Electricity for all: States up additional capacity, but low demand keeps them stressed

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Maharashtra, Uttar Pradesh and Punjab follow Chhattisgarh in terms of adding installed capacity. While Maharashtra added 5,508 MW, UP and Punjab added 4,256 MW and 4,076 MW, respectively, over the last two years. The capacity addition is, however, not a two-year story and the pipeline for most of these added capacities were built five to six years ago.

But rather than helping them generate revenue, the additional power capacity is bringing financial stress on the states since there is little demand for the added capacity. It has also led to a situation where the pipeline for new capacity is weakening as the demand is not encouraging power generators to built new capacity.

On the other hand, the low demand in the economy is posing a challenge for these states that have built a lot of these excess capacities, resulting into a situation of financial stress for them.

“The demand in the economy has softened and excess capacity addition is leading to cash stress for most of these states. There is a fixed cost involved with these power plants and the state government has to pay a fixed obligation to the contractual power generators who have built the capacity. Therefore, it is creating a significant challenge for them,” said Anish De, Partner- infrastructure and government services at KPMG. He also said that an unused or marginally utilised 1000 MW capacity results into a financial loss of anywhere between Rs 1,200 crore and Rs 1,500 crore per annum.

Some say that even as the per capita availability of power has jumped significantly, there are not many takers for the same and therefore the numbers don’t reflect the true story.

While at the all-India level, the per capita availability of power has gone up from 793 kwh in March 2014 to 901 kwh in March 2016 (witnessing a growth of 13.6 per cent), Chhattisgarh, Goa and Madhya Pradesh have witnessed their per capita availability of power grow by more than 25 per cent over the last two years. While Bihar has witnessed a 60 per cent jump in its per capita availability of power, it still stands lowest at 228.8 kwh and is much below the national average of 901 kwh. Jharkhand was a shade better at 229.5 kwh and that of Uttar Pradesh stood at 466 kwh witnessing a 14 per cent rise over the last two years.

Goa, Haryana and Punjab top in terms of per capita availability of power. While that of Goa stood at 3,511 kwh, the same for Haryana and Punjab stood at 1,871 kwh and 1,793 kwh.