Home News Reports The silent reforms that are helping transform the once ailing power sector

The silent reforms that are helping transform the once ailing power sector

India’s power sector has long been struggling for the lack of power, financial or otherwise. The worst faring have been the state government owned power distribution units (DISCOMs) who by March 2015 had been reeling under outstanding debt of approximately Rs. 4.3 lakh crore. Plus they had accumulated losses worth about Rs 3.8 lakh crores.

PM Modi during the run up to the 2014 elections had promised power for all by 2022. That’s a tall ask considering more than 20% of the Indian population still did not have access to power.

To steer the power sector, the PM chose Piyush Goyal who was given a collective charge of Power, Coal, New and Renewable Energy, and Mines ministry. He was considered the key man when it came to the NDA’s 2019 fortunes as energy is the cornerstone to every sector’s development.

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So here we look how he is silently reforming the India’s power sector:

  • UDAY scheme: In November 2015, the power ministry announced its ambitious scheme to finally set right the debt ridden state distribution units. Just in the financial year 2014-15, the DISCOMs had accumulated losses worth Rs 60,000 crores. The ministry’s answer was UDAY or Ujwal Discom Assurance Yojana. It wasn’t a simple bailout package. Under UDAY, the states would be able to take over as much as 75% of their public DISCOM debt. For that the state government would give a one time grant to DISCOMs to eliminate their debt and the state would then issue bonds against its new debt at a rate of interest 4-6% lower than what the DISCOMs were paying. Plus under the scheme, DISCOMs would be made efficient by increasing their operational efficiency and reducing their cost of power generation. This initiative has shown results and in just one year, DISCOMs’ losses were reduced by 50% to about Rs 37,500 crores. Plus thanks to the falling interest rate, the states gained about Rs 11,989 crores.
  • Shrugging off the past: The state DISCOMs which have been under financial stress are cutting off their excess baggage. On 11th Jan 2017 the Rajasthan govt announced its plan to sell its 1000 MW coal based Chhabra power plant to NTPC. It would not just ensure the Rajasthan government trims its debt (Chhabra has Rs 3200 crores worth of debt), it would also get cash of around Rs 700 crores. It is speculated that as a result of the deal, the end consumer might benefit via lower tariffs. Plus Piyush Goyal in the parliament announced that he plans to phase out power plants which are over 25 years old. And as the report mentioned, Piyush Goyal plans to create a thermal power ecosystem which has a high scale, high efficiency, high coal linkage predictability and greater supply visibility for power-consumers which would be a win win for all parties.
  • Pushing for Renewable Energy: Apart from strengthening the conventional power sector, Goyal led ministries are also pushing for adoption of renewable energy sources. The Power Minister along with the Niti Aayog is drawing up a plan to promote electric vehicles in the country. As part of its initiatives, the FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) seeks to offer incentives of Rs 29,000 and Rs 1.38 lakh for two and four-wheeler electric vehicles. Also in less than three years after the Piyush Goyal-led Ministry of New and Renewable Energy (MNRE) announced its renewable energy program, India has added about 14.3 Gigawatt of energy via non-conventional sources. The renewable sources are not just growing but they are also getting cheaper. From Rs 14 to Rs 16 a unit, solar power tariffs have dropped to a paltry Rs 2.97 a unit and wind power has dropped from Rs 8 to Rs 10 a unit to Rs 3.46 a unit. Piyush Goyal attributes it to a transparent auction process among others. If this wasn’t enough, just yesterday reports emerged which stated that Goyal was also looking into ways to reduce the hydro electric costs.
  • Adopting digital India:  The Power Ministry has launched GARV and GARV-II mobile Apps in Oct 15 and Dec 16 respectively. Using this one could track the total progress of electrification of villages. Via the GARV App one could track the progress of 18,000 villages which was expanded to over six lakh villages, amounting to 15 lakh habitations of 17 crore people in the GARV-II App. Via this initiative the Power Ministry wished to usher in accountability and transparency in its implementations.
  • India becomes a net-exporter: Lets end this post with the icing on the cake. For the first time, thanks to the Government’s investment in India’s power sector, India became a net exporter of electricity. India’s power export from April to February, at 5,798 million units, surpassed its import from Bhutan by 4 per cent. Also upcoming transmission lines to Nepal, Bangladesh and Mayanmar are only set to increase the export percentage in the future.

Piyush Goel may not get the headlines which some others in the NDA get, but he certainly deserves applause for setting many things right in a sector which is plagued by huge legacy problems. More “power” to him!

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