Are India's power woes hyped?

Tue, 26 Feb Pre-Open

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The glaring gap between India's power demand and supply is known to all. But there is no doubt that this gap has been narrowing over time. Going by media reports one cannot be blamed for presuming that Indian power sector is one of the most inefficient, but this is not the entire truth.

Former Union Power Secretary Dr. E.A.S. Sarma, has in an interesting article in business daily, dispelled some of the myths related to paucity of power supply. To begin with, Dr. Sarma, believes that the current method of estimation of power demand is incorrect. That in turn tends to inflate power demand supply gap. Also, he is of the opinion that one should factor in the effects of shifts in fuel and improvements in efficiencies. These trends display the 'per capita useful energy use', something the 'gross per capita energy use' does not take into account.

Further, Dr. Sarma discussed the importance of maintaining a balance between thermal and hydel power. Considering that end power usage is different and varies from users to users, it tends to be more expensive on an overall basis as thermal power generation is more suited for steady requirements. On the other hand, hydro power is mainly used to meet peak demands. As such, he believes that investments in hydro generation have not kept pace. And that this has caused an imbalance.

Moreover, Dr. Sarma believes that setting up new and more efficient generation projects should be considered to reduce wastages and meet geographical requirements. Also given that setting up new plants is not considered as the cheapest option, power prices tend to be high. Eventually, the poor find it difficult to afford. Not to mention that energy security concerns rise on the back of usage of non-renewable resources.

This is where the aspect - that we at Equitymaster have been discussing for a long time - comes into play. We are talking about investments in transmission and distribution (T&D). These have not kept pace with generation investments, therefore leading to huge T&D losses. According to Dr. Sarma, about one-third of the generated electricity is lost in T&D. While investment in generation is necessary - we believe that this aspect has been getting a lot of attention - by the government as well as private players. The media focus in the recent past has been mainly on how generation capacities have not kept pace. We have also seen blame game between the generation and coal supply companies. But the fact of the matter is that a lot of this can be curbed with better and efficient usage of the current infrastructure as well as more efficient consumption by end users.