Saturday, August 3, 2013
How Madhya Pradesh solved its power crisis in 3 years
Read this ET article on how an Indian state managed its "power" problem. NEW DELHI: It took 5,000 young professionals, guidance from PricewaterhouseCoopers and dogged determination from officials to inject a performance-driven culture in an orthodox set up, but in barely three years, Madhya Pradesh has wiped out huge electricity shortages and losses in a rare success story in the distribution sector. After a series of reforms, tariff hikes, involvement of private firms in supplying electricity to some cities and customer-friendly initiatives, Madhya Pradesh now enjoys 24-hour power supply. Latest data available with the Central Electricity Authority shows that the state does not have power deficit. Distribution losses, which have crippled many state utilities, have fallen from 37% to 27%, narrowing the gap between revenue and cost to 60 paise per unit from 1. The gap is expected to fall to 43 paise this fiscal. Losses in the transmission segment are at 3.5%, which is one of the lowest in the country. To bring fresh air in the system, the state hired and trained 5,000 young professionals, including 1,500 engineers in the past three years. It also framed new service rules to ensure a performance-driven culture. Madhya Pradesh principal energy secretary Mohammed Suleman said the government began with identifying the problem areas, including assessing the actual demand for electricity of the state. States accept the demand projections given by the Central Electricity Authority and Planning Commission. The state's assessment showed the demand to be far higher than the earlier projections for the state. The state hired PricewaterhouseCoopers (PwC) for providing all-round consultancy to the government and the generation, distribution and transmission companies. "PwC undertook a six-month long detailed modeling of districts for assessing the demand. We have a fair idea of power demand in relation to GDP till 2020 and we have accordingly planned for the availability," Suleman said. PwC executive director (infrastructure) Kameswara Rao said the state needed a strong leadership, a clear action plan and the discipline to implement it. The consultancy firm helped the government in designing, implementing and monitoring the broad-based reform implementation work in various key functional areas like finance, technology and regulatory framework. Madhya Pradesh invested about 9,700 crore in expanding and upgrading electricity distribution network by piggybacking on the Centre's flagship schemes. It also laid separate electricity feeder lines to rural houses. These steps helped it to increase the consumer base to 110 lakh in 2013 from 65 lakh in 2004. The state pushed for electricity generation improvement, leading to a 126% increase in availability of long-term contracted power. At present, about 5,000 MW of new capacity is under development with which Madhya Pradesh will be power surplus by 2018 and its power procurement costs will be among the cheapest. The distribution companies have launched many customer-focused measures for easier bill payment, timely issue of new connections. The state government implemented a financial restructuring plan by converting loans, and offering transition period support to distribution companies. The state regulatory commission has also been raising tariffs annually. Structural reforms were taken up sincerely along with the investments.