‘Saubhagya’ may prove lucky for private investment in Uttar Pradesh

Electricity is one of the most critical components of infrastructure required for the economic growth of any state.

Unreliable power supply and prolonged outages that Uttar Pradesh has been experiencing for the last two decades or so always acted as one of the major deterrents to investment in the state.

Uttar Pradesh still remains the country’s most power deficit state after Jammu and Kashmir, the peak shortage being 10.9% between April 2017 and January 2018, says a Central Electricity Authority report.

But the power situation has considerably improved in the state for around a year and a half.

UP’s power demand is second only to Maharashtra’s even today when the state is not able fulfill the full requirement, the CEA report adds.

The peak demand-supply gap used to be recorded as high as 20- 25% or even more only till recently, CEA data suggests.

The previous governments’ efforts for augmentation of generation capacities in the last 12 years appear to have started paying off now.

The present regime has not only placed a greater thrust on supplying round the clock power and providing last mile connectivity but has also shown the political will that was largely missing so far to deal with power thieves firmly.

“The power situation in the state has indisputably looked up considerably during the last one year or so to much of the relief of the people and boosted industries’ confidence,” Indian Industries Association (IIA) executive director DS Verma says.

Implementing the Centre’s Saubhagya scheme, the Yogi Adityanath government now aims at providing 24X7 power to every household in the state by March 2019 in a move that is sure to drive up the electricity demand dramatically.

BOOST TO POWER DEMAND

The ongoing Saubhagya scheme may prove lucky not only for people in general but also change the fate of industries. The completion of the ambitious project that seeks to provide last mile connectivity is expected to raise the peak power demand in UP from the current 17,000-18000 MW to over 22,000 MW in 2019-20 as per a conservative estimate made by the UP Power Corporation Ltd (UPPCL) in the Power For All (PFA) memorandum of understanding (MoU) signed with the Centre in April last year.

The demand may actually cross the projected figure going by the fact that the peak load/demand was already more than 20,000 MW (20,274 MW to be precise) between April 2017 and January 2018, the CEA report said.

Meeting the demand is believed to require a lot of investment in terms of capacity additions, apart from strengthening the distribution and transmission networks.

“The government spending is expected be around Rs 20,000 crore during the next two years to create new and upgrade the existing distribution and transmission infrastructure in the shape of transformers, sub stations etc,” principal secretary, energy and UPPCL chairman, Alok Kumar said.

INVESTMENT OPPORTUNIES GALORE

The electrification of around 1.75 crore households, which is more than 40% of the country’s total four crore households without an electricity connection, and spurt in the power demand will be a naturally corollary to an increase in demand for goods like transformers, meters, cables etc apart from electricity as well as electronic gadgets in villages, opening new avenues of investment.

“Increase in power demand and electrification of new households will obviously create a new market for electricity and electronic goods and gadgets generating new investment opportunities,” Verma says, adding “There is especially immense scope for investment in solar power that holds the key to meeting the growing electricity demand in future.”

The state government in December released its new solar policy 2017 seeking to generate more than 10,000 MW solar power by 2022. “We have already invited tenders for 1,000 MW solar generation in the state,” Kumar says.

Increased demand/consumption is expected to boost manufacturing of appliances and will especially propel power intensive industries like steel and cement.

It will also create demand for product and services like smart as well as normal meters. Uttar Pradesh procured 40 lakh smart meters recently to install them in power theft-prone areas in Lucknow and Varanasi and has plans to purchase lakhs of such meters for a dozen other cities.

Around 70 lakh power connections in villages are unmetered and nearly 1.75 crore new connections are proposed to be given within next one year. This means UP needs 2.85 crore meters immediately for installation in villages alone.

E-mobility or growing trend of electric vehicles is further expected to boost demand for the EV sub-systems and ancillaries such as batteries and chargers. The Central government has set a target that 30% of the total vehicles in country will be e-vehicles by 2030. At this rate, UP alone may have more than 75 lakh e-vehicles, considering the fact that it has around 2.60 crore total vehicles at present. The number of e-rickshaws is already fast-increasing in cities.

“New trades and emerging areas like roof-top solar, e-vehicles, smart meters and auxiliary services will certainly open additional avenues in investment,” Verma pointed out.

THE CHALLENGE

Rampant theft of electricity, high aggregate transmission and commercial (AT&C) losses, low bill collection efficiency that are feared to derail the 24×7 power project in the long run.

The gap between the average cost of supply (ACS) and Average Revenue Realisation (ARR) is currently Rs 0.80 per unit, resulting in a huge and increasing deficit for the UPPCL and discoms every year.

The AT&C losses, a large part of which is said to be pilferage, are more than 30% in UP. This figure is not only above the national average of 20% but also highest among the big states, barring Bihar.

The UPPCL, in its last annual revenue requirement (ARR) proposal, had projected its deficit at around Rs 19,000 crore during the current financial year even after the tariff revision. Little wonder, the UPPCL does have adequate funds to make regular payments to the generating companies that keep on writing to it, demanding clearance of outstanding power purchase bills that stand at somewhere around Rs 10,000 crore.

“Unless the UPPCL is able to recover the cost of electricity, it supplies to consumers by plugging in leakages, it will be near impossible for it to sustain the task of giving round the clock power to consumers,” All-India Power Engineers Federation (AIPEF) chairman Shailendra Dubey says.

“After all, it will require even more money to purchase more power in future to meet the increased electricity load,” he says.

THE ROAD AHEAD

Uttar Pradesh may emerge as the number one state overtaking Maharashtra in matter of electricity demand in the years to come. Managing the demand may require further capacity additions. But even more important will be the financial turnaround of the discoms to the extent that they have the money to purchase electricity from various sources to be able to supply 24×7 power to people.

The government has taken a lot of steps for the financial turnaround of the discoms under the ongoing UDAY scheme under which the Central and the state governments had taken over discoms’ debts liabilities to the tune of Rs 50,000 crore in 2014-15. The discoms, under the scheme, are contract-bound to do 100% metering, bring AT&C losses to 10%, do regular tariff revisions, among other things, for a permanent solution.

The state government has shown a political will, giving a free hand to the UPPCL to deal with defaulters and power thieves and now raids are being conducted even in the areas that were considered to be “sensitive” politically.

“We have not only made sufficient arrangements to meet the power demand in future but also doing a lot of things to control power theft and increase revenue collection by targeting and identifying areas and the results are coming, though a lot is to be done,” Alok Kumar said. He said special camps were being regularly held to provide power connections free of cost the poor.

“We have given two lakh power connections new power connections within last two months. Chief minister Yogi Adityanath and energy minister Sri Kant Sharma, Kumar said had given full freedom to work,” he said.

Source: hindustantimes