HT interview: Wrong to give free power to those not in need, says RK Singh

Union power minister RK Singh speaks to Sweta Goswami about the government’s plans to achieve India’s India’s COP26 promises, possible roadblocks in the journey, the “culture of freebies’’, and reveals that he has told officials to conduct a financial health study on all major states offering electricity subsidies. Edited excerpts from the interview:

A short-term power crisis is turning out to be an annual problem now. What is being done to improve the situation?Even this month, every single day the power demand is 20-22,000 MW (megawatts) more than the same day last year. Today if I look at just domestic coal, my average consumption per day is about 0.25-3 million tonnes (MT) which is more than the arrival (of domestic coal). My domestic coal stocks, despite the blending, have declined from 24 MT (million tonne) to 21 MT today.

We must also keep in mind that we have added 28.9 million consumers in our electricity network which was the largest expansion in history. Secondly, the economy is growing, so the power demand will keep going up. We are also adding renewable energy which has reduced the burden to some extent.

Besides, we have 25,000 MW of gas-based power plants that are completely not being utilised. The power ministry is going to soon come up with a separate exchange for trading of gas-based power and it will not have a cap of ₹12 per unit like we have in normal power exchanges. The competitive pricing will help reduce the price of spot gas based energy.

Also, I want to make it clear that if domestic coal cannot meet the entire demand, so be it. But the power demand of the country shall be met. I will once again order for more blending of imported coal if the need arises. Last time the directive was for 10% blending, this time if the situation demands, we might ask for even 12%.

From the Prime Minister to the Supreme Court, the debate over “freebies” is raging across the country and subsidies on electricity has turned out to be the go-to example for all. What is your perspective on the matter?I don’t mind if you give free electricity to everybody. But you must pay for the electricity you have purchased or sourced. You have to make a provision in the budget to pay for it. We have now put stringent rules for this. If discoms don’t pay gencos their dues within 75 days, then their connection with the exchange will get cut and they won’t be able to trade in the power exchange. If they do not pay even 30 days after that, then 10% of their long term access gets cut and that will keep decreasing further as per the rule.

After we barred 13 states from trading in the power exchanges due to non-payment of dues recently, everyone has fallen in line. As far as arrears are concerned, we offered them an instalment option, and now all of them are paying their instalments. So, the system is working.

But, as far as the larger question is concerned. There are some things like health and education that are not freebies because you are investing in human capital. But, there are some freebies that are absolutely unhealthy from the point of view of the environment and the fabric of a particular system.

Giving 30-40 units per month free to the poor is good as it would enable the poor person’s children to study. But, if you provide 300-400 units free then you are giving free electricity also for running air-conditioners and for conspicuous consumption. You are also benefiting those who consume more. This culture of giving free electricity to even those who do not need it is not right. It is only being done for votes.

I am getting a study done on all major states to show how in some form or the other over the years, the coffers of the state government are drying up. So far, we found that in most states the total revenue is eaten up by salary, pensions, loan repayments, and interest repayments itself. In some states, the total revenue is not even sufficient to cover this. So for meeting the committed revenue expenditure like salaries they have to borrow, and more loan is being taken for the freebies.

We need to understand that the total consumption today is 1,450 billion units (BU). By 2030, it is going to be 2,900 BU. Today my established capacity is 404GW and that has to be doubled to 820GW by 2030. So, in just eight years I have to add about 50GW a year. Investments are not coming because the outstanding dues owed by discoms to gencos has set a very bad precedent. The outstanding dues to the gencos were 1,35,000 crore. So they used to announce subsidies and not pay gencos. Also, because of freebies, all the state-run gencos will gradually become sick for want of maintenance.

But India’s Aggregate Technical & Commercial (AT&C) losses are also one of the highest..Yes, I agree. Our AT&C losses are at 20.88% at present. The bulk of AT&C losses is because regulators are appointed by the state governments. They appoint regulators who listen to them. Now most states do not increase power tariffs. So, the revenue recovered is now getting lower than the cost of supplying electricity.

Besides, I have written to RBI which has been shared with all the banks. If states want any loan from PFC or REC, and if they are making losses, they will qualify only if they work on the trajectory of loss reduction as laid down by the Centre. The Revamped Distribution Sector Scheme (RDSS) has blocked their doors from getting loans if they don’t improve their financials.

Another thing we are doing to reduce AT&C losses is allowing competition among multiple discoms in an area to improve quality of power.

Solar projects have been hit in the country due to imposition of high basic custom duty on solar cells and modules and indigenous manufacturers quoting arbitrary rates. Do you have any plan to intervene in the matter? We are one of the fastest-growing capacities in the field of renewable energy in the world. We said that we will have 40% of our capacity coming from non-fossils which means primarily renewable energy by 2030 which we achieved in November 2021.

Then there was Covid-19 and the lockdown which delayed a lot of projects. We were expanding rapidly and the bulk of cells and modules were coming from China, we wanted it to be made in India. China also tried dumping to kill our nascent manufacturing capacity due to which we had to put safeguards. We came out with a production linked incentive (PLI) and put up a tariff barrier 1.5 years ago to give them advance notice. This mechanism would have worked fine, but what happened was the capacities took time to come up and the Customs duty was imposed because of which the prices of cells and solar models went up. There is a mismatch in what the bidders had presumed for the prices to be and what actually happened. I have had a meeting with both the developers and manufacturers, we are working on a mechanism. But, we shall achieve our targets. In fact, last year itself we added 15 GW.

There are other options -- reimbursement, project imports, and so on. To cut a long story short, India will continue to be a leader in increasing renewable energy capacity.

Battery storage is turning out to be a major challenge in the country due to the high costs involved. What can be done to increase its manufacturing in the country?The problem I am facing right now is that almost all the battery manufacturers in India are focused toward on the transport market. They are making batteries for two-wheelers, three-wheelers, cars, and so on. It’s all for electric mobility. I want batteries of a much larger size which can store my renewable power to the extent of 1000s of MW.

So I am planning to come up with another PLI scheme only for grid storage. The extent will be up to 50 GW.

One solution is to push manufacturing which will bring down prices. The other solution is to add volume - we have already had a tender for 1,000 MWh, then NTPC is coming up with about 2,000 MWh and I will come up with another bid of about 2,500 MWh. All these bids will be the largest in the world because we are such a big country.