Narendra Modi’s remarkable rise to power has given hopes for an economic turnaround in the country as well for the power sector. The BJP's election manifesto promised a 'comprehensive energy policy' to harness oil, gas, hydro, ocean, wind, solar, coal and nuclear energy.
One of Modi's key accomplishments in Gujarat is said to be his reform of the power sector, making the state the only one with a consistent power surplus. Gujarat, however, has ample power fuelling ample industry, and Modi wants to both keep it that way, and reach the remotest parts of the country too. This is an activity to strengthen the core of the country. One is his abiding interest in providing 24×7 electricity to every nook and cranny in India. Expanding clean power generation will be his administration's top energy-related priority, especially solar and wind energy, because it has the potential to create jobs and supply power to millions of scattered households not connected to the grid. The new government is also expected to reinstate accelerated depreciation for investments into wind energy projects and accord priority sector lending for the entire renewable energy segment to give a fillip to non-conventional energy resources.
What Modi's government did in Gujarat was less to do with building new power plants and more to do with reforming how electricity was distributed and paid for. His government re-negotiated purchase agreements with private power companies set up a police unit to stop thieving of electricity and ended unmetered supplies to rural areas.
The Coalgate scandals of the UPA highlighted the incompetence with which some coal blocks were parceled out for a pittance to the highest bribe-givers from the private sector, but India continued to import massive quantities of expensive coal to keep generating electricity. If Modi decides to run the Coal Ministry himself he will certainly be able to deliver results in a time-bound manner. Reducing coal imports will reduce the burden on our foreign exchange reserves also and will become a key component of increased GDP and reduced deficits. It might, with the generation of abundant electricity using cheaper coal, actually bring down the high costs of electricity at the retail level too.
India is structurally short of electricity, and it's hard to see how the economy can be ramped up significantly, especially in power-hungry sectors such as manufacturing, without the provision of reliable power at prices high enough to ensure sustainable supply, but not so high as to choke growth. Power sector reforms must now be driven by simple straight forward thinking based on ground realities with customer at the centre and full involvement of states rather than complicated, central driven initiatives. Sorting out the disconnect between retail prices and the actual cost of producing and distributing electricity is also just the tip of the iceberg in ensuring sufficient power for economic growth.
It remains to be seen whether he can replicate the electricity success of his home state but only he can after all being the country's first energy literate Prime Minister!
InfralineEnergy Power Knowledgebase Team