Union Budget 2021: Fresh Allocations to Power Sector may Ignite Economic Growth

 

The first budget of this decade looks to be a promising one for the power sector which was substantially rattled by the Covid-19 pandemic outbreak and the prolonged economic slowdown. Government of India while announcing the stimulus packages last year had called for exercising independence and self-reliance in all aspects.

Atmanirbhar Bharat Abhiyan, which the government is keenly promoting has infrastructure as one of its five pillars and power sector is an integral part of it. So far power industry hasn’t been able to take full advantage of the packages announced by the government during the pandemic. Industry analysts attribute this to the unwillingness of companies to increase their spending. Perhaps many are waiting for the financial year to get over and start afresh from April onwards while other experts have said that the sector was watching the developments and treading cautiously.

Importantly, a framework will also be put in place to give consumers alternatives to choose from more than one discom. "Power distribution companies are currently monopolies, whether public or private. There is a need to provide choice to consumers. There should be a framework to give consumers alternative of more than one discom," finance minister Nirmala Sitharaman said while presenting the budget in the Parliament. The minister further stated, "This comes amid "serious" concerns over the viability of power distribution companies (discoms) in the country. The scheme is expected to provide assistance to discoms for infrastructure creation tied to financial improvements, including prepaid smart metering, feeder separation and upgradation of systems."

During the unlock phase industries restarted their operations in a calibrated way and as economic activities began gathering steam the adverse impact from the fall in demand due to Covid-19 began diminishing. Experts suggest that overhauling tariff structure with lower commercial and industrial tariffs is the need of the hour for a quick recovery to pre-Covid days. India needs to emulate countries such as Germany, Japan, the United Kingdom, and the United States of America where tariffs are lower. As India brings down its power tariff rates significantly the power sector recovery can be perhaps accelerated.

As per the Ministry of Power estimates, the electricity generation target of conventional sources for 2020-21 is 1330 billion units, a growth of more than 6% as against 2019-20. Power sector think-tanks should efficiently address flaws in distribution and ensure a reliable supply of power for consumers for more significant growth. Power consumption with India’s exploding population and increase in per capita usage is estimated to reach 1,894.7 TWh by 2022, as per Ministry of Commerce & Industry estimates.

More often than not, consumers would buy new connections when they have access to uninterrupted power and this becomes one of the key factors in increasing per capita power consumption. Moreover, the power sector needs to augment and modernize its power grids to control outages and tripping problems. It also needs to address large-scale power theft, faulty billing, and inordinate delays in new connection procurement, besides ensuring the sector’s economic stability. These have been perennial problems that have beleaguered the power sector and it will need a more holistic approach to fix these glitches.

The sector now needs to reap the benefits of the prevailing positive sentiment through aggressive distribution reforms, indigenous R&D and technology development and creating an ecosystem for growth.

The author is a Delhi based journalist. He can be reached at prasad.n@indoen.com