Why electricity is costly in Punjab

Bhupinder Singh & Malkit Singh
Power sector experts

ONE of the primary reasons for the high cost of electricity in Punjab is the lopsided policy of totally relying on the private sector for power generation capacity addition. Punjab is the only exception in the country which has ignored the state sector and built all three supercritical thermal plants under the private sector in recent years. Further, the PSPCL has to pay fixed charges to the private thermal plants even for power not utilised and this amount is recovered from the consumers as a part of electricity tariff announced by the regulator. Now, the question is if the problem of high power cost be solved at this stage. The answer is yes, if the required policy corrections are made. The closure of state-run thermal plants without any alternative plan is prone to exploitation by the private sector. The need of hour is to take short- and long-term corrective steps.

No technology upgradation

The generation wing of PSEB (now PSPCL) is credited with the commissioning of GNDTP at Bathinda a year before NTPC was established in 1975, but now, it is passing through its lowest ebb. PSPCL failed to match with the technology upgradation and opted to renovate the old technology based thermal plant at Bathinda at a cost of Rs 750 crore which has led to present state of affairs. Had the PSPCL opted for setting up of supercritical technology based units, the situation would have been different. Now as per the multiyear tariff order, the PSPCL has decided to close GNDTP, Bathinda, and two units of GGSSTP, Ropar, due to high electricity generation cost compared to that of supercritical thermal plants of the private sector in the state. 

As a result, the dependency on the purchase of electricity is rising. The total power generation capacity of the state is 13940 MW, including 2640 MW from state thermal plants, 3920 MW from IPP, etc and the energy requirement in the state is rising steadily at around 3-4 per cent annually. The purchase of power has crossed the alarming stage and with the closure of 860-MW state-owned units, dependency on purchase of power will increase.  The state's share in the energy supply has declined from 57% in 2012-13 to 23 per cent in 2016-17 and share of its own thermal has declined from 38 per cent to 9 per cent, which ranks amongst the lowest in the country. In contrast, power purchase has risen from 43 per cent to 77 per cent during the same period. 

One of the reasons for the low utilisation of state plants is the peculiar load curve of Punjab, which varies from 5000-6000 MW in the winter to 10000-11500 MW in the summer. The state plants come into operation only when power demand crosses 9000 MW which occurs only for small periods during the year. Due to lower demand of power in winter, fixed charges are paid to private plants for surrendered power. 

Most of the states in the country have invested in the technology upgradation and generation capacity addition by setting up fuel-efficient thermal projects. Haryana has built a 1200-MW thermal plant at Hisar and has plans to add 8400 MW in the coming years. Rajasthan owns 2x660 MW of supercritical technology units and thermal projects of capacity 2840 MW are under execution. Uttar Pradesh is executing 5x660 MW supercritical thermal plants and Gujarat has three 800-MW thermal units under execution. Andhra Pradesh is planning to add 11210 MW at a whopping investment of Rs 66,538 crore.

Dependence on private players

The total neglect of the state sector in generation capacity addition has contributed to the rise in the cost of electricity since the consumers are burdened with paying fixed charges to the private players even for surrendered power to the tune of Rs 1,300 crore annually. It has also resulted in non-utilisation of cheaper and good quality coal available from the state-owned Pachhwara coalmine. The operation of this coalmine can reduce electricity cost by 30 paise per unit, saving Rs 400 crore annually. 

PSPCL should acquire pvt plant

Punjab needs to acquire a supercritical thermal plant under the state sector. It is possible if a private plant is acquired by the PSPCL. Besides intangible benefits, it will reduce the electricity cost by Rs 1.75 per unit. As other states are also mulling acquiring of private plants like 4000-MW Tata's plant, 4600-MW Adani's plant and 1320-MW Essar's plant, Punjab should do the same. The PSPCL should initiate the process of setting up of 3x800-MW plant at Ropar and solar plants. 

It is time to take bold and out-of-the-box policy decisions, or  the state will suffer on account of payment of fixed charges to the private plants and creation of their monopoly in generation which will result in non-utilisation of cheap and good quality coal from the state mine. The state will also lose the expertise of building and operating thermal plants acquired over the years.

Why state plants are facing closure

The state-run plants are facing closure because they are old and operate on sub-critical technology and in comparison; the private plants in the state operate on supercritical technology and are more fuel efficient. The fuel cost of private plants at Rajpura, Talwandi Sabo and Goindwal Sahib is Rs 2.29, Rs 2.77 and Rs 2.97 per unit, respectively, whereas fuel cost of state-owned plants, namely, GNDTP, GGSSTP and GHTP is Rs 3.62, Rs 3.82 and Rs 3.60 per unit, respectively. Thus due to higher fuel costs, the utilisation of these plants remains low.