Forward March: Telangana’s initiatives to drive power sector growth

Telangana’s initiatives to drive power sector growth

Telangana, which was carved out as a new state in 2014, has come a long way in the past three years. The state’s economy contributes around 4.28 per cent to the national GDP. The state domestic product has reached a double-digit growth rate of 10.1 per cent in 2016-17, surpassing the national growth rate for the third consecutive year since 2014-15.

The power sector too has achieved a significant turnaround since the state’s formation. From acute power shortages, the state has now turned completely self-sufficient in power. As per Telangana’s socio-economic outlook document, the state has experienced no load shedding since November 2014. The state’s performance on the capacity addition front has also been fairly impressive with the addition of around 2 GW during the past two fiscal years. The state has a robust transmission network with low loss levels. Telangana’s state discoms, which have been saddled with high debt, are now on the road to recovery under the Ujwal Discom Assurance Yojana (UDAY).

Going forward, the Telangana government is planning to significantly ramp up its power infrastructure with the target of achieving 24×7 power supply in the state. For the agricultural segment, which currently receives nine hours of power supply, the state plans to ensure 24×7 power supply, becoming the first state to do so.

Power demand and supply

Telangana is a power-intensive state with a per capita energy consumption of around 1,439 units in 2015-16, higher than the national average of 1,010 units.  During 2016-17, the state’s energy requirement was 53,030 MUs, while the energy supplied was 53,018 MUs. The peak demand and supply during the year was 9,187 MW each.

In 2015-16 and 2016-17, the state did not report any energy or peak deficits. The state’s energy deficit and peak deficits were 6.2 per cent and 14.3 per cent respectively in 2014-15. During the period 2008-09 to 2013-14, the peak deficits ranged from 8 to 10 per cent, while energy deficits were 5-12 per cent.  For 2017-18, however, the Central Electricity Authority (CEA) has projected that the state may have to arrange power from surplus states given a projected peak deficit of 10.1 per cent though it is expected to experience an energy surplus of 6.1 per cent during the year.


The state’s power generation capacity is nearly 11,501 MW as of May 2017, and has increased by 2,032 MW in the past two fiscal years according to CEA data. Coal-based power constitutes the bulk of Telangana’s installed capacity at nearly 62 per cent, followed by hydro at 20 per cent, renewables at 13 per cent, gas at 3 per cent and nuclear at 1 per cent. Most of the generation in the state is undertaken by Telangana State Power Generation Company Limited’s (TSGENCO) thermal and hydropower stations with a capacity of 2,882 MW and 2,776 MW respectively. Also, post the bifurcation, Telangana has been allocated 53.89 per cent of the existing generation stations of Andhra Pradesh till the expiry of the existing power purchase agreements (PPAs). The state also has allocations from central power generating stations (CGSs).

Since its formation, some of the key projects commissioned in the state have been the 600 MW Kakatiya Extension, the 240 MW Jurala hydroelectric project and the 30 MW Pulichintala hydroelectric capacity, all of which have been commissioned by TSGENCO. Another key project recently commissioned in the state is coal producer Singareni Collieries Company Limited’s (SCCL) Singareni Stage 1 project of 1,200 MW capacity. Further, in the past three years, the state has increased energy availability by procuring 570 MW from private producers (long term), 178 MW from CGSs, 1,273 MW from solar and 99 MW from wind.

Going forward, the state genco has significant capacity addition plans to become energy surplus. Nearly 5,880 MW of power projects are proposed to be set up by TSGENCO by 2018-19. These would include the 800 MW KTPS-VII project (already under construction), the 1,080 MW Bhadradri project as well as the ambitious 4,000 MW project at Damarcherla based on supercritical technology, the first ultra mega power plant to be taken up by a state utility. For the latter two projects, contracts have already been awarded to Bharat Heavy Electricals Limited. While the Bhadradri project was cleared by the environment ministry last year, the Damarcherla project has recently received the expert appraisal committee’s approval.

By the end of 2020, the total availability of power would be in the range of 16,306 MW as per the state government. This would include 1,000 MW from Chhattisgarh’s power plants (for which Telangana discoms signed a PPA in 2015), a 4,000 MW project to be set up by NTPC Limited (as per the AP Re-organisation Act, NTPC was mandated to set up fresh capacity in the state), another 800 MW from the Singareni project of SCCL, 809 MW from CGSs, and 3,727 MW from solar and 90 MW from hydro power generation projects.

Renewable energy

The state has a relatively small renewable energy base compared to other industrialised states. According to the CEA, Telangana’s installed renewable energy capacity stood at 1.54 GW as of May 2017, most of which comes from solar. Thus, the state is betting big on solar and plans to exploit the vast solar potential of nearly 5.5 kWh per square metre for over 300 days a year. The state has put in place a comprehensive state solar policy. It is planning to add around 5 GW of renewable capacity by 2018-19, and increase the share of renewable to nearly 26 per cent. Towards meeting this target, the state has already issued tenders for 3,800 MW of solar capacity.

Transmission and distribution

The state’s transmission network, which is managed by the state transco Telangana State Power Transmission Company Limited, has performed reasonably well with a network availability of 99.9 per cent and transmission losses of 3.37 per cent for 2016-17. The state transco plans to invest over Rs 65 billion during the current and next fiscal year as capex. The majority of the capex planned by the transco will be for lift irrigation schemes to supply water for irrigation, drinking water and industrial purposes for 16 hours of operation every day from August to November.

Power distribution in the state is managed by the two state discoms – Northern Power Distribution Company of Telangana Limited and Telangana Southern Power Distribution Company Limited (TSSPDCL). Both state discoms have been reasonably good performers and were assigned a grade of B+ by the Power Finance Corporation in the most recent annual ranking exercise for the year 2015-16. The state is part of UDAY scheme as well. It has set a target to lower its aggregate technical and commercial (AT&C) loss to 11.93 per cent from 14.2 per cent as of March 2017. It was the fourth best performing state in terms of AT&C losses for March 2017. However, so far, the reduction in AT&C losses from the pre-UDAY level (14.02 per cent) has been marginal.

The gap between the cost of power supply and revenue realised from consumers for the state has come down by almost 15 per cent from pre-UDAY levels and now stands at Re 0.64 per unit. Bonds to be issued by the state under UDAY are worth around Rs 112.44 billion, of which Rs 89.23 billion worth of bonds have been issued so far. On the power reliability index, the state ranked fifth among other states for the month of May 2017 in terms of the average duration of power cuts per month (with a reported value of 3.5 hours) and sixth in terms of the average number of power cuts per month (with a reported value of 6.15 times).

Under the Integrated Power Development Scheme, 67 towns are proposed to be covered in the state for system strengthening and around 30 towns for Phase 2 of IT enablement. Telangana has been sanctioned nearly Rs 6.5 billion under the scheme. Under the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Rs 4.6 billion has been sanctioned to the state, of which the majority share of 95 per cent will be incurred on system strengthening. Of the sanctioned amount, Rs 2 billion has been disbursed to the state till date.

The state does not have any unelectrified villages. In terms of household electrification, around 4.9 million households, of the total 5.97 million households in the state, have been electrified under the DDUGJY. As of June 2017, there were close to 1.03 million households that needed to be electrified in the state. The state also has a smart grid pilot project under implementation as part of the pilot projects being implemented by the Ministry of Power. The Rs 349 million project is being implemented at the Jeedimetla industrial area of TSSPDCL.

Energy efficiency

The UJALA scheme for the replacement of incandescent bulbs with LED bulbs is currently under implementation in Telangana. As of June 12, 2017, over 1.17 million bulbs have been distributed in the state. This has helped the state lower its peak demand by 30 MW and save 151,931 MUs annually. The state is expected to achieve significant energy savings from the programme given that nearly 20 per cent of its energy consumption (9 billion kWh annually) is on account of lighting. Meanwhile, under the Street Light National Programme, around 88,260 conventional street lights have been replaced with LED street lights in Telangana.

Issues and concerns

According to industry experts, Telangana may need to halt its capacity addition as the generating stations are being backed down and the payment of fixed costs for the backed-down capacity would result in a huge tariff burden. The state will thus be compelled to explore options for effectively managing its surplus power. Further, the state’s proposal for the supply of 24×7 power to the agricultural sector by end-2018 onwards from the current level of nine hours per day is expected to be a tall order for the state to achieve and will also increase the pressure on the grid. For the state’s distribution companies, high power purchase costs and continued levels of high payables are some of the key concerns as per credit rating agency Credit Analysis and Research Limited.

These issues notwithstanding, the state’s massive investment plans for the power sector, coupled with the proactive policy and reform measures being taken by the government, are expected to ensure sustained growth in the sector.