UMPPs need some Oomph
Ultra mega power projects provide a sound basis to increase generation capacity, but they can’t solve the country’s problems on their own
In recent years, the government has aimed to promote ultra mega power projects (UMPPs) across the country. Each of these large-sized projects has a capacity of 4,000 MW and requires an investment of Rs 16,000 crore. Upon completion, the UMPPs will meet the needs of a number of states or state distribution companies on a build-own-operate (BOT) basis. The projects would use supercritical technologies focused on higher fuel efficiency and lower emission of various pollutants, including greenhouse gases.
Conceptually, this plan provides a sound basis for the enhancement of power generating capacity. However, even if these projects are implemented on schedule, several other initiatives would be needed to ensure that the country’s overall energy problems are solved. The current weaknesses in energy supply, particularly of electricity, need to be ironed out. Apart from causing the loss of economic welfare of a large section of the population, these shortcomings have also resulted in inadequate, unreliable and poor quality power supply, ultimately impeding economic growth. Moreover, current policies still haven’t addressed the energy deprivation that almost half the population in this country faces.
Powerless regulators In the early 1990s, when economic reforms were initiated, the government opened up power generation to the private sector, and this brought forth diverse expressions of interest in specific projects. Unfortunately, nothing materialised on the ground. The major reason for this lack of capacity expansion in power generation was the continuing gap between the revenues earned by state electric utilities and their cost of operation. The risk of non-payment of dues by these utilities was large enough to discourage independent power producers from investing in projects.
After examining power-generation technologies in several countries and coming in for considerable pressure at home from those outside the system, the government realised that electricity tariffs could be rationalised only through the establishment of independent regulatory commissions in each state and at the Centre. The Central government brought in an effective legislation to give these regulatory commissions enough powers, and make them an instrument of change. Unfortunately, the same bodies are today manned by unsuitable candidates and suffer from a lack of professionalism, eroding the potential they were conceptually born with. Consequently, tariffs in a number of states remain subject to political pressures. In some cases, regulatory commissions have become rubber stamps for those in power, defeating the very purpose for which they were established.
An overwhelming reliance on conventional solutions and the traditional supply-side approach has also obscured several other initiatives that could have improved the welfare of the country’s population. For instance, the 2001 census identified that 84.7 million households had no access to electricity. About 78 million of these were in rural areas, while 6.7 million were in cities. Almost all these households used kerosene for lighting. As of today, about 2.4 million rural households have received access to grid electricity under the Rajiv Gandhi Grameen Vidyut Yojana. Assuming that electricity provides lighting in these homes, there would still be 75.6 million households in villages and 6.7 million in cities that had no access to electricity. Meanwhile, we continue to subsidise kerosene at around Rs 20,000 crore annually. It is well known that this subsidy promotes adulteration of petro products. Several households do not receive regular supply of kerosene as large quantities are diverted for adulteration. Kerosene, when burnt, is harmful to the health of those who sit close to it, and in any case provides poor illumination.
If the perverse subsidy on kerosene was shifted to solar lanterns, unelectrified homes would get a renewable source of illumination, without any additional cost to the exchequer. TERI has developed designs for solar lanterns that are non-polluting and highly energy efficient. Each of them costs around Rs 3,000. If the lanterns were used to light up all the unelectrified homes in the country, the total cost would come to around Rs 21,000 crore—almost the same as the annual subsidy on kerosene.
Another important initiative would be the promotion of solar water heaters, which in Delhi alone can reduce power demand by several hundred megawatts. This renewable know-how is also a less expensive option for consumers.
In sum, UMPPs are definitely a necessity for the country. However, there is much to be done before they can come into their own. Perhaps, some models of success initiated by civil society would provide a basis for national policies that incorporate a range of innovations.