Notes on “Know Your Power” , A Prayas Publication

A while ago, I had written an essay on India and her urbanization. Related to this, I’ll be launching tomorrow a six part YouTube series on urbanization, and how to go about thinking about it. Keep an eye out for an announcement about this tomorrow!

The reason I bring this up is because I would like to do a similar series about electricity. Urbanization is relatively easy for me to think about because I have been reading about it, on and off, for a while. Electricity is rather more difficult to do, precisely because I know relatively little about it.

And the best way to learn is to write about it, of course!

I was recommended this publication: Know Your Power, by the Prayas foundation. What follows are the first installment of my notes from having read it. It’s 400 odd pages, and I won’t torture you by putting all my notes in one place: promise. The following are my notes from the first chapter, which is an introductory one, and the ninth chapter, which is about electricity reforms in India. Here we go!

Figure 1.1 from the publication cited above

India doesn’t too well in terms of energy consumption, and the data suggests that this may potentially have something to do with where we rank in terms of the Human Development Index.

  • As of the year 2015, about half of our total energy supply came from coal
  • About 2/3rd of our energy use as of 2015 was for industrial and residential purposes, with a roughly equal split between the two. I would have thought agriculture would be higher than the 2% that is quoted, and that makes me wonder about whether this data is not being captured correctly.
  • The concept of the energy tree is lovely (page 32 on the epub version. My apologies, copying and pasting is not possible.)
  • We’ve tended to allocate about 10-15% of our five year plan outlays to the electricity sector. The sector has been doubling in size every ten-fifteen years. That is, it grows at about 6% a year.
  • The installed power generation capacity has grown 300 times since independence. I don’t know whether to be amazed at the growth, or horrified at the implied low levels at independence. Both, probably.
  • The three most important components of the power sector (generation, transmission and distribution) were unbundled on the basis of the Odisha model, which is where it was attempted first.
  • The State Electricity Boards (SEB’s: MSEB in case of those of us who are from Maharashtra, for example)) were an outcome of the Electricity Supply Act (1948). Until then, provisioning of electricity was mostly by the private sector. This also helped supply of electricity reach rural areas.
  • Generation, Transmission and Distribution (GTD) was all handled by the state board alone. SEB’s could set the tariff so as to earn a fixed surplus of 3% over costs. But even this “autonomy” was in name only, since state government regulations meant that it was the state that would effectively set tariffs.
  • Four factors helped increase the supply of electricity at this time:
    • Government backing and subsidies
    • The development of regional and national grids
    • An increase in self-reliance for fuel
    • Cross subsidization: the rich paid more
  • NTPC and NHPC – The National Thermal Power Corporation (H is for Hydro) were set up in 1975, as was a company called POWERGRID.
  • Leaving the government in charge of deciding who pays what tariff worked about as well as could be expected, and SEB’s ran into financial problems beginning the late 1980’s. Four main causes for this too:
    • poor techno-economic management
    • Poor policies, especially pricing
    • Poor overall planning
    • Too much interference from the state governments in all asects of running the SEB’s.
  • The major change in the 1990’s reforms was to begin thinking of electricity as a tradable input, rather than as a development input. Or put another way: pricing matters!
  • Electricity Reforms Acts were passed by states around this time, as electricity is a concurrent subject.
  • The Central Electricity Regulatory Commission (CERC) was established in 1998, and soon began adjudicating on issues between Independent Power Producers (IPP’s) and SEB’s
  • A note to the reader, to help and to check that you’re still awake: I’ve yet to meet a field of study that doesn’t fetishize jargon and acronyms. But even so, the electricity sector is just whatay.
  • Both the CERC and the state ERC’s started pointing out the impossibility of the pricing structure surrounding electricity, and also started pointing out the need to carry out urgent reforms for this sector. “Tariff rationalization” happened around this time.
  • With great transparency comes great accountability. If a state government announced a populist scheme regarding electricity, it also had to explain how it was going to fund it. No longer could the government simply “announce” a scheme, and leave it to the SEB to figure out how to implement it.

    Obviously, state governments were less than thrilled about this.
  • In 2001, the Ahluwalia Committee was set up to decide the mechanism for settlement of SEB dues. Two main recommendations from this:
    • Operate like a commercial entity, which may well be where the phrase “easier said than done” was born (I jest!)
    • Operate more efficiently, by reducing AT&C losses. That’s Aggregate Technical and Commercial losses.
  • IPP’s only came into existence in 1991-92(!)
  • The idea behind allowing IPP’s to exist was good. The implementation of this idea was not (this sounds familiar, no?). A secretive process to select projects and IPP’s made the who thing far too opaque. Anybody who knows India can guess the rest of the story. (And if you don’t, see Dabhol, Enron. But be warned: your face and your palm are about to get to know each other really well)
  • Since 1991-92, 24,000 MW of hydropwer capacity has been added in this country. 3004 MW of this are from the private sector. 7% of all hydropwer projects in the country in 2018 were from the private sector.
  • The case studies on Odisha and Delhi are fascinating, but I’d recommend reading about them in their entirety.
  • The Electricity Act (EA) of 2003 is so important that it possibly deserves its own blog post, but here goes:
    • Vertically integrated SEB’s need to be unbundled (GTD to be separate)
    • ERC’s became much more powerful under the EA. Setting tariffs, adjudicating disputes, and granting of licences all now comes under ERC’s.
    • Checks and balances have been put in place, along with an Appellate Tribunal for Electricity as well as a Consumer Grievance Redressal Forum (CGRF)
  • We also introduced at this point of time the following: The National Electricity Policy, the Tariff Polisy, the Rural Electrification Policy and the National Electricity Plan (phew!)
  • The process for setting up captive plants and thermal generation plants was simplified: permission was not required from the Power ministry, but was required from other ministries (environmental clearances, for example). If you know how Indian bureaucracy works, this is nothing short of amazing.
  • The EA made generation a completely de-licensed activity (save for nuclear and large hydropwer)
  • Captive plants now became possible ( you could set up plants for your own needs, rather than buy from the grid. But note, this is much more complicated than I can write about here)
  • Consumers could choose their own supplier through the all important open access policy

This, I would think, is about as much as any reasonable person ought to be subjected to in a single sitting. Next Monday, we’ll continue notes from Chapter 9 of this same publication.