Power crisis in Punjab
The government must review its policy
by Ranjit Singh Ghuman

The Union Government and almost all state governments, except Punjab, have been depending heavily on public sector power generation during the 11th Five Year Plan. The Electricity Act 2003 and the National Electricity Policy 2005, too, do not bind the government to generate power only through the private sector.

According to the Central Electricity Authority (CEA), the public sector (Central and states) commissioned 7472.2 MW (79.45 per cent) thermal power out of the total of 9404.7 MW during the first two years of the 11th Five Year Plan (2007-12).

The share of the public sector in the targeted additional capacity building, during the remaining three years of the 11th Five Year Plan, is 36025.2 MW (69.66 per cent) out of the total of 51718.2 MW.

It is significant to note that the private sector commissioned zero units of hydro-electricity during the first two years of the 11th plan. Its share in the under construction project capacity in hydro-electricity during the remaining three years the Plan is 28.82 per cent (3,491 MW out of the total of 12,115 MW). Clearly, the public sector has the predominance in the additional capacity building during the 11th Plan.

Contrary to national policy and wisdom, Punjab is depending wholly on the private sector for additional capacity building in the power sector. Even the neighbouring states, Haryana, Rajasthan and Himachal Pradesh are relying heavily on the public sector generation of electricity.

It seems that Punjab has not learnt any lesson either from the experience of others (e.g. Enron in Maharashtra) or from its own experiences (the GVK Company). The inordinate delay in the initiation of the Goindwal Sahib Thermal Power Project in Punjab is a typical example of private players’ irresponsible and non-committal attitude.

The Punjab Government signed its first MoU with GVK Company in 1997, renewed it in 2004 and restated it on February 6, 2007. The likely date of commercial operation of the project is 2012-13.

The power purchase agreement for Talwandi Saboo (Bathinda) was signed with Sterlite Company in September 2008 at Rs. 2.86 per unit of electricity. It is learnt from reliable sources that the company is adopting delaying tactics to start construction.

For the Rajpura plant, there was a single bidder, Lanco, at Rs 3.38 per unit of electricity. It is learnt that the Punjab Government is going to invite fresh bids for this plant.

One, however, wonders why the Punjab Government is not inviting the PSEB to undertake the task of capacity addition in the power sector. The PSEB has already completed three thermal power plants (Bathinda, Ropar and Lehra Mohabatt). Moreover, the PSEB’s trained manpower (engineers and others) can be engaged in the new projects.

The only hindrance seems to be the 20 per cent equity for which the Government of Punjab can give the guarantee. Alternatively, the PSEB can go in for a joint venture with NTPC. The latter is a central agency and enjoys a great deal of credit worthiness.

Given the past experience with the private sector players, the Government of Punjab should not entirely depend on the private sector. It should rather encourage the PSEB and joint ventures with NTPC.

An essential service like electricity cannot be left entirely at the mercy of the private sector alone. Such a strategy may prove counter productive. Even the most liberal economists and supporters of the market economy the world over have advised against leaving essential services to the market forces alone.

The increasing gap in the supply of and demand for electricity will put more and more financial burden on the financial health of the PSEB, which is already in a very serious condition. According to the CEA, Punjab will suffer a shortage of 6,703 million units of electricity during 2009-10.

The cost of power purchase increased from Rs 1,508.40 crore in 2002-03 to Rs 7,264.61 crore in 2009-10. This figure may go up to Rs 13,098.58 crore in the 2012-13, when the Goindwal Sahib project is likely to generate electricity.

The unit cost of purchased power, particularly the power purchased through traders, is rising by leaps and bounds. It increased from Rs 3.24 in 2005-06 to Rs 6.67 in 2007-08.

The share of cost of purchased power in the annual revenue expenditure of the PSEB increased from 29.76 per cent in 2002-03 to 46.91 per cent in 2008-09. This is likely to increase further in the coming years. In the absence of purchased power the state will witness serious power cuts.

The commutative revenue gap of the PSEB increased from Rs 1,802 crore in 2007-08 to Rs. 6,980 crore in 2009-10. The amount of loan increased from Rs 10,588.76 crore in 2007-08 to Rs 19,532.79 crore in 2009-10 and the interest component increased from Rs 972 crore to 1,566.21 crore during the same period.

Even the working capital of the PSEB is being met with loans which increased from Rs 2,316.68 crore in 2007-08 to Rs 6,500 crore in 2008-09. The PSEB is, thus, facing a severe debt-trap. The issue of the PSEB’s financial health needs to be addressed on a war-footing otherwise normal life and development activities in the state are bound to suffer.

There is, thus, an urgent need to generate additional power in the public sector in order to make electricity available to the marginalised sections of society and for the development of the state.

It is high time that the Punjab Government review its policy and strike a balance between the public and private sectors for additional capacity building in the power sector.

The writer is a Professor of Economics and UGC Research Awardee, Punjabi University, Patiala