Annual Report on the Working of
State Electricity Boards and Electricity Department, April 1999
Power and Energy Division, Planning Commission

Chapter 2: Power Sector Outlay and General Issues

2.1 Introduction

The previous chapter dealt with some important parameters of electricity sector at the aggregate (all-India) level. This chapter reviews the investment pattern in terms of plan outlays and actual expenditure by the power utilities, particularly State Electricity Boards (SEBs),and the Electricity Departments (EDs). Power balances are also presented from 1980-81 to 1994-95. The elasticities of electricity generation and consumption with respect to GDP have also been worked out for the period 1980-81 to 1995-96.

Information is provided for 19 State power utilities. In addition, 8 EDs of smaller States and Union Territories are also covered. The data presented is actuals for 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, revised estimates for 1997-98 and Annual Plan projections (AP) for 1998-99. In some cases viz average tariff and cost of supply, information is presented from as early a year as 1974-75.

Annexure 2.1 gives the outlays and expenditure in the power sector and the total outlay and expenditure since the First Five Year Plan for the country as a whole. The State-wise information is given in Annexures .2 to 2.10.

In the First Five Year Plan (1951-56), 19.02% of the total Plan outlay was provided for the power sector. Even though, the power sector outlay has steadily increased since then in absolute terms, its percentage share in the all sector outlay declined until the Fifth Five Year Plan (1974-79). Thereafter, the share of power sector outlay in the total Plan outlay again increased to 19.09% in the Annual Plan (1979-80), 20.13% in the 6th Plan, 19.09% in the 7th Plan and 19.28% in the Annual Plan 1990-91. In the 8th Plan, the power sector outlay accounted for 18.33% of the total Plan outlay. However, the share of power sector in the total annual plan outlay has progressively decreased from 18.5% in 1992-93 to 13.4% in 1996-97.. From mid-sixties, the share of power sector expenditure in total expenditure remained in the range of 18-19%. The likely power sector expenditure for the Eighth Plan is about 14.9% of Total Plan Expenditure. The pattern of plan-wise outlays and expenditure in power sector is shown in Figure 2.1.

In the Ninth Five Year Plan (1997-2002), the outlay provided for power sector is 14.5% of the total plan outlay. In percentage terms, the share of power sector has decreased as compared to the provision of 18.33% in Eighth Plan. As against this, the share of power sector outlay in the total outlay for the Annual Plans 1997-98 and 1998-99 is 13.4% and 13.85% respectively. This may be partly due to the policy of the Government to encourage private sector participation in

the development of power sector. The Ninth Plan capacity addition programme of 40245 MW includes 17588.5 MW capacity addition from private sector, which is quite significant. This works out to about 0.78 MW of capacity addition for every 1 MW capacity added in the public sector.

Table 2.1 shows the relative share of power sector in total outlay both at the All India and the State levels from 1990-91 to 1997-98.

There has been a gradual decline in the share of power sector in the total Plan outlay since 1992-93. The share was 18.5% in 1992-93 and it declined to 13.4% in 1996-97. Although the planned share of power sector in the total Plan outlay for the Eighth Plan was 18.33%, the actual annual outlay never reached that figure except in 1992-93 when the share of power sector was 18.5%. The share of power sector in the total outlays by the States declined from 27% in 1992-93 to 19.1% in 1996-97. Added to that, there are wide inter-State as well as yearly variations in the allocation of outlays to the power sector. For example, in 1997-98 the share of power sector in total outlay was over 30% in Punjab and West Bengal. On the other hand, the share of power sector in total outlay was only 4.6% in Bihar, between 6-20% in the North Eastern States..

Table 2.2 gives activity-wise distribution of power sector outlays in the 8th Plan and the Annual Plans from 1992-93 to 1995-96. Figure 2.2 gives a graphical view of distribution of power sector outlay in these years.

The outlay on the generation component in the total power sector outlay is much higher than the corresponding share in R and M and T and D components. There has been some change in this trend during the Eighth Plan. Generation component which was about 69% in 1992-93 declined to 56.4% in 1995-96. Increased outlays on R and M projects is also desirable because it would improve the average PLF of the power plants. The outlay on T and D increased to 30.7% in 1995-96 from 22.5% in 1992-93. Investments on T and D schemes, however, continue to be lower than what is considered desirable from the operational point of view. This is one of the major reasons that has resulted in high T and D losses and poor quality of electricity supply to the consumers in almost all States. These operational deficiencies have also adversely affected the financial position of the SEBs.

The total quantum of electricity available for sale with a utility is its own generation net of auxiliary consumption plus net purchase minus T and D losses. Table 2.3  gives the position (power balance) from 1980-81 to 1995-96 for the utilities in the country.

It is observed that the auxiliary consumption has varied between 6.5% and 8.1% during this period. It was highest in 1987-88 and thereafter has improved marginally. In 1995-96, it has been around 7.2% of the gross generation. T and D losses are higher than the desirable levels. In 1995-96, T and D losses have been around 22.3% as against 21.8% in 1992-93. These losses were about 20.6% in 1980-81 and 22.9% in 1990-91.

Table 2.4 gives the plan-wise elasticity of electricity generation and consumption with respect to GDP.

The elasticity of electricity generation and its consumption vis-a-vis GDP has declined over time after an increase till the Third Plan. The elasticity of electricity generation and consumption with respect to GDP for the period 1980-81 to 1995-96 works out to 1.6 and 1.59 respectively. This implies that if the GDP increased by 1%, electricity generation and consumption increased by 1.6% and 1.59% respectively, during this period.

It is seen from the analysis above that the share of power sector in the total outlay declined during the Eighth Plan and so did the share of the sector in total expenditure. Inadequate funding is one of the main reasons why the capacity addition fell short of the target during the Eighth Plan. However, the gross generation increased much faster, aided to a great extent by an improvement in the PLF in the Central as well as State sectors. This along with some of the other physical parameters are considered in the next Chapter.

2.1 Introduction

The previous chapter dealt with some important parameters of electricity sector at the aggregate (all-India) level. This chapter reviews the investment pattern in terms of plan outlays and actual expenditure by the power utilities, particularly State Electricity Boards (SEBs),and the Electricity Departments (EDs). Power balances are also presented from 1980-81 to 1994-95. The elasticities of electricity generation and consumption with respect to GDP have also been worked out for the period 1980-81 to 1995-96.

2.2 Scope and Coverage

Information is provided for 19 State power utilities. In addition, 8 EDs of smaller States and Union Territories are also covered. The data presented is actuals for 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, revised estimates for 1997-98 and Annual Plan projections (AP) for 1998-99. In some cases viz average tariff and cost of supply, information is presented from as early a year as 1974-75.

2.3 Power Sector Plan Outlay and Expenditure

Annexure 2.1 gives the outlays and expenditure in the power sector and the total outlay and expenditure since the First Five Year Plan for the country as a whole. The State-wise information is given in Annexures .2 to 2.10.

2.3.1 Planwise Trends

In the First Five Year Plan (1951-56), 19.02% of the total Plan outlay was provided for the power sector. Even though, the power sector outlay has steadily increased since then in absolute terms, its percentage share in the all sector outlay declined until the Fifth Five Year Plan (1974-79). Thereafter, the share of power sector outlay in the total Plan outlay again increased to 19.09% in the Annual Plan (1979-80), 20.13% in the 6th Plan, 19.09% in the 7th Plan and 19.28% in the Annual Plan 1990-91. In the 8th Plan, the power sector outlay accounted for 18.33% of the total Plan outlay. However, the share of power sector in the total annual plan outlay has progressively decreased from 18.5% in 1992-93 to 13.4% in 1996-97.. From mid-sixties, the share of power sector expenditure in total expenditure remained in the range of 18-19%. The likely power sector expenditure for the Eighth Plan is about 14.9% of Total Plan Expenditure. The pattern of plan-wise outlays and expenditure in power sector is shown in Figure 2.1.

In the Ninth Five Year Plan (1997-2002), the outlay provided for power sector is 14.5% of the total plan outlay. In percentage terms, the share of power sector has decreased as compared to the provision of 18.33% in Eighth Plan. As against this, the share of power sector outlay in the total outlay for the Annual Plans 1997-98 and 1998-99 is 13.4% and 13.85% respectively. This may be partly due to the policy of the Government to encourage private sector participation in

the development of power sector. The Ninth Plan capacity addition programme of 40245 MW includes 17588.5 MW capacity addition from private sector, which is quite significant. This works out to about 0.78 MW of capacity addition for every 1 MW capacity added in the public sector.

2.3.2 Share of Power Sector in Total Plan Outlay

Table 2.1 shows the relative share of power sector in total outlay both at the All India and the State levels from 1990-91 to 1997-98.

There has been a gradual decline in the share of power sector in the total Plan outlay since 1992-93. The share was 18.5% in 1992-93 and it declined to 13.4% in 1996-97. Although the planned share of power sector in the total Plan outlay for the Eighth Plan was 18.33%, the actual annual outlay never reached that figure except in 1992-93 when the share of power sector was 18.5%. The share of power sector in the total outlays by the States declined from 27% in 1992-93 to 19.1% in 1996-97. Added to that, there are wide inter-State as well as yearly variations in the allocation of outlays to the power sector. For example, in 1997-98 the share of power sector in total outlay was over 30% in Punjab and West Bengal. On the other hand, the share of power sector in total outlay was only 4.6% in Bihar, between 6-20% in the North Eastern States..

2.4 Activity wise Distribution of Power Sector Outlay

Table 2.2 gives activity-wise distribution of power sector outlays in the 8th Plan and the Annual Plans from 1992-93 to 1995-96. Figure 2.2 gives a graphical view of distribution of power sector outlay in these years.

The outlay on the generation component in the total power sector outlay is much higher than the corresponding share in R and M and T and D components. There has been some change in this trend during the Eighth Plan. Generation component which was about 69% in 1992-93 declined to 56.4% in 1995-96. Increased outlays on R and M projects is also desirable because it would improve the average PLF of the power plants. The outlay on T and D increased to 30.7% in 1995-96 from 22.5% in 1992-93. Investments on T and D schemes, however, continue to be lower than what is considered desirable from the operational point of view. This is one of the major reasons that has resulted in high T and D losses and poor quality of electricity supply to the consumers in almost all States. These operational deficiencies have also adversely affected the financial position of the SEBs.

2.5 Power Balance

The total quantum of electricity available for sale with a utility is its own generation net of auxiliary consumption plus net purchase minus T and D losses. Table 2.3  gives the position (power balance) from 1980-81 to 1995-96 for the utilities in the country.

It is observed that the auxiliary consumption has varied between 6.5% and 8.1% during this period. It was highest in 1987-88 and thereafter has improved marginally. In 1995-96, it has been around 7.2% of the gross generation. T and D losses are higher than the desirable levels. In 1995-96, T and D losses have been around 22.3% as against 21.8% in 1992-93. These losses were about 20.6% in 1980-81 and 22.9% in 1990-91.

2.6 Elasticity of Electricity Generation and Consumption w.r.t. GDP

Table 2.4 gives the plan-wise elasticity of electricity generation and consumption with respect to GDP.

The elasticity of electricity generation and its consumption vis-a-vis GDP has declined over time after an increase till the Third Plan. The elasticity of electricity generation and consumption with respect to GDP for the period 1980-81 to 1995-96 works out to 1.6 and 1.59 respectively. This implies that if the GDP increased by 1%, electricity generation and consumption increased by 1.6% and 1.59% respectively, during this period.

It is seen from the analysis above that the share of power sector in the total outlay declined during the Eighth Plan and so did the share of the sector in total expenditure. Inadequate funding is one of the main reasons why the capacity addition fell short of the target during the Eighth Plan. However, the gross generation increased much faster, aided to a great extent by an improvement in the PLF in the Central as well as State sectors. This along with some of the other physical parameters are considered in the next Chapter.