Light the cash bulb for PSPCL
Till the state becomes ‘power surplus’, as promised by the govt, the power utility will need to purchase electricity from the open market. That needs cash, which it does not have. The foremost duty of the govt, thus, is to pay PSPCL its dues in cash
Jangveer Singh

Short of funds, the SAD-BJP government is banking on the power surplus tag — which it hopes to get in the next three years — to present as its shining achievement when it heads into the next electoral battle for the state in 2017.

Punjab may become power surplus, but it will have to reckon with a power utility that is on the verge of bankruptcy, juggle a subsidy bill that is on the rise each year, and ensure electricity tariff does not increase dramatically along with availability.

Things at present seem to be looking good on the generation front. According to estimates, the first unit (660 MW) of the Talwandi Sabo plant would be commissioned in December 2012, and the remaining two in six to eight months. Similarly, the first unit of 270 MW of the Goindwal Sahib thermal plant is likely to be commissioned in January 2013. The first 700 MW unit of the Rajpura thermal plant is expected to come on steam in January 2014.

At present, there is a gap of 3,100 MW between the peak demand (10,000 MW) and the state’s own resources, including hydel and central allocation (6,900 MW). This gap will reduce considerably by 2013-14, after which the state is expected to face problems only because of peaking shortages during the paddy season.

Price points

Despite assertions to the contrary by the government, more power could mean expensive power. This is because Punjab State Power Corporation Limited (PSPCL) is facing a financial crisis as it is saddled with old debts and not getting compensation for the free power being given to farmers. There is also the issue of proper utilisation of human resources. Keeping these issues in mind, the power utility has sought a 55 per cent hike in tariff in its annual revenue requirement (ARR) for 2012-13 submitted to the Punjab State Electricity Regulatory Commission (PSERC).

PSPCL is not likely to get a full increase, but the tariff will increase for sure in the next financial year. Things could get worse for the consumer over the next few years. This is because the government has chosen to follow the memorandum of understanding (MoU) route with the three private players rather than go for competitive bidding, as recommended by the Central Electricity Regulatory Commission (CERC).

PSPCL may end up paying more for electricity as power purchase agreements with the three private players making it clear the state would have to purchase the entire power produced by them. This means in case of fall in demand, PSPCL would have to pay private companies fixed charges without buying any power. This can be corrected by giving importance to state generation. The government has given in-principle agreement for setting up a 1,320 MW plant by PSPCL, but it needs to be seen whether any progress is made on this front.

Financial health

The key to a balanced tariff structure is a financially healthy PSPCL. Though the government, particularly Deputy Chief Minister Sukhbir Singh Badal, showed foresight by splitting the erstwhile Punjab State Electricity Board (PSEB) into two separate generation and transmission companies, it did not take care to provide clean balance sheets to the two firms. At present, PSPCL is saddled with a cumulative loss of Rs 11,000 crore and a working capital loan of Rs 10,000 crore. The crisis can be judged from the fact that it is for the first time ever that the state power utility has started defaulting on repayment of loans to banks.

The government is not making things easy by deferring the payment of cash subsidy to PSPCL for the free power supplied to farmers as well as cheap domestic supply to weaker sections. This financial year the government has adjusted dues worth Rs 980 crore against bonds in a paper transaction. It has made paper adjustments of Rs 4,000 crore over the past five years. Continuation of such transfers would spell doom for PSPCL.

From Rs 3,144 crore in 2009-10, the subsidy bill increased to Rs 3,400 crore in 2010-11, Rs 4,353 crore in 2011-12 and is expected to increase to Rs 5,500 crore in the next financial year. The increase in the number of beneficiaries receiving 200 units per month alone has resulted in an increase in subsidy by Rs 500 crore.

Technology

Among the factors affecting PSPCL is delay in introducing information technology. The pilot project for distribution and collection of electricity bills and record keeping is yet to be expanded to the entire state. As many as 100 sub-stations are still overloaded and unable to distribute power as scheduled.

In its race for populist schemes, the government also seems to be impervious to the looming environmental crisis, with 11.5 lakh tubewell pump sets being run indiscriminately in the state due to free power. In 2000, there were only 7.7 lakh pump sets.