Power Strides: Two-year performance review

Two-year performance review

June 8, 2016

The present government is approaching the halfway mark of its five-year term. Amongst all infrastructure sectors, the power and coal sectors have perhaps witnessed the most significant overhaul in the past two years. There has been significant focus on improving power generation through captive coal block auctions and gas auctions. Further, transmission and distribution network strengthening was initiated through the Integrated Power Development Scheme (IPDS) and the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY). The government also undertook several breakthrough initiatives including the launch of the Ujwal Discom Assurance Yojana (UDAY) and amendments to the tariff policy.

Power Line presents a round-up of the developments in the power and coal sectors in the past two years….

Generation performance

  • Capacity addition stood at 25 GW in 2014-15 (an increase of 25 per cent over the previous year) and at 30 GW (an increase of 23.6 per cent) in 2015-16.
  • During both years, the majority of the capacity addition was in the thermal power segment (83.9 per cent in 2014-15 and 76.1 per cent in 2015-16), followed by the renewable energy segment (9.1 per cent in 2014-15 and 23.4 per cent in 2015-16).
  • In 2014-15 and 2015-16, power generation was recorded at 1,044 BUs (an increase of 8.5 per cent over the previous year) and 1,102 BUs (an increase of 5.6 per cent over the previous year) respectively.
  • In 2015-16, the all-India plant load factor (PLF) stood at 62 per cent, declining by 2 percentage points over 64 per cent in the previous year. Sector-wise, in both 2014-15 and 2015-16, the central sector recorded the highest PLF at 74 per cent and 73 per cent respectively.

Network growth

  • Transmission line length addition stood at 22,101 ckt. km in 2014-15 (an increase of 27 per cent over the previous year) and 28,114 ckt. km in 2015-16 (an increase of 32 per cent over the previous year).
  • Transformation capacity addition stood at 65,554 MVA in 2014-15 (an increase of 14 per cent over the previous year) and 62,849 MVA in 2015-16 (a decline of 4 per cent compared to the previous year).
  • One of the significant achievements in the transmission segment was the commissioning of the first 800 kV high voltage direct current (HVDC) line in September 2015. The 3,500 ckt. km Biswanath Chariali Agra bi-pole line links the north-eastern region to the rest of the country.

Power availability

  • The power deficit in the country stood at 23 BUs in 2015-16 (2.1 per cent), against a power deficit of 38 BUs (3.6 per cent) in the previous year.
  • In 2015-16, peak power deficit stood at 4,903 MW (3.2 per cent) against 7,006 MW (4.7 per cent) in the previous year.

Coal production

  • In 2014-15, coal production stood at 612 million tonnes (mt) against 566 mt in the previous year, marking an increase of 8.1 per cent.
  • In 2015-16, coal production was 638 mt (provisional), registering a growth of 4.3 per cent over the previous year.
  • In 2014-15, coal imports grew to 216 mt against 169 mt in the previous year, marking an increase of 27.8 per cent. In 2015-16, coal imports stood at 181 mt, registering a decline of 16.2 per cent. The decline in imports is one of the significant achievements of the government and is attributed largely to the increase in domestic coal production.

Key policies and schemes

  • UDAY: A significant policy measure undertaken by the present government was the launch of UDAY – the third restructuring package for distribution utilities. So far, 10 states have signed MoUs under this with the central government. Meanwhile, the Reserve Bank of India has issued bonds for debt aggregating Rs 989.59 billion on behalf of eight state governments including Rajasthan (Rs 373.5 billion) and Uttar Pradesh (Rs 243.32 billion). The government is now considering the participation of discoms (both state owned and private) exclusively for improving operational efficiency.
  • Amendment to Tariff Policy, 2006: Another key policy initiative by the current government was the approval of the amendments to the Tariff Policy, 2006. The amendments focused on four broad areas – electricity for all, improving energy efficiency to ensure affordable retail tariffs, focus on the environment for a sustainable future, and enhancing the ease of doing business. Some of the key provisions in the amendments are renewable generation obligations for new coal- or lignite-based plants; pass-through of changes in domestic duties, levies, cess and taxes for competitively bid generation projects; and promotion of hydroelectric projects through long-term power purchase agreements (PPAs), among others.
  • Short-term power procurement: The cabinet, in March 2016, notified the guidelines for the procurement of power on a short-term basis (a period of one day to one year) through the tariff-based bidding process. To this end, the government, in May 2016, launched the Discovery of Efficient Electricity Price (DEEP) e-bidding and e-reverse auction portal. So far, three states have undertaken power procurement through the portal. These are Kerala (lowest price Rs 3.14 per unit [day slot in May]), Uttarakhand (Rs 2.59 per unit [round the clock in July]), and Bihar (Rs 3.08 per unit [day slot in July]). In addition, Torrent Power Limited has procured power at the lowest price of Rs 2.95 per unit (day slot in May and June) through this portal.
  • Coal-related developments: A key coal-related initiative taken by the government was the passing of the Coal Mines (Special Provisions) Bill, 2015. This was following the deallocation of 204 captive coal blocks awarded between 1993 and 2011 by the Supreme Court. The Ministry of Coal commenced coal block auctions in December 2014 and awarded 74 coal blocks across three rounds of auctions – 48 coal blocks to the power sector and 26 to non-regulated sectors. Meanwhile, due to aggressive bidding for the power sector blocks in the first two rounds of auctions, the MoP issued a directive to the Central Electricity Regulatory Commission to ensure that the rates for power produced by plants utilising coal from the auctioned blocks do not exceed the rates concluded in the PPAs. However, as the coal block winners challenged the directive in the Delhi High Court, the MoP has dismissed the auction of coal blocks for the power sector till the matter is sub judice. Some of the other significant coal-related developments in the power sector are rationalisation of coal linkages, flexibility in the use of domestic coal, bridge linkages, automatic transfer of linkages from old to new power plants, and two separate e-auction windows.
  • LNG auctions: To address the issue of fuel shortages at gas-based power plants, the central government offered support from the Power System Development Fund for the use of imported re-gasified liquefied natural gas (R-LNG). So far, the government has conducted three rounds of reverse auctions for gas-based plants. In the latest round, the successful bidders were allocated 7.62 million standard cubic metres per day of R-LNG. The round witnessed aggressive negative bidding with bidders quoting a premium of Re 0.03 per unit of power.
  • PFA scheme: Another key initiative was the Power for All (PFA) scheme, which aims to provide 24×7 reliable power to domestic, industrial and commercial consumers by 2018-19. The central and state governments will jointly implement the scheme. So far, 22 states including Sikkim, Rajasthan and Uttarakhand have signed MoUs under it.
  • Energy efficiency: The Unnat Jyoti by Affordable LEDs for All scheme (previously known as the Domestic Efficient Lighting Programme) was launched in January 2015 with the objective of replacing 770 million incandescent bulbs with LED bulbs. As of June 2016, 116 million LEDs have been distributed under the scheme. Besides this, the government recently launched the National Energy Efficient Agriculture Pumps Programme and the National Energy Efficient Fan Programme.
  • IPDS and DDUGJY: The twin schemes of IPDS and DDUGJY were launched together in December 2014. The IPDS aims at improving sub-transmission and distribution infrastructure in urban areas and subsumes the previously launched Restructured Accelerated Power Development and Reforms Programme. So far, the scheme has been extended to 3,405 towns across 435 projects areas. The projects entail a total cost of Rs 234.32 billion, including government grants of Rs 145.54 billion. As of May 2016, Rs 3.27 billion of the government grant has been released.

The DDUGJY aims to improve sub-transmission and distribution infrastructure in rural areas and subsumes the previously launched Rajiv Gandhi Grameen Vidyutikaran Yojana. As of May 31, 2016, 6,131 projects have been sanctioned under the DDUGJY. These projects entail a sanctioned cost of Rs 1,088.84 billion, of which Rs 417.33 billion has been released. Under the scheme, 117,027 villages have been electrified, 363,861 villages have undergone intensive electrification, and 23.6 million below poverty line households have been electrified.

Conclusion

Over the past two years, the present government has undertaken significant measures to energise the power sector. That said, certain grey areas still remain. These include the lack of policy for the hydropower sector, delays in the finalisation of standard bid documents for ultra mega power projects and amendments to the Electricity Act, 2003, and subdued private participation in the transmission segment. Going forward, it is critical for the government to appropriately address these long-standing issues.