ET : Gujarat has shown how to tackle the power problem : Nov 3,2007
LIGHTon the edge of DARKNESS
Gujarat has shown how to tackle the power problem and to deliver reliable power to all. It’s time other states followed the lead, say Ashish Kumar Mishra & Mithul Thakkar
It used to be that the 20,000-odd villagers of Navi Sangali, a tribal village some 16 km from Panchmahal district of Gujarat, would go to bed latest by 7 pm. Electricity changed that ritual. The illumination of the 60 Watt bulb, (the families don’t know about CFL yet and can’t afford fans) means that now the villagers stay awake late in the night, indulging themselves by participating in chit-chat sessions in coherent groups, women feel more comfortable while cooking and children postpone their studies, thanks to late evenings.
“I am very happy,” says Anandbhai, a tribal who believes he doesn’t have a surname. He reluctantly admits that apart from the satisfaction of having a blotch of light in the darkness, electricity means nothing more to him, but then he carefully adds, “But, my children are very happy studying in the evening.”
That has been Gujarat’s achievement in the power sector in the last three years. Aided by the
Jyoti Gram Yojana (JGY), Gujarat, today, holds the distinction of the only state
in India to have provided access to electricity to each of its 17,940 villages. A dream that is expected to be achieved only by 2012, if the government reforms see the light of the day — a big if. Says, P Ramesh, managing director, energy division at Feedback Ventures, “In the power sector, what Gujarat has achieved is phenomenal.” This is helping build fortunes and reverse the flight of manpower away from the villages.
ALL THE ROADS NEEDN’T LEAD TO SURAT
According to a Confederation of Indian Industry (CII) & Institute of Rural Management report, a significant impact of the JGY has been observed on the commercial front. While the number of commercial enterprises in villages has increased, shops have a better environment in the form of lighting, music and television. Storing medicines, dairy products and cold drinks have also become easier. Much to the chagrin of the anti-cola lobby, the daily average sales of cold drinks has also seen a two-fold increase. On an average, small shopkeepers are able to save Rs 50 to Rs 250 per month on account of ice alone. Industries have benefited in the form of increased production due to reduced interruptions and less dependence on diesel generators. Business activities like flourmill, welding shops, carpentry, agro processing units and provision stores have also received a positive boost. About 14% of households surveyed in the study informed an increase in income due to business activities while 55% of households believed that there has been an increase in employment opportunity.
On the socio-economic front, the migration of people from the rural areas has declined by almost 33%. Especially, the migration of women and children from the villages has declined by 44% and 60% respectively. A direct consequence has also been the increase in the ownership of consumer durables in household by 100%, 80%, 67%, 66%, 50%, 36% and 40% for heaters, VCD/DVD, washing machine, fan, refrigerator, cassette players and televisions respectively, consequently leading to an increase in the standard of living. Evidently, the locals have also realised that if they use all of the above, then the electricity bills are also bound to shoot up, hence the use of energy efficient lights (CFL) has also increased by 136%.
THEN THERE WAS LIGHT
Significant positives. But, these didn’t materialise out of thin air. This is how it all came to happen. So, how did Gujarat do what it did?
Sitting on a deficit of Rs 2,542 crore in 2000-01, it was evident that the Gujarat Electricity Board (GEB) was feeling the heat. It had to change things or face the consequences. To help things, the mood within the power ministry at the Centre was also tilted towards reform. The GEB came up with a four step plan of action and more importantly stuck to it.
The first step was in the direction of reducing the power purchase cost. In 2003-04, the GEB began renegotiating power purchase
agreements (PPAs) with the four independent power producers (IPPs) — Essar Power, Gujarat Paguthane, GIPCL and GSEG. This led to savings of Rs 4.95 crore in that financial year. Considering that GEB’s dues to the IPPs were at a staggering Rs 1,300 crore in 2003-04, it asked the IPPs to work out a compromise. Otherwise, the GEB would become yet another sick state corporation and would have to suspend operations. In another round of negotiations in 2005-06, it managed to get a further reduction of Rs 64 crore. Meanwhile, the GEB also created a centralised purchase cell, which undertook the responsibility of timely and cost effective procurements of materials and inventory planning. Today, after the renegotiating of PPAs, GEB has no outstanding dues. Another development which came more in the form of a boon was the notification from the Ministry of Environment and Forests was to use washed coal with ash content of less than 34%, which is less polluting, for power plants. This step led to huge savings of almost Rs 137.93 crore over the period of 2002-06.
The second strategic step made by the government of Gujarat, thoughtfully provoked by the Electricity Act of 2003, was the order for the unbundling and corporatisation of the GEB along with putting in place a slew of reforms to bring down the Aggregate Technical and Commercial (AT&C) losses. The GoG formulated the Gujarat Electricity Industry ( Reorganization & Regulation) Act, 2003 which resulted into the split of GEB into four regional power generation companies, four regional distribution companies, one transmission company and one parent company. The GEB acquired corporate status and was renamed as Gujarat Urja Vikas Nigam (GUVNL). The entity focuses on generation, transmission and equitable distribution of power to achieve an all-round economic growth of the state. Another entity, Gujarat State Electricity Corporation (GSECL) was incorporated to look into power generation projects. Simultaneously, The Gujarat Energy Transmission Corporation (GETCO) was incorporated to look after transmission. Finally, the GoG incorporated four distribution companies for four different geographical regions of the state. For regions of north Gujarat, it formed Uttar Gujarat Vij Nigam (UGVNL). Likewise, it formed Madhya Gujarat Vij Nigam (MGVNL), Dakshin Gujarat Vij Nigam (DGVNL) and Paschim Gujarat Vij Nigam (PGVNL) for conducting the functional distribution of electricity in Central Gujarat, South Gujarat, and West Gujarat respectively.
THE FEEDER CLINCHER
But, more than the unbundling it was corporatisation that made the difference. Says Mr Ramesh, “The classic problem of the distribution segment is that it is one of the most complex jobs in the entire scheme of things as there is a daily interface with the consumer.” He adds, “And the people at the helm of affairs are either IAS officers or technical experts, not mangers. Gujarat realised that very early and acted on it.” Professionals, especially with an administrative background were recruited for all senior posts in the new companies which were incorporated. Key Performance Indicators (KPIs) were introduced to measure performance against standards. But the biggest challenge, though, still remained to be tackled. High AT&C losses. Among various measures that were introduced, a few key steps which enabled GUVNL to curb the losses were; bifurcation of feeders, severe crackdown on power theft including sealing of connections and improvements in cash collection.
Feeder is a core component in the transmission line for supply of electricity. Essentially, it transmits power from a generating station to a substation or network. Further, such power is distributed to consumers from transformers. In most cases, such feeders cause overloading which in turn lead to higher distribution transformer burnout rate. Besides, undersize conductors installed in each feeder simply add to the losses. The
GUVNL made investments of almost Rs 10 crore in the bifurcation of such feeders. Once this was done, the next
step was easy: Gujarat could segregate agricultural load from existing rural feeders which provided power supply to both agricultural
areas and rural villages.
TO CATCH A THIEF
At present, such feeders provide electricity supply to only agricultural areas. New feeders were laid down to cater many villages. In those villages nearly 31,589 km of 11 KV network was laid down and 6,124 transformer centres were erected. In addition, in order to maintain support to such distribution lines, 3429 Km of LT (Low Tension) network was laid down entailing an investment of almost Rs. 681.34 crore.
There is no denying the fact that power theft is the sole cause of commercial losses. The concern no less shared by Prime Minster Manmohan Singh. At a conference on the power sector held in May 2007, attended by chief ministers of various states, he
pointed out, “Theft is the cancer of the power sector.” In that context, Gujarat was no exception. In constant raids, the GUVNL observed that apart from tampering by residential consumers, industries like oil mills, engineering units, paper mills, cold storage and diamond cutters were involved in power theft. Led by a team of 130 vigilance officers and policemen, the GUVNL went ahead with a severe crackdown on power theft.
The move was unpopular and there was stiff resistance from the people. So much so, that in one instance an official was kidnapped by some locals. In a span of four years almost all connections, both High Tension (HT) and Low Tension (LT), were checked and verified. Consequently, sealing of connections was carried out and by 2005, GUVNL had sealed almost 13.89 lakh connections in the state. In 2004-05, GUVNL recovered Rs 16 crore by settling 36,982 civil suits of power theft and malpractices. Simultaneously, 11.8 lakh metal meter boxes were installed for better energy audit and prevention of power theft. The last checkpoint was cash collections, the tripping point of most state utilities. The GUVNL set up almost 1,000 centres, outsourced to private agencies to carry out cash collections. 9,000 rural post offices were also put on the job, the collective result of which was that the average cash realisation increased at a CAGR of almost 10.81% from 1999 to 2006.
LIGHT AT THE END OF THE TUNNEL
The above measures have resulted in a splendid turnaround story. What used to be a sick organisation, today, has recorded a Rs 200 crore surplus. But, are the other state utilities looking this way? One might argue that they are, but only a few. While Andhra Pradesh has achieved a lot and is another turnaround story by itself, West Bengal is also getting its act right. A team of experts, from the power ailing state of Maharashtra, also made a trip to Gujarat recently to imbibe the learnings. However, apart from these paltry initiatives, the overall picture of the power sector in the country is quite gloomy. Says Kalyan Mukherjee, Deputy Director, ASSOCHAM, “This is a success story and other states need to emulate the model in cognizance of their own set of challenges.”
What happens, if they don’t? ASSOCHAM warns, in its Eco Pulse Study that of the total investments of Rs 8,10,000 crore in the power sector during the 11th Plan, over Rs 2,70,000 crore would turn out wasteful, if war-footing steps are not taken to control the mammoth AT&C losses. The financial health of the utilities would continue to deteriorate. “India is far from the global standards of AT&C losses which are about 5-10%. If not contained, these losses would effectively mean pouring of funds in a bottomless bit,” said Venugopal N Dhoot, President, ASSOCHAM. The pace of reforms at the centre are partly to blame. Under the incentive mechanism of the Accelerated Power Development & Reform Programme (APDRP), against the provision of Rs 20,000 crore for the 10th Plan period 2002-07, only Rs 1, 575.20 crore (less than 8% of the outlay) has been released as of January, 2007.
The ASSOCHAM study suggests that every 1% reduction in T&D loss can save additional capacity of almost 800 MW. Reduction of technical losses by 6,000-7,000 MW is expected to obviate the need of fresh capacity addition to an extent of 9,000 to 11,000 MW avoiding investments to the tune of Rs.40,000 crore to Rs.60,000 crore. “In many states 100% metering, technical modifications and overhauling of transformers has still not taken place. If India has to make up for the severe power shortage then 50% of the AT&C losses need to be reduced by putting in place the above measures,” said Mr Mukherjee.
ashishkumar.mishra@timesgroup.com
Publication:Economic Times Mumbai; Date:Nov 3, 2007; Section:The Big Story; Page Number:13