Electricity can be made cheaper in Punjab

Bhupinder Singh and Malkit Singh

Bhupinder Singh
Former Dy Chief Engineer, PSPCL 

Malkit Singh
Former Additional Superintending Engineer, PSPCL

Recently, the Punjab State Electricity Regulatory Commission (PSERC) allowed a hike of 2.14 per cent on electricity tariff in the state. The average cost of electricity in the state has been increased to Rs 6.63 per unit from Rs 6.55 per unit. In addition, the consumers will be charged around Rs 1.35 per unit on account of electricity duty, infrastructure cess, cow cess etc. 

The average cost of electricity in Punjab will be Rs 7.98 per unit compared to Rs 7.27 per unit (including electricity duty of 10 paise per unit) in Haryana. The government levies, which are amongst the highest in the country, make power costlier in Punjab, compared to the neighouring states. Subsidy reimbursements by the state government shall account for nearly 30 per cent of revenue of the PSPCL in the year. 

However, there is scope for lowering of the rates in Punjab if the PSPCL takes commercial decisions in public interest and disciplines itself.

Areas of concern 

The foremost concern for the PSPCL is its increasing reliance on power purchase to fulfil the energy requirements of the state. Expenditure on power purchase alone accounts for Rs 4.15 per unit of the Rs 6.63 per unit cost of electricity. The prime reason for the overdependence on power purchase is that the PSPCL's thermal plants operate on subcritical technology and require more coal to produce electricity. 

The fuel-efficient thermal plants operating on supercritical technology are all in the private sector. Not keeping pace with technology upgradation has forced the permanent closure of all four units of Guru Nanak Dev Thermal Plant at Bathinda and two units (out of six) of Guru Gobind Singh Thermal Plant at Ropar w.e.f January 1, 2018. Also, the plant load factor of other operating units has gone down to a mere 25 per cent from the earlier more than 85 per cent.

The generation wing of the PSEB, which had won many national awards for meritorious performances in the past is the weakest link of the PSPCL now.

Some out-of-box thinking and initiatives are urgently required to enhance its own generation in the short and long terms. The PSPCL is the only utility in the country with such huge overdependence on power purchase and it is contributing to higher cost of power in the state. The failure of the PSPCL for non-solar renewable purchase obligation has also been viewed seriously by the PSERC and a fine of Rs 10 lakh has been imposed on the PSPCL.

The PSPCL recently lost direction and steam in executing loss-reduction schemes. The commission has thus reassessed loss figures of the PSPCL at 16.19 per cent instead of projected loss of 13.68 per cent, resulting in 1,360 million units of excess power purchased and a loss of Rs 495 crore on this account. 

Shifting out of meters in high-loss divisions is pending and maintenance of pillar boxes is anything but dismal. Last year, the PSPCL managed to shift out only 6,000 energy meters the of remaining 4.5 lakh meters to be shifted. Earlier, the PSPCL had managed to shift out, on an average, 7.5 lakh meters per year. The failure to shift out meters in divisions like Patti, Bhikiwind, Zeera, Baghapurana, Malout, sub-urban Amritsar etc, where the losses are still in the range of 35 to 40 per cent, is causing a huge financial drain on revenues of the PSPCL. Also, the number of defective and burnt meters during the last year has increased by nearly 800 per cent. The failure to replace such meters in time is also contributing towards the financial loss. If loss reduction measures had been pursued in earnest during the last couple of years, the losses would have been in the range of 10-12 per cent, thus enabling lower tariff in the state. This has a direct bearing on electricity tariff since lower losses would enable lower tariffs.

Higher employee cost of around Re 1 per unit is another area of concern. The reason for this is that no pension trust was created and funded at the time of unbundling in Punjab and, resultantly, pension and terminal benefits are charged to tariff. In other states, these expenses are paid from pension trusts created for the purpose. Presently, pensioners are almost double the number of existing employees. Almost 60 per cent of the employee expenditure of the PSPCL goes towards paying pensions and terminal benefits. 

However, the need of the hour is to provide adequate employee strength, especially in the distribution subdivisions, based on latest workload norms to improve consumer services. Shortage of manpower and material cause consumer harassment and are breeding grounds for corruption in the field.

Delay in non-operationalisation of the state-owned Pachhwara coal mine has also had an adverse commercial impact on the PSPCL. The coal extracted from the mine would be cheaper and could reduce the cost of power in the state. Not surprisingly, the rating of the PSPCL has lowered to the thirteenth position from its earlier fifth position.

How to make it better, cheaper

Quality and cheaper electricity is what the consumers desire. Both these goals can be achieved if commercial decisions are taken by the PSPCL which are in public interest. 

Foremost amongst these is regarding the huge stranded generation assets of the permanently closed Guru Nanak Dev Thermal Plant. If these assets can be disposed of and consequential returns utilised to infuse equity for acquiring a thermal plant of supercritical technology, Punjab shall gain by inward gains of depreciation and return on equity, use of cheaper coal from its own mine and utilisation of spare and trained manpower from existing thermal plants. 

Reduction of losses by shifting out of balance meters in high loss areas needs time-bound completion. 

Rationalisation of government levies, cross-subsidisation in tariff can also reduce tariffs of other categories. 

Easing of the financial position, after the PSPCL obtains grant and equity from the state government under the UDAY scheme shall also help in bringing tariff down in subsequent years.

Electricity is the backbone and driving force for the economy of the state. Thus, all steps required to make it cheaper need to be earnestly taken, keeping the public interest in mind.