Boosting power sector: These two areas may hold key to revival post-pandemic
October 5, 2020 11:15 AM
India’s power sector has shown great resilience in the wake of the COVID-19 pandemic with continued generation and supply of electricity to millions of households and business establishments.
The decision to privatize the DISCOMs in Union Territories was a significant step in this direction that is expected to pave way for more positive reforms in future.
By Jaideep Mukherji
India’s power sector has shown great resilience in the wake of the COVID-19 pandemic with continued generation and supply of electricity to millions of households and business establishments. The proactive government interventions made during this time, especially the Rs 90,000 crore stimulus package, provided immediate relief to the distribution companies in managing and making up for the financial loss due to the reduced electricity demand. The International Energy Agency data suggests that the global energy demand too fell by 3.8% in the first quarter of this year. The months of March and April witnessed the highest decline in demand as half of the world went into lockdown.
But now, as economic activities and business operations begin to shake off the COVID-19 impact, electricity demand is likely to rise consistently over the next few quarters. This is, therefore, an opportunity for the power sector to start fixing the shortcomings that held it back from improving the per capita energy consumption. The Economic Survey 2018-19 too noted that India needs to increase its per capita energy consumption three-fold to spur economic growth and support the rising aspirations of its people. But this can only happen if the sector is able to address the systemic flaws at the distribution side, ensuring reliable energy delivery for the end users with better financial performance.
Boosting demand and ensuring delivery quality key to reshaping the power sector
Access to reliable power plays a key role in increasing the per capita power consumption and encourages prospective customers to take new connections. The post-pandemic phase in the power distribution sector should address key issues such as power theft, inaccurate billing, delays in new connection process and ineffective grievance redressal mechanisms, to accelerate growth and ensure increased financial stability. However, it must be noted that these issues have existed for long in the distribution sector and will need more nuanced strategic interventions. No quick fixes can address them. Slowly but steadily, bold reforms need to be initiated to bridge these gaps and prepare the sector for better operational and financial performance with supportive policy interventions.
The decision to privatize the DISCOMs in Union Territories was a significant step in this direction that is expected to pave way for more positive reforms in future. Increased private sector participation in the distribution space will not only help DISCOMs deal with the growing financial stress but will also enhance the quality of services and foster healthy competition. The presence of multiple competent players in the sector will provide consumers a handful of options to choose the right distributor, based on their performance and customer service quality. Telecom sector, for example, gives the customers an option to switch to another operator through mobile number portability if the existing service provider fails to ensure quality service. However, these kinds of progressive reforms can be initiated only if the DISCOMs have enough capital to spend on upgrading their existing infrastructure and strengthening the customer connect. Between 2017 and 2022, the power sector is expected to attract investments worth Rs 11.56 trillion in thermal, hydro, nuclear and renewable segments. This will help the sector in building state-of the-art infrastructure, upgrading the necessary technologies and establishing a stronger relationship with the customers.
How should the power sector brace up to meet the increased electricity demand?
The power sector has made remarkable progress in the last two decades with 100 percent household electrification and robust power generation and transmission infrastructures. The next phase of growth should therefore be built upon its past achievements, followed by bold downstream (distribution) reforms to capitalize on the current positive sentiment in the sector. India’s rapid economic expansion has increased power demand, which is still largely unmet, particularly in rural India. With the positive outlook and strong progressive reforms expected in the sector, India will witness increased foreign participation in areas such as power generation, transmission, equipment supplies and technology upgradation. But the sector needs to be prepared for external interventions by opening up and creating a business-friendly eco-system.
Here are two key areas that the power sector should focus on to increase the demand, ensure financial viability, and enhance service quality in the near term:
Initiate reforms in the distribution sector
In order to improve reliable electricity access and create preference among end users, DISCOMs need to plug the existing gaps such as inaccurate billing, and lack of awareness among customers around collection processes. For example, infrequent billing often leads to accumulation of unpaid bills. Customers find it difficult to pay the accumulated bills later. This in turn affects DISCOMs’ collection efficiency, leading to weak financial performance. In addition, the new electricity connection process needs to be further simplified for household and non-household customers. Currently, the average time it takes to get a new connection in rural areas is 65 days. As technology integration picks pace, online/app-based processes can be initiated for quick release of new connections. This will streamline and strengthen DISCOMs overall performance.
Speed up technology upgradation
The power sector should adopt innovative technological solutions that could help it enhance the quality of services and ensure reliable power supply. Technologies such as Smart Grids and Smart Metering ecosystem will further introduce transparency through real-time monitoring of electricity supply and improve operational efficiency and bill collection processes of DISCOMs. Further, technology upgradation can also help the power sector in reducing the cost of operation and consumption, while managing energy losses and increasing the reliability of the network.
The post-pandemic phase is going to witness an increased demand for power, but the demand-supply dynamics should be supported by an efficient supply and delivery network. The power sector needs to continue with reforms it has already initiated in the last few months to sustain the momentum and achieve improved growth. As India seeks to achieve greater self-reliance, quality of service delivery and availability of reliable power will determine the aspirations of 1.35 billion Indians.
Jaideep Mukherji is the CEO of Smart Power India. Views expressed are the author’s own.