Will power sector report card brighten govt's re-election hopes?

What is the state of the power sector as Power Minister Jyotiraditya Scindia prepares to present his report card on Thursday (January 16), the last one before the general elections in May?

First, the good news. Today, the country has an installed capacity of 229.5 GW with all the four grids synchronized. The minister can certainly take credit for connecting the southern grid to the other three grids and effectively handling the flow of electricity. In 2012, India had faced one of the biggest power breakdowns ever, nothing close to it happened in 2013. "We have asked our control room to just disconnect the line of any distribution company which overdraws" says R.P. Sasmal, Director Operations at Power Grid Corporation.

"To ensure grid security, the 'islanding' scheme for Delhi has been completed, while that for UP, Punjab and Haryana are under finalisation," a ministry spokesperson said.

Electrification is proceeding at a rapid pace-the Rajiv Gandhi rural electrification programme is on track and is meeting its targets.

But major problems still remain. One of the biggest problems is attracting global players, who still do not find India's power sector attractive. The second phase of allocation of ultra mega power plants saw only domestic bidders. "Generation is capital intensive, and FDI must come in. But largely because of the regulatory framework, foreign players don't find India attractive," says Kameswara Rao, Leader, energy utilities and mining practice, PwC India.

In the second phase, the Power Finance Corporation (PFC) is working on UMPPs at Nayunipalli in Andhra Pradesh, Husainabad in Jharkhand, in Bihar and several places in Odisha - Bijoypatna in Bhadrak district, a coastal location and Narla and Kasinga in Kalahandi district, which are inland locations. It is also finalising sites in Tamil Nadu and Gujarat for these states second UMPPs.

The regulatory body, the Central Electricity Regulatory Commission (CERC), certainly needs reforms. It is manned mostly by former bureaucrats. PwC's Rao believes it is high time professionals along with representatives of civil society are included in it. Last year, the CERC gave three historic decisions, two relating to the tariff the Adani Group-run Mundra Power Plant and the Tata Power-run Costal Gujarat Mega Power Plant, both at same location, could charge because they were using expensive imported coal. But neither company has been able to take advantage of the decisions yet. The third decision was the cancelling of the commissioning of Reliance Power's UMPP at Sasan.  This has been challenged before the appellate authority, which has directed CERC to take a relook at the whole matter.

Officials who have been working with the minister on Thursday's presentation say that power ministry has worked hard in last one year to persuade Coal India to sign fuel supply agreements with NTPC and other power generation companies. The biggest achievement is that these companies have been allowed to pass on the increased cost of imported coal to the consumer. "While ensuring the fuel, the major coup for the power sector remains the decision of the government to cap domestic gas supply to the top priority fertilizer sector to 31.5 MMSCMD. All additional domestic gas for the years 2013-14, 2014-15 and 2015-16 will be allotted to the power sector to help improve generation," says an official spokesperson of the ministry.

A big headache for the power sector have been the distribution companies. Barring a few states, most are still not keen to bring private players into the distribution sector.

"If you want efficiency, you will have to turn to private distribution companies and increase the competition among them," says Rao of PwC.

"Today we have all sorts of state barriers in place when it comes to increasing the competition." State governments, for instance, levy a surcharge if a consumer buys electricity from a source other than the appointed discom. A number of state owned discoms are in precarious financial health. In 2012, seven states were offered restructuring of their mounting debt, especially when their distribution companies were on the verge of bankruptcy.

Overall, Scindia is likely to have a difficult time when he faces the media on Thursday.