Is the Gujarat model answer to Maharashtra’s electricity woes?

Is the Gujarat model answer to Maharashtra's electricity woes?

For years, neighbours Maharashtra and Gujarat, two of the most industrialized states in India, have competed aggressively to woo the same industrial investments with innovative appeals and projects.

Now, with Maharashtra in the throes of an unprecedented power crisis, its ability to keep pace with Gujarat might actually depend on its ability to learn from the state, suggest industry experts.

Consider how both states are dealing with their respective power shortages:

Maharashtra, which is suddenly acutely aware that lack of power will have serious implications for its ability to attract industry, is looking at adding huge power generation capacity, which typically has long gestation periods.

Gujarat, on the other hand, has already realized that it is better off meeting its own rising demands for industrial power by adding smaller but more power-generation projects.

While Maharashtra is still grappling with its huge power transmission and distribution losses, Gujarat has paid special attention to reducing such losses. While Maharashtra is facing public ire for rising tariffs, primarily on account of the increase in coal and gas fuel costs as well as for buying power from others, Gujarat’s power tariff has been stable for over six years now.

Resolving the power crisis is key to industrial development. “Both the states have not been resource-rich states. Hence, providing adequate power and infrastructure had been main attraction for the industries at certain points of time. Good distribution of power within the state is important," says Siddhartha Roy, economic adviser for Tata Group.

Both states have not really added a lot of power-generation capacity in the past six-seven years. Gujarat’s installed capacity was around 9,561MW as on 1 January, while Maharashtra’s installed capacity was 11,869MW.

But this summer, Maharashtra’s shortage is estimated at around 6,000MW, a stunning 63% of installed capacity, whereas Gujarat’s shortfall is around a 1,000MW, or 10.5%.

“One step which Maharashtra could take immediately to meet at least part of the shortfall is to float tenders for smaller capacity, like Gujarat did," says P. Ramesh, managing director of energy division of Feedback Ventures Pvt. Ltd, an infrastructure advisory firm working for the state electricity boards of both the states.

Gujarat has commissioned around five new projects totalling up to 789.5MW during fiscal 2006-07. These projects produce power in the range of 75-250MW.

Maharashtra recently began producing 250MW of power at its Parli plant during mid-May. “This is the first additional capacity that Maharashtra has added in the last six-seven years," says Ajoy Mehta, managing director of Maharashtra State Power Generation Co. Ltd. The Paras plant of Maharashtra is expected to be commissioned in mid-June and has a capacity of another 250MW.

Besides capacity addition, Gujarat has also been effective in reducing its transmission and distribution (T&D) losses. On the other hand, critics say, Maharashtra has only paid lip service to this key area.

“I don’t see any serious plans being done by the state here to trim their T&D losses," says Nikit Abhyankar, research associate of Prayas, the electricity watchdog of Maharashtra. “The situation has worsened due to historical planning mistakes. There will be shortages for next two years."

Electricity distribution companies in Gujarat have installed 11KV feeders as directed by the Gujarat Electricity Regulatory Commission (GERC). “This has helped in identifying the loss-making feeders by comparing the amount of energy sent and charges received for amount of energy sold to consumers. The difference between these two is a loss, which could either be due to theft of energy or transmission and distribution loss," notes K.K. Bajaj of Ahmedabad-based Consumer Education and Research Society.

Gujarat also separated feeders for the agricultural sector, where the losses are typically higher. During shortfall, Gujarat’s power utilities first switch off these agricultural feeders, and then the 11KV feeders with maximum power losses. “Due to effective measures taken up by the power utilities in the state, the losses have been reduced considerably," says a GERC official.

The transmission and distribution losses have come down from 41% to 30% in Paschim Gujarat Vij Co. Ltd and Uttar Gujarat Vij Co. Ltd areas. The T&D losses of the other two unbundled utilities, Madhya Gujarat Vij Co. Ltd and Dakshin Gujarat Vij Co. are both below 25%.

Maharashtra has tried to mimic this but with limited success. Following Gujarat’s model of separating the agricultural feeders from rural residential feeders, the Maharashtra Electricity Regulatory Commission (MERC) had also directed the Maharashtra Electricity Distribution Co. Ltd (Mahadiscom) to separate the feeders. “But the progress been very slow," says Pramod Deo, MERC chairman. A.B. Pandey, managing director, Mahadiscom, could not be reached for comment. Mahadiscom has separated the feeders only to the extent of 10-15%. The state’s power losses are still at around 40%.

While Maharashtra has experimented with the franchisee model of letting a private firm run a discom at Bhiwandi, it is still mulling converting rest of the discoms into franchisee models.

“If the government’s belief is that privatization can help, then it should privatize all the distribution companies. The T&D losses in Mumbai are far lower than rest of the state. That is because of privatization. It is more of a law-and-order issue," says a senior Mahadiscom executive.

As shortfall increases with every passing day, the consumers in Maharashtra, especially the industrial ones, have seen their power bills swell in the range of 20-70%. The worst hit are the shopping malls, which are being forced to consume less power.

In contrast, the tariffs in Gujarat have been stable for the last six years with consumers, on an average, paying in the range of Rs2.20-4.70 per unit of power consumed. Gujarat’s shopping malls as well as neon hoardings that consume power are charged at the high end of the power tariff, Rs4.70 per unit. In Maharashtra, for instance, hoardings are now being charged Rs13 per unit.

Sunil Raghu contributed to this story.