Media reports about the power situation over the last few days are alarming. About 9,000 MW of commissioned power plants have had to be shut due to non-availability of coal, over and above the 11,000 MW of new generation capacity that is lying idle for want of fuel. According to the Central Electricity Authority (CEA), all power plants need to stock coal for at least two weeks of usage. If coal stocks at any plant falls below three days, it is termed ?super critical?. The situation has turned ?super critical? at about 27 thermal power plants, with availability of stocks ranging for just one to three days, according to data published by the CEA.

An acute shortage of coal has come to afflict scores of power plants in northern and western India, putting a squeeze on generation and the grids at grave risk. Last week, in the northern region, against 50,173 MW of peak demand, there was a generation loss of about 5,000 MW. Despite this, Uttar Pradesh, Rajasthan and Jammu & Kashmir were resorting to overdrawals. The Western Regional Load Despatch Centre (WRLDC) issued a similar warning saying that the regional grid was ?severely affected?.

Against this background, the ministry of power has issued its scorecard of achievements in the last 100 days. It states that ?this government inherited a host of legacy problems in the power sector? Power cuts have become a part of daily life. Despite such enormous demand for electricity, coal and gas-based power plants, where lakhs of crores have been invested, are either lying idle or performing sub-optimally? Already, coal-based electricity generation from June to August 2014 grew by a record 21% compared to the corresponding period last year. Even coal production has grown by 9% in August 2014 as compared to August 2013??

The above claim is no doubt true. Last year in August, the coal-based power plants produced 50,842 gigawatt hour of energy. This year that went up to 62,310 gigawatt. This was partly to do with 5% better plant load factor?the efficiency at which the power plants work?and partly with 6,000 MW of additional power capacity operating in August this year compared to last year. For the nationwide 100-odd power plants the CEA monitors, the benchmark for daily requirement of coal was increased from 1.27 million tonnes to 1.54 million tonnes. Now, even when the Coal India Ltd (CIL) met 96% of its August 2014 target, it was bound to fall below the requirement.

The primary reason for low stocks is power plants? failure to make prior arrangements. But they could not have made their generation plans based on anticipated demands from their consumers, i.e., the state distribution companies (discoms) which are owned and controlled by governments in the state. At the time of the Lok Sabha elections, India had reached a total installed capacity of 250 gigawatt (2.5 lakh MW) but peak demand was not exceeding 130 gigawatt. The reason was the Kejriwal effect. State governments did not want power tariffs to go up. Hence by purchasing less power and resorting to load-shedding selectively, discoms? costs were controlled. Moreover, industrial demand was subdued. But in the last quarter, as the economy started looking up, power demand from paying consumers went up and discoms had no hesitation buying more electricity to supply to these subsidising consumers. In addition, because of the near-36% rain deficit in the northern region, agricultural demand for water pumping also shot up. In the western region, too, demand went up for the same reason, but the industrial sector?s demand predominated over that of the farm sector?s.

The government?s report card states that ?state electricity boards have an accumulated debt of over R3.04 lakh crore and their losses are R2.52 lakh crore?putting them at the brink of financial collapse?? No doubt, discoms face pressure to provide below-cost power to agricultural and rural residential consumers for which they are reimbursed through subsidy payments by state governments. However, currently, 37% of the subsidies booked by state utilities are not paid to them. Since 2003, in fact, subsidies booked have grown by 12% per year, and subsidies received by 7% per year?the cumulative gap between them was R46,600 crore. This has had a crippling effect on the already struggling financials of the discoms.

On the eve of the general elections, Arvind Kejriwal reduced power tariffs in Delhi, which was followed by the states of Maharashtra and Haryana. In many states, electricity regulators must have been under tremendous political pressure not to increase prices. Statutorily, all state regulators should have come out with annual tariff orders by end of the financial year (March 31, 2014), but they chose to refer the issue to the Election Commission?this suited the political executive in all states.

The implementation of cooperative federalism can alone transform the electricity scenario. Efforts are needed at the highest political level to enter into a dialogue with chief ministers and arrive at a political consensus on: What should be the quantum of subsidy to agriculture and targeted low-income sections; how to pay this subsidy and not only provide sufficient funds to state utilities to meet operating expenses, strengthen and expand their networks, but also try different governance models? Since we are dealing with the political economy of electricity, the central government needs to demonstrate how reforms have improved the power situation in states controlled by the ruling party, and earned them rich political dividends. Bringing down tariffs by giving government subsidies did not translate into more votes for ruling parties in Delhi, Maharashtra and Haryana.

The author is former chairman,

Central Electricity Regulatory Commission