Changing Electricity Sector in India

Changing Electricity Sector in India – A Social Science Perspective

March 6, 2018

“Electricity is not merely an infrastructural entity, it has emerged as a socio-political tool in the new and shining India.”

-Ashok Pendse, Consumer Representative, Maharashtra Electricity Regulatory Authority (MERC)

The trajectory of Indian power sector is undergoing rapid transformation with an influx of new technologies, skills and policies. The story-line of electricity sector, in the present time, stands at a junction from where a contrasting image of historical developments and the potential future endeavors is clearly visible. Considering the complexities of the sector and its wide range of impacts over various types of societal actors, there is a growing need to look at the highly technical sector of electricity with a mix of a social scientist lens too.

One cannot stress enough on the fact that electricity is a commodity of utmost importance, in terms of economic and social prosperity of the entire country.

The technical aspects, the social values, the economic rationales, the political dramas, all tend to make this sector more narrow and selective in the sense that technical literacy, social differentiation, economic backwardness along with political fragility stands as the major obstacle in the path of abiding by the principles of accountable and transparent last mile delivery in the power sector.

Conflict of interest as a problem can be tackled by employing the tool of expertise by the authority, but information asymmetry as a problem has deeper social roots which are gripped with various other facets of Indian society like poverty and illiteracy. The electricity sector of India is suffering from a grave information asymmetry problem when it is put under a social science scanner and this information asymmetry (having social roots), when coupled with other technical blockades makes this sector limited to a certain category of people only.

Owing to this asymmetry, we have more number of consumer representatives than the actual consumers in any usual public hearing of an Electricity Regulatory Commission. It is worthwhile to mention here that the upsurge of the regulatory state in power sector, inter alia, is defined by setting up of new Independent Regulatory Authorities (ERCs in this case) which primarily works on the public interest model, working within the accountable premises of practices.

In the case of Electricity Regulatory Commissions, one of the foremost function is to compute reasonable tariff on the basis of a Cost-Benefit Analysis for each of the generators. It has quasi-judicial mandate for dispute settlements, but then again almost all the cases climb up the ladder of appeal mechanisms via Appellate Tribunal for Electricity (aptel) to the apex court of the land, overburdening the already burdened judiciary.

Another outcome of the social analysis of the power sector of India is embedded in the tariff setting process. Previously (pre-ERC), tariff was the imperative of North Block, and thus highly politicized an affair. At the state level too, high voltage drama (perhaps an appropriate description) flourished during the election years, be it the Enron case of Maharashtra, or the free electricity poll promises from Tamil Nadu.

Electricity is enshrined under the concurrent list of subjects in the 7^th schedule of the Indian constitution, which provides the constitutional backing for this dual level political play of tariff and free-waivers. Post the regulatory intervention times, the scenario has changed to a great extent with the new institutional structures called IRAs (Independent Regulatory Agencies). These IRAs claim independence from the political masters of the day, but to what extent the appointments made are independent is an unanswered question. Another power centers fast emerging in the 21^st century are big industry houses, who have commercial interests and also the monetary capacity to influence the political big guns of the capital.

This can intensify the already heated conflict of interest between the industry players (who want maximum profit margins) and local consumers (who want the cheapest electricity supply), providing room for backdoor foul-play in the entire “independent” tariff setting process. The balance of this blame game cannot be tilted in favor of any one group, the industry is already paying an extra surcharge in the name of cross-subsidy and is bound to resort to efficient practices due to market competition and on the other hand, electricity theft is on an alarming rise too. Thus, there is a need to tighten the regulatory grip while ensuring that the regulators too are working on principles of accountability and public interest.

Another area of interest from a social sciences point of view could be the contemporary developments in the renewable energy sector. Ministry of New and Renewable Energy official website boasts the accomplishments made so far in this sector and it is undoubtedly true that the renewable sources of energy are and will be a major infrastructural as well as paradigm shift in the course of the Indian power sector.

Be it the 73-rank jump in the World Bank’s ease of getting electricity index, or the NASA image being highlighted by the National Geographic as being the direct result of policy change towards renewable, with each passing milestone India aims at fulfilling its Intended Nationally Determined Contributions (INDCs) of the Paris Agreement. We feel proud in being designated as the country that produces excess electricity, but the catch lies in the ground level realities.

While the finance capital of Mumbai rarely faces any power cuts, such phenomenon is a matter of daily routine for a remote village in the state of Maharashtra. There are manifold reasons to as why despite being a power producer, there are many households who haven’t seen this miracle of electricity. The techno-economic reason is the absence of a domestic market for excess power, thus forcing the companies to shut off generation.

There can be political angles to it too, as the opposition parties have highlighted the constantly postponed deadlines for the government’s ambitious Power for All project. At a time when India is undergoing a shift from being dependent on conventional sources to new and renewable sources, considering the capital intensive and risky nature of the latter, it becomes vital that this shift is carried out in a well-planned manner where the government and the sprouting market of renewable are on the same page.

Whether the INDC targets of 40% reliance on Renewable Energy or the National Solar Mission targets are feasible or not is another issue, but the essence of this sustainability millennium demands rigorous and collaborated efforts of the market and the state to achieve self-sufficiency and also environmental sustainability.

The aim of social science is to give meaning to the natural sciences, based on the connotation that science is democratically embodied in the functioning of the society. In the case of electricity too, although the complexities are as intertwined as any cross-road feeder junction in the interiors of Chandni Chowk, there is a need to address the sociological aspects of this supposedly purely technical field.

The regulatory commission regime has tried to incorporate the social aspects, but there is a need for a lot more development on this front. It becomes even more important in this era of promoting renewable energy sector that the aims and objectives be laid down straight so that they don’t disappear in the due process of transformation.