India Masters Scarcity Management

In seventies power outages in West Bengal was horrible. Hindustan Motors was under very tight financial conditions. However, it had to make its first investment on huge Japanese diesel generators of about 20MW capacity. We really felt bad as we wanted instead to investing on production machinery to de-bottleneck certain operations in its manufacturing process. As I find today the power outages are not that frequent in West Bengal, may be because of the closures of most of the manufacturing companies. But in rest of the country particularly in Delhi and NCR region, it is still the biggest of the worries in manufacturing companies and even for the service providers’ facilities.

For the whole country, the current demand of power exceeds supply by a factor of 1.2 times. However, one may be puzzled to find that manufacturing that is heavily energy intensive sector is fastest growing today at 11.2% to boost the GDP growth to respectable level of 9% or more. It is happening because the manufacturing sector has more than 30,000 MW of captive power generating capacity. It’s costlier but at least keep the production facilities running.

The companies are doing its best to find innovative ways to conserve energy and use it in most efficient way. According to a study by the India Brand Equity Foundation, in five years between 2000 and fiscal 2005, sales grew at an average of 11.5% per year, while power and fuel expenses grew only at 7.3% despite steep increases in the price of both utility- supplied power, as well as in price of fuel for in-house generators.
Even the steel sector that is highly energy intensive, despite the presence of large and inefficient pubic sector units, managed to bring down the sales-to-fuel ratio down by nearly 3% during this period.
The Carbon Sequestration Leadership Forum points out that ‘India’s energy intensity vis-à-vis GDP growth has been falling and is about half what is used to be in early 70s. Energy consumption per unit of GDP in purchasing power parity term is only 0.19-kilogram oil equivalent per dollar as compared to 0.21 of the world average. And this is what that has made India’s manufacturing sector globally competitive even with very poor infrastructure.

However, it doesn’t say that India can keep on doing the expected growth without solving the power shortages and distribution losses. It must build its mega power plants fast. It must go ahead and exploit the potential of hydropower such as the 3,000 MW Lohit hydel project in Arunachal Pradesh from its river in all the northern states. It must cut down its distribution losses. (A whopping 33% of electricity that is generated is lost or stolen during distribution and transmission. On a world scale, even countries like Cameroon and Nicargua lose less electricity. And according to estimates only around 60% of the power produced is billed, while 45-50% of the overall amount is paid. The losses tripled from about 9% in 1971 to nearly 30% in 2003 when even in Bangladesh, for instance,losses fell from 31% in 1971 to 12% in 2003, almost a third of the losses recorded in neighbouring West Bengal.)

However, the good news comes from the result of the recent bids for the two mega- power projects at Sesan and Mundra. Private companies have own both the projects and not the NTPC that repeatedly fails to meet target set. And very soon the private players will enter in the most economic and preferred source of energy, the hydropower. Unfortunately, the share of hydropower in the total power output has declined from about 50 per cent in 1962 to about 26 per cent now. Of the estimated 1,50,000 Mw hydro- power potential, only 33,600 Mw has been developed so far.

The solution is known. Indian project managers are to act. India needs many more effective project managers such as Sreedharan in Delhi Metro. It must create a world record in completion of power and distribution projects to leave the power problems behind in next five years.

Read “The road ahead”
News ‘Increase in power generation pushes up infrastructure performance’

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