Punjab Power Crisis The Worst Case Scenario For Poor Policy Decisions

Less than 72 hours after Union Minister R.K. Singh spoke about a target of 24×7 power, Punjab, one of the most  prosperous North Indian states, is plunged into a power crisis. In this crisis lies the case for some of the biggest reforms that have been pending due to resistance from multiple states, including Punjab itself. So let’s see just how Punjab got here.

At the top is the state’s electric subsidy for farmers. At the outset, many state consumers who get subsidised free power must ask, what is the point of free power with this level of dependability?

In May this year, the state regulator Punjab State Electricity Regulatory Commission (PSERC) had worked out a subsidy of ₹10,668 crore payable to different consumer categories. This comprised ₹6,735 crore for agriculture pump set consumers, ₹1,627 crore for scheduled caste, backward class and below poverty line domestic consumers and ₹2,266 crore for industrial consumers. There are also ₹7,117 crore arrears from the last fiscal due to an overall funds crunch. Power subsidies thus are over 10 percent of the state budget today. And delivering failure at the peak of summer and the sowing season. Failure that is best explained by the 12-14 hours of power cuts across the state, in a record shattering summer heat.

The state also stands unique in having subsidies for large industrial consumers.

Now state discom Punjab State Power Corporation Limited (PSPCL) has imposed a two-day compulsory weekly shut down of key industry, including rolling mills, arc and induction furnaces with immediate effect. Along with the usual appeals on using power judiciously, including AC’s. This is the same cash strapped discom that had come out with a deposit scheme for advances from its consumers, offering really high interest rates. Mortgaging future cash flows to keep running and pay salaries.

PSPCL’s problems don’t stop there. Like all discoms where losses have mounted, it has found itself stuck with legacy arrangements it cannot look beyond. That explains the discom making a claim on record that net metering for rooftops needed to be changed, because it was simpler for the discom to buy solar power off the market and supply it. When the issue at hand was just 200MW of total rooftop capacity, in a state where peak power consumption today just crossed 14000 MW. The disregard for RPO apart, coming from a discom that can’t buy enough basic power for shortage of money, this is galling, for renewable proponents. We have already covered how, like many discoms across states unfortunately, the incumbent has been very lethargic with permissions and pushing files for rooftop solar connections.

While no large thermal capacity has been added to the state since the Goindwal sahib plant of GVK in 2016, so far the state has done everything possible to miss the renewables bus. Adding salt to injury, besides looking to renegotiate contracts for the small capacity of solar that exists, the state discom has failed to dent distribution losses at 14 percent, falling well behind neighbour Haryana, and Delhi, among others in the region. That simply means higher losses than projected at the time it gets its tariff approvals. A skewed consumption pattern of power, (14GW peak in summer versus 7 GW in winter) actually makes an even stronger case for a faster rollout of solar in the state, to add power in the peak summer months, and provide backups for shortfalls in winter. Fixed cost contracts can also be relooked now as 25 year PPA’s draw to a close.

Today, PSPCL finds itself understaffed, unprepared, and under equipped with spares, be it transformers, wires or anything else required to maintain its network. With elections possibly less than 12 months away, it will take a herculean effort, and dollops of good luck, for the state’s consumers to see better days as far as power supply goes.