Moneycontrol Pro Panorama | Are power reforms the need of the hour?

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Prime Minister Narendra Modi's office may review the coal supply situation today amid complaints of fuel shortages. Yesterday, Home Minister Amit Shah met ministers of coal and power to review the situation.

The coal and power ministries have been reassuring states and electricity distribution companies (discoms), by trying to increase the supply of domestic coal and electricity from central utilities, notably NTPC. Yet, the coal inventory at thermal power plants remains precariously low and electricity prices in the spot electricity markets remain elevated. So much so that some states are even advising consumers to moderate their electricity usage.

The withdrawal of the Southwest monsoon may ease bottlenecks and help Coal India supply more coal, thereby easing the fuel supply crunch. The onset of the winter season may also reduce power demand.

Even so, a crisis presents an opportunity to correct past mistakes and the power ministry is using this one to urge states to set their discoms' houses in order. Among several measures, the power ministry this week mandated discoms to undertake energy accounting on a periodic basis.

The notification stipulates quarterly energy accounting by discoms. There will also be annual audits. Both these reports will be published in the public domain and will provide details on consumption and on transmission and distribution losses. “It will identify areas of high losses and theft and enable corrective action. This measure will also enable fixation of responsibility on officers for losses and theft,” says the statement from the ministry of power.

Readers may recall that India suffers from poor distribution practices. The aggregate technical and commercial losses, which indicate energy losses, inefficiencies in billing and payments, stood at 21 percent in FY20, showed the latest analysis of state power discoms by rating agencies. Reduction in wastages and improvement in efficiencies can bring notable relief and ease the burden on the power supply chain.

Among other measures, the power ministry has also allowed  power plants that are operating at suboptimal levels due to low offtake by state discoms to sell electricity in the open market. This opens a tactical opportunity for Tata Power Co’s Mundra power plant, point out analysts at Edelweiss Securities. One has to await the dispatch numbers for the current quarter to gauge the impact of the policy change. Note that Tata Power has crimped production from the Mundra plant due to unviable tariffs and faces the risk of incurring penalties levied by states with which it has power purchase agreements.

“We observe that CGPL has coal reserves sufficient for 15 days of plant operations for 80 percent plus PLF’s which could generate ~1 billion units,” analysts at Edelweiss said in a note. CGPL is Coastal Gujarat Power Ltd, the unit that constitutes Tata’s Mundra power plant. PLF is plant load factor, it indicates utilisation levels. Tata Power stock is up 21 percent this month.

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R Sree Ram

Moneycontrol Pro