Rajasthan’s Power Crisis is Of its State Government’s Own Making - An Analysis
While India and the whole
World face an Energy Crisis that doesn't seem to be diminishing anytime soon,
things have gone from bad to worse in Rajasthan's Power Sector with record-high
bills and unannounced power cuts throughout the State. The matter has generated
considerable political heat in the state, with the Leader of Opposition in the
Vidhan Sabha Gulab Chand Katariya cornering the government on
the exceedingly high power bills and former Chief Minister Vasundhara Raje slamming the government on
the issue of power cuts, blaming it for mismanagement.
Politics apart, there are several layers to the problem that need to be unraveled to truly understand the origins of the so-called Desert State's power woes that have led them into this storm. The reasons are manifold, with some being systemic while uncontrollable factors also coming into the picture now. However, as one will see, the state government has left much room for desire on the issue, and carries much of the burden on the subject.
High Cost of Power Headed Further North, Discoms Back to Square One
The cost of electricity has
touched Rs 8.13 per unit in Rajasthan. In contrast, the same is just Rs 6.76 in
Uttar Pradesh and Rs 5.65 per unit in Haryana. Adding to the state’s woes is
the state's loss in a case to Adani Power Company in a reckless tariff dispute
over Coal payments. The extra ₹7,400 crore
that the state now has to pay will definitely translate into an even higher
bill for consumers further for at least another 36 months. The state of
Rajasthan has now also applied a Mandatory Charge of ₹800 in the form of
Connection Load even if there's zero Electricity used by a connection. This
price, along with cuts, can be expected to rise further in the coming days.
Source: Analysis based on
Power Finance Corporation Data
This plays out in the form of
rampant electricity theft that has started to rise again, creating a new burden
on the over 1.5 crore consumers of the State. What is interesting to note is
that. Interestingly, the sharpest jump in losses is for the Jodhpur circle,
which is interestingly the base of the present Chief Minister of Rajasthan
Ashok Gehlot.
However, there was a significant jump noted in the average cost of supply with the change of government even before the COVID pandemic hit, as Power Finance Corporation data suggests. Instead of the stability seen during the BJP tenure, there was a sharp spike in the average cost of supply for the state’s discoms.
Source: Analysis based on
Power Finance Corporation Data
Clearly, despite all this
load to consumers over the last years, the losses of Electricity Companies in
Rajasthan have again crossed ₹86,000 crore with a loss of ₹6,740 Crore in the
last financial year. That the revenue gap has increased significantly despite
being a signatory to the UDAY scheme pre-pandemic reflects that the present
government has chosen a blind eye approach towards fulfilling commitments to
discom reforms.
Unwillingness to Pay Coal India Dues
Rajasthan has had high Coal
India dues for the longest time. Its state utility, Rajasthan Rajya Vidyut
Utpadan Nigam Limited, owes Coal India Limited (CIL) ₹774 crore presently. The Centre’s exhortations to pay the outstanding dues clearly
seem to be going on deaf ears in the present circumstances. The low level of
coal stocks or in some cases even zero days of coal stocks for thermal power
plants has resulted in the closure of many of their units.
The problem had in fact turned up in August 2021 itself, when it was discovered that the state genco, Rajasthan Vidyut Utpadan Nigam Ltd (RVUNL), on which the state is substantially, dependent, had run out of cash to pay for coal and keep running the state’s power plants. In fact, the state owed at that time The state power generator company (RVUNL) owes ₹850 crore to CIL and ₹1,850 crore to Paras Kanta Colleries Limited (PKCL). To tide over this shortage, the state has in fact been buying power from the exchange at ₹17/unit during peak hours! This despite cheap power usually being available on the Indian Energy Exchange (IEX) is a result of higher cross-subsidies and additional surcharges besides wheeling charges that all consumers including discoms end up paying, thanks to the regulatory regime prevalent in the state.
Seasonal Changes in Demand Impacted by Climate Change
The demand for Electricity
has significantly varied recently due to the Climate Changes in the State. In
September this year, while demand decreased for the districts with Rain
showers, it increased by 250 lakh units in just three days for those without
it. Good Rain in the State could've helped cover a part of the Electricity
Shortage, but recently, they haven't been uniform either and thus the abnormal
increase in demand.
It is certainly not the case that the state always had good rainfall in the past. However, the unpredictable and erratic rainfall has come up with a problem of its own. These rains have overwhelmed the State's limited hydro capacity, leading to flood-like conditions in some regions of India's largest state, whereas there's drought in others and the Government has done little to prepare for the same in future. With no support from the climate, the State Government has thus often also resorted to buying costlier Electricity and removed the ceiling on maximum price for buying in energy exchange multiple times.
What has also surfaced from a glance at the data is that the consumption in Rajasthan has increased significantly. A monthly power demand analysis based on POSOCO data for the month of July between 2013 and 2021 has in fact shown an upward trend in power demand. Given the presence of this data, there is a reflection of the inability of the state to plan accordingly for the monsoon period each year.
Source: self analysis of
POSOCO data
Surrendering Contracts is a Challenge, Ignoring Central
Assistance
Payments according to
decades-long contracts have resulted in the purchase of Electricity at prices
as high as ₹12 per unit. The application of Fixed Charges that are even much
more than the actual electricity costs at the present time to production
companies has continued in full swing without a moment of thought from the
Gehlot Government or the State's Discoms. These Fixed Charges were paid to 7 of
these plants even when no electricity was bought from them.
While the state like many
others is facing this legacy problem, fiscal irresponsibility means that the
state does not have any bandwidth to even consider surrendering any of these
contracts. ₹3,800 Crore in payments was made as per these long term PPAs
between April 2020 and March 2021 even while the Discoms were themselves
already financially strained and the State was suffering due to COVID.
Covid was a black swan event, but Atmanirbhar Bharat gave an option in the form of Liquidity Support of Rs 90,000 Crores presented to power discoms to improve their financial situation. The Union Government intended to support State Governments while promoting state-level reforms and safeguard the interests of farmers while making the power sector sustainable.
As the presentation of details of the fifth tranche announced by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman under Aatmanirbhar Bharat Abhiyaan to support Indian economy in fight against COVID-19, May 17, 2020 clearly highlights:
In accordance with this, the State Government could have taken ₹2,000 crore in the first tranche, but they failed. Similarly, the second tranche would have amounted to ₹2,490 crore.
Clearly, a combination of mismanagement, legacy issues and inability to ensure adequate advance planning has always existed. The latest manifestation of coal availability will not necessarily solve the problems of Rajasthan in the present circumstances unless a conscious effort to break clean from past intransigence does not take place.
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