In March 2013, the then UPA Government commissioned a study under the aegis of the Ministry of Power to study the operational state of all the state electricity distribution companies (discoms). The Indian Credit Rating Agency conducted the study. It graded 39 discoms across India from A+ to C, where A+ (“Very High Operational and Financial Performance Capability”) stood for the best and C (“Very Low Operational and Financial Performance Capability”) stood for the worst. There were just four discoms that were rated A+. Each of those four discoms was from Gujarat. Gujarat had just four discoms in 2013, and the number didn’t change in 2021. What has also remained unaltered is the pole position of the four discoms not just in 2021 but in each year between 2013 and 2021. I recall how the then UPA Minister of Power had made news for calling off the event organised to mark the rating of the discoms for two consecutive years, 2013 and 2014, in a row.
It is hard to imagine that this was the same Gujarat power sector that had nigh wilted by the time one arrived in 2001, when Narendra Modi took the reins of power in Gujarat in his hands and the rest is a historical landmark, a phenomenon in motion, which has received unrelenting national and international attention; a Gangotri of multifarious ideas to be learned from and replicated across the length and breadth of the public electricity sector across Indian states.
Scholars have noted that “In 2001, Gujarat’s electricity sector was in dismal condition. The Gujarat Electricity Board (GEB) put a strain on the State’s finances and development, and the organisation was disliked by customers and farmers alike.” (Palit, Debajit; September 2020).
Gujarat had corporatised its electricity sector by setting up the Gujarat State Electricity Corporation Limited (GSECL) as far back as 1993 and Gujarat Energy Transmission Corporation Limited (GETCO) in 1994. But such was the pace of the failed Nehruvian-Socialist model that despite dire need of performance, it wasn’t till 1998 that the new institutions commenced commercial operations. Yet, in 2001 Gujarat Electricity Board reported a loss of Rs 22.46 bn. Power theft was at 20 per cent in urban areas and 70 per cent in rural areas. It was coupled with an unmetered electricity supply which led to high AT&C losses to the tune of 35.27 per cent. It shows that in keeping with the Nehruvian Socialist tradition of going round and round in circles, a lot of files were being pushed without any focus on results – often a deliberate malaise that plagues and is a characteristic trait of Nehruvian Socialist superstructures – which eyewashes the real game of crony capitalism and blatant corruption. No wonder the result was frequent blackouts and transformer busts. Consequently, due to the whooping losses, the GEB obviously had no money to execute new projects or to attract private investment in power generation.
Enter Narendra Modi in 2001
He assiduously studied the problem. He was also aware of the reforms in motion in Delhi which Prime Minister Atal Bihari Vajpayee headed. The BJP Government brought in the path-breaking Electricity Act 2003. Narendra Modi didn’t lose time and like a good batsman who times his stroke for a six, responded quickly to reorganise the electricity sector in Gujarat and establish a State Electricity Regulatory Commission by instituting the Gujarat Electricity Industry (Reorganisation and Regulation) Act in 2003. It required the sort of political commitment which was not for the chicken-hearted. The new Act brought the Gujarat State Electricity Regulatory Commission, established in 1998, under the purview of the Indian Electricity Act 2003. The old Electricity Regulatory Commission Act, 1998 was repealed. It needed courage for a first-time CM to stand up to incredibly strong political lobbies.
The new Act, in one sweep, destroyed the moribund monopoly of the GEB and with effect from 1st April 2005 broke up the mighty GEB into seven parts, each part doing its specialised duty, thereby diluting conflicts of interest and injecting a sense of greater responsibility and transparency in each of them. Gujarat State Electricity Company Limited (GSECL) was formed as a generation company, Gujarat Energy Transmission Company (GETCO) as a transmission company and four discoms were set up – Uttar Gujarat Vij Company Limited, Dakshin Gujarat Vij Company Limited, Madhya Gujarat Vij Company Limited and Pashchim Gujarat Vij Company Limited.
The revival of the state’s dying electricity sector had been set in motion.
Gujarat’s sweeping reforms in its endeavour to break out of the nuclear deep freeze that the Congress’ Nehruvian Socialist mindset, policies, politics, and work ethics had doused its electricity sector into took time to turn around. The reforms that began in 2003-04 took five years to show results regarding the most critical parameter of electricity generation meeting demand. Gujarat was an electricity deficit state till 2008-09 (-5.97 bn units). In 2014, Gujarat had a requirement of 91 bn units of electricity and a surplus of 29.55 bn. units (Palit, September 2020).
The reforms were not merely cosmetic as in the Nehruvian Socialist past. Instead, they were focused on process re-engineering, network redesign, and administrative streamlining. Results poured in. The T&D losses started to recede, like cancer leaving the body, cost of supply dropped, technical improvements paced up. The revenues expanded significantly. Soon, in 2005-06, the combined Gujarat discoms turned in its first-ever profit of Rs 20.3 bn, after-tax. In 2010-11, this number expanded to Rs 53.3 bn.
T&D losses, which are a euphemism for theft, fell from 31.24 per cent in 2002-03 to 22.81 per cent in 2007-08 as theft dropped from 107,985 cases in 2004 to 77,000 in 2008.
Needless to say, all these savings were a significant payback to the people of Gujarat, who benefited both directly and indirectly, as unintended consequences ricochet through the system and are mostly ignored and unrecorded. What was recorded though, was the fall and democratisation of power tariffs from INR 4.15 per kWh to Rs 3.63 in 2006-07.
A phenomenal scheme that contributed to the turnaround of the power sector was the Jyotir Gram Yojana (JGY). It was initiated immediately after the reforms’ execution, and the aim was to segregate the rural power feeder lines that farmers used primarily to operate water pumps from the power feeders that supplied electricity to domestic users. The JGY assured a 24×7 quality power supply to all villages. It led to a significant drop in power theft by identifying the power requirement for agriculture – something that couldn’t happen earlier as the feeder was common. The scheme was so successful that consumers co-opted into the scheme because of the larger benefits which accrued. More than 18000 villages were covered under JGY in a quick time of 2.5 years. JGY has been the centre of attention of many international case studies by peer institutions such as the World Bank and reputed think tanks.
Other schemes that contributed in no small measure include the micro-irrigation scheme, the use of solar panels over canals, Suryashakti Kisan Yojana, which has taken ahead of the work of reforms that started in 2003 with commendable force and foresight.
Now, as per the Uday dashboard, Gujarat state discoms has India’s lowest aggregate technical and commercial losses of 11.42 per cent. The Average Cost of Supply and Average Revenue Requirement gap is Rs – 0.02 per kWh – one of India’s best performances.
According to the UDAY, Gujarat is second only to Karnataka, another BJP ruled state, in terms of the continuing performance of the State’s discoms. The state discoms turn in a moderate profit (Rs 456 cr in FY19, including subsidies), the rare State to do so, which is a testament to its operational efficiency, apart from the data and analysis shared above that points in the same direction.
Gujarat leads India in terms of per capita electricity consumption at 1733 kWh, with Tamil Nadu coming at a distant second at around 1400 kWh. Despite the size, the annual growth rate in this number is an above-average 6.1 per cent.
Renewable Energy in Gujarat
Lakewood has estimated it, OH, USA-based Institute of Energy Economics and Financial Analysis (IEEFA) that by FY29-30, Gujarat would derive 70.3 per cent of installed and 48.1 per cent of electricity generation capacity from renewable energy sources. According to Central Electricity Authority, in November 2021, 60 per cent of Gujrat’s installed electricity capacity of 40.94 GW was attributable to coal. The equation, therefore, would flip around completely over the next decade in favour of renewables. The intended consequence of this flip would be experienced in savings of water – a coal-based thermal power plant takes around 3.8 cubic metres/MWh of water as compared to 0.1 cubic meter/MWh for solar and almost nil for wind. Gujarat is situated in India’s climatically and topographically arid zone, and such a flip would yield substantial conservation of water resources.
According to the Ministry of New and Renewable Energy (MNRE), as per the National Electricity Plan of 2018, the total current potential of Gujarat’s renewable energy capacity is 72.7 GW split equally between Wind and Solar energy. Gujarat’s current installed capacity is 16.09 GW.
Gujarat is currently on schedule to build the world’s largest solar power park at 5 GW installed capacity in Dholera. The bids received were in excess to the tune of 600 MW. The best part perhaps is that the discovered bid price was derived at Rs 2.78 per kWh, and the tariff in subsequent rounds of bidding only crashed to Rs 1.99 per kWh in December 2020. Perspective comes in handy, so one shall compare that to Rs 3.73 per kWh of thermal power tariff by NTPC as reported in its statutory corporate filings.
NTPC has also announced another 5 GW of solar power park in Kutch. This easily places Gujarat as a leader in the mega solar park arena, benefiting from an aggregation of demand or scale.
Gujarat also possesses the largest liquefied natural gas handling and regasification terminal in India at Dahej with a total capacity of 22.5 mn metric tons per annum (MMTPA) with another 10 MMTPA under construction, according to IEEFA. Two operational LNG terminals in Dahej (by Petronet LNG) and Hazira (by Royal Dutch Shell) form 60% of India’s existing LNG handling capacity as per IEEFA.
Gujarat is next only to Tamil Nadu in the size of installed capacity of Windpower at 8.97 GW versus 9.85 GW respectively at the end of November 2021, as per MNRE data. Again, the wind power tariffs are being discovered consistently significantly below the thermal power tariffs. The 745 GW of wind power auction by Gujarat Urja Vikas Nigam Limited (GUVNL) is a case in point. The tariff was discovered in the range of INR 2.8 – 2.9 kWh. It is also commendable that the state utility bats assiduously, vociferously, and transparently for protecting the interests of the consumers. In the May 2019 bids, GUVNL had asked the developers to match the lowest bid of INR 2.8 per kWh. This shows that the state bodies are not indulging in crony capitalism and are eking out just the right amount of money that would be sufficient to attract developer interest. Of course, there’s a trade-off between such aggressive protection of consumer interest and attracting developers – a zone that GUVNL must tread carefully.
Gujarat is also a pioneer in the space of offshore wind energy and home to India’s first offshore wind energy project that would have an installed capacity of 1 GW when completed. The project attracted who’s who of PPP developers, both Indian and foreign, when the Gulf of Khambhat offshore Wind power project was announced by the MNRE in June 2018.
What is required apart from playing the volume game of installing more and more renewable energy sources, strengthening of the grid to handle the intermittent nature of renewable energy through technology intervention such as smart grids and smart metering, is to make Gujarat the leader in cutting edge renewable energy technology. This would not only save India a lot of foreign exchange but also add to the strategic and financial depth of Gujarat’s and indeed India’s renewable energy infrastructure. We need entrepreneurs who’d talk in terms of virtual power plants, hydrogen-based renewable energy, significantly higher CUFs for both wind and solar energy, high efficiency and performance energy storage, nuclear fusion-based electricity generation. That would need the next generation of reforms, and it’s an idea whose time has come.