There is more in common between Gujarat and Madhya Pradesh than the fact that they are ruled by BJP governments. Both these states want to ensure uninterrupted power supply to their people.

In March 2006, Gujarat completed its Jyoti Gram Yojana to provide round-the-clock electricity to all consumers and at least eight hours of supply to farmers. This year, the Madhya Pradesh government has decided to undertake a similar programme, but with the promise of 10-hour supply for agricultural use. To begin with, Madhya Pradesh adopted the strategy of feeder separation (different distribution lines for farmers and other users), just as Gujarat did, and then steadily tied up long-term power supply.

There was another exercise that the states took up simultaneously: the unbundling of the power business to bring in corporate efficiencies. In 2005, the Gujarat government created Gujarat Urja Vikas Nigam Ltd (GUVNL) out of Gujarat Electricity Board as the holding company for seven entities with functional responsibilities of trading, generation, transmission and distribution. The same year, Madhya Pradesh also unbundled its power business and created government-controlled companies. Later, Madhya Pradesh also restructured Rs 11,491 crore of debt and took over the short-term exposure of banks to its distribution companies.

The MP Power Management Company, the holding company of three distribution companies, has now undertaken the Atal Jyoti Abhiyan which involves providing round-the-clock power to 72 per cent of the consumers in the state. The programme has already covered 10 districts including Bhopal, Ratlam and Jabalpur.

Generating a surplus

Madhya Pradesh had seen a huge shortfall in generation capacity after Chattisgarh was carved out of its resource-rich belt in 2000. But as DJ Pandian, chairman, GUVNL, and principal secretary in Gujarat’s energy department, puts it, “You cannot draw water in a bucket if there is no water in the well”. Any state embarking on this model of round-the-clock power, therefore, first needs to secure long-term contracts. Madhya Pradesh did just that. “In 10 years, from a deficit of over 14 per cent in 2007-08, we expect to have surplus power of around 19 per cent from long- and medium-term sources,” says Manu Srivastava, managing director, MP Power Management Company. This year itself, the state is likely to have a surplus of 4 per cent.

Srivastava says the state added 1052 Mw to its power pool through long-term contracts last year. It will add another 495 Mw from Reliance Power’s Sasan ultra mega power project this year.

With Madhya Pradesh due for elections later this year, the programme, obviously, has a populist undertone, but as Kameswara Rao, leader, energy, PricewaterhouseCoopers, says, such measures also have a huge social and economic impact. He quotes a PwC survey conducted in Madhya Pradesh that shows that 24×7 power is helping children study longer, besides improving the safety for women, and permitting more economic activity in the villages.

Rao says, a more reliable power supply has also reduced migration to cities as better social and economic activities are now available in the village itself. “Nonetheless, it requires considerable effort from state governments in terms of policy-making, planning, financing and investment. Other states can replicate this but it will not be easy,” he says.

Uninterrupted power is something that states like to provide even at the cost of booking losses for distribution companies. Prior to elections, there is often an increase in spot purchase of electricity at high rates without charging consumers a commensurate price. Pandian says it is important for states to inculcate a culture of paying for power among consumers to maintain the quality of supply. Gujarat raised tariff by 4.05 per cent last year and by 8.34 per cent this year for all consumers except those below the poverty line. Madhya Pradesh has been more conservative with only 0.77 per cent increase this year over 2012-13.

Another important measure is to differentiate tariff on the basis of quality. So, Gujarat charges 50-60 paise for every kilowatt per hour (unit) for agriculture and Rs 3.15 for domestic use in villages. Pandian says nuclear power which is the cheapest should ideally be used for agricultural.

Banking on hydel power
At present, both Gujarat and Madhya Pradesh feed agricultural demand through hydro power stations. Gujarat has 779 Mw available and Madhya Pradesh has 3688 Mw of hydropower for its use. “We use hydro power during night and early morning to meet agricultural demand. Hydro power is also used for meeting peaking shortages,” says Srivastava. Besides, Madhya Pradesh exchanges some 1500 Mw with Punjab and Haryana. During the rabi sowing season starting October when the demand is high, Madhya Pradesh takes power from the two states in return for supplying them similar volumes in summer.

However, creation of separate infrastructure for different users is a drag on the state-owned power companies. Both Gujarat and Madhya Pradesh incurred increased spending on creation of this infrastructure and in subsidising new consumers. Gujarat initially spent around Rs 1,500 crore through budgetary allocation, which it was later able to retrieve. In the case of Madhya Pradesh, Srivastava says, the finances of the distribution companies in the state will improve after the likely reduction in aggregate technical and commercial losses over the next three years.

Funding Gujarat’s Jyoti Gram Yojana had its challenges too. Initially, the state government was to provide 70 per cent of the money, with panchayats, cooperatives and other local bodies contributing the remaining 30 per cent as public contribution. However, in October 2004, the Gujarat government had to pitch in to meet the shortfall in public funding to help the state meet the roll-out target.

These hiccups, however, have not affected the finances of discoms in Gujarat. Its four companies are the only ones enjoying the Union power ministry’s highest rating of A+. Madhya Pradesh’s three discoms have the third-best B rating.

Gujarat has also received representations from other states like Bihar, Punjab and Karnataka for studying the Jyoti Gram Yojana. Pandian has a word of caution for them. “Free power has spoilt the sector. Every consumer should pay. Even power for agriculture should be priced even if at a subsidised rate.” Every Rs 1 crore raised through tariff can get 300-400 Mw more power. Besides, it is essential to set up good transmission network and efficient management.

Consumers, of course, are happy. It’s not that power outages have completely vanished, but the situation is far better than earlier, they say. The 24×7 electricity programmes may be politically motivated, but one thing is certain: it requires a strong will to implement change.

Courtesy: Business Standard