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Business News/ Industry / Energy/  Govt’s plan to segregate power supply may need Rs1 trillion
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Govt’s plan to segregate power supply may need Rs1 trillion

REC to be tasked with executing project; initiative also involves strengthening sub-transmission, distribution systems

The investment, spread over five years, is aimed at reducing India’s aggregate transmission and commercial losses by 5 percentage points from the present level of 27%, which will be sufficient to recoup the investment. Photo: MintPremium
The investment, spread over five years, is aimed at reducing India’s aggregate transmission and commercial losses by 5 percentage points from the present level of 27%, which will be sufficient to recoup the investment. Photo: Mint

New Delhi: The National Democratic Alliance (NDA) government’s plan to supply electricity through separate feeders for agricultural and rural household consumption, aimed at eventually providing round-the-clock power, may require an investment of around 1 trillion—20 times the amount the centre has budgeted this year.

State-owned Rural Electrification Corp. Ltd (REC) will be the agency tasked with executing the project named after the late Deen Dayal Upadhyaya, a leader of the erstwhile Bharatiya Jana Sangh, the forerunner of the Bharatiya Janata Party. In addition, the initiative also involves strengthening sub-transmission and distribution systems. A note sketching out the contours of the project will be submitted to the cabinet shortly for approval.

“An investment of 1 lakh crore is required for the scheme," said a person aware of the investment requirements. The person requested anonymity.

Central Electricity Authority (CEA), the apex power sector planning body, has already conducted a study on the proposed initiative. This investment, spread over five years, is aimed at reducing India’s aggregate transmission and commercial (AT&C) losses by 5 percentage points from the present level of 27%, which will be sufficient to recoup the investment.

“The discussions are on with the state governments and their requirements for rolling out the Deen Dayal Upadhyaya Gram Jyoti Yojana for feeder separation announced in the Union budget," said a government official who also didn’t wish to be identified.

“The programme includes feeder segregation and an integrated model. According to CEA’s preliminary estimates and its study, an investment of 1 lakh crore is required for the same. A final number will emerge when a cabinet approval will be sought for the same," said the official. A second official confirmed the plan.

Mint reported on 24 June about the plan, based on an initiative called Jyotigram Yojana in Prime Minister Narendra Modi’s home state of Gujarat, which the NDA proposes to extend to all states to ensure around eight hours of quality power supply to agricultural consumers and 24-hour electricity to households.

The proposed investment will benefit companies across the entire power ecosystem—companies that manufacture electric conductors, transformers, insulators, poles, towers and capacitors—in addition to construction contractors.

“The plan to supply electricity through separate feeders for agricultural and rural household consumption aimed at providing 24x7 power offers a huge opportunity for the associated equipment component suppliers and EPC (engineering, procurement and construction) contractors," said Amol Kotwal, associate director, energy and power systems practice, for South Asia and the Middle East, at consulting firm Frost and Sullivan.

Separating electricity feeders will ensure that while farmers get the desired amount of electricity, the quality of power and its availability for households improves. It will also ensure that users are billed and there are reduced technical and commercial losses because of theft.

“Power is a vital input for economic growth and the government is committed to providing 24x7 uninterrupted power supply to all homes. Deen Dayal Upadhyaya Gram Jyoti Yojana for feeder separation will be launched to augment power supply to the rural areas and for strengthening sub-transmission and distribution systems. I propose to set aside a sum of 500 crore for this purpose," finance minister Arun Jaitley said in his 10 July budget speech.

The minister said additional money for various projects proposed in the budget would be allocated as and when the need arises.

While India has an installed power generation capacity of 249,488.31 megawatts (MW), it faced a peak deficit of 3.7% in June. Analysts say the data doesn’t capture the real demand. The lowering of the deficit is due to the unwillingness of the state boards to buy enough power because they cannot afford to do so.

Queries emailed to a power ministry spokesperson on Sunday evening remained unanswered as of press time on Tuesday.

A fourth person aware of the plan said on condition of anonymity: “With the targeted reduction in AT&C losses by 5%, this money will be recovered in five years. The CEA study is complete."

According to the World Bank, India’s per capita power sector consumption, around 800 kilowatt hour, is among the lowest in the world. Around 600 million Indians do not have access to electricity and about 700 million Indians use biomass as their primary energy resource for cooking, according to the Planning Commission.

Despite the subdued energy consumption, the electricity subsidy numbers have been rising.

“Overall subsidy dependence for FY 2014-15 for distribution utilities in the 16 states (based on the allowed subsidy levels in tariff orders) has also shown an increase by 17% over the previous FY, mainly on account of upward pressure on cost of power supply and continued subsidized nature of tariffs for agriculture consumers," rating firm Icra Ltd said in a 22 July report.

“On all-India basis, subsidy dependence for the state owned distribution utilities for FY 2014-15 is estimated in the range of 720 billion, which is estimated to have increased at CAGR (compound annual growth rate) of 16% since FY 2010," Icra said.

The new government is trying to attract investors back to the power sector, which has been set back by slowing economic growth, costly loans, delayed land acquisition and environmental clearances and fuel shortages.

“Feeder separation is an excellent idea that has been already implemented successfully in several states and is one of the critical solutions for long term viability of the country’s distribution companies. Further, it will be a huge opportunity for the large electrical engineering industry in India for supply of poles, conductor, transformers, etc," said Pratik Agarwal, head, infrastructure business, Sterlite Technologies Ltd.

Experts welcome the government’s plan, noting that it is modelled on a programme that has been successfully rolled out in Gujarat.

“This is a proven scheme and has improved the quality and reliability of power to the agricultural consumers," former power secretary P. Umashankar said. “It should be taken up for implementation in those states where agricultural consumption is more than 20% of the total electricity consumption."

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ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Published: 23 Jul 2014, 12:17 AM IST
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