Let us respond and not react to power scarcity
3 min read . Updated: 18 May 2022, 10:30 PM IST
PremiumThe Centre’s drive to plug power shortages must proceed with care. Relaxing bad loan norms or a knee-jerk expansion of nuclear capacity without proper cost analysis will be inadvisable
India’s early summer this year will likely be followed by an arrival of monsoon rains ahead of time, delivering relief from a heat-led power crisis. The expected relief is visible in the price of market-traded electricity. On 15 May, a day-ahead unit of it could be bought on the Indian Energy Exchange, the country’s largest, for just ₹3.35, down sharply from ₹10.38 per unit on 6 May. This suggests traders foresee an easing of the country’s power shortfall, though we may not have seen the last of our heat waves and peak demand has tracked levels of 200 GW in recent days, a point above which supply falters in many places. On its part, the government has been working to keep coal-fired plants supplied with feedstock. Railway rakes were recently mobilized for express coal delivery. This week, in a signal that it would rather not take chances, the Centre was reported to have considered asking the Reserve Bank of India (RBI) to relax rules and let lenders under its watch lend money to import-fed generators even if their debt was classified as non-performing. As the operations of many projects were stalled by their failure to repay loans, this leeway is seen as a way to enhance generation. This idea follows a power ministry directive to the state-run Power Finance Corporation and REC Ltd to arrange loans for plants that use imported coal but are under financial stress.
While it is reassuring that the Centre has rushed to make up for lost time in dealing with our power crunch, it must refrain from having any rules bent in the exercise. Not only would waivers of the kind contemplated weaken the integrity of bank regulation, the proposal should be rejected on practical concerns. A pile-up of bad debt has ailed Indian banks for much of the past decade and RBI’s pandemic relief extensions might mask an asset quality drop that is yet to show up. Sure, lenders are not in dire need of capital infusion right now. But to prevent state-owned banks from acting as a periodic drain on public funds, we must not disturb reforms done half a decade ago for better tabs to be kept on credit quality. After all, the health of India’s banking sector is vital to the growth prospects of our economy. A power squeeze should not serve as a pretext for a departure from settled policy norms.
India’s scramble for coal is also awkward in the context of our push for clean energy and a renewable build-up. As carbon neutrality calls for a green transition, low-emission nuclear power is back in our consideration set. With just 6.8 GW of it currently available, a 1.7% sliver of our total installed capacity, nuclear advocates are bullish on a ramp-up. As many as 10 new atomic facilities are reportedly being envisaged. Once bulky investments are made upfront in setting up reactors, they can generate clean power on relatively low running costs for decades on end. This hard-sell, however, fails to account for the safety burden. A reasonable cost calculation must also work out how much extra we would need to spend on spent fuel. Since nuclear waste disposal is very costly, the bill for it cannot be left out of any cost-benefit analysis. Accident liability is another hitch. Access to global technology and fuel granted by our celebrated nuclear deal with the US has not resulted in a profusion of such plants largely because reactor makers sought indemnity from meltdown risks. If granted, we would have to bear that responsibility ourselves. We need more electricity, no doubt. But today’s shortage mustn’t provoke knee-jerk responses.
