As RK Singh, the new minister of state (independent charge) for power and new and renewable energy assumes charge on Tuesday, he will be taking over a sector which had seen numerous reforms under his predecessor Piyush Goyal. However, a lot of issues would require the new minister’s continuous attention in order to achieve the government’s target of providing 24X7 power to all households by 2022 and at the same time help the sector recover from financial duress.
Under Goyal’s regime, the country’s thermal power generation capacity increased by more than 31% to 2,20,570 MW. Renewables capacity between FY14 and FY17 increased by more than 80% to 57,260 MW. The gap between the average cost of power supply and average revenue realised (ACS-ARR gap) by the state-owned distribution companies (discoms) narrowed by 40% to Rs 0.46 a unit. Aggregate technical and commercial (AT&C) losses have come down by about three percentage points to a little above 20%.
The most significant contribution of Goyal is the inception of the Ujwal Discom Assurance Yojana (Uday) in November 2015. State governments of 16 states have taken over around `2.32 lakh crore debt of their discoms, effectively lowering the payable rates of interest. The accumulated losses of discoms stood at a staggering Rs 3.8 lakh crore when Uday was launched. Their outstanding debt then stood at Rs 4.3 lakh crore.
However, the scheme was envisaged to provide some financial relief to the discoms through lower interest rates, while it directed the discoms to improve operations efficiency. While discoms saved 15,000 crore till March through lower interest rates, some targets in the operational front remain elusive. While more than 26 lakh distribution transformers had been metered so far, the number is only 46% of the target which needs to be met by December, 2017. Only 1.3% of the overall Uday target of 2.2 crore smart meters has been installed so far. The deadline for the same is December, 2019.
Singh also needs to ensure compliance of other important Uday targets by the state discoms. According to the latest available data, AT&C loss levels of only seven out of 17 discoms were under the target-levels set by the Central government for FY17. For ACS-ARR gap, seven out of the 24 discoms (which submitted sufficient data) were successful in achieving FY17 Uday targets.
Goyal had a specific focus on renewable energy, setting a target of installing 175 GW green energy capacity by 2022. His regime also encouraged the tariff-based competitive bidding mechanism, which caused solar and wind power tariffs drop to historically low levels of Rs 2.44 and Rs 3.42 per unit. However, recently the Economic Survey stated that a part thermal generation plants would be left idle or running at low utilisation levels due to the rampant addition of renewable generation assets, raising the risk of turning into NPAs. The NPA ratio pertaining to electricity generation is around 5.9% from total advances (outstanding) of Rs 4,73,815 crore.
He would also have to tackle other impediments such as stalled and stranded assets. More than half of the total gas-based capacity of about 25,139 MW remains stranded due to unavailability of natural gas. Currently, 21 hydroelectric projects of 6,429 MW are stranded. Work has not even started for 45 projects with a capacity of 25,000 MW.