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Business News/ News / India/  Electricity demand is rising: Raj Kumar Singh
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Electricity demand is rising: Raj Kumar Singh

Singh drew attention to some electricity generating companies conniving with state governments and falsely communicating to regulators about receiving letters of credit (LC), as part of payment security mechanisms

India’s per capita power consumption at about 1149 kilowatt-hour (kWh) is among the lowest in the world. (Photo: Mint)Premium
India’s per capita power consumption at about 1149 kilowatt-hour (kWh) is among the lowest in the world. (Photo: Mint)

NEW DELHI: Power and new and renewable energy minister Raj Kumar Singh on Monday said India’s electricity demand has been rising on the back of a growing economy.

Speaking at the annual general meeting of the lobby group Federation of Indian Chambers of Commerce and Industry (Ficci), Singh said India’s electricity demand has risen on year, with December’s daily consumption in excess of 5-10 GW when compared to last year.

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This assumes significance as the Indian economy has been severely hit by the coronavirus pandemic. Energy consumption, especially that of electricity and refinery products, is usually linked to overall demand in the economy. The development also comes in the backdrop of other economic indicators such as refineries, GST collections, and railway freight witnessing a revival.

Singh, in his address, also pitched for the privatisation of state electricity distribution companies (discoms) that have been making losses.

This follows the Punjab and Haryana high court order staying the privatization of Chandigarh’s electricity discom. The Chandigarh discom sale is slated to mark the start of India’s efforts to privatise electricity discoms of its Union Territories as part of its next generation power sector reforms.

Singh said while there has been a push-back, workers’ union and the state governments don’t realise that this system is not sustainable and there will come a time when they will not be able to buy electricity.

India’s per capita power consumption at about 1149 kilowatt-hour (kWh) is among the lowest in the world compared to the world’s per capita consumption of 3,600 kWh. India’s peak electricity demand has been low due to issues such as precarious finances of some state-owned electricity distribution companies, which prevents them from power procurement of the required quantum.

Singh said all loss making discoms are owned by state governments and all the private discoms and franchisees are making profits. He added that this dampens investments as these discoms are unable to pay for the power bought.

With at least 10 states losing about a third of the power supplied to their consumers in distribution losses, their overdues have not only affected power producers adversely, but have also contributed to stress in the banking sector. India’s average aggregate technical and commercial (AT&C) losses of 21.4%. Also, the gap between the cost of electricity bought (average cost of supply) and supplied (average revenue realized) for discoms is still substantial in most states.

While most of the states have resisted the move to privatise their loss making discoms, Odisha has gone ahead with the privatisation exercise.

Singh also drew attention to the malpractice of some electricity generating companies (gencos) conniving with the state government and communicating to the electricity regulators about receiving the letters of credit (LC), as part of the payment security mechanisms in power purchase agreements (PPAs).

He said discipline needs to be ensured and added, “So, don’t dig your own grave. Thats my message to you."

In an attempt to ensure timely payments by states to electricity generation utilities, the government had made it mandatory for state discoms to offer LCs. Accordingly, the National Load Dispatch Centre (NLDC) and Regional Load Dispatch Centres (RLDC) were directed by the Union power ministry to “dispatch power only after it is intimated by the generating company and distribution companies that a letter of credit for the desired quantum of power has been opened and copies made available to the concerned generating company."

The next set of privatisation bids expected to be called shortly are for the discoms of Andaman and Nicobar Islands, Dadar and Nagar Haveli, and Daman and Diu. Discoms of Puducherry, and Jammu and Kashmir and Ladakh are not immediately on offer due to issues such as political opposition and security respectively. With the electricity load for Lakshadweep Islands being low, it is also currently not being considered for privatization.

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ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Published: 14 Dec 2020, 11:57 AM IST
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