If you are being tormented by frequent power cuts this summer, add our government’s generosity to Bangladesh to your curse list. For a country, with more people without power than the entire population of the US, does it really make sense to export power? And that too at subsidised rates?

Satyapal Menon | @TheDollarBiz 

Call it serendipitous, but it’s definitely not a coincidence! Even while writing this piece on power exports, there are series of agonising power cuts. Well, believe it or not, power deficit India is also a power exporter. Call it misplaced or displaced priorities, or attempts to position India as a regional powerhouse, our policymakers have, what in their view is diplomatic altruism, opened up power lines to Bangladesh. Diplomacy and helping one’s neighbour is unquestionable, but shouldn’t one put one’s house in order first? Sharing what one has in surplus is always welcome, but what is incomprehensible is the rationale behind exporting power, when India itself is countering chronic crisis and consistently rationing its power resources.

Sour deal

Power flow to Bangladesh, through the 125-km Baharampur-Bheramara transmission link between the grids of the two countries, became operational last October. According to the arrangement, 250 megawatt (MW) of power from Indian central government’s unallocated quota and 250 MW more from a private firm will be supplied to Bangladesh. Apart from this commitment, there are also plans to augment the power supply to 1,500 MW within the next few years. 

The big question here is, can India afford these exports? Scarcity and shortages of power have impacted the Indian economy and dealt debilitating blows to both the industrial and agriculture sectors. If the initial decision exposed a lack of insight, the proposal to increase the quantum reflects policy fallacy. 

Hungry numbers

India is the world’s 5th largest producer and consumer of power, accounting for 3.4% of global energy production. It is also a country with shockingly low per capita power consumption – per capita power consumption in India, at 684 units, is about 95% lower than that of USA. About 25% of our populace, i.e., about 300 million people do not have access to power. According to a report titled ‘Shackling India’s Growth Story’ by Federation of Indian Chambers of Commerce and Industry (FICCI), power demand in India has been growing at an annual rate of 3.5% for the last three decades and is expected to grow at a much faster pace over the coming decades.

During FY2014, the demand for power was 10,02,257 million units (MUs) against a supply of 9,59,829 MUs – a shortage of 42,428 MUs. While the peak demand was 1,35,918 MW, the availability was 1,29,815 MW – a shortage of 6,103 MW. According to Load Generation Balancing Report (LGBR), India is expected to experience a peak shortage of 2% and energy shortage of 5.1% during FY2015. Against requirements of 1,048,672 MUs, the availability would be 9,95,157 MUs, resulting in a shortage of 53,515 MUs. The peak availability would be 1,44,788 MW against a demand of 1,47,815 MW, resulting in a shortage of 3,027 MW.

In fact, this perpetual story of shortage continues despite a 10% annual growth in installed capacity in recent years. The all-India installed capacity as of February 2014 was 1,63,304.99 MW of thermal, 4,780.00 MW of nuclear, 40,195.40 MW of hydro and 29,462.55 MW of renewable power.  

Non spared

According to a FICCI commissioned survey conducted by Bureau of Research on Industry & Economic Fundamentals (BRIEF) on the impact of intermittent power cuts and shortages in supply on the industrial sector, 39% of Indian companies were found to be requiring 10,001-50,000 KWH, 29% needing 50,001-1,00,000 KWH, 26% requiring 1,00,001-5,00,000 KWH and 6% requiring more than 5,00,000 KWH power every month to maximise output and production. To avoid shortfall in production, companies use power backup units, which ultimately increase their cost of production/operations. The study reveals that 61% of the companies are burdened by over 10% cost escalation due to power cuts. The highest cost escalation was observed in Andhra Pradesh, Tamil Nadu and Odisha, where cost escalation extended beyond 30% for a few firms.

The study further adds that if the firms do not rely on power backup units to ensure continuous production, 61% of the firms would experience over 10% shortfall in production. According to the report, 21% of the surveyed companies experience more than 30 hours, 16% from 6 to 10 hours and 15% from 1 to 5 hours of power outage every week. In fact, India loses $68 billion in terms of GDP due to electricity shortage. For instance, the Rs.13,000 crore knitwear industry at Tirupur in Tamil Nadu is witnessing an uptick in enquiries and orders, but it is unable to accept all orders. Reason: unprecedented power cuts lasting 8 to 10 hours a day.

Power shortage and deficiencies have also adversely impacted the agriculture sector, which has been deprived of even minimal needs. A majority of rural areas across the country are subjected to chronic shortages, affecting the produce and productivity.

Who’s commitment?

Currently, India is exporting power to Bangladesh at 7 taka or Rs.5.4/unit. The consideration appears neither viable nor profitable. If one looks at power tariffs in India – avg.  price of Rs.9.85/unit in Maharashtra, Rs.8.15/unit in Andhra Pradesh, Rs.8/unit in West Bengal, Rs.6.95/unit in Kerala – one can’t help but get the feeling that supplying power to Bangladesh is nothing but extending subsidies across the border. Perhaps, in the long term, if and when India becomes a power surplus country, we can afford such largesse. National Thermal Power Corporation (NTPC), one of India’s largest power producers, which has been asked to meet the present commitment to Bangladesh, has already expressed its strong reservations about augmenting supplies at the negotiated prices.

The other one

There is an alternative and a more feasible plan on the anvil though – a takeoff from the success of Bhutan’s hydro-electric projects. The success of the Bhutan model is a classic case in point under which India had constructed two 2,600 MW capacity hydro-electric projects in Bhutan, which are being used for redirecting or exporting 4,800 BUs to India after meeting local demand.

India has been consistently upgrading and augmenting its generating capacity. In fact, the installed capacity registered a growth rate of 10% during FY2014. Although India is well endowed with coal resources, the country’s coal based plants are not generating power in accordance with the installed capacities. The plant load factor or the actual generation has been consistently between 70-73% of the total thermal installed capacity. Paradoxically, coal-based plants are being operated with imported coal since coal produced in India does not meet the standards required for power generation. Apart from these factors, India also has had to import natural gas to operate its gas-based plants. The performance of hydro-electric plants are also subjected to the vagaries of monsoon and availability of water.

This is where our neighbours can chip in. India can use its thermal power infrastructure to its full capacity by importing natural gas and the right quality of coal from its neighbours. It can also contribute its expertise in constructing infrastructure for power generation, both thermal projects and hydro-electric projects – like in the case of Bhutan. According to a Ministry of Power report, “because of low electricity per capita consumption in India, the country is going to achieve surplus electricity generation during the 12th plan period provided its coal production and transport infrastructure is developed adequately. Surplus electricity can be exported to neighbouring countries in return for natural gas supplies from Pakistan, Bangladesh and Myanmar. Bangladesh, Myanmar and Pakistan respectively have proven natural gas reserves of 184 billion cubic meters (BCM), 283 BCM and 754 BCM. There is ample opportunity for mutually beneficial trading in energy resources with these countries. India can supply its surplus electricity to Pakistan and Bangladesh in return of natural gas imports by gas pipelines. Similarly, India can explore scope to develop, on BOOT (build–own–operate–transfer) basis, hydro power projects in Nepal, Myanmar and Bhutan.

Long-term power purchase agreements with China for developing the hydro power potential in Brahmaputra basin of Tibet region could prove to be another viable initiative. There is ample trading synergy for India with its neighbours in securing its energy requirements but they have to be explored with proper planning – not in the way Bangladesh is being provided subsidised power by keeping India in darkness.