Power a question of political courage

Power a question of political courage

The spot price of electricity recently hit a decade-high of ₹17.61 per unit. This would suggest seriously deficient capacity to produce power. Yet, that is hardly the case. Utilisation of installed capacity is barely above 50% in the power sector. High price of any commodity at a time of huge spare capacity is indicative of a seriously dysfunctional market. Instead of fixing this flaw, the government has only tried assorted versions of financial engineering, to put off finding a lasting solution to a later date. This will hobble not just the power sector but the entire economy.

The root problem is political patronage of theft and giveaways of power on a large scale. Technical losses can be brought down significantly but will need large-scale investment. But bringing down technical losses to 10-12% is not tough. Losses above that, up to 2.5 times that much, arise from theft and giveaways. The rule is that a state government must compensate a power utility for the power it distributes for free or at concessional rates on the government’s say-so. Many state governments fail to. Tolerating theft is seen as a political right by the ruling side. Fixing this calls for a sea-change in political attitudes and culture. This is where leadership has to step boldly forth, but has shied away from.

Unpaid-for power cripples utilities that buy power from generators and sell to consumers. These, in turn, default on payment to generators or deny them purchase agreements. Investment in power generation turns stranded. The economy is starved of power, the capacity exists, but it cannot produce power. Dysfunctional state monopoly over coal makes things worse. India cannot realise its economic potential with its energy market as flawed as this. Fixing it must be a priority.