High Voltage

*Bimal Prasad Pandia

As consumers in Orissa were bracing to face the summer, power tariff hike came in as big shock. While they are being made to believe that the hike was unavoidable as hydro power generation has suffered a lot owing to low rainfall, this report finds that the reservoirs are in fact teeming with higher levels. Definitely there is something fishy in the whole episode.

The order of Orissa Electricity Regulatory Authority (OERC) to hike power tariff has jolted a big shock to the people of Orissa.  “It’s a big and unnecessary increase”, fumes Bhupinder Singh, the leader of the opposition in Assembly. Even the industry-wallahs are very unhappy with it. “We did not expect the hike to be so steep. It will take the competitive edge out of Orissa,” rues R K Jena, chairman, CII's Orissa State Council.   While it has shocked most, a minority section of the society justifies it by arguing that “It was long overdue as Orissa continued with the same tariff structures since 2000”. When every other commodity has become costlier, this justification succeeded in soothing many. “May be, there was no other way out”, Sujit Nath, a student of Pharmacy in Bhubaneswar, tries to reason out.

While people slowly come to terms, a deceptive strategy - which was in all probability well planned and executed – was succeeding on its objectives. The focus of objection has been on the steep rate of hike rather than on whether the hike was warranted at the first place or not. And this was the plan to lead people that way. They wanted people to focus their attention on lesser important things.  People are shouting about the end result while remaining ignorant about the mischiefs that have been played to achieve that result. There is enough evidence to suggest and prove that the condition of ‘severe power shortage’ has been an artificially created one aimed at achieving many objectives – power tariff being just one among those. And hydro-power production has been the most preferred tool to create that condition. 

Loss – A deliberate creation

Raising the tariff structure, OERC has noted that the Grid Corporation (Gridco) – which buys power from producers and sells to distribution companies – has suffered huge losses and by the end of year 2009-10 the loss may well surpass 1,500 crore rupees. While the loss to Gridco is true, not many people know that the loss was - to a large extent - an outcome of very low power supply from Orissa Hydro Power Corporation (OHPC), the state owned corporation that owns hydro-power units in Orissa.  

The Gridco procures power from various sources at OERC fixed rates. As per the process, Gridco had informed the OERC that Orissa will require a total of 18,726.15 Million Unit (MU) in the year 2009-10. It then informed about the sources from which it intends to procure and meet this requirement. Like the Gridco, other players in the power supply network like the power producers, transmitters and consumer representatives also submitted their design power generation, expenditure burdens and what price they expect etc. Taking everything into account the OERC decides quantity of power to be supplied to Gridco and their rate. It also decides power tariff for consumers and end users. While going through this process for the year 2009-10, the Gridco had submitted its plan to meet Orissa’s power requirement. There is no point for guessing that hydro power being the cheapest among all sources was and is the first choice for Gridco. The Gridco, relying on OHPC sources, had estimated that it will get 6,184.44 MU from OHPC. However parties appearing for the consumers submitted that this was a too conservative estimate and ‘Gridco has merely accepted the data submitted by the OHPC and has not done independent assessment of hydro power availability’.  They submitted that ‘the availability of power from state hydro stations would be around 7,680 MU in FY 2009-10 as against the GRIDCO proposal of 6,184 MU’. But the OERC negated consumer’s estimation and instead agreed to the estimates made by Gridco. Though, OERC did not agree to consumer’s assertion that the consumers are losing out on cheapest energy, still 6184 MU from the OHPC in the year 2009-10 was the single most dominant procurement source for Gridco.  This allotment constituted about one-third of its total energy procurement target for the year at a very cheap rate of 57.66 paise per unit on an average with power from Machhkund being the cheapest among all hydro power centres at 13.90 paise per unit and Indravati being the costliest at 73.35 paise.

In contrast, other sources - from which Gridco budgeted to procure the remaining two-third of required power - were 3.35 to 5.2 times costlier. The purchase rate – fixed by OERC - from Orissa Power Generation Corporation (OPGC) owned thermal power plants is 193.70 paise per unit; from Central Power Generation Corporation (Primarily NTPC) is 197.31 paise; from central hydro sources like Chukha, Tala and Teesta is 190.30 paise; from Captive Generation Plants (CGPs) in Orissa is 300 paise; and from renewable sources at 269.43 paise per unit. OHPC’s power, being the cheapest and the largest source, was expected to moderate all these costly sources and keep Gridco’s total purchase cost at 2,923.80 crore rupees for 19,619.11 MU of power required for Orissa in the year 2009-10, at 148.27 paise per unit.    

So the power sources, per unit cost, units to be made available etc. were all decided by the OERC. Had everything gone as per the plan, Gridco would not have bled losses. But that was not to be. OHPC - the most vital source that moderated Gridco’s total purchasing cost to a reasonable level – faltered in making committed supply to the Gridco. For a period OHPC’s supply almost dried up as if its reservoir beds have gone bare. At the last count, OHPC managed to produce just 4,136.139 MU till 25 March, 2010. With only six days remaining of this financial year, the OHPC is expected to produce another 60 MU. This will take OHPC’s total energy production for the year 2009-10 to about 4,200 MU. This is a mere two-third of what was expected from it. Because of this huge deficit supply from the OHPC, the Gridco was forced to scout for other suppliers to plug the gap. That has undone all calculations and caused severe losses to Gridco. As the other sources from which Gridco gets supply are already stretched, they are in no position to make additional supply to Gridco. Even if they make supply, the cost will be many times more than that of OHPC’s power. Now, Gridco has no other way than to purchase power from wily producers at exorbitant cost. Some privately owned CGPs, with whom the Gridco has purchase agreement, charge OERC fixed rate up to the agreement level. Beyond that... it’s the producer’s fiefdom - to grab profits as much as possible from the Gridco’s misery. The negotiations are held hardly on equal terms. The OERC plays no role there; it does not have any jurisdiction to play either. Naturally, power rates spiral with the summer heat. In such a similar situation, the Gridco purchased power at more than 800 paise per unit last year. The situation is ripe to worsen this year. Gridco has lost substantial units of very low cost energy – hydro power - and is now compensating that loss with very high cost energy.

Smacks of Subterfuge

Low hydro power production cannot be reasoned in any manner

As power situation worsens to new lows, people get bemused by the status of the so called ‘energy capital of the nation’ – that Orissa was flaunting as its USP not long ago. But the government had a ready excuse – that reservoirs have dangerously low water level. That excuse has fooled many people into believing in that.  But the reality of reservoir level is starkly the opposite. As the summer was approaching all the major power producing reservoirs were having higher than their normal water level.

With March we entered the summer months. On the first day of March this year, all the major reservoirs had higher water level than what they had on the same day last year. Hirakud, one of the largest reservoirs of Asia, was at 618.73 feet level against last year level of 612.47 feet. Indravati, the largest hydropower producing reservoir of the state, had a level of 635.6 meter against last year’s 632.61 meter. Rengali, Orissa’s second largest reservoir, was at 118.94 meter level on 1 March 2010 against 116.02 meter level that it had on the same day in year 2009. Only Kolab reservoir had a slightly lower water level than what it had on the same day last year. In fact, the water levels maintained by these reservoirs on the 1 March were higher than not just their last year’s level, they surpassed their past five year’s average level too by quite a big margin (See table: On a High...**). In the last five years, excluding this year, Hirakud reservoir had maintained an average water level of 616.63 feet against this year’s level of 618.73 feet. Similarly, Rengali this year was at 390.12 meter level against last five year’s average 383.82 meter. The catchment area of Indravati reservoir received less rainfall this year. But still, Indravati reservoir maintained a higher water level this year than its average level of last five years. Only Balimela reservoir maintained a slightly lower level than its average level in past years.

When water levels in the reservoirs are at higher than their normal levels, government’s contrary propaganda is very hard to swallow and is perplexing. May be a cleaver ploy is cooking to benefit wily parties at the cost of the consumers. Clearly, while some are probably smiling at the deceitful act of the government, awed common people are floundering on their ways to brace the shock in the ensuing heat.

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* The writer is a development researcher. He can be contacted at bimalpandia@gmail.com  

** Figures in the bracket shows difference in water level compared to 1st March 2010.

Hydropower in Hibernation

Bimal Prasad Pandia*


Power shortage has reached an unprecedented high in Orissa, which was promoting itself as an ‘energy surplus’ state till last year, as hydro power generation has plunged to never before low. This report dissects the realities and finds out that probably some other motives are working behind the hydro-power management than shortage of water.

As Orissa approaches the summer, people’s fear of powerless days grows bigger. Stretching hours of power cut, and innumerable power disruptions have already become the order of the day in both the urban and rural areas. “Dibri (a small kerosene lit lantern) has become another accompaniment of my son along with books, notes and copies,” rues Shankar Kanha Hota, father of a class 10th student of Binka town in Orissa. Power cut has reached an unprecedented level. “Never in the recent history, power cuts had been so long and power disruptions so frequent even before the summer. I am having a horrible time in saving my crops,” alleges Sunil Mishra, a farmer of Bargarh district. The government and other agencies involved in distribution of energy blame it on ‘very low hydro power production’ due to ‘seriously low water level in major reservoirs’.

Power Plunge

Indeed, hydro-power production in the state has come to an abysmal low. Orissa Hydro Power Corporation (OHPC), the state government undertaking in-charge of hydro power production, produced an average 99.3 Mega Watt on March 1, 2010. This is only one-sixth of the average hydro power produced on April 1 in past five years, from year 2005 to 2009. The government has resorted to strategic water blockade for hydro-power generation soon after the monsoon. In this post-monsoon to pre-summer season - November 2009 to February 2010 - the OHPC produced only 770.73 Million Units (MU) of energy from its hydro-power generating units. This is a mere 40 percent of the OHPC’s average generation in the same period over the past six years, 2003-04 to 2008-09.

Even with additional installed capacity and large-scale modernisation of its power generation units, post-monsoon to pre-summer hydro-power production by OHPC this year has been the lowest of the decade (See chart: Power plunge). This year it produced a mere one-third of what it had produced in the November-February season 2003-04 and 2007-08 and less than half of other years.

This level of energy production will surely lead a lay man to believe that it has been one of the worst years as far as rainfall is concerned. But facts tell differently. Year 2002-03 was one of the worst drought years in the recent memory. We had far better rainfall this year than year 2002. Still, this year’s post-monsoon season hydro-production has been lower than the 2002-03 season.

On a ‘High’, But they say ‘Dry’!

While very low hydro power production this year is a fact, a look at the reservoir levels and the manner in which they have been managed in the past few months lays bare the gross inappropriateness in putting the blame on low water level in reservoirs. Government’s attempt to blame ‘low water level in reservoirs’ for low hydro power production resulting in inadequate availability is nothing short of an abject strategy to continue with a entirely false statement to make people believe that falsity as true. Starkly opposite to what the government wants us to believe, almost all of Orissa’s major power producing reservoirs are teeming with higher level than previous years (See table: Definitely… Water level is not worse).

With March we entered the summer months. On the first day of March this year, all the major reservoirs had higher water level than what they had on the same day last year. Hirakud, one of the largest reservoirs of Asia, was at 618.73 feet level against last year level of 612.47 feet. Indravati, the largest hydropower producing reservoir of the state, had a level of 635.6 meter against last year’s 632.61 meter. Rengali, Orissa’s second largest reservoir, was at 118.94 meter level on March 1, 2010 against 116.02 meter level that it had on the same day in year 2009. Only Kolab reservoir had a slightly lower water level than what it had on the same day last year. In fact, the water levels maintained by these reservoirs on the 1st March were higher than not just their last year’s level, they surpassed their past five year’s average level too by quite a big margin (See Chart: On a High). In the last five years, excluding this year, Hirakud reservoir had maintained an average water level of 616.63 feet against this year’s level of 618.73 feet. Similarly, Rengali this year was at 390.12 meter level against last five year’s average 383.82 meter. The catchment area of Indravati reservoir received less rainfall this year. But still, Indravati reservoir maintained a higher water level this year than its average level of last five years. Only Balimela reservoir maintained a slightly lower level than its average level in past years.

A systematic neglect to stymie hydro-power?

So, why does the government continue to blame ‘low level in the reservoirs’ for the present mess in the energy sector? After all, almost all reservoirs of the state are maintaining a healthy level and definitely a higher level than most of last few years. Answer to this question might just be a speculation, but we have enough indications to presume that it is a well thought out plan by the government to gradually neglect the hydro-power sector. While hydro-power production in monsoon months have somewhat increased, non-monsoon production is on a constant decline. Even with capacity additions and modernisation of its units, annual hydro power production has drastically nosedived (See Chart: Towards Dead Head). In 2009 it produced slightly higher than half of what OHPC had produced the year before.

Hence, something else is driving the government’s decision to prune hydro-power than low water level in reservoirs. It says that ‘providing irrigation to the agriculture sector is the first priority’ and thus hydro-power production has been reduced. While such an excuse definitely pleases the masses, the problem is that the excuse is based on very loose footing. Irrigated areas from the reservoirs have not increased, and the reservoirs hold a higher level than past years. Hence, agriculture sector did not require more than what they were normally requiring.

What is the reason then that the government is so desperate to close the gates for hydro-power production? There are many possible reasons. The first is that almost nobody cares about the water level of the reservoirs and hydro-energy production. They can be easily led to a false belief that water level is very low and hence hydro-power production potential has reduced a lot. Water saved through such falsity can be then diverted towards others uses. Government is now under serious pressure from both pro and anti industrial lobby on water diversion issue. The anti-diversion lobby alleges that government is diverting water at the cost of agriculture and by blatantly violating the State Water Policy of 2007. The pro-industrial lobby, on the other hand, rues that government is not doing enough to provide them enough water quickly. Government has already burnt its fingers in Hirakud as irrigation got severely affected after heavy industries started using water from it. The ensuing farmer’s movement is still alive. The movement has put strong brakes on government’s industrial overdrive plan. Thus the government now does not wish to be fooled the second time. It has found a convenient scapegoat in hydro-power production.

The second reason is probably a result of succumbing to private power producer’s lobby. Many large steel, iron and aluminum plants are coming up with their own Captive Generation Plants (CGPs). Besides, many coal based thermal power plants are coming up. They will bargain the most remunerative price for their energy in a situation of shortage and gain handsome profits. Reducing hydro power production may have been a definite ploy to create a shortage condition.

The third reason may have been an attempt to artificially raise production rate of hydropower energy. Besides being one of the cleanest sources of energy, hydro-power is the cheapest sources of power that the transmission company Grid Corporation of Orissa (Gridco) procures. The Orissa Electricity Regulatory Commission (OERC) has fixed Gridco’s purchase price from the CGPs at the range of 3.10 to 4.05 Rupees per unit. The purchase cost from Orissa Power Generation Corporation (OPGC) comes at 1.94 Rupees per unit. From outside state sources like Farakka, Kahalgaon, TSTPS etc., the Gridco’s purchase rate ranges between 1.69 to 2.28 Rupees per unit. Even the states renewable energy sources cost 2.64 Rupees per unit. In contrast, the Gridco proposed to pay only 51.77 Paise to OHPC in the year 2009-10.

OHPC’s energy rate is primarily governed by its design capacity. Design capacity is the total production capacity of its unit(s) in a year. Total cost – including fixed, variable and depreciation costs - of the power producing units is divided by the design capacity to arrive at per unit production cost. Thus, if the design capacity is higher the per unit cost of energy produced will be lower as OHPC’s total production cost almost stays stable, irrespective of the units it produces. Based on the design energy of the OHPC units, the Gridco had planned to purchase 6184.44 MU of energy from OHPC for the year 2009-10. Now, that plan has gone haywire as OHPC is producing almost nothing. OHPC produced only 4,530.8 MU, including its share from Machhkund, in the 2009 calendar year. Up to March 15 of the present financial year 2009-10 (April 2009 to March 2010), OHPC produced only 4,176.7 MU including its share from Machhkund. In the remaining fortnight of the financial year, it can at best produce another 150 MU. Thus, the total hydro power production in the financial year 2009-10 will be somewhere around 4,300 MU mark. The Gridco was quite conservative in expecting 6,184.44 MU from OHPC. Ironically, the OERC in one of its order made on March 20, 2009 pertaining to case number 62/2008 had rapped the Gridco for such low estimation from OHPC. The order stated, “The availability of power from state hydro stations would be around 7,680 MU in FY 2009-10 as against the Gridco proposal of 6,184 MU.” Hence, OHPC will be producing only 56 percent what the OERC had expected from it (See chart – Fooled by the Fall).

Such low production by the OHPC is affecting itself, the Gridco and ultimately the consumers. The OHPC is losing because its sell price is fixed at the beginning of the year. As its establishment and other variable cost remains almost same, low power production hits its finance badly. Now the OHPC is vigorously pleading before the OERC to reduce its design capacity and increase per unit selling cost. While OHPC is pleading, Gridco is bleeding with losses. Gridco was aiming to buy about 31.5 percent of total procurement required for the state from the state’s hydropower units. For this 31.5 percent power it would have paid only 11.1 percent of its total power purchase budget. Now that Gridco will not get those many units, it has not only lost on the cheapest source of energy, it is now breathlessly scouting for alternative sources to maintain a bare minimum standard supply. And the alternative sources are waiting to cash in from such desperation. Last year, the Gridco was forced to buy energy at more than 8 Rupees per unit from such sources during the summer crisis period. It may be worse this year. No surprise that the Gridco is now staring at a loss of over 1,650 Crores in 2009-10 financial year. The ultimate loser will be the consumers as the burden of the additional cost will inevitably fall upon them very soon. The OERC has already started the process to reevaluate the design energy capacities and price structure. Higher price and even longer hours of power cut is going to be the order now.

Avoidable Fiasco
Not long ago, Orissa government was thumping its chest for being a ‘energy surplus state’ and ‘energy capital’ of the country. It is now one of the most energy deficient states of the country. But the status of the reservoirs and the manner in which hydro-power has been produced suggests that the energy fiasco was avoidable. There was no reason to push the panic button and hydro-power production could have been normal. But the ultimate question is, did the government really panic or is it is a clever ploy to allow more profits for the private power producers and private distribution companies at the cost of general public?
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*The author is a farmer and a social researcher active in the development sector of Orissa. He may be contacted at: bimalpandia@gmail.com