This is the second article in a series of two articles on the electricity situation in Maharashtra.
In the previous article, I talked about the present situation, overview of MSEB, agricultural consumers, the political economy, and the political rhetoric vs action. In this article, I will talk about the problems, solutions, and the challenges in implementing the solutions.
Now that we understand the present situation fairly well, let us take a look at the problems facing the present government of Maharashtra.
MSEDCL’s financial situation is in the doldrums
This is by far the biggest problem that is facing the present government. And here is a fact that will give you an idea of the magnitude of this problem: the total outstanding payments due to MSEDCL are apparently close to Rs.30,000 crores! That’s mind-boggling to say the least. And unless MSEDCL recovers these dues, their financial situation will remain in the doldrums.
State is in a financial mess
Maharashtra state is in a big financial mess as well; the outstanding debt of the State is supposedly close to Rs.3 lakh crores! And therefore, out of every Rupee that the State earns, only 14 paisa is available for development projects. This is a sad state of affairs and something that constrains the present government severely in developing the electricity sector. Therefore, it is a big problem.
Renewable energy sources have to be adopted but they are more expensive
Climate change is a reality that cannot be ignored anymore. And why is it happening? Because of the burning of fossil fuels combined with the fact that forest covers are getting depleted more and more with every passing day. As simple as that. But while there’s no doubt whatsoever that our present way of life is responsible for the present situation, can we change it completely starting today? Can we make a U-turn? Is switching off (lights, mobiles, computers, motors, pumps) the solution? I don’t think so.
Fortunately, we don’t have to switch off because there are plenty of renewable energy sources that we can tap and stay on the path that we are on. Sustainable development isn’t just a pipe dream; it can very much become a reality. However, renewable energy sources are more expensive than conventional energy sources, and cannot be adopted unless the electricity sector is healthy. The whole premise of RPO is that a part of the energy generated by obligated entities – and all discoms including MSEDCL are obligated entities – should come from renewable energy sources. However, if MSEDCL has Rs.30,000 crores of outstanding dues and if that amount is increasing with every passing day, is it feasible for them to buy more expensive renewable energy?
Now that we have understood the present situation and the problems facing the present government of Maharashtra, let us take a look at the solutions.
Improve MSEDCL’s financial situation
The first thing that the present government has to do is to take steps to improve the financial condition of MSEDCL. Is it easy? No. But is it impossible? No, again. Should the present government find a way out of the present situation? Absolutely! Why? Because they talked about development while campaigning. That’s why!
It is also abundantly clear that the present condition of MSEDCL is a political problem – it has been created by the previous politicians – and therefore the solution to the problem is political as well. And the present government must find the courage and strength to identify the solutions and implement them. The slogan “Sabka Saath, Sabka Vikaas” that Mr. Modi came up while campaigning for the General Elections struck such a chord with the aspirational middle class of India that they catapulted him to the post of Prime Minister of India. And that’s exactly why Mr. Devendra Fadnavis has been made the Chief Minister of Maharashtra: to rid Maharashtra of the misrule of the last fifteen years, to implement a development agenda with all sincerity, to bring Maharashtra out of the mess that it is in, and then take it to new heights.
And improving MSEDCL’s financial situation is important not just for the sake of MSEDCL alone but for the health of the entire sector. If MSEDCL’s financial health improves, then the health of all the others in the chain will improve: Mahagenco (the power generation company), Mahatransco (the power transmission company), the IPPs (Independent Power Producers), and the banks – Public Sector Unit (PSU) banks as well as private banks – who have lent huge sums of money to companies in the power sector. If the health of the electricity sector improves, it will attract huge investment in renewable energy projects, which in turn will create a lot of jobs. If the energy sector becomes vibrant and if industries get reliable electricity at affordable rates, then industries can stop worrying about power cuts and rising bills and focus on their core competencies, which will contribute hugely towards improving the state’s financial health.
The way I look at it, improving MSEDCL’s financial condition is crucial. I will go so far as to say that if it is not done, then nothing else will matter! In many ways, it is the foundation on which everything else will be built.
Here are a few concrete steps that can be adopted:
1. Stop serving the interests of the benefactors of the previous government.
The previous government was giving unimaginable amounts of indirect subsidies to the semi-feudal rural elite of Western Maharashtra, who were their benefactors. But does the present government have to? That is the Rs.8,000 crore question! Call me naïve, but the answer to that question has to be a no, and that too a resounding no. (If the answer to that question is a yes, then Maharashtra is doomed anyway!)
2. Make all the subsidies explicit.
As already stated before, farmers need to be provided with electricity at subsidized rates, and this has to be done not just for a few farmers but all farmers. Similarly, it is okay to subsidize electricity for certain weaker sections of the society. However, whatever subsidies are given, they need to given explicitly. No implicit subsidies please. Let everybody know whose pockets are being picked and whose pockets are being filled.
And I would urge the present government to consider giving these subsidies through the Aadhaar route, which is to say that electricity will be charged at a higher rate but subsidy should be given through direct cash transfers to the intended beneficiary’s bank account linked to an Aadhaar number. This is a much better way of giving subsidies because one of the big problems right now is that the subsidized electricity is used for “other” purposes as well.
If this is done, it will have a big positive side-effect, which is building trust. There is no doubt that there is a big trust deficit between government and people, and it is both ways: people don’t trust the government, and the government doesn’t trust the people either. This has to change if the present government is serious about development of all, and the onus is on the government to take the first step; bringing in transparency in the amount of subsidies that are handed out and the way they are handed out is that first step.
3. Have separate feeders for agricultural consumers
In simple terms, what this means is that the feeders that are used for supplying electricity to agricultural consumers should not be used for feeding electricity to other consumers like residential, industrial, and commercial. This automatically ensures that electricity that is subsidized for the purpose of agriculture is not used for other purposes, as mentioned in the above point. As per my information, this is an exercise that has already begun in Maharashtra but not finished. Gujarat has done it already and shown the way for other states including Maharashtra. It just has to be done and should be done ASAP.
4. Rationalize the agricultural electrical subsidy policy.
If farmers have to be made productive, then they have to be provided a reasonable amount of electricity when they want it. However, any use beyond this reasonable amount has to be charged the full tariff. This is the only way of ensuring that farmers do not use electricity indiscriminately, which will save both electricity and water. And again, Gujarat has shown the way. To my knowledge, this has already been done in Gujarat under the leadership of Mr. Modi as part of the implementation of their Gram Jyoti Yojana. So there is no reason why it can’t be done in Maharashtra by Mr. Fadnavis.
Now the question is: what is a “reasonable” amount of electricity? Well, the answer to that question is fairly simple and well-known. If a farmer has a 3 hp pump in his farm and if he needs to operate it for eight hours a day, then he will consume around 20 units a day, taking into account the inefficiencies of the pump. So the yearly consumption will be around 7,300 units, if he uses the pump every single day. However, agricultural pumps don’t need to be operated during the rainy season. So assuming that they have to be operated for 300 days in an year, 6,000 units is a reasonable yearly consumption for a 3 hp pump. If the pump capacity is more or less, the consumption will be more and less in the same proportion. That’s it! It is really as simple as that. It is certainly not rocket science by any stretch of imagination.
The other thing that needs to be rationalized is this: should electricity be subsidized for farmers growing all types of crops? Or should some crops be removed from the list? And the crop that tops that list is obviously sugarcane. Since it is a cash crop, an argument can be made in favour of sugarcane-growing farmers not getting subsidized electricity. Besides, sugarcane is a water guzzler. So that’s one other reason why the amount of sugarcane being cultivated should be controlled. And one must not forget that sugarcane is used to make sugar, the excess consumption of which is the main cause of diabetes, which has debilitating effects on the health of people and the society as a whole. That’s yet another reason for not giving any subsidies to sugarcane-growing farmers. Why should we subsidize something that wrecks the society in the long run?
Mr. Fadnavis has said a few things to this effect already, and has also talked about banning sugarcane cultivation in the water-scarce Marathwada region. He has also begun talking about treating water like a scarce and economic resource and hiking water tariffs. All this is very encouraging.
5. Provide meters to all the connections.
While this should seem trivial and rather obvious, it is not done. As per my information, out of the 32 lakh agricultural pumps that are there in Maharashtra, almost half do not have metered connections! This isn’t a coincidence; it has been done on purpose. Why you ask? So that the electricity that has actually been consumed by the rich farmers can be attributed to some other farmers or somebody else. Also, it can be used to artificially depress the Aggregate Technical & Commercial (AT&C) losses and bring them down below the limit prescribed by the Central Electricity Regulatory Commission (CERC). MSEDCL has shown a progressive reduction in AT&C losses over the years, but the reduction is not real. If they are not even measuring the electricity consumed at all the end points, how do they know what their losses are? And if the reduction was real, why is MSEDCL in doldrums? So it is as clear as daylight that MSEDCL has achieved these “reductions” through mathematical gimmickry and plain manipulation. This has to stop.
And it should be obvious that providing the meters is essential if overuse – beyond a reasonable level – by agricultural consumers (or in general by any other consumer) has to be charged at a different rate.
It also goes without saying that meters have to be provided not just for all agricultural consumers but for all consumers, irrespective of their type and intended purpose. So everybody including politicians, people who are connected to politicians, the Ganesh mandals and other mandals during other festivals, should pay for electricity. Nobody should be allowed to steal electricity, for any reason whatsoever. Period.
6. Outstanding dues have to be collected.
MSEDCL has to go after all the defaulters using all the means at their disposal. I was recently in Amravati and was told that MSEDCL officials there used “shaming” as a weapon against the defaulters. Essentially, they revealed the names of the defaulters to the other people in their neighbourhood, and it was the incessant taunts from the neighbours that actually got the job done! (Incidentally, a similar tactic was used by PMC officials to get defaulters of property tax to pay up; they used to go to their building with dhol-tasha and announce the names of the defaulters to everybody!)
So it can be done. This method of shaming is much more effective than a different strategy that MSEDCL has adopted in many areas: go for load-shedding in proportion to the AT&C losses in a particular area. So if the AT&C losses in an area are 40%, then they won’t get power for 40% of the time. While there is a certain logic in this, it’s not fair because it also punishes people who pay regularly. When I visited Ambajogai Engineering College a couple of years ago to give a lecture on solar PV, their Principal told me, “We have never defaulted on our payments but we have to unnecessarily suffer because other people in our area are defaulting!” So when there are power cuts in their area, they have no option but to use DG sets, which is a very costly affair and is best avoided if possible.
Adopt smart meter and smart grid technologies
There has to be a lot of emphasis on adopting smart meter and smart grid technologies. Smart meters are, as their name suggests, meters that are smart and do two things that simple meters don’t do:
ToD (Time-of-Day) metering
This is very important since it tells us how much people are consuming and more importantly when. Once this is known, usage during peak hours can be charged extra whereas usage during non-peak hours can be subsidized. There are other deeper reasons for doing this.
Coal-fired thermal power plants cannot be turned on and off at will. Their ideal usage scenario is to keep them running 24/7 at a constant load. However, that is not possible since load keeps changing all the time. What to do with the power that they generate during the night, especially if it is not being fully utilized, is a big problem. So if there is excess energy generated at night, then with the help of ToD metering, people can be incentivized to use it up by offering it at cheaper rates.
Most of the wind energy is also generated at night. That can also be utilized with the appropriate incentives.
In the future, if a lot of solar PV power plants get connected to the grid, it could create a daytime trough, as opposed to the daytime peak that is more common. If this happens, which it already has in the US, then consumption can be shifted to the daytime with the appropriate incentives using ToD metering.
Therefore, ToD metering is very important and should therefore be implemented ASAP.
In the simplest case, the communication is one way: from the meters to the control room. If all the meters communicate their consumption to the control room say every fifteen minutes, then it will give an accurate picture of the consumption patterns. When such patterns have been accumulated for a few years, accurate prediction of the load becomes possible. And only when you can accurately predict the load, can you plan the generation accurately. And mind you, the situation is going to get a lot more complicated when all types of renewable energy sources, which are “variable” by nature”, get connected to the grid in the years to come.
The more advanced scenario is when the control room can also communicate with the smart meters and tell them to do something. And that something is increasing or decreasing the load to match the generation. Let me give you a simple example. Imagine a scenario in which 10% generation capacity suddenly comes offline, or needs to be taken offline for some reason. The control room would pass a message to all the smart meters to reduce their load by 10%. If the loads connected to the smart meters were “prioritized”, then it would switch off the lowest priority loads. If the desired saving goal of 10% is not achieved, it could switch off the loads with the next level of priority, and so on, until the goal is achieved.
LEDs enable current control, which is to say that you can control and vary the current flowing through them. The more the current, the brighter they will grow, and vice versa. When LEDs become the predominant source of lighting, which they will in the years to come, load reduction can be achieved by reducing the current flowing through them. When the control room wants a 10% reduction in loads, the first step would be to reduce the current flowing through the LEDs to a level where the reduction in luminosity isn’t all that noticeable. Switching off loads would be the next recourse.
So adopting smart meter and smart grid technologies should be done ASAP since it will enable a lot of other things.
Adopt all energy efficiency measures
Since energy is a scarce resource, we have to use it as efficiently as possible. Lighting loads contribute 20% of all the loads, and therefore switching to LEDs which are highly energy-efficient makes a lot of sense. That didn’t happen all these years since LEDs were very expensive. However, in recent times, due to the tremendous advances in their manufacturing technology, their prices have come down significantly. The prices will come down even further in the years to come as their sales volumes grow exponentially. Apart from LEDs, all appliances are getting energy efficient with advances in technology, which is a very welcome trend.
I read a very interesting paper recently. It suggested that MSEDCL should take the initiative and replace all old agricultural pumps with ones that have the latest and greatest technology. Depending on how bad the old pumps are, it could save anywhere from 10% to 30% energy. Even if we go with an average of 20% savings, it could save 5% of the total electricity consumed by Maharashtra. That’s a lot! Imagine how many homes, offices, and industries could be powered with those savings! The paper also did a lot of financial analysis and showed how it could be done viably.
Introduce a good net metering policy
Introducing a good net metering policy is the key to encouraging renewable energy sources. To understand why that is so, some explanation is required.
All renewable energy sources, with only a few exceptions, are “variable”; they are called “infirmed” in technical jargon. They also have other constraints. For example, solar PV power plants produce power during the day; they start generating as soon as the sun rises, increase production gradually, peak at around 11 a.m., stay at that peak till around 3 p.m., and then start generating less and less till sunset, after which they stop generating completely. The generation can vary quite a bit at any given time. For example, if there is a cloud cover, the generation can drop drastically. I have seen the output of a 40 kW solar PV power plant drop from 30 kW to 15 kW in a matter of a few seconds!
So you can’t really depend on the renewable energy sources unless you buffer them with batteries. But batteries are expensive, need maintenance, and need to be replaced every few years. So a much better alternative is to connect the renewable energy sources to the grid. All the generated energy is pushed into the grid. Of course, if there are local loads, they will draw energy from the grid. At the end of every month, you measure the “net” energy consumed. If it is positive, you pay to the utility company. If it is negative, the utility company pays you, or carries it forward and adjusts it against next month’s bill.
Such grid-tied solar PV power systems are very popular because they obviate the need to install batteries. They also have another big benefit. In places where there is a lot of daytime usage, like schools, colleges, offices, industries, they ensure that the energy generated on “off” days does not get wasted because there is very little load on those days; they get due credit for it.
Maharashtra is working on a net metering policy. When it comes, it will give a boost to solar PV and other renewable energy projects a boost that they desperate need.
Encourage all renewable energy producers
The last thing that the present government needs to do is to encourage renewable energy producers. There are already a lot of people who are into it, and a lot more who want to get into it, if given the proper incentives and a stable policy framework. If they get that, investment will simply pour in. There’s absolutely no doubt about that! When that happens, the electricity sector will get a lift, lot of jobs will be created, and the overall economy will be benefitted.
However, it goes without saying MSEB doesn’t look at renewables like that. For them, renewables represent a great risk, which they are in many ways. Yet we cannot forget that grid-tied renewable energy power plants cannot function without the grid. So it’s much better to look at renewable energy source as ones that complement the conventional energy sources rather than ones that replace them.
Here are a few points about the various renewable energy sources:
Solar PV power plants are perfect for agricultural use! They generate power during the day which is when agricultural consumers need power. And they don’t generate a whole lot of power when it is raining, which is when agricultural consumers do not need power. So it works out quite well. I talked about having separate feeders for agricultural consumers earlier in the article. If the present government can find a way to construct solar PV power plants where these feeders are, then they will take of the agricultural consumers for 25 years to come!
Solar PV also happens to be perfect for places where there is a lot of daytime usage of electricity like schools, colleges, offices, commercial buildings, and industries. If all such places take care of even 20% of their daytime, it would represent a big step towards sustainable development. 20% of today’s installed capacity in Maharashtra works out to around 3,000 MW. At 10 crores per MW, it will require Rs.30,000 crores to set it up! That’s a lot of money. Maharashtra cannot, and should not, do this investment on their own. But they needn’t do it. All they have to do is come up with the right incentives and people will invest. Solar PV is at a point where it is economically viable, especially in Mumbai, Pune, and a few other cities.
It has been found that when a little bit of wind is added to solar PV installations, the performance increases quite a bit since they complement each other very well. So solar – wind hybrids should also be encouraged.
Biomass, biogas, and bagasse are also renewable energy sources that Maharashtra can and should go for. They especially make a lot of sense for rural areas where a lot of the raw material for these plants is readily available. So these types of renewable energy sources can lead to self-sufficiency, even in areas which are not connected to the grid.
The present government would have to implement all the solutions that I have pointed out in the previous section if it is serious about reviving the electricity sector. But it goes without saying that there are challenges in their implementation. I will list them out in this section.
The biggest challenge in reviving the electricity sector is the political challenge, without a shadow of doubt. Many of the solutions can be termed as “better pills” and the question is if the present government is willing to swallow them. The current trend in Maharashtra, and the entire country for that matter, seems to be hand out freebies to the people. But that hasn’t worked in the past and it won’t work in the future either. Tough measures will have to be taken at some point of time. Past governments haven’t shown the courage to implement them. Will the present government will act any different? Well, it remains to be seen.
For every person in the government who says that tough measures should be implemented, there will be five other who say that they shouldn’t. “If people want free electricity, we should give it to them. After all, we are their representatives, aren’t we?” That could be their argument. They will also be quick to point out that the two Chief Ministers who tried to implement reforms – Chandrababu Naidu in the then Andhra Pradesh and S. M. Krishna in Karnataka – got voted out of power! It was said that what they did helped Hyderabad and Bangalore respectively, but did not help rural Andhra Pradesh and rural Karnataka.
The other big challenge is the people who seem to be asking for free electricity. But just because they are asking for it doesn’t mean that it can be given. What cannot be given, cannot be given. Period. If people don’t understand it by themselves, then they need to be convinced. The ones who break laws despite all this need to be dealt with “firmly”. It’s as simple as that. If a child asks its parents for two dozen chocolates a day, should the parents give it to them?
So the question then becomes: can people be convinced? I think they can. But not if the government is filled with corrupt politicians who treat the public exchequer as their personal inheritance. We have to accept that we have become a very corrupt society, and today even the general people have also started demanding their share of the loot. “You politicians are having a party. So why shouldn’t we?” That is what their argument is. So come election time, candidates give all kinds of “goodies” to the people. “You make merry just before the elections. We will do it for five years after coming to power.” That seems to be the tacit understanding and is the crux of the problem. So the present government would have to display a character that is vastly different than that of the previous governments if it is serious about development.
But even if it does, the all-important questions remain. Will people understand? Will they change? Will they shoulder their share of the burden? Will they make the required sacrifices? I would like to believe that they will. But I am not saying that not just out of optimism but from my own experience. My father and I had the opportunity to meet and talk to a group of farmers in Solapur district. During the initial part of the discussion, their attitude was much like the one mentioned above. But as we explained various things, we could see an understanding dawn on their faces. However, the fact that we were well-meaning citizens who had no vested interests was part of the reason why they bought our arguments. So I am convinced that it can be done, but only if the government does it with a purity of intention. So it is absolutely crucial for the government to be open, honest, and transparent since it will help build trust.
Lastly and quite unfortunately at that, we do not have a history of following laws. We make laws but neither the makers nor the general public expect them to be followed. This is not the case in Western countries and I will give three examples to corroborate that claim.
Rajat Gupta, who was once highly praised for rising from a very humble background to the peak of success in corporate America is now in jail for insider trading. In the UK almost two decades ago, Prince Charles was caught over-speeding with the help of Doppler radars, for which his license was suspended for a period of two years in accordance with the law. This decision must have been taken by somebody of the rank of traffic police sub-inspector, but nobody from Buckingham Palace called to interfere with the decision and to see if “something could be done”. And lastly, in the late 1980s, when Steffi Graf was at the peak of her successful career, her father was arrested and convicted for evasion of tax, and then subsequently sent to jail. These three incidents prove that the criminal justice system works in the US, UK, and Germany. Let alone actually happening, can we even imagine something like this happening in India? That is a big impediment to major changes coming about in the electricity sector.
So yes there are challenges, but like the age-old adage goes: where there is a will, there is a way.
Writer, Publisher, Entrepreneur
Dear Prashant, very elaborate article.Actually, I was Director (Operations) till 2007. The situation was not much better.