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OPINION: Reform distribution, capacity will follow

   July 12, 2018        445        The Economic Times

The more things seem to change in the vexed power sector, the more they remain the same. After a quarter century of putative power reforms, the policy focus remains stepping up generation, never mind that power distribution leaks revenue like a sieve thanks to reckless, politically mandated giveaways and routine theft.

Power minister R K Singh has recently announced that the government would invite bids for a massive 1 lakh MW of solar power capacity in one go, the game plan apparently is to far exceed the target for 1,75,000 MW of renewable power capacity by 2022.

The relentless drive to shore up the installed generation base, albeit of green and renewable energy, is entirely questionable given that about 50,000 MW of conventional power capacity is stranded, in the main due to lack of demand from cash-strapped distribution utilities.

Besides, the 175 GW target for renewables seems likely to be met, although the lack of line capacity may well affect power evacuation going forward. The lop-side emphasis on generation can short-circuit the system, given the moribund finances of state power utilities.

The Fifth Integrated Rating for State Power Distribution Utilities, the latest available and published back in May 2017, makes sorry reading. Take, for instance, Paschim Gujarat Vij Co Ltd, which gets A+ rating, despite its aggregate technical and commercial losses — euphemism for plain theft — barely reduced from 24.8% in FY 2015 to 24.2% in FY 2016.

Other state power utilities fare far worse. Open-ended consumption subsidies and patronage of theft wreak havoc in power, leave generation capacity stranded, stultify much-needed investments, and put paid to growth at enormous national cost. We need budgeted subventions and transparency in utility finances.

[This piece appeared as an editorial opinion in the print edition of The Economic Times.]

The Economic Times

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