Author: cprindia

When Chief Minister HD Kumaraswamy announced crop loan waivers in his first budget after he came to power in May this year, there was widespread concern about how the state would finance these. Many who thought the loan waiver was a valid response to agrarian distress argued for managing costs by cutting the other biggest subsidy component in the budget – government subvention to the Electricity Supply Companies (ESCOMs).

This is estimated to be ~ 11,048 crores for FY2018-19 according to the most recent tariff order issued by Karnataka Electricity Regulatory Commission (KERC) and is owed by the government to the ESCOMs in the state so that they can provide free electricity to irrigation pump sets below 10 HP, a key plank in the government’s welfare policy.

Electricity subsidies are often attributed to the incompetence of ESCOMs and are rarely interpreted as welfare policy. This has led to a near-complete silence about the continuous cycle of evasion of responsibility in the sector: the government subvention owed to the ESCOMs is only partially-paid; the ESCOMs delay payment for power bought from state-owned generating stations hoping this would be set off against the subsidy owed to them; and in turn, municipal bodies do not pay the ESCOMs for the electricity they consume. In this way, the power sector has become the flexible and convenient current account for the government whenever it needs a bit more fiscal wiggleroom. What seems to make this cycle of evasion acceptable is the widespread belief that subsidy payments to utilities are somehow ill-justified.

This belief stands on a now-familiar storyline which turns the utilities into villains of fiscal problems of the state – inefficient public utilities that have no incentive to improve performance, compromise fiscal prudence and prevent much needed public expenditure on sectors such as health and education, all due to political pressures from rural constituencies. In this story, the solution is straight forward: there must be strong political will at the top of the hierarchy to implement tough measures to reform the sector.

Unfortunately, this kind of thinking that seeks to separate “petty” politics from what are considered technical matters of utility operations has contributed to the obfuscation of the very real political negotiations that have been happening in the sector. This thinking has also stifled what would be a useful debate in the sector on whether and how publicowned companies can be incentivised to become commercially viable and less prone to corruption.

This thinking has restricted the debates in the sector to ways and means to improve technical and commercial efficiency parameters in public utilities without acknowledging the central role that electricity departments and utilities played in agricultural development until the recent past and how to transition out of this regime and at what cost.

Political settlements therefore, have occurred under the guise of techno-economic adjustments. For example higher agricultural tariffs in the northern region are justified on the basis of deeper ground water levels in that region.

The real effect of this adjustment, however, is not on ground water consumption as that is completely free for users. Instead, ESCOMs in the regions with low paying consumers receive a higher allocation of the budgeted power sector subsidy in the State relative to their share of sales to consumers that do not pay for electricity (IP sets account for 97% of this sales revenue).

Historical factors such as structural differences across regions in Karnataka also affect seemingly technical issues such as tariff determination subsidy.

For example, Karnataka’s strategy of relying on a services-led growth around Bengaluru also left most paying consumers concentrated in one region.

The creation of regional ESCOMs as part of the reform in 2002 was meant to create autonomous companies that could operate on commercial principles according to cost of supply in each region.

In practice, however, tariff setting norms and subsidies in the state have evolved an equilibrium that can accommodate the vastly different consumer profiles in various regions of the state so that most of the budgeted power subsidy is allocated to the ESCOMs in the northern region.

Figure 1: When region decides benefits.

The state’s historical context and its politics of development, including the debate on the inequalities between the northern and southern regions, has consequences for the balancing act that is required in the sector- often brokered by the energy department and the regulator. It is useful to be mindful of this political dynamic in the sector rather than relying on measurement and monitoring based on technical parameters alone.

Meera Sudhakar is a graduate student at the National Institute of Advanced Studies. This research is based on work presented in full in the book Mapping Power, edited by Navroz K Dubash, Sunila S Kale, and Ranjit Bharvirkar. This article was published in the comment section of the Hindustan Times on 21 September 2018, and can be accessed here. 

Op-Eds in the Mapping Power Series:

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• AAP and the Politics of Power in Delhi
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

Recent events show extreme discontent in rural Maharashtra. Fifty-eight silent Maratha Kranti Morchas in one year have mobilized lakhs of people. Recent agitations have demanded reservation for Marathas. And the Kisan Long March was based on a demand for farm loan waivers and implementation of the Swaminathan Commission’s recommendations. All these events indicate a deep-rooted crisis in agriculture and allied sectors in Maharashtra, the share of which in the gross state value added (GSVA) has declined to 11.9% in 2017-18.

The lack of economic opportunities in various parts of Maharashtra is closely tied with the failure of basic infrastructural facilities, mainly water and electricity. Once recognized as the best performing public sector agency, the electricity utility in Maharashtra is now in a state of flux. The distribution sector is constrained by the legacy of high-cost power and large capacity addition but lower-than-expected industrial demand growth. Further, there is pressure from the centre to increase the share of renewable energy (RE), including rooftop solar with net metering. A recent tariff proposal by the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) demanding a 23 per cent hike was met with strong opposition from grassroot activists. In view of these potentially unsettling emerging trends, it is imperative for the state to revise its political strategy of managing the sector.

Figure 1: Financial and Physical Profile: Maharashtra

Figure 1 depicts some recent trends in Maharashtra’s electricity sector. Especially noteworthy is the rising cost of power, now among the highest in India. As a result, the annual revenue requirement for Discoms has ballooned from Rs 2.67/kWh in 2007-8 to Rs 6.15/kWh in 2015-16. At the same time, the share of industrial electricity consumption declined from 45 per cent in 2007-8 to 31 per cent in 2014-15. This was due to sluggish industrial growth and a high number of industrial consumers purchasing power privately. Consequently, industrial revenue decreased by 15 per cent during this period. The installed capacity of RE reached 6.40 GW which, while impressive, came at a high cost. Subsidies to agricultural and powerloom consumers have reached Rs. 10,500 crore in 2014-15, indicating growing pressure on state finances. While distribution losses have consistently declined over the years (down to 14.51 per cent according to the latest tariff proposal), in view of persisting unmetered supply to agriculture, this issue is far from settled. Another worrying trend is backing down of contracted power (6000 MW to 8000 MW per year) due to sales migration away from the grid (to open access consumption). In the case of Mumbai, both Tata Power and Reliance Infrastructure (now taken over by Adani Transmission) failed to contract power through competitive bidding, depriving consumers of the benefits of competition.

A complete understanding of the recent trends requires a deeper exploration of the political forces historically driving this sector. The story of electricity development in Maharashtra is best characterised by state attempts to accommodate both industrial and agricultural interests. The latter had a dominant role in the state Congress party and the broader politics of the state. The development of cooperative sugar factories provided a strong institutional foundation for the ruling Congress and helped initiate early rural electrification in the state. The adoption of flat rate tariff for agriculture in 1977 benefited well-off farmers by reducing the input costs for cash-crops. The expansion of electricity to rural areas was a part of a virtuous cycle of reaping electoral gains by building institutional networks ─cooperative, educational and panchayati raj. This cycle was broken in the 1990s with the decline of cooperative institutions, factionalism within the Congress party and growing pro-urban bias within the Congress leadership.

The Congress government had also adopted early generation reforms by negotiating a deal with Enron, which proved controversial. This started an era of high-cost power in Maharashtra. The Shiv Sena-BJP government came to power for the first time in 1995. However, since the new government had enlisted many disgruntled Congress leaders, there was no discernible change in policy. Along with substantially increasing the electricity subsidy burden, the Enron project also constrained the public utility’s ability to add new capacity for nearly a decade (1995-2005).

The sector entered into a stage of stagnation thereafter with low capacity addition, high load-shedding and selective expansion. The newly established Maharashtra Electricity Regulatory Commission (MERC) and active civil society organizations (CSOs) tried to arrest this trend, but with little success. The state’s high economic growth pattern, however, enabled the state to continue cross-subsidizing agriculture. This ensured the stability of the Congress-Nationalist Congress Party rule for three successive terms (1999-2014). There were some attempts to direct the reform process proactively, mainly by bureaucrats. These included initiating internal reforms such as feeder separation and introducing transparency (under pressure from MERC and CSOs) as well as negotiating reasonable capacity addition deals. However, factors external to the sector (industrial growth slow-down and the centre’s RE push) hampered these initiatives. Consequently, the large capacity addition and ensuing demand shortfall led to the current situation of surplus power.

The political leadership has maintained a functional equilibrium in the state all these years by successfully managing the dominant interests through a combination of explicit and implicit subsidies (non-action in case of theft and arrears). The continued viability of this strategy is under threat from macro technological forces and changing federal policy. In this context, the mediatory role of the state assumes critical importance, mainly in resolving the issue of high-cost long term power purchase contracts and in incentivizing the bureaucratic machinery to play a developmental role.

Kalpana Dixit teaches political science at the Tata Institute of Social Sciences, Tuljapur. This research is based on work presented in full in the book Mapping Power, edited by Navroz K Dubash, Sunila S Kale, and Ranjit Bharvirkar.

Op-Eds in the Mapping Power Series:

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• Karnataka’s Power Politics
• AAP and the Politics of Power in Delhi
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

A few months before the next general election, the Central government has proposed a set of changes to the Electricity Act 2003. The amendments seek to enable a market transformation in electricity. The link between political power and electrical power is widely known; promises around electricity access, price and quality are important political currency. However, the expenditure of scarce political capital on this issue is puzzling. The amendments will be hard to get through Parliament (an earlier 2014 effort failed) and voters will not see an immediate impact. What is the political rationality of this effort? Who are the winners or losers from these amendments?

Competition and choice

Bringing in competition and choice in supply for the final consumer has long been an aim of electricity reform and remains central to these amendments. The idea is that while a single public utility will run the wires through which electricity flows, multiple supply licensees (both public and private) will be allowed to compete for consumers. The intent is that the discipline of competing for customers will lead to improved supply and lower bills. However, the global track record on this approach is far from definitive.

While an earlier 2014 reform effort proposed mandatory and time-bound implementation of these reforms, and therefore was resisted by States, the current amendment allows them discretion on the timing of implementation. The combination of time discretion and the improved presence of the ruling coalition in State governments may facilitate passage this time around.

If it does, India could have an electricity distribution sector with pockets of competition for wealthy consumers in a sea of monopoly inhabited by the poorest. Private suppliers could cherry-pick profitable locations and consumers; the state-owned incumbent supplier will be left with the obligation to serve low-paying consumers.

This need not be bad, if there were a mechanism to support the second group. This currently happens through ‘cross-subsidy’ from wealthier customers, but this is also being changed under the amendments. This leaves only the possibility of direct support from States. If these transfers are not forthcoming, or late, the cash-starved incumbent supplier will be locked into a cycle of poor quality of service for its customers who have no ‘exit’ option, leading to more bill evasion, and further financial deterioration.

The amendment (along with changes in the National Tariff Policy) aims to get the price right — a long-standing aspiration — by capping cross-subsidies at 20% immediately, and eliminating them within three years. The cross-subsidy surcharge on open access customers — the fee that holds back customers from leaving the grid — would be eliminated within two years.

There is a compelling rationale for these changes — India has among the highest electricity tariffs for industry, which bears the burden of low-performance and losses among other consumers, impacting their global competitiveness. However, this shift could be highly disruptive if the profit-making side is allowed to flee, without devising a transition pathway for the loss-making side of electricity.

Perhaps because of these political sensitivities, the proposed approach to eliminating cross-subsidies is complicated. Subsidies will not be allowed across consumer categories like industry and agriculture, but will be allowed across consumption categories — big consumers can subsidise small ones. Big industrial consumers will see no effective change, although small business consumers will escape payment of subsidy.

The more significant change is abolition of the cross-subsidy surcharge, which will open the flood gates for large consumers to migrate through ‘open access’ to cheaper sources and avoid paying any subsidy. In short, cross-subsidy will become load-based subsidy, but the load available to pay that subsidy will be allowed to escape.

Where is support for poorer customers to come from? The amendment recognises the need to subsidise the poor, but mandates this be done through direct benefit transfers. However, identifying and targeting beneficiaries remains a challenge. Moreover, with these changes, the mechanism of support for poorer customers will shift from the electricity customer to the taxpayer. Cross-subsidies are certainly distorting. But the solution requires the electricity sector to assert its claims for support in competition with several other possible uses of state funds, introducing political uncertainty.

The proposed legislation makes subsidy to the poor the collective responsibility of the States and the Centre, which has so far been only the responsibility of each State. Notably, the Centre may have access to enhanced tax revenues from electricity because it stands to gain from additional tax revenue from profitable new wires companies and private suppliers. Thus, the Centre could become a new fulcrum of redistribution from wealthy areas in wealthy States, to needy customers that are concentrated in a few States.

While this may be a pragmatic fiscal strategy allowing redistribution across States, it also has undeniable political implications. It provides greater control to the Centre and limits the States’ and regional political parties’ capability to make electoral use of electricity pricing. The politics of power prices will shift from sub-national to national electoral politics. In an electoral context where the battle lines may be drawn between the ruling coalition and strong regional parties, this is worth noting.

Moreover, the amendments have other centralising dimensions. The amendment proposes a re-formulation of the selection committee for State regulators, from a majority of State representatives to a majority of Central representatives.

The Centre will also gain more oversight on capacity addition, through the requirement of detailed project report submission to the Central Electricity Authority. There is no doubt that State performance has been poor on both fronts. But the amendments reflect a clear choice of solution: re-direct responsibility to the Centre instead of fixing the process in the States.

Pump priming generation

Many generating companies have been in the news recently due to decreasing demand for their power and consequently their stranded assets. The amendments potentially provide comfort to them at the expense of distribution companies. Specifically, they mandate that suppliers sign power purchase agreements (PPAs) to meet the annual average demand, ostensibly to ensure 24×7 power for all, which will be subject to review and compliance measures.

The challenge of low demand for existing power is undoubtedly an issue. However, the logic of this move is curious; disincentives to serve poor customers rather than availability of power is the real obstacle to 24×7 power. The gain to generators could come at the cost of customers, who, through the PPAs signed by supply companies, have to ultimately bear the risk of uncertain load growth, prices and migration.

The amendments include many other provisions, notably around making the Act more up to date with regard to renewable energy, which is a worthy objective. In terms of the big questions, it places its bets on more competition, subsidy reform, a steering role for the Centre and throwing a lifeline to generators.

There is no doubt the status quo is unsatisfactory; India’s electricity sector remains beset with problems. Yet, the amendments leave quite unclear what happens to those left behind by distribution reforms and by efforts to help out generators. Disruptive change in Indian electricity may be needed, even inevitable. But the amendments risk placing the cost of disruption on the backs of the poorest, and shifts the potential for ameliorative measures to the hands of the Centre, rather than the States.

All three authors are affiliated with the Centre for Policy Research. Ashwini K Swain is a visiting fellow, Parth Bhatia is a Research Associate, and Navroz K Dubash is a Professor. This opinion piece was featured in The Hindu on Tuesday, October 9. The full article can be accessed here.

Op-Eds in the Mapping Power Series:

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• Karnataka’s Power Politics
• AAP and the Politics of Power in Delhi
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here. 

The Indian economy is among the fastest growing in the world. Sustaining this growth requires a healthy electricity sector that is able to meet increased demands, ideally alongside an eye to environmental sustainability. Yet, electricity consumers continue to face unreliable supply, distribution utilities are in poor financial health, and, most problematic, power plants remain under-utilized even as universal 24*7 supply remains an unfulfilled promise. Far from buttressing growth, the sector risks acting as a drag on the economy as its poor finances reverberate through the Indian banking sector in the form of stubbornly intractable non-performing assets.

These long-standing problems have not persisted for want of attempted solutions: opening up the sector to private generation; regulatory reforms; an omnibus federal Electricity Act in 2003 to introduce competition; and successive efforts to restructure discom finances. The persistence of utility failures speaks to an underlying flaw in the approach taken thus far. All past reform efforts have had, at their core, a common effort to insulate the sector from politics.

In our recently released book Mapping Power, we argue that this approach is misplaced. Electricity reform will succeed only by providing greater political payoffs than the flawed status quo. In a developing country like India, where citizens’ life chances are strongly influenced by electricity access, costs, and performance, electricity is invariably political, and this is how it should be in a democratic polity. Far from de-politicizing the sector, successful reform will require deeper, but more careful, engagement with politics.

Is productive political engagement possible in the power sector, leading to simultaneous electoral and electricity gains? To explore this question, we worked with a set of talented researchers to examine the politics of electricity in fifteen states from the mid-1990s to the present. In this introductory article we explain what our work suggests not only for why politics is important for India’s power sector but how it is best examined and addressed. In articles that will appear throughout this week in these pages, four of our colleagues share their state-level case study findings.

Our framework for Mapping Power can be summarized in three steps. First, start with understanding state-specific factors driving politics and power. Thus, electricity politics may be driven by subsidy and quality of service in Delhi, procurement politics in Jharkhand, farmer subsidies in Punjab, the balance of farmer and industrial interests in Maharashtra, and high loss levels and theft in UP. As this suggests, mapping power requires exploring politics beyond the power sector alone, including party politics, the politics of regionalism within states, and patterns of economic development. While national-level politics and technology drivers are also important, the starting point must be dynamics that are state-specific.

Second, four categories are crucial to understand the political economy of power: demand for access and service quality, demand for subsidies, cost of supply, and available financial space. The first two—demand for access/quality and subsidies—represent political demands placed on the system, and the last two represent the extent of breathing room that enables states to manage those political demands. While the importance of each of these factors may vary across states, collectively these four categories, combined with the reform process and the interaction between them as shown in the figure, constitute a way to map the political economy of power in states.

Figure 1: Four categories are crucial in understanding the political economy of power.

Third, applying this understanding to a forward-looking analysis, how can state governments pursue a virtuous cycle between electoral and electricity politics? In a state such as Bihar, the answer lay in promising and delivering on energy access, taking advantage of low cost power in surrounding states. In Gujarat, creatively managing farmer pressure through a mix of technical solutions and political promises was key. Other states are trapped in a vicious cycle, and the starting point is to tackle the driving factors, whether the expanding scope of subsidies in Tamil Nadu, or high cost supply and high losses in Rajasthan.

Applying this framework, which leads to diverse state-specific explanations, also allows us to comment on the national-level electricity challenges described earlier. With regard to electricity for the poor, electoral gains and electricity outcomes point in opposite directions. In an effort to limit their losses, discoms have strong disincentives to connect new citizens to the grid and provide only minimal quantity and quality of supply to the connected poor, because most pay below-cost tariffs. Simply calling for tariff increases to match costs is unlikely to win voter consent, given the low credibility of discoms to deliver improvements. Resolving this situation requires developing a state-specific pathway that appropriately sequences politically credible quality improvements and tariff increases alongside expanding the financial space to actually implement such a pathway.

Moreover, distribution company finances could be further squeezed by slower growth in industrial electricity demand, which would limit the amounts of cross-subsidies available to compensate for low paying customers. Periodic bailouts, the most recent of which is UDAY, are intended to alleviate this financial pressure on distribution companies. But unless the breathing room thus generated is explicitly and intentionally used to fundamentally alter some mix of the four key factors described above —political demands for access and subsidies, or supply costs and fiscal space – the result will only be to kick the financial can down the road.

Solving India’s electricity problems by continuously devising ways to shut out politics and pretend the sector can be run apolitically simply will not work. This is not to be naïve and suggest that the power sector must be swayed by every political gust. Rather, we need more creative politics, based on a careful analysis of state-specific links between politics and electricity, which can credibly promise and deliver on long-term electricity gains, and reap long-term political rewards.

The authors of this piece are Navroz K.Dubash (Professor, Centre for Policy Research), Sunila S Kale (Professor at the University of Washington), and Ranjit Bharvirkar (Principal at the Regulatory Assistance Project).

This article was published in the comment section of the Hindustan Times on 17 September 2018, and can be accessed here. Subsequent articles will be published simultaneously in the Hindustan Times and on the CPR website. 

Op-Eds in the Mapping Power Series:

• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• Karnataka’s Power Politics
• AAP and the Politics of Power in Delhi
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

In the last week, Jharkhand’s state government inaugurated its first fleet of electric cars for official government use. Launched with much fanfare and coverage, the chief minister, energy secretary, and JBVNL (the state’s main discom) MD were all in attendance at an event in which Ranchi joined the ‘energy revolution’. Yet the installation of charging stations around JBVNL offices and the procurement of electric vehicles is a strange ambition for a city which is still plagued by regular power cuts, even in some of its most affluent neighbourhoods. In a state where almost half of all households are still without power, this event is yet another public relations exercise overshadowing the state’s more fundamental energy problems. Jharkhand’s power problems originate from three key areas: financial distress, capacity problems and out-of-state conflicts.

Jharkhand has had a history of low tariffs, high technical and commercial losses, and high external dependency due to a lack of in-state generation. Almost seventy percent of JBVNL’s power purchase costs come from Central generators, or entities like the Damodar Valley Corporation (DVC). From the latter, the cost of power tends to be unusually high, accounting for a large portion of JBVNL and the Energy Department’s overall expenditure. While the PPAs with DVC will expire in a few years, for now JBVNL has been stuck with both high-power procurement costs and major problems in recovering dues and preventing theft. A severe shortage of working capital over the last decade has led to the state’s discom frequently defaulting on or delaying dues to generators; it is barely capable of maintaining manpower, procurement pipelines and the existing grid infrastructure.

In the last six months, the JSERC approved major increases (between Rs. 1.90-3.15) in retail tariffs across almost all categories of domestic and commercial consumers, both rural and urban. In a departure from almost a decade of JSERC rulings, the most recent tariff orders sweepingly simplified JBVNL’s existing tariff schedule and also declared its intent to eventually dispense with the massive cross-subsidies that had been in place from industry to domestic and agricultural consumers. Not surprisingly, the government soon stepped in with a large financial compensation package to JBVNL so that rural customers would be minimally affected by these hikes. While this is a commendable move towards improving the financial situation of the JBVNL, much like the previous UDAY scheme all it really does is move liabilities from the discom to the state government; a temporary bandage as opposed to the deep surgery needed to fix the state’s power problems.

The crisis in the state’s electricity bureaucracy is just as worrying. Despite the many promises made to the Central government associated with UDAY, accusations of meter tampering, graft, and preferential treatment in the granting of industrial power connections are rife among the state’s power bureaucracy. Not long ago, an open and shut case of industrial power theft was dismissed in the Ranchi High Court because JBVNL engineers failed to collect sufficient evidence, leading to the discom MD admitting that “[O]ur engineers lack proper training and skills to gather evidence to prove industrial power thefts. This combined with the rapid spread of subcontracting for many basic functions has left the state discom with little credibility of actually accomplishing the grandiose expectations of the Central government’s electrification schemes before the next election.

To be fair, the state’s discom has not been the sole cause of electricity problems in Jharkhand. Because of the language of the DVC Act, 1948, the DVC is responsible for power supply to seven districts in Jharkhand for more than 11 million residents. Because of the protracted financial disputes with Jharkhand leading to the withholding of power, and its underinvestment in distribution infrastructure, the DVC was recently hauled up by the National Human Rights Commission for failing to perform its statutory duty in those seven districts. Such overlapping jurisdictions and the inability for the state government and its politicians to resolve these disputes over the last decade and a half has meant that much of Jharkhand is still very far from the utopian vision of Power for All.

Unless Jharkhand is able to shed (or renegotiate) its legacy contracts, complete its within state generation projects, and generate some reserves of working capital for JBVNL, it is difficult to see the light at the end of the tunnel. Until then, selling dreams of electric cars seems like a cruel joke to the tens of millions of citizens who watch the car zooming by at speed, ignoring them as they are left in the dark.

Rohit Chandra recently completed his doctorate at the Harvard Kennedy School. His work focuses on state capitalism and energy policy, and he is currently writing a book on India’s coal industry. This research is based on work presented in full in the book Mapping Power, edited by Navroz K Dubash, Sunila S Kale, and Ranjit Bharvirkar.

Op-Eds in the Mapping Power Series:

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• Karnataka’s Power Politics
• AAP and the Politics of Power in Delhi
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

Into the 1990s, West Bengal’s sultry summers meant interminable power cuts and fewer than one in five rural households had electric lighting. Today, by contrast, villages across the state are electrified and Bengal’s utilities boast a shelf of prestigious awards. Nonetheless, there are also dark clouds on the horizon as financial losses once again start to mount – thanks most recently to a 23% cut in electricity bills for this year’s Durga Puja displays.

West Bengal’s journey shows that escaping a low-level equilibrium in the power sector is possible, but sustaining a virtuous circle of payment and performance is often difficult. The temptation for political interference in the day-to-day operation of power utilities is ever present. Though the CPI(M) had governed West Bengal since 1977, its electricity record had been unimpressive. All this changed when the nominally socialist administration revised its economic strategy in order to court private investment. Reliable power would be a pillar of the new pro-industrial turn.

In the early 2000s, a team of senior bureaucrats and consultants began electricity reforms. Well aware of the failures of privatisation and deregulation in other states, they developed their own incremental reform path. Outside Kolkata, utilities remained under public ownership, but managers were granted greater autonomy. Officials hoped to further “reduce the human element” of corruption and inefficiency through computerisation and performance monitoring throughout the workforce. The ultimate goal was profitability, which would guarantee the utility’s independence.

This model looked surprisingly similar to another very different and more famous case: Gujarat. Both emphasised improved utility governance, technical solutions, and winning over employee unions. Both rejected outright privatisation and sought to minimise citizen participation in their electricity regulatory process. Together, these cases suggest that public sector reforms may offer a pragmatic alternative to controversial electricity liberalisation.
While popular opposition had stymied power reforms elsewhere in India, Bengali policymakers also benefitted from a series of favourable factors. Earlier, land redistribution meant that there was no powerful farmer lobby to block tariff hikes.

Like the BJP in Gujarat, the CPI(M) was able to call upon its political dominance and disciplined, centralised structure to manage dissent. The results were impressive. From losses of ~1,009 crore in 2001— more than a third of total expenditure — West Bengal was one of only three states with profitable utilities in 2011. Rural household electrification rose from 20.3% in 2001 to 98% today. Yet, as early as 2010, there were ominous signs that utility independence was under threat.

While the CPI(M)’s embrace of economic reforms had brought rewards in the electricity sector, state violence over land acquisition in Nandigram and Singur created a groundswell of popular discontent. Intensifying competition between the CPI(M) and Trinamool Congress, in turn, increased the temptation to meddle in the power sector in order to win votes. Combining quarterly billing data with satellite images of nighttime lights across West Bengal, a recent working paper by the economist Meera Mahadevan shows this politicisation at work. She finds that the new Trinamool government rewarded constituencies it narrowly won in 2011 with faster electrification and systematically lower bill collection. Billing data from these areas is full of suspiciously round numbers, she argues, suggesting it has been manipulated. Key posts in the electricity regulator were also left vacant, undermining its power of oversight, while tariff hikes were delayed.

Traces of utility independence nonetheless remain. The original reformers mobilised to ensure tariff rises in 2012. After the 2016 state elections, which Trinamool again won handsomely, tariffs were once again allowed to rise. The new government has also ushered in an impressive expansion of rural electricity access. As Lok Sabha elections approach, though, tariff hikes have been blocked despite increasing utility costs. Utilities therefore face mounting financial losses, threatening their ability to invest in the sector’s continuing growth. Eventually, consumers will pay the price.

Classic theories developed in the West suggest that democratic competition makes politicians more likely to deliver collective goods. West Bengal’s ambivalent trajectory— two step forwards and one step back— suggests instead that intensifying competition encourages short-term strategies that undermine the power sector’s longterm health. A similar pattern is visible even in wealthier states like Tamil Nadu and Punjab, where fierce partypolitical competition has driven the expansion of populist subsidies and spiralling utility debts. Conversely, oneparty dominance may give politicians the confidence to take unpopular decisions like cutting subsidies or cracking down on theft.

Today, the Trinamool regime looks dominant, its CPI(M) rival a spent force and the BJP still playing catch-up. Will the administration therefore decide to take a long-term view and end interference in the power sector? Previous experience suggests that this depends on how politicians perceive the likely risks and rewards. If consolidating electoral strength remains the key concern, as it seems presently, they will continue to reward new voters with cheap electricity and turn a blind eye to power theft.

If ensuring robust industrial and revenue growth becomes the priority, the long-term benefits of high-quality electricity may begin to outweigh the perils of short-term dissatisfaction. As citizens begin to expect 24/7 power in Kolkata and beyond, they may start holding politicians to this higher standard. In the longer term, then, popular pressure will become the guarantor rather than the enemy of a virtuous cycle in the power sector.

Elizabeth Chatterjee is a politics lecturer at Queen Mary University of London. This research is based on work presented in full in the book Mapping Power, edited by Navroz K Dubash, Sunila S Kale, and Ranjit Bharvirkar.

This article was published in the comment section of the Hindustan Times on 20 September 2018, and can be accessed here. 

Op-Eds in the Mapping Power Series:

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Karnataka’s Power Politics
• AAP and the Politics of Power in Delhi
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

In 2013, a young political party, the Aam Aadmi Party (AAP), led by Arvind Kejriwal, charted a course to one of the most significant electoral upsets in Indian political history. A substantial plank of AAP’s successful election campaigns in 2013 and 2015, as seen in its manifesto, is the emphasis on making electricity and water affordable to the common man. Interestingly, power sector reforms had been key to sustained electoral victories by Kejriwal’s predecessor, Sheila Dixit of the Congress Party, over the three previous legislative assembly elections as well. During Dixit’s period in power from 1998-2013, the focus was on improving the quality of power supply in Delhi through privatisation of the electricity distribution sector. AAP’s election campaign questioned the success of this privatisation model by alleging financial irregularities by distribution companies (discoms) as well as collusion between the Congress government and the discoms to keep tariffs artificially high.

Since coming to power in 2014, the AAP has sought to translate its political vision of affordable basic needs into reality in at least two ways. First, the AAP provided a flat 50% subsidy on power consumption below 400 units for domestic consumers. While consistent with its political agenda, the subsidy has been criticized on a few grounds.  In particular, the power subsidy is so broad-based that, on an average, over 80% of Delhi homes benefit from it. Moreover, as a Brookings India study notes, given that the upper limit of 400 units is quite high, wealthier households consuming more power receive more in subsidy than do poorer households. In May 2018, the subsidy scheme was revised to steer greater subsidy toward lower consuming, and therefore, presumably less affluent households, by offering an additional subsidy of Rs 100 for consumers with a monthly consumption under 100 units. However, concerns regarding benefits being claimed by middle and high income households persist.

The subsidy scheme also throws up new challenges to management of discoms. Since the subsidy is paid by the government, any delays in transfers to the discoms has a cascading effect on the sector, as the discoms also delay payment to generating companies, resulting in an additional financial burden of late payment charges. In the absence of a significant tariff hike since 2014, the additional consideration of delayed subsidy payments from the government could adversely impact the discoms’ financial health.

A second consumer-friendly move spearheaded by AAP is the proposed imposition of penalties on discoms for unscheduled power outages. This effort has run afoul of the larger political context in Delhi, one shaped by a struggle for authority between the elected government and the Lieutenant Governor (LG).  AAP had originally mooted this idea in 2015 but the Delhi High Court had struck down the scheme as it had not been approved by the LG. Earlier this year, the LG approved this scheme, however, it will come into effect only upon notification by the state regulatory agency – the Delhi Electricity Regulatory Commission (DERC). This would require an amendment to the existing DERC (Supply Code and Performance Standards) Regulations, 2017, which already sets out timelines for resolution and compensation payable to consumers by discoms on account of various defaults including meter complaints and power supply failure. While the government has proposed a penalty of Rs 50 per hour for the first two hours and Rs. 100 for each subsequent hour of unscheduled power outage, payable by discoms to consumers, the existing DERC regulations are more nuanced as they account for seven categories of power supply failures and a differential timeline for resolution of defaults, ranging from two to twelve hours, within certain categories depending upon the percentage of the aggregate technical and commercial losses in a particular zone. Therefore, it is unclear if the government’s scheme is in fact an improvement on the existing regulations.

The AAP’s moves in the Delhi electricity sector illustrate the challenges of implementing a political vision in the sector without crossing over into pure populist policies that also undermine the financial health of the sector. For instance, the government needs to consider the scope of the existing electricity subsidy – who are the intended beneficiaries? In what way can the scheme be targeted to ensure that benefits are passed on only to the intended beneficiaries? In the context of the proposal to impose penalties on discoms for power outages, the government should be cognisant of stepping into a purely regulatory sphere and answer why changes to the existing regulations are required to begin with. Further, in both schemes, consumer interests are at the forefront but allaying concerns of the distribution companies is key to long term sectoral sustainability.

In Delhi, while issues in the power sector have resonated with the electorate and their concerns have been amplified by political parties, finding the balance between political goals, financial viability and institutional constraints continues to be a challenge.

Megha Kaladharan is a lawyer working on regulatory and policy challenges in the Indian electricity sector at Trilegal, an Indian law firm. This research is based on work presented in full in the book Mapping Power, edited by Navroz K Dubash, Sunila S Kale, and Ranjit Bharvirkar.

Op-Eds in the Mapping Power Series

• Reform is All About Getting the Politics Right
• How to Reform Uttar Pradesh’s Troubled Power Sector
• Consumers Upfront in Tale of Two Reforms in Andhra
• Taking Two Steps Forward, One Step Back
• Karnataka’s Power Politics
• New Trends Demand New Strategies in Maharashtra
• The Story Behind Uttarakhand’s A+ Performing Discom
• Electricity Distribution in Gujarat: A Sustainable Energy Future Roadmap?
• Small Gains Behind Mounting Losses in Jharkhand
• Power Politics at Play
• The Saga of the Subsidy Trap in the Tamil Nadu Power Sector

More details about the Mapping Power Project can be accessed here.

Listen to the full audio (above) of the talk by  Kumar Sambhav Shrivastava, Ankur Paliwal, and Bhasker Tripathy, where they present an analysis of 331 ongoing land conflicts in India which affect close to 36 lakh people and span over 10 lakhs hectares of land.

In this presentation, they address how, why, and where these conflicts are emerging and what are the implications of these conflicts for local communities and investment policies in India.

Kumar Sambhav Shrivastava writes on issues at the intersection of human rights, environment, industry and politics; Ankur Paliwal divides his time between coordinating Land Conflict Watch, and exploring stories about science, global health, gender and the environment;  Bhasker Tripathy covers and writes on the issues of rural development, agriculture, migration, women empowerment, and renewable energy.

Even as the Joint Parliamentary Committee’s report on the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) is awaited, several states have already brought about changes that severely compromise the scope of clauses related to consent, Social Impact Assessment (SIA), food security and higher compensations. These changes also restrict the applicability of the 2013 law at state level.

States have executed these changes through Rules under Section 109 of the Act, or have enacted their own state level land acquisition legislations using Article 254(2) of the Constitution of India. States, which have exercised the latter option, have managed to override the provisions of the central law. In the present case this has meant doing away with the provisions of consent and Social Impact Assessment.

While ‘land’ is the subject matter of the State list, the ‘acquisition and requisitioning of property’ finds place in the Concurrent list of the Constitution. This implies that both the central and state governments have jurisdiction over the same. In such cases, state level rules need to be within the binds of the central law; as in the case of the RFCLARR, 2013. However, Article 254(2) allows for instances for states to override the central legislations provided they receive presidential assent.

The year 2013 saw the enactment of the RFCTLARR replacing the colonial 1894 law on land acquisition. This new law introduced several critical requirements such as SIA, consent from land-owners, increased rates of compensation, provisions related to return of unused lands and food security.

Several of these provisions would have been repealed had the amendments proposed in the Bhartiya Janata Party’s RFCTLARR Ordinance, 2014, been accepted. In response to mass scale protests by farmer’s organisations, political parties and objections by NGOs and researchers, Prime Minister Narendra Modi announced that the government would not be pursuing these amendments. However, in the last three years several dilutions proposed in the Ordinance have found their way into state laws and Rules.

An examination of these legal changes reveals the following trends:

• At least six state governments have enacted their own land acquisition laws by seeking Presidential consent using Article 254 (2) of the constitution. This is based on suggestions of the NITI Ayog in 2015.
• These new state laws like the RFCTLARR (Gujarat Amendment) Act, 2016 directly adopt the amendments proposed by the 2014 land ordinance. With this the Gujarat state law manages to dispense the requirements for consent and SIA for a range of projects, including industrial corridors, infrastructure or those projects important for national interest, as was proposed in the Land Ordinance.

• States are also adopting the clauses of the NDA government’s 2014 land ordinance through the drafting of state rules, thereby attempting to ‘amend’ the central law. This is being done by dispensing with the requirement of specific processes or restricting the scope of the law. For instance, the process of conducting an SIA under the Uttar Pradesh Rules is much less comprehensive than the 2014 Central Rules.
• State level rules are diluting the applicability of progressive clauses like prior consent, public hearings or SIAs. In Jharkhand, the state rules reduce the quorum of the Gram Sabha consent to one-third from half as required in the central law.
• States are repatriating unused acquired land into land banks rather than returning it to the original owners as required by the central law. This is being done by Odisha and Jharkhand. The Tamil Nadu law allows unused land to be taken for any other purpose, provided the District Collector certifies the same.
• State Rules are reducing the amount of compensations to be paid against acquisitions. In states like Haryana, Chhattisgarh and Tripura, the multiplying factor for rural land is fixed at 1.00 as against 2.00 as specified in the central law.

A full table on these dilutions is also available in the occasional paper.

The CPR-Namati Environmental Justice Program had carried out a preliminary mapping of the dilutions and exclusions in a working paper in August 2016 (see here). The team has now updated this analysis to include several new developments.

Even though the Land Ordinance was not pursued, its provisions have already found their way in state level land acquisition processes. The final paper is available here and its executive summary here.

Hindi translation of this paper is available here.

Read the full working paper produced by the CPR-Namati Environmental Justice Program on the dilutions made to the central law of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, over a period of two years.

Even though the fate of the amendments brought to the Act by the National Democratic Alliance (NDA) government, through a series of ordinances, currently rests with the Joint Parliamentary Committee report, several states have already brought about changes through Rules under Section 109 of the Act.

This paper attempts to trace and analyse how the state governments have modified and built upon the central Act, and especially at how they have diluted the applicability of progressive clauses like consent, Social Impact Assessment (SIA), food security provisions, clear compensation related provisions, as well as clauses which allow for unused land to be returned to original owners.