The Planning Commission has asked the power ministry to take urgent steps to reform the distribution sector. Speaking after releasing ?Powering India?the road to 2017?, a report by global consultancy firm McKinsey, deputy chairman of Planning Commission Montek Singh Ahluwalia said the power ministry should set targets for achieving reforms in the distribution sector.
The McKinsey report has advocated a radical new approach through a 10-point programme that primarily suggests methods to reduce the aggregate technical and commercial losses (AT&C) losses to 15% from the current 30-40% by 2017.
Responding to Ahluwalia?s suggestion, minister of state for power, Jairam Ramesh said, ?We are in close coordination with Mckinsey regarding the suggested 10-points and I look forward to work for implementing them?. Ramesh added that, ?As per the estimates of Bhel, today we have 8,000 mw manufacturing capacity, which by the end of 2009 would be 14,000 mw and by the end of 2012 would touch 15,000 mw.?
Speaking about the investments required in the power sector, Ahluwalia said it would not be of use unless power was properly and evenly distributed. ?If you improve generation and not distribution, then it would be a loss,? he said.
?The power sector values are linked to the coal sector and the issue of climate change. So, the question of energy and demand are integrally related. If India is going to use power then India has to supply that power. 21,000 mw is what we added in the 10th Plan, it was a weakness though because it did not include captive power. If we want broad-based growth process there has to be a better performance on ability-based power. The 11th Plan target we have in mind is based on more performance in generation capacity,? Ahluwalia said.
He added that there have been opening of captive coalmines and in that respect things are moving quite well. Apart from this, there is enough of investment needed to accelerate the improvement in efficiency.
According to Ramesh, one of the major focus is on the joint venture between NTPC and Bhel. He said the business plan for this joint venture was ready. It will be about focusing on balance of plant equipment. The second main highlight is unshackling of public sector units. ?I am glad Mckinsey is working with Bhel,? he added.
Ramesh said, ?I believe that nuclear power is going to play a very important role in the energy mix particularly with our focus on green house gas effect. There are already 140 sites in India where power projects are going to be put up.? He added, ?There is one point that I would like to tell you all today which is a matter of fact but whether others are aware of it or not. We commission 6,620 mw of coal-based capacity which is an all record but 58% of that is yet to reach the commercial operation.?
As per the McKinsey report, the reduction in AT&C losses can be made possible by implementing a series of distribution reforms, including separating agriculture feeders that allow SEBs to distinguish agricultural from non-agricultural supply. It also talks about partial or complete privatisation of distribution circles in tier 1 and tier 2 cities, lowering industrial tariffs by driving open access and setting up multi- year loss reduction targets for SEBs and franchisees using modern technologies.
The report also talks about creating a market mechanism that would involve two measures necessary to stimulate investments especially in peaking plants. Investments in peaking plants are vital for India to meet its potential peak deficit of 70 gw by 2017.
The country?s power demand is likely to cross 300 gw in the next 10 years. Meeting this demand will require a five-fold to ten-fold increase in the pace of capacity addition. The profile of planned capacities will also need to be suitably modified to fulfill peak demand, keep emissions under check, reduce dependence on imported fuels and provide affordable power. For this a new approach is required. The McKinsey report suggests that if India continues to grow at an average rate of 8% for the next 10 years, the country?s demand for power is likely to soar from around 120 gw at present to 315-335 gw by 2017?100 gw higher than current estimates.
The 10-point programme addresses issues such as viability and market risks, slow pace of capacity addition, inadequate fuel supplies and operational inefficiencies. The 10-point programme is the outcome of the discussions with the stakeholders of private and public sector players, government officials across the Centre and states, regulators, fuel suppliers, financers and other infrastructure providers. The magnitude of the task at hand shows that piecemeal measures will not be enough.