A State of concern

Maharashtra faces its worst ever power crisis and the State government, in a desperate move, seeks to revive the controversial Dabhol power project.

LYLA BAVADAM in Mumbai

THE magnitude of the power crisis in Maharashtra became evident recently with the roll-back of the Congress-Nationalist Congress Party (NCP) alliance's pre-election promise of free power to farmers and its government's decision to reinstate the controversial Dabhol Power Company (DPC) as a potential supplier of power. Both are politically sensitive issues that can evoke strong emotions among the Opposition parties and the voters, and both are being presented as solutions to the power crisis.

However, neither will bolster the sagging image of the Democratic Front (D.F.) government. It was accused of manipulating voters by promising free power to farmers despite warnings of an impending power crisis. Chief Minister Vilasrao Deshmukh tried to protect his government by saying that free power supply was only a temporary measure to help farmers tide over the drought. The claim lacks credibility, especially since the drought is far more severe now than it was seven months ago when the promise was made.

Although the flip-flop on free power is a serious issue, in political terms it is likely to be overshadowed by the controversy surrounding the revival of the Dabhol project. Besides providing a weapon to the Opposition Shiv Sena-Bharatiya Janata Party alliance, it is expected to give the NCP the upper hand in the coalition.

The $3 billion project was initiated by the government led by Sharad Pawar, who was then in the Congress, in the early 1990s. After irregularities and doubts about the high cost of power generated by the plant led to protests, Pawar kept a low profile, while other politicians and parties continued to try and derive mileage from the growing controversies. In 2000, under a Congress government, Phase I of the 2,144 MW project went on stream and sold power to the Maharashtra State Electricity Board (MSEB) at Rs.7 a unit. Within a year, in May 2001, Deshmukh did a turnaround. He accepted the findings of the Energy Review Committee (ERC), chaired by Madhav Godbole, which criticised the DPC's power tariff. Deshmukh allowed the MSEB to withdraw its Power Purchase Agreement (PPA) with the DPC citing exorbitantly high rates as the reason. The plant closed down and a long period of legal wrangling began.

Four years later and in his second term as Chief Minister, Deshmukh has come full circle and is eager to restart Phase I of the idle project. He explained his latest turnaround on Dabhol: "We were never against Enron. Even now we are not against it. Our opposition was limited to the PPA which we felt was on the higher side." The government expects DPC to begin supplying power in June 2006 at the asked for rate of Rs.2.20 a unit. However, as the current power generation facilities are stressed to their peak production capacity, it is unlikely that the government will be in a position to drive a hard bargain with the DPC and the final rate is expected to be in the region of Rs.3.20 a unit.

Paradoxically, the demand to reinstate the Dabhol project is as loud as it once was to scrap the project. The government, in its eagerness to revive the project, views it as a "saviour", a term used by a State Department of Energy official who requested not to be identified. It even attacked the findings of the Energy Review Committee - the very report which had found favour with it four years ago. Again, the attack has political overtones. As the power crisis in the State steadily deepened in the last few months, Pawar launched an attack on the ERC report and on Godbole, who responded in kind. The exchange only served as a reminder that the project continued to be a politically sensitive matter that divided the NCP and the Congress. (It is noteworthy that the NCP controls the vital Power and Finance portfolios in the State Cabinet.)

While the NCP chief's initial diatribe against the Godbole report may have been meant to blame the power crisis on the report and its author, it was an unfortunate choice because the attack only served to highlight the fact that the government had ignored the report's recommendations for the past four years. Not only did the report generally support the Dabhol project - it said the project's "existence could not be wished away" - but warned the State government about the possibility of a power crisis. Among other things, the Godbole report's recommendations centre on a restructuring of the MSEB so as to minimise transmission and distribution (T&D) losses and prevent power theft. According to rough estimates made by MSEB officials, in the past year T&D losses amounted to 35 per cent of the power generated. Six per cent of this is inevitable and acceptable loss, but the rest is the result of power theft and poor infrastructure maintenance. Power theft in industrial towns like Bhiwandi, for example, is an endemic problem. It is so common that it seems to exist with official consent.

The magnitude of the theft is such that if reduced by 10 per cent, it could lessen the peak hour deficit in power, which amounts to 3,045 MW. Power theft is a simple operation. Cables are hooked onto transmission wires or electric pillar-boxes and the new consumer is immediately assured of free power. In a belated response to Godbole's recommendations, the State Minister for Energy, Dilip Walse Patil, released a full-page advertisement in some newspapers on May 10 assuring consumers of a "vigorous campaign against illegal users of power", "technical measures to reduce power leakage" and steps to "improve the power and efficiency of the transmission and distribution grid". He promised other remedial measures and long-term action, like the expansion of existing power plants.

It is an ironic inevitability that Maharashtra, with its five-star rating as the most industrialised State in the country, is now fourth in the list of power deficit States. After Gujarat, Punjab and Uttar Pradesh, Maharashtra has an energy deficit of 11.6 per cent. The peak deficit has touched a high of 20 per cent. In practical terms, this means that the shortfall is about 3,000 MW. Heavy load-shedding has disrupted industrial and agricultural activity and caused the State's first ever riots triggered by power shortage. In early May, mobs in Amravati, Nagpur and Pune stoned and burnt offices of the MSEB protesting against the chronic and increasing burden of power cuts, sometimes as long as 15 hours a day.

In an effort to ramp up its peak-hour supply to 400 MW a day, the MSEB entered into agreements with various power utilities. The Tata Power Company, Adani Exports, Power Trading Corporation and the National Thermal Power Corporation's (NTPC) subsidiary NTPC Vidyut Vyapar Nigam Limited have agreed to provide power to the MSEB in order to help it tackle the worst ever power crisis in the State. MSEB Chairman Jayant Kawle said the short-term contracts with the three power traders were expected to yield an additional 200 MW of power daily during peak hours and up to 900 MW during non-peak hours. They are expected to realise a maximum power yield in May when the power situation in the State is at its worst. Load-shedding and the Load Management Charge (LMC) were recently projected as two ways to manage the situation until the advent of the monsoon. (LMC is levied by the Maharashtra Electricity Regulatory Commission on all electricity consumers whose consumption exceeds 500 units a month.)

But the solutions are temporary. Despite a decade or so of power sector reforms, the energy and peak-time power deficit of Maharashtra have increased substantially between 2000-2001 and the early part of this year. Demand has been steadily increasing by about 350 MW annually, but the supply available to the State is 11,777 MW. This summer's demand has been an all-time high of 14,822 MW, causing a shortfall of 3,045 MW. The greatest fear is that if immediate action is not taken, the deficit will increase to over 10,000 MW in the next five years.