Arvind Kejriwal and his Aam Admi Party (AAP) fooled Delhi by making many false promises, one of which was reduction in electricity charges. Soon after coming to power he announced rate cut but equivalent amount of subsidy to the distribution companies [Discoms] assuring them abnormal profit. Since then he has been silent on electricity and water. He never had any intention of taking on the Discoms. Power flows through the electric wires, both literally and metaphorically.
The January electricity bills have come. During 2013 my average consumption was 705 units per month but the charges ranged from Rs 5.40 to 6.71 per unit at an average of Rs 4,300 per month. In fact, now I am paying over Rs 5,000 per month for the same level of consumption which Kejriwal can see. The billing appears to be so manipulated as to generate Rs 60,000 or so from reasonably well-off households per annum when it should not be more than Rs 25,000 for me, same rate as Goa. The Government can separately mention the amount of subsidy it wants from us to pay for poor people in our monthly bill. I am investigating this further. In fact, Kejriwal has exposed a major flaw in his capability and character: he is not a strategist; at best he is a mediocre tactician but a superb manipulator of people’s expectations.
The electricity issue requires long-term decisions, spanning a time frame of five to seven years. Consequences of decisions taken today unravel years later. Generation and distribution are highly technical matters, but in India metered rates have become a political football played by politicians with one leg, the other leg is tied to a rope held by Big Capital. The racket in subsidy for farmers was exposed decades ago, but even Manmohan Singh’s liberal regime has done nothing to sort this out because Big Farmers are close to his corporatist agenda.
Transmission and distribution losses
Transmission and Distribution [T&D] losses remain at an appalling level of 24% [CEA, 2013], one of the highest in the world, which must count as a singular achievement of UPA I and II. China’s T&D losses are around 6% and that of Indonesia and USA around 9%. Assuming 9% as average T&D losses after electricity is dumped at the bus-bar from where it is carried by transmission lines to the national grid for onward distribution, India loses 15% of generated electricity to theft. In 2001-02 it had reached nearly 36%. In fact, I suspect that the amount of power theft correlates with how powerful the secularist parties are in a given State. Recently one of the Delhi Discoms, BSES, said it had reduced T&D losses to 18%. Why is it not 9% if they have upgraded the distribution system? Who is stealing the balance 9%? Do we even have data on ‘parasitic load’ that includes Kejriwal’s Aam Admi Legislative Assembly, free offices and homes?
During the mid-1990s, President Clinton’s energy advisor Dr Arjun Makhijani was invited to sort out India’s energy sector. He calculated that with as little as 100 dollars per kilo watt (KW) installed capacity, T&D losses can be reduced to the design level. This comes to about Rs 6 million per megawatt [MWe, i.e. installed capacity]. He also said that ‘Indian planners are infatuated with generation, paying little or no attention to transmission and distribution’, and as such electricity is being pumped into a tottering T&D system. Indian planners stopped talking to him after this.
According to the Central Electricity Authority (CEA), the installed capacity in India was 233,000 MWe [2013]. Assuming on average 65% capacity utilisation, the total generation could be 151,450 MWh [megawatt per hour] with 24% T&D loss which comes to 36,348 MWh. The net availability to the people is about 115,102 MWh. The excess 15% loss means that 22,720 mega watt of electricity is lost every hour from faulty transmission and distribution lines, poor management, corruption, blatant theft by powerful corporates and the parasitic class.
This lost electricity is equivalent to thirty-eight 1000 megawatt capacity nuclear reactors operating at 60% capacity factor. The average capacity factor achieved by India during its 350 odd nuclear-reactor- years of experience [i.e. sum total number of years of reactor operation] is about 62% against USA’s over 90%. Arnie Gundersen, one of the world’s leading nuclear reactor engineers, was shocked when I shared this data with him.
Alternatively, if we take hydro-power, the 22,720 lost megawatt per hour is equivalent to thirty-eight 1000 megawatt capacity hydro-electric power stations operating at 60% capacity factor. Each megawatt capacity up in the Himalayas requires an investment of Rs 60 to 80 million [2007], that is now estimated at Rs. 100 million [2012] and the way the costs are estimated includes huge payoffs to political leaders, bureaucrats, even judges. I am not giving the equivalent nuclear cost because there is no way one can accurately estimate the true cost of nuclear power. Unless T&D losses are plugged and a completely transparent system introduced, all this multi-billion dollar investment is actually futile waste of resources.
The per capita consumption in Delhi was 1450 units in 2010; the lost electricity comes to 22,720 x 8760 [hours per year] x 1000 [1000 KWh=1 Megawatt hour]. Plugging that loss could have provided free electricity to 137 million persons at Delhi’s per capita rate of consumption. However, a determined effort to eliminate the excess losses has never been made. Sheila Dikshit never once raised this issue in 15 years. Dr Makhijani rightly said that Indian planners are infatuated with generation. I’d say that Indian planners, politicians, bureaucrats, capitalists and terrorists are conjoined humanoids.
Planning Commission’s Working Group reports on energy
That infatuation of planners with electricity generation is contained in the five volumes of Working Group Reports chaired by the most consistent non-performer Kirit Parekh. Four reports cover coal, hydro, oil and gas, nuclear and a malnourished thoughtless report on renewable sources, perhaps an afterthought. All are seriously deficient in strategic analysis as if written by an intellectually and technologically challenged working group. Without taking into account all the available options, they focused on coal, hydro and nuclear as if the Working Group was told to focus on coal, hydro and nuclear. There are 14 technologically feasible and economically viable ways to generate electricity. In the last international conference-cum-exhibition on renewable energy, over 100 innovations were on display and, shockingly, not one from India.
There is no discussion on Geo-thermal, large scale off-shore wind farms despite India’s long shore-line, Ocean Thermal Energy Conversion [OTEC; an OTEC plant of 150 Megawatt capacity was purchased and left to rot off the Kerala coast], rapid adoption and dissemination of advanced solar lighting and heating system at household level, wave energy, or even the 100-year old Viktor Schauberger innovation which uses vortex power to harness energy from even small rivers without building a dam. Massachusetts Institute of Technology [MIT] had recommended a US$ 500 million research grant to help upscale geothermal plants and make the electricity even cheaper, and safer with zero pollution. Kirit Parekh allocated a princely sum of Rs 100 million, less than two million dollars, for research on renewable during the 12th Five Year Plan and Montek was very happy with this sort of idiocy.
After Fukushima events [March 2011, when three reactors blew up and the northern Pacific is slowly dying], China stopped all new reactor construction, but added over 19,000 megawatt of wind energy capacity in less than two years. India’s planners, on the other hand, have drastically reduced subsidy on renewable sources. Suppose nuclear sector gets 100 rupees of subsidy, renewable gets about seven and yet this sector is rapidly expanding everywhere including India. Has anyone questioned why should coal, hydro and nuclear get subsidy and hidden sops? Why planners want to stifle renewable?
The biggest failure of the Working Group was to ignore an objective assessment of the relative cost of generation from various fuel sources. The method widely recommended includes eight major parameters, namely (1) cost of generation and maintenance, (2) average down time [net operational capacity], (3) land requirement, (4) pollution potential and environmental impact, (5) cost of plant failure and estimates of clean-up and compensation, (6) decommissioning cost, (7) waste management cost, and (8) displacement potential and rehabilitation cost [people who will have to be relocated from the project area].
Despite the Uttarakhand disaster accentuated by ruthless damming of rivers and the Chernobyl and Fukushima disasters, no serious review of the available options has been done. In the early 1980s, the US Government ordered an estimation of damages from nuclear accident that led to CRAC-II report. The estimates were so horrific that no insurer has ever insured a nuclear plant and all plant operators are insured by the government.[1]
Even some renewable fuel based systems are now being questioned by environmentalists. For instance, few anticipated that wind farms could cause bird deaths on sufficiently large scale to reconsider this option. When opposition became vocal, engineers came up with a safe and compact design which is based on the physical properties of wind vortex [a tornado is wind vortex] and last year a 25 megawatt capacity wind vortex machine entered the market. Many geologists have warned that large scale exploitation of geo-thermal heat can induce earthquakes, but a 200 megawatt geo thermal plant has been safely operating for many years now in a California car-park. Basically, planners must assess any option on intrinsic merit like economic feasibility, technological viability, environmental safety, and overall suitability. The ‘switch-over’ cost, i.e. the final cost of a unit of electricity, was estimated in 2005 to be almost equal for all the renewable options, which means one could select any. In fact, if environmental costs alone are taken into account, nuclear and coal are most unsuitable. The main problem in India is that the political class and untrained generalist administrators determine technological options.
Cost of electricity in various states [2]
If one simply glances at electricity rates in various States of India, one can see the wide variation between States and between Discoms. For example while Reliance charges Rs 10.75 [17.95 cents] per unit in Mumbai after the slab of 500 units is crossed, which is higher than the highest rate charged in the USA [16 cents per unit], Tata Discom charges Rs 5.95 [about 9.87 cents] after the same slab as Reliance. How does one explain the difference between Tata and Reliance rates of Rs 4.80 per unit? The cost of generation and distribution does not vary much; it seems to be political manipulation.
In the Congress alliance ruled States, the charges vary from a maximum of Rs 9.50 per unit [Maharashtra] to the lowest Rs 5.75 [Tamil Nadu]. Even chappal-wali didi Mamata Banerjee charges Rs 8.10 per unit. The average charges in non-BJP states like Andhra Pradesh, Bihar, Maharashtra, Tamil Nadu and West Bengal comes to Rs 7.20 per unit for highest slabs.
In the BJP and allies ruled states-Chhattisgarh, Goa, Punjab, Gujarat and MP – the average comes to Rs 4.40 per unit. The highest charge is in Chhattisgarh [Rs 5.87] and the lowest in Goa [Rs 3.00]. Rajasthan rate was revised in June 2013 and is now Rs 5.45.
These are highest chargeable rates after ‘subsidised’ slabs, ranging from 200 to 900 units, have been crossed. Bihar has 300 units for 5 Kwh load after which maximum rate applies. Maharashtra has 500 and West Bengal 900.
Different levels of subsidy are also given to priority sector users, but no one has any idea of leakages. By privatising distribution, UPA I and II has ensured monopolistic predatory capitalism to flourish in India. Energy sector has become the exclusive domain of India’s political class, to hell with efficiency and technology.
Unit cost in European Union also varies dramatically
The highest charges per unit are paid by people of Denmark [Rs 24.65], Cyprus [Rs 22.95], Germany [Rs 22.10] while the lowest charges are paid by Bulgaria [Rs 6.8], Romania [Rs 8.5], Croatia and Estonia [both charge Rs 9.35]. Here is a hard evidence of what globalization, corporatisation and monopolies do to people. The corporatist-globalist-political game of squeezing the last available Euro or Cent out of people’s pockets is based on proper prior planning for profiteering. While the low income European countries are paying lowest rates, high income countries are paying the highest rates irrespective of cost of generation and distribution. [3] Energy sector is totally controlled by a small group of Europe’s elite families, including old royalty.
Encouraging monopoly
Similarly, the Discoms in India have decided to extort as much as they can from high income conclaves in the country and even within a metropolitan area, without any relationship to the actual cost of generating and distributing electricity.
Many years ago, the scion of the Rockefellers had said that “so long as we control the distribution of oil it does not matter who produces oil.” The production cost of oil varies between 15 to 20 dollars per barrel. International market price is now US dollar 107 and this international market price is manipulated by the oil cartel to between 60-70 [lower side] to 105-150 per barrel [higher side] exactly as they want. Producers don’t benefit; consumers don’t benefit. But the energy cartel exploits everyone.
To the Discoms in India it does not matter who produces electricity at what cost, so long as they control the distribution. The control over distribution confers absolute monopoly because of the nature of the industry. If crowd funding generates electricity at one rupee per unit, people don’t have the resources to install distribution and metering system and deploy an army to collect the charges or even control power theft. At the most people can opt out of the grid by adopting household level distributed energy system. Since subsidies have been reduced, the full cost of household level electricity generation or even to install renewable system is prohibitive. The problem with energy /electricity distribution is that either one depends totally on one supplier or invests in alternatives. In fact, in a discussion with a senior Planning Commission officer, I had strongly advocated to leave generation in the hands of private players but keep Transmission and Distribution strictly under State control. [Extending the same logic, airports should be owned by the State, let private players fly airplanes; keep the railway stations and tracks under State control, let private players run trains, and so on]
The cost of generation of hydro-electricity can be easily computed. Suppose the cost is Rs 100 million [Rs 10 crores] per megawatt and a company installs a 1000 megawatt hydro-power station. The total cost comes to ten billion rupees or Rs 10,000 crores. At 60% capacity factor, the unit will produce 600 Megawatt of electricity per hour. In one year it will produce 600 x 24 hours x 365 days which is 5.256 billion units. Now divide the total investment of 10 billion rupees by 5.256 billion units generated over one year. Simply stated, a billion rupee investment is generating 5.256 billion units at 60% capacity factor annually. Should generation cost be more than 2 rupees per unit? Add as much as you wish for staff costs, 100% bribe, 100% profit margin, whatever. Add to that interest charges, dividends, staff costs, and bribes, whatever. Should the cost be more than a few rupees? The story of coal based plants in India is even better and shadier.
Both Manmohan Singh and Montek Singh are economists. Don’t they know the basic nature of certain industries and critical value linkages? Or have they forgotten economics and chosen to confer feudal rights to corporates to extort people in their respective domain?
Kejriwal and Aam Admi Party
On what basis did Arvind Kejriwal decide to reduce electricity charge by 50 per cent? Delhi gets electricity from its three thermal plants and one in Badarpur and sources the shortage from Narora nuclear power plant, Himalayan hydro-electric system and coal based plants spread over the northern states. Delhi uses a mix of sources with widely varying costs. Does Kejriwal know the weighted average cost of generation and transmission up to the point that electricity is transferred to the Discoms? Who has estimated the cost and on what basis? How is Goa Government supplying the same electricity at a maximum cost of Rs 3 per unit? Or, if he wishes to take on Narendra Modi, did he ask him why Gujarat is charging Rs 4.90 after the subsidised slab of 250 units is crossed, which is 63% higher than Goa rate? Does he know how much electricity is guzzled by the parasitic class of Delhi to which he now belongs?
Kejriwal did not promise anything to anyone. He waffled, lied, and obfuscated a very serious issue. An engineering degree from IIT does not mean that a person is capable of eliminating corruption. In fact Kejriwal proves that people like him can neither calculate nor think strategically. As many as 21 out of 70 contestants of Aam Admi Party in the December election had barely completed high school. Who does Kejriwal represent? Is he not the typical counter-gang of big capital masquerading as Leftist? His claims to honesty and transparency will really be established if he could frame rules for electricity billing which include cost of purchased power, cost of distribution, and cost each consumer should pay to subsidise poor people. Additionally Discoms must publish the consumption of the parasitic class which we, as common people, are forced to pay for to support their privileges. Kejriwal should know the true cost of electricity.
Notes
1. CRAC-II Report [Calculation of Reactor Accident Consequences] was made public in 1982 and can be found here: Click to view
2. State-wise electricity charges: Click to view
3. Country-wise EU electricity charges Click to view
©Arun Shrivastava
First published Click to view
