By Sumarbin Umdor
Meghalaya is presently experiencing acute power shortage with the gap between availability and demand widening every year. Although the state has vast hydro power potential estimated at 3000 MW, the installed capacity of hydro-electric projects at 312.7 MW is less than half of the peak hour demand of 650 MW. Even with increasing purchase of power from central utilities, the state has had to restrict sale of energy particularly during the lean period in order to manage this widening gap between the availability and demand for energy. The power situation in the state will only get worse in the coming years as the own generation capacity is likely to increase only by 41.5 MW from two hydro-electric projects which are currently under construction. By the end of 12th Five Year Plan, the electrical energy requirement of the state is estimated to reach 2243 million units (MU) which is almost double the total energy sale in 2011-2012.
The power crisis in the state is an outcome of the mismatch between demand and supply. The demand for energy has increased drastically in the last few years driven by surge in demand from domestic and industrial sectors. There has been a significant shift in the sector wise consumption patterns with energy sale to industries increasing from 118 MU in 2000-01 to 522 MU in 2011-12. This represents a sharp increase from 19.5 percent of total sales to 44 percent during the 12 year period. The rise in demand from this sector is mainly due to the setting up of power intensive industries which are drawn to the state due to incentives offered under industrial policy. High tension industrial segment accounts for more than 85 to 90 percent of total power consumed by industrial sector.
Consumption of electricity by domestic consumers has also strengthened with sale increasing from 136 MU in 2000-01 to 355 MU in 2011-12, representing an increase in the share of this segment from 22 to 30 percent of overall energy sale. Demand for energy from this segment is set to further increase driven by urbanisation, rural electrification and rise in disposable income leading to increase usage of electrical appliances.
On the supply side, the exclusive reliance on hydro power projects has affected generation of power during periods when monsoon has failed and also during lean season. This dependency on monsoon is reflected in the wide fluctuation in own generation of energy which varied between a high of 708 MU in 2010-11 to a low of 391 MU in 2006-07. The commissioning of the much touted Leshka Myntdu hydel project in 2012, on which close to Rs. 1300 crore has been incurred, has proven to be a damp squib as this run of the river project is operating more like a small hydro project generating a disappointing 6 MW of power of its installed capacity of 126 MW during the dry season.
The state has failed to develop thermal power generation which would have helped to tide over the power deficit during dry season. It has also not been able to tap into the vast renewable energy potential of the state. It is estimated that the state can generate 44 MW of power from wind energy and another 230 MW from small hydro projects. However, except for reviving of the British era Sonapani mini hyro project of 1.5 MW in 2011, the state is yet to make much headway in harnessing renewable energy sources which are not only environmental friendly but have other added advantages such as relatively low capital cost involved and the short gestation period.
The energy deficit in the state is made worse by the huge electricity losses during transmission and distribution and the low collection efficiency- losses that are collectively known as aggregate technical and commercial loss (AT&C). In the last few years, the AT&C losses of state owned power utility varied between 30-40 percent. This implies that power utility in the state are able to realised revenue only on 60 percent of the total energy available from own generation and through purchase.
With the growing demand for electricity and limited own generation capacity, the state has become more dependent on power purchased at high cost from central power utilities. Power purchased from outside the state has steadily increased to 1166 MU in 2011-12, a seven fold increase since 2001-02. This has resulted in increase in expenditure on power procurement which today accounts for around 60 percent of the total expenditure of power utility.
The increasing dependence on power purchase at higher rates has affected the cost of supply of energy. The average cost of supply per kwh has increased from Rs. 1.84 in 2004-05 to Rs. 4.30 in 2011-12. However, during the same period the growth in revenue has been at a much slower pace with average revenue per kwh increasing from Rs. 1.78 to Rs. 3.06. This has widened the gap between the average cost of supply of energy and revenue realised from Rs. 0.06/kwh to Rs. 1.24/kwh during the last eight years. The gap is still substantial even if we include the subsidy received from the state government.
This expanding gap between average cost of supply of energy and revenue realised has led to accumulation of losses which in 2012-13 stood at Rs. 736 crore. This situation has put a lot of financial strain on the state power utilities resulting in repeated delay in clearing of dues related to power purchases. The present load shedding in the state is therefore not only an issue of demand outstripping supply but also that of growing gap between cost of supply of energy and revenue realisation.
The state owned power distribution corporation (MePDCL) has proposed to increase power tariff across consumption segments to improve revenue realisation. There have been many revisions of the power tariff in recent years resulting in steady increase in average tariff. For instance, the revision in March 2013 saw an increase in the average tariff per unit for domestic households from 3.30 to Rs. 3.58 (on minimum load of 4 KV and consumption of 300 units). MePDCL has proposed steep hike in tariff structure for 2014-15 for all consumer categories. For domestic consumer, the proposed new rates will more than double the tariff per unit to Rs. 7.65.
While reasonable revisions of tariffs to address low revenue realisation is understandable, steep hike in tariffs cannot be the only solution to mitigate the present power crisis and improve the financial health of state utilities. Power utilities in the state have to address issues of operational deficiencies which contribute to a large extent to the present situation. Foremost among these is the issue of staggering AT&C loss which is among the highest in the country. Success in reducing the AT&C losses would significantly improve the average revenue realisation and financial health of state power utilities. This calls for investments in the grid and metering system and determined action against theft and pilferage of energy. Unfortunately, power utilities in the state have not achieved much success in this regard. In fact it would be a sheer waste to augment the own generation capacity if we are not able to bring down the staggering energy losses to an acceptable level. Other issues related to high employee and administration costs must be addressed as these also contribute to the high cost of supply of energy.
The introduction of time of day tariff structure starting with industrial sector and other bulk consumers is another step that would ensure better and efficient management of available energy by providing incentives to consumers to shift consumption from peak to off peak hours. Also, since industries are major consumers of electricity in the state, attention has to be given on adoption of energy efficient measures by industrial units. For this, suitable incentives have to be introduced in the industrial policy of the state. Similarly, other energy demand management initiatives should be introduced to improve energy efficiency. As a start the electricity bill issued to consumers should include a section containing information on energy savings tips. A web portal should also be launched with online electricity bill payment option and also information to educate consumers on energy efficient measures.
However, in the long run the state will have to strive to fully realise its hydro and renewable energy generation potential so that affordable and quality electricity is available for overall socio-economic advancement of the state.
(The writer teaches Economics at North Eastern Hill University)