State electricity discoms won’t get free power, says RK Singh

NEW DELHI : Raj Kumar Singh, India’s minister for power and new and renewable energy, wants to bring financial discipline to state electricity discoms . In an interview, the former home secretary and a 1975 batch Bihar cadre IAS officer spoke about linking funding under the Union government’s schemes to discoms’ performance, southern states cautioning the Centre of civil unrest because of mandatory letters of credit as part of the payment security mechanisms and his strategy of limiting state governments’ borrowing. A two-time Lok Sabha member of Parliament from Arrah in Bihar, Singh also spoke about expediting hydro power projects in Jammu & Kashmir to help India fully utilise its share of water under the Indus Waters Treaty and building projects totaling 17,000 MW in Arunachal Pradesh to pre-empt China’s plan to divert water from rivers that flow into the Brahmaputra. Edited excerpts:

Will there be a larger private sector involvement with the discoms?

That reform was envisaged in the law that was passed in 2003, where you have a number of suppliers in the business of providing electricity to the consumers, so that the consumer has a choice. Like you have a choice with your mobile. If I don’t like Airtel, I will switch to Vodafone. It is something that is still there in our minds and we intend to push it through. That means that the discom will continue and it will have the monopoly on the wire part of the business on the distribution system. So, the wheeling will be done by the discom. The supplier will buy the electricity in bulk.

When does this become a reality?

We have a project that is being formulated where I am putting it all together where I am saying, earlier the money part and trajectory part were two different schemes. Now, I am putting them together so that we will give you (discoms) money for smart meters, for aerial bunch cables, underground cabling, SCADA systems, stabilizer systems, whatever, we will give you money for that. We will also give you credit through the Power Finance Corporation (PFC) and REC Ltd but this will be conditional on you achieving certain parameters and reforms. So, you reach this milestone, we will release the money.

Will the Integrated Power Development Scheme and the Deendayal Upadhyaya Gram Jyoti Yojana become conditional?

If you (discoms) don’t do it, you won’t get money—neither grant nor loan. The thing is, number one, reduce your losses. The second is, you must implement the reforms. That means the consumer must have a choice. So, you have multiple suppliers at the consumption end. One of the suppliers can be a government company but there has to be competition, so that people have a choice.

By the first of August, I put in place a system by which the power gets dispatched only when a letter of credit is given. Earlier, the losses didn’t matter because of inefficiencies or they could cover those losses. States used to announce subsidies without giving the money or the government departments did not pay. They would cover the losses by paying late to the generating companies or not paying at all and doing load shedding. Now, both these options are being cut off. So, now you can’t pay late because you have given a letter of credit and there is no question of load shedding. So, now if you incur losses, you will have to find the money to buy power. Basically, what is happening is that the stratagems that were employed to tide over the losses are being ruled out and ruled out appropriately because you don’t have a right to tell a group of consumers that I will not supply electricity because I am inefficient. You will have to pay a penalty. You can’t tell a generating company that you supply power and I will pay you tomorrow maybe or maybe not. This will bring a rationality in the system that is much needed. The state can give whatever subsidy they want to give but if you want power you will have to pay.

Some of the southern states have approached you on the issue of letter of credit stating that absence of electricity will create social strife.

They wrote to me.

Which are these states?

I won’t name them. Ministers, chief ministers they wrote to me. They wrote to the Prime Minister saying that it will be very difficult and all that. We said, nothing doing. You can’t say that I will take electricity without paying. There is no electricity without paying because they have to pay for the coal, they have to pay for the freight, they have to pay salaries, so there is no question. So, basically this is towards making the sector viable and sustainable. So, one step has already been taken. That will leave the generating assets owned by the states themselves. That I am not interfering with. You want to run them to the ground, you can run them to the ground. I think now the states will be faced with a choice—either to make discoms more efficient or do load shedding.

Are you also looking to bring financial discipline to state electricity distribution companies (discoms) by limiting state governments’ borrowing?

That is the second stage. The second stage will happen after three months. I have told the chairpersons and managing directors of PFC and REC that after three months, I am going to insist on you following prudential norms at par with banks for any l oan you give out . There is no provision of working capital. They can give short term credit or long term credit. So, if somebody is incurring losses and not improving their efficiency then lending to them is a bad idea because your money will be at risk. So, this money will also dry up. So, I am putting in place incentives and disincentives.

So, basically what was happening in the sector was that we (the Union government) would pump in money and every 7-10 years so the discoms would build up their assets and improve their systems. But just because they were continuously running losses, they never had money to maintain these assets and these assets would run to the ground. After 7-10 years, the central government would come up with another package to help them. The basic issues remained unaddressed. Now, an attempt was made under UDAY (Ujwal Discom Assurance Yojana) after our government came, but it met with limited success. Losses came down by 2%. As it was not combined with incentives and disincentives that partial success was met. Now, I am merging both.

If there is uncertainty about whether you will be paid for power or not, if you are a generator, who will invest in the power sector?

So, this is UDAY-II in the works?

That is it. You can call it by any name. A rose by any name…It is basically going to be one integrated project, which will have the trajectories of conditionalities as well as the provisions for funding. So, all Government of India schemes will come together with conditionalities. Within 100 days of the new government, the new tariff policy will be approved.

You have spoken about India’s plan to fully utilise its share of water under the Indus Waters Treaty.

I have already told my ministry that the objective is to utilise all the water in our share and whatever scheme needs to be set up to utilise our share of the water should be done. In some cases, we are allowed non-consumptive use and in some cases we are allowed consumptive use. In either case, I have said that we have to go ahead and utilise our share.

What will happen to the projects on the Brahmaputra given China’s plan to divert water from rivers that flow into the Brahmaputra?

Subansiri is through. All the clearances have come. All the committees found that the project is very safe, it will reduce floods. So, that is now into play. Similarly, Dibang is through. Then there is a cascade of projects in Arunachal—Siang I and Siang II. So, all these tributaries that feed into the Brahmaputra, we have a list of projects that have been prospected and examined. So, we are taking them up. These projects total around 17,000 MW. Arunachal Pradesh has an assessed hydropower potential of around 50,000 MW.