Efficient Power Transmission Can Save $12 Bn: McKinsey Report

New Delhi, Aug 25: | Updated: Aug 26 2002, 05:30am hrs
India can save $12 billion by 2005 by improving efficiency in power generation and removing transmission bottlenecks and distribution breakdowns as it will bring down the new capacity addition requirement from 18 gw to 6 gw.

Stating this in a report on Creating Momentum for Change in India, global consulting firm McKinsey & Company has said that so far, implementation of power sector reforms has fallen short of desired goals as distribution level reforms and alignment of states have not been given adequate attention.

Though, the power ministrys Blueprint for Power Sector Development and related action-taken reports address all the right dimensions, action for most critical dimensions (that is, distribution level reforms and alignment of the states) is lagging others, the report said.

Reflecting on the power shortage problem, the report said, a review of the regional load curves based on CEA data suggests that enough generation capacity exists to meet the peak load demand in every region. The report is a part of Confederation of Indian Industrys (CII) study on Initiatives to Develop Electricity Affordability and Supply (IDEAS).

If the productivity of the Indian power sector is brought up to its demonstrated potential (notwithstanding local constraints) the sector can be restored to financial health without removing current subsidies or increasing prices, it added.

Commenting on the power sector reforms, it said, the privatisation efforts of state electricity boards (SEBs) have been unsuccessful due to insufficient groundwork, inaccurate data, lack of political consensus and unrealistic structural solutions.

The Electricity Bill does not commit the states to time-bound reform. Furthermore, in the area such as transmission, it leaves considerable room for grid inefficiency and indiscipline, by allowing parallel centres of authority to coexist at central and state levels.

The report stressed on the need to have a high-powered task force led by the Prime Minister and the Union power minister to monitor the implementation of power sector reforms. It suggested that reforms in the sector can be implemented in three stages. The first stage should be completing the ground work including forging consensus among the stakeholders, conducting technical and financial audits of assets, strengthening regulators and aligning states around a common reform agenda.

The second stage, suggested by McKinsey is unbundling, corporatising and privatising the SEBs, creating five regional transmission grids and negotiated generator-customers contract. It finally, suggests to introduce market mechanisms, customer choice and further unbundling of the value chain.