable power supply, naturally raise questions on how they were estimated. 

Based on the graphic an obvious question that needs to be posed is when Plant Load Factor has been falling during the last four years, why have we been adding to generation capacity? Also with a low PLF, we should have been able to reduce twin deficit of peak load and energy demand to close to zero by proper balancing of load and making use of the national grid. This clearly shows lack of coordination among different regions. 

As shown in the graphic 2 during the 12th Plan, generation capacity has exceeded the target by 15 per cent. This is the first time in the history of India’s power sector that actual commissioning of power plants has exceeded the target. In this voluminous NEP, there is no explanation on how it was possible to have such an outstanding performance by the power sector. 

Of the capacities added, private sector accounted for 56 per cent. With distribution companies losing large amount of money (Rs. 60 to 65 lakh crore per year), on what basis did the banking sector advance loans to construct these power plants? Addition to generating capacity is a necessary investment and economy will benefit in the long run. However if it is not done prudently loans can turn sour. In recent years there are two notorious examples of such irresponsible bank loans - one to Mallya’s Kingfisher Airlines and the other to Gujarat State Petroleum Corporation to develop KG basin gas reserves. 

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