How low prices prevent India from supplying power 24x7 to all homes

The inability or refusal of state governments to increase power bills, as we explain later, has led to more borrowing and power shortages and made DISCOMs reluctant to buy available electricity.

India mined more coal, built more power plants, and distribution companies connected millions of homes to the grid over four years to 2019. But those companies are now saddled with a record debt that hinders a key government promise.

“24x7 power” is the government’s priority, India’s new power minister Raj Kumar Singh said on May 30, 2019. His predecessor, Piyush Goyal, declared India “power surplus” two years ago, and a government dashboard says 99.99 per cent of rural homes--which account for nearly 7 in 10 Indian homes--now have grid power.

At the root of the contradictions between almost-universal electrification, “surplus” electricity and the inability to supply it around-the-clock to Indian homes is a debt that burdens state-owned electricity distribution companies (DISCOMs) nationwide, impairing their ability to build and maintain power grids and equipment.

The inability or refusal of state governments to increase power bills, as we explain later, has led to more borrowing and power shortages and made DISCOMs reluctant to buy available electricity, which means continuing blackouts and erratic power supply.

This debt will reach Rs 2.6 per cent ($37 billion) by 2020, according to a May 2019 study by Crisil, a market research agency. When that happens, the debt will be the same as in 2015, which is when the Ujwal DISCOM Assurance Yojana (UDAY), the government’s bailout programme for DISCOMs, began.

“The much bigger need [other than DISCOM inefficiencies] is to address the large amount of free power that is distributed for irrigation and for rural households in the country,” Vibhav Nuwal, director, REconnect, a Bangalore-based energy solutions company, told IndiaSpend. Only if this electricity is metered and billed will DISCOM losses reduce, he said.

We sought comment from Vishal Kapoor, director, UDAY, at India’s power ministry over email and followed up with phone calls over two weeks, but there was no response. His office declined a request for an appointment. If and when there is a response, we will update this story.

Business Standard