Punjab power sector struggles with losses

• 12 years ago (2011-12-28)
• David Flin

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The newly corporatised Punjab State Power Corporation Limited (PSPCL), created after the unbundling of the Punjab State Electricity Board, has continued to experience high transmission and distribution power losses and a “mammoth” gap in the revenue requirement to meet its costs.

PSPCL has announced that it will increase power supply ahead of Indian Assembly elections at the end of January 2012. The company made major efforts to ensure uninterrupted power supply to farmers through the paddy season, including arranging 5700 million units from several sources, including through power purchase agreements. PSPCL entered into power purchase agreements with Power Trading Corporation (PTC), NTPC, and National Vidyut Prasaran Nigam (NVPN). It also entered into agreements with Rajasthan, Madhya Pradesh, Maharashtra, and Delhi.

To allow PSPCL to improve its finances, the Punjab State Electricity Regulatory Commission (PSERC) announced a power tariff increase of 9.19 percent. However, PSERC chose not to pass on all of the tariff increase to power consumers, despite power utilities, including Punjab State Transmission Corporation Limited (PSTCL) facing huge revenue gaps.

Subsidising power supply has become the norm for political parties in Punjab, and this has resulted in an expenditure of what is claimed to be $2 billion, placing a severe strain on the financial resources of the state. A Punjab economist speaking on condition of anonymity said: “If Punjab stops giving free power, the state could turn into a revenue-surplus state, and it would have a substantial amount of resources available to spend on development projects.”

PSTCL has said that transmission and distribution losses continue to run at over 20 percent, the sixth year in succession that this level of loss has been sustained.