Electricity shortages this summer in Punjab forced activities to come to stand still at homes, in commercial and industrial establishments. It is the responsibility of the distribution licensee, the Punjab State Power Corporation Limited (PSPCL), to make arrangements for providing round the clock electricity to consumers as per Sections 42(1) and 43(1) of the Electricity Act, 2003.Does the white paper tabled by the government in the Punjab Vidhan Sabha serve the twin purpose of providing cheaper and uninterrupted power to consumers? Realistic planning and not politics in matters related to electricity shall achieve these objectives.

Narrative around costly power

A sustained narrative has been created in public domain that power is costly in Punjab, and that, the prime reason for the high cost is due to costly power purchase from the three private sector thermal plants in the state.

However, the data for FY 2019-20 released by the Power Finance Corporation of the Government of India reveals otherwise. The per unit cost of power including own generation for Punjab is ?4.33 compared to ?4.79 in Haryana, ?4.81 in Rajasthan, ?5.19 in Uttar Pradesh, and ?5.56 in Delhi. The PSPCL has stated the same in its petition to the Punjab State Electricity Regulatory Commission for this year’s tariff order. Also, the PSPCL has stated that the average cost of supply (ACOS) to consumers in Punjab is the lowest among its neighbours. The ACOS for Punjab is ?6.66 per unit compared to ?6.89 in Haryana, ?8.04 in Rajasthan, ?7.35 in UP and ?6.98 in Delhi.

Fixed charges for surrendered power

It has also been argued that only private thermal plants are being paid fixed charges for surrendered power (power not purchased) and this is making power costly. However, to the contrary, the PSPCL paid a total of ?1,366 crore for FY 2020-21 as fixed charges for surrendered power, which included ?841 crore to the three private sector thermal plants in the state, ?400 crore to the central sector plants and ?124 crore for other plants. Importantly, the PSPCL has incurred similar expenditure of about ?500 crore on its own thermal plants.

The narrative built up around costly power, therefore, belies these facts and the real reasons for costly power lie elsewhere.

What the white paper says

The white paper essentially says that the peak demand projections were hugely inflated and this resulted in addition to generation capacity of around 4,000MW, more than what was actually required. Estimates by some quarters have quoted additional requirement of only 2,000MW.

If the argument put forth in the white paper is to be accepted that excess capacity had been installed, then, why was the PSPCL facing shortage of around 1,700MW this summer that led it to impose long power cuts? Moreover, power cuts were forced when only one unit of 660MW out of the 1,980MW Talwandi Sabo plant failed. Imagine, what would have been the situation, had there been an outage of 2,000MW! Purchase of power from the grid exchange made at rates as high as ?15 per unit this summer would even go higher in case Punjab faces further shortages.

Regarding the issue of making power cheaper, the government has introduced a bill for referring the agreements to Punjab State Electricity Regulatory Commission for redetermination of tariff. Interestingly, the regulator, having fixed the tariff earlier as per Section 63 of the Electricity Act, 2003, will reassess its own orders.

Will power become cheaper?

The white paper has failed to pinpoint the real reason for costly power in the state and that is due to total privatisation of generation in Punjab, a policy pursued by successive governments. The share of the state’s thermal energy in the total energy of the state has gone down from 46% to a mere 3% and it is the lowest in the country.

The white paper neither acknowledges this folly nor contains any proposal for correcting the same. Thus, power purchase is likely to remain costly in Punjab.

The cheaper and good quality coal from the state’s captive Pachhwara coal mine shall be made available to the private thermal plants unless these plants are acquired by the state. This shall create fertile ground for exploitation of the state’s assets by the private companies.