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NEWS  COVER STORY

POWER CRISIS IN BIHAR

EM NEWS BUREAU ,  Monday, August 01, 2011, 11:06 Hrs  [IST]

Untitled - 19.jpg1. OVERVIEW
Bihar is amongst India's most backward states in terms of industrialization and socio-economic development. Reflecting this, or perhaps being the very cause of it, is a pathetic power sector. In terms of power generation capacity, power transmission and distribution network and also with respect to power sector reforms, Bihar has just not been able to register even a modicum of achievement. To sum up the abject picture that one is compelled to paint of Bihar's power sector, we have— consummate failure of the state electricity board to add fresh power generation capacity for years on end, unhealthy reliance on power generation from Central government agencies, failure in attracting private investment in the power sector, unacceptably high ATC losses exceeding 50 per cent, inability to trifurcate the state electricity board, etc.

As of December 2010, Bihar had an installed power capacity of 1,855 mw, which was dominated by allocation from power plants of Central government agencies, mainly NTPC, NHPC and Damodar Valley Corporation. Central allocation accounted for 1,261 mw, or 68 per cent of the total. While coal-based capacity accounted for 1,132 mw, hydropower capacity accounted for the remaining 129 mw. The state sector had 585-mw of power capacity that included coal-fired power capacity owned by Bihar State Electricity Board and 55 mw of small hydropower capacity of Bihar State Hydroelectric Power Corporation. Private sector companies have had a very limited presence in Bihar's power sector—nothing more than 9.5 mw of renewable energy capacity as of December 2010.

POWER SUPPLY POSITION IN BIHAR
  Peak Demand
(MW)
Peak Met
(MW)
Peak Deficit
(%)
Energy Reqmt
(mln kwh)
Energy Available
(mln kwh)
Energy Deficit
(%)
2002-03 1,389 1,325 -4.6 8,096 7,422 -8.3
2003-04 973 788 -19.0 7,588 5,878 -22.5
2004-05 980 980 0.0 7,201 6,476 -10.1
2005-06 1,314 1,116 -15.1 7,955 7,218 -9.3
2006-07 1,399 1,162 -16.9 8,425 7,741 -8.1
2007-08 1,882 1,243 -34.0 9,155 7,933 -13.3
2008-09 1,842 1,333 -27.6 10,527 8,801 -16.4
2009-10 2,249 1,509 -32.9 11,587 9,914 -14.4
2010-11 (Apr-Dec) 2,073 1,659 -20.0 9,792 8,422 -14.0
2011-12 (Projected) 3,607 1,225 -66.0 19,905 9,927 -50.1

Bihar's power sector has seen much deterioration from the X Plan (2002-07) onwards; the slide transcending into the ongoing XI Plan as well. In 2001-02, the terminal end of the IX Plan period, Bihar had a peak power shortage of 8.6 per cent and an electricity deficit of only 4 per cent. This was well in tune with the national metrics prevailing then. By the end of the X Plan period, peak power shortage had climbed to 17 per cent and energy deficit had worsened to 8.1 per cent. In the first three quarters (April to December) of 2010-11, Bihar was contending with peak power shortage of 20 per cent and an energy deficit of 14 per cent. According to estimates by the Eastern Regional Power Committee, Bihar's power woes are feared to continue in 2011-12.

2. NEW POWER GENERATION CAPACITY
Addition of power generation capacity in Bihar is a multifarious activity involving Central agencies, Bihar State Electricity Board and the private sector. By itself, BSEB is not expected to contribute much leaving Central agencies and private enterprise to play a domineering role.

2.1 BSEB projects
Bihar State Electricity Board has had a disastrous time with respect to adding new power generation capacity. In the X Plan period (2002-07), not a single megawatt of capacity was commissioned. In the XI Plan period (2007-12), matters will be no different. At the moment, there is only one project that BSEB is pursuing-the 2x250-mw extension project at the Barauni thermal power project in Begusarai district. Much pre-project work has been completed, such as land acquisition, coal and water linkages, etc. BHEL is likely to be mandated the order for supplying main plant equipment. According to BSEB estimates, the project is likely to be fully commissioned in the second half of 2014. For Bihar, the Barauni TPS extension is of great importance as it will entirely serve the state. Once commissioned, it would take BSEB's total thermal power capacity from the existing 530 mw to over 1,000 mw.

2.2. NTPC joint ventures
Following its failure to contribute towards new power generation capacity, Bihar has been taking recourse to NTPC's expertise. In the years ahead, NTPC is expected to play a significant role in helping Bihar add new power generation capacity through joint ventures. Speaking to Electrical Monitor from Patna, senior BSEB officials said that NTPC has significant expertise in thermal power generation, and is usually faster than state government agencies in matters like coal linkages, environmental clearances, water allocation, etc. Besides, NTPC has a large number of coal-fired stations in Bihar giving it much of local experience. On its part, BSEB (or the Bihar state government) could be in a better position to handle issues like land acquisition, officials said.

NTPC currently has two separate joint ventures with BSEB to implement the 2x195-mw Muzaffarpur thermal power project and the 3x660-mw Nabinagar supercritical power project. "In both the joint ventures, NTPC is a majority and dominant partner," BSEB officials noted.

Untitled - 21.jpgThe first joint venture is Kanti Bijlee Utpadan Nigam Ltd that would implement the 2x195-mw Muzaffarpur extension project. This project was earlier to be taken up BSEB by itself, but was later transferred to the JV as the utility could not make much headway. By current thinking, the project (originally a 2x250- mw venture) is scheduled to commission by 2012-13. Bihar will get 85 per cent electricity generated from the Muzaffarpur project.
The second JV is Nabinagar Power Generating Company Pvt Ltd that will implement the 3x660-mw coal-fired plant running on coal from the Nabinagar and Barun blocks. Coal linkages have been firmed up and NTPC is currently finalizing the main plant equipment for the supercritical project. Estimated to cost nearly Rs.jpg12,800 crore, the Nabinagar project will feed 75 per cent of its output to the Bihar grid. Commissioning is scheduled for 2015-16.

2.3. Tariff-based bidding
What can bail out Bihar from its power crisis is its ability to procure long-term power from external sources, using both modes (Case-1 and Case-2) of the tariff-based competitive route. As discussed, the state electricity board, by itself, would never be able to make significant contribution to the power capacity addition endeavour. Here is a summary of BSEB's achievements in its tariffbased power procurement drive.

Bihar versus Jharkhand

Much of Bihar's power woes can be traced to the bifurcation of November 2000 that led to a new state Jharkhand being carved out of erstwhile Bihar. Jharkhand inherited much of the undivided Bihar's mineral wealth and hence was in a better position to pursue mining-related asset creation like coal-based power plants and metallurgical units. According to statistics released by the Eastern Regional Power Committee, Bihar is expected to sustain a peak power deficit of 42.2 per cent in 2011-12, as against a very benign 5.8 per cent for Jharkhand. Bihar's peak power demand in FY12 is expected to be 2,300 mw against which only 1,330 mw would be met. In the case of Jharkhand, the comparable levels are 1,200 mw and 1,130 mw. In terms of energy demand also, Bihar would be in a much worse situation than Jharkhand. Bihar's electricity demand during FY12 is estimated to be 13,706 million kwh that is expected to be fulfilled only to the extent of 11,210 million kwh, implying an electricity shortage of 18.2 per cent. Jharkhand would have a more manageable electricity shortage of 11 per cent in FY12. One striking aspect of Jharkhand is that it has been able to meet most of its electricity demand without much reliance on Central government agencies. This unfortunately has not been the case with Bihar, and has turned out to be the state's biggest undoing. Out of the total 11,210 million kwh of electricity that is expected to be available to Bihar in FY12, as much as 93 per cent would be from Central agencies. Jharkhand's reliance on Central agencies, measured thus, would be only 45 per cent.

Bihar and Jharkhand: Relative Performance*
Parameter Unit Bihar Jharkhand
A. Expected Peak Demand MW 2,300 1,200
B. Peak Demand Met MW 1,330 1,130
C. Peak Demand Deficit per cent 42.2 5.8
D. Expected Energy Demand mln kwh 13,706 7,346
E. Energy Demand Met mln kwh 11,210 6,540
F. Energy Deficit per cent 18.2 11
G. Generation from Central Utilities mln kwh 10,416 2,961
H. Dependence on Centre ( G as % of E) per cent 92.9 45.3
*Projections for 2011-12 made by Eastern Power Regional Committee

 


Case-1: Under Case-1 of the tariff-based competitive bidding route, Bihar has not had much success. On at least two occasions in the past three years, the state has failed to elicit adequate response to its Case 1 power procurement drive. Speaking to Electrical Monitor, R.P. Chaudhury, Chief Engineer (Transmission), Bihar State Electricity Board, confirmed that the power utility has so far tied up 450 mw under Case 1 through a lone instance involving the Essar Group. The 25-year power purchase agreement, signed with Essar Power Jharkhand Ltd, is for procuring power at a levelised tariff of Rs.jpg2.64 per kwh from Essar's upcoming 1,200-mw Tori-I coal-fired power plant in Jharkhand's Lategarh district.

Chaudhury also noted that BSEB has been mandated to procure at least 1,500 mw under Case-1. With 450 mw already tied up, the remaining is likely to be realized through a Case-1 procurement drive currently underway. The official explained that eight entities have been technically qualified and financial evaluation is in progress. The utility hopes to tie up at least 1,050 mw by the end of July 2011.

Case-2: It is encouraging to note that Bihar has taken the lead in promoting large projects under Case-2, an achievement that not many state government power utilities have recorded. By current thinking, Bihar would have access to 3,366 mw of power generation capacity from three such projects expected to commission in the XII Plan period. In the process, Bihar will also see the emergence of supercritical power technology in the state from these projects.

Case 1 and Case 2

Case 1 and Case 2 represent two distinct modes used by power utilities in firming up long term power purchase agreements with suppliers, under the Competitive Bidding Guidelines issued by the Union power ministry in 2006.

Under Case 1, the supplier is free to decide on all parameters of the power supply, including nature and location of project, fuel type, etc. Even the source of power (the power generation plant) need not be located within the political boundaries of the state seeking power procurement.

Under Case 2, the power utility procures power from a supplier through a designated new power generation project. When the procurer is a state government utility, the agreement revolves around a new power generation project located within the state. In Case 2, the state government plays a very active role in helping the power developer set up the project. Usually, the state government would assist in matters relating to land acquisition, fuel linkages, securing environmental and other mandatory clearances, etc. The supportive activities carried out by the state government are through a designated special purpose vehicle whose ownership is then transferred to the private developer selected through the tariff-based bidding route.

In both the cases, the long-term power purchase agreement is usually for a period of 25 years. The tariff is subject to approval by the state electricity regulatory commissions or the Central Electricity Regulatory Commission, as the case may be.

Developers of merchant power plants (where there are no firm power purchase agreements and the entire risk is borne by the developer) would normally use the Case 1 route to enter into power supply agreements with power utilities.

The Union power ministry has stipulated that all power purchases made by utilities after January 5, 2011, would have to be made using the tariff-based competitive bidding route. Till then, power producers, mainly those setting up greenfield plants, could enter into a memorandum of understanding with power utilities governing the terms of power purchase.


Untitled - 22.jpgDwelling on the details, senior BSEB officials explained that the three projects structured under Case-2 were Buxar, Lakhisarai and Pirpainti, each with capacity 2x660-mw. All of them would be based on supercritical technology. A special purpose vehicle Bihar Power Infrastructure Company Ltd, formed as a joint venture between Bihar State Electricity Board and IL&FS, is acting as the bid processing agency for the three projects. Officials said that the bidding process should be concluded in the next two months or so. All the three projects are scheduled to commission in the latter half of the XII Plan period. According to information available, while Bihar will get 85 per cent of the power generated from the three projects, with Haryana, Rajasthan and Assam procuring the remaining 15 per cent.

BSEB officials said that the land process of land demarcation and acquisition has begun in all the three projects. Over 3,300 acres of land has been demarcated for the three projects together and Industrial Development Authority, Bihar, has been entrusted with the land acquisition process.

POWER CAPACITY IN BIHAR
(As of 31-Dec-2010, in MW)
  Thermal Hydro RES* Total
Central 1,131.70 129.43 0.00 1,261.13
State 530.00 0.00 54.60 584.60
Private 0.00 0.00 9.50 9.50
Total 1,661.70 129.43 64.10 1,855.23
*Renewable energy sources, mainly small hydro

Three special purpose vehicles have been formed that will be handed over to the respective developers to be selected by the tariff-based bidding route. The projects are expected to cost around Rs.jpg20,420 crore together.

2.4 Role of IPPs
Bihar has traditionally never been to attract private investment. While there was some interest with respect to mining and metallurgical industries before the bifurcation in November 2000, these proposals were in geographical areas that are now part of Jharkhand. Present-day Bihar is much inferior to Jharkhand in terms of natural endowments, mainly mineral wealth.

Lack of natural resources and the general backwardness of the state were responsible for the indifference attitude that Bihar has elicited from the private sector. Matters are slowly changing as the eastern state has begun to seek private sector interest with sincerity and seriousness.

The State Industrial Promotion Board (SIPB) of Bihar is the main agency for channeling private investment in the state. Thermal (coal-based) power has been the biggest investment avenue, at least in terms of aggregate investment envisaged. Apart from this, the private sector has identified metallurgy, cement, sugar and distilleries and educational institutions as key areas of investment.

Recent statistics from SIPB indicate that as many as 46 agreements have been signed in Bihar to set up coal-based power plants envisaging a total investment of Rs.jpg1.45 trillion. However, there has not been demonstrable progress with total actual investment standing at just Rs.jpg176 crore.

Untitled - 23.jpgBSEB officials speaking to Electrical Monitor concurred that investor interest in the state's thermal power sector has been picking up slowly but nothing can be said about the timely conversion of this interest into tangible assets. Except for about half a dozen projects where some progress has been made, that too in pre-project stages, the overall show is none too inspiring, at least at the moment. The promising six projects include those of Jas Infrastructure, Nalanda Power Company, Ganga Power (Adhunik Group) that have begun the land acquisition process and are in an advanced stage of securing mandatory clearances. Based on the current level of progress, it is estimated that six projects (see table) will move to the construction phase in the coming years, and could commission in the XII Plan period. These six projects aggregate 9,920 mw of new power generation capacity and in some cases, involve the use of supercritical power equipment. Bihar State Electricity Board would get at least 25 per cent of the power generated from those projects that have signed MoUs, officials said.

IPP PROJECTS IN BIHAR (MOU ROUTE)*
Promoter Location District Capacity Cost
      (MW) (`crore)
Jas Infrastructure Capital Pvt Ltd Bhaunsi Banka 2,640 11,120
Nalanda Power Company Ltd Pirpainti Bhagalpur 2,000 9,260
Ganga Power & Natural Resources Pirpainti Bhagalpur 1,320 7,500
India Power Corporation Ltd Areraj East Champaran 1,320 7,280
AES India Pvt Ltd Jagdishpur Bhagalpur 1,320 8,120
Mirach Power Pvt Ltd --- Lakhisarai 1,320 7,360
*Partial list

3. THE WAY FORWARD
Bihar's power sector is today in a state of peril. If extreme steps in resurrection are not taken in good time, the eastern state will quickly find itself in a devastated condition—indeed a point from where recovery would be even unthinkable. This study has taken a closer look at the power sector from the supply side—basic power generation units. This is only one aspect; Bihar's power sector woes are all-pervading and are unfortunately working in unison towards a comprehensive disaster.

Yes, Bihar has failed to create significant new power generation capacity for the past twenty years, and on this count, it must do better. The state electricity board has failed to do much in terms of new generation capacity and all hopes are now pinned on Central utilities like NTPC, and the private sector. While these efforts will fructify in the years to come, Bihar needs a systemic change to ensure that more power does not only mean more financial losses, which is ironically the case today.

It is estimated that BSEB's cumulative losses are in the order of Rs.jpg7,000 crore with state government agencies alone accounting for Rs.jpg3,000 crore. ATC losses are incredulously high at over 50 per cent. Losses of BSEB amount to Rs.jpg3 crore per day. As against a daily requirement of 2,000 mw, only 150-200 mw can be generated within the state. Around 1,000- 1,200 mw of expensive power has to be purchased from Central utilities.

Except for capital city Patna, availability of electricity is generally poor. The statewide per capita power consumption is a measly 110 kwh per year, as against the national average of over 700 kwh.

When one takes a look at Bihar's power distribution sector, it is complete mess. An estimated 11 lakh consumers have un-metered connections or meters that are not functioning. Bihar has not been able to effect any revision in tariff in recent years. Hence, while power generation is an important area that needs to be addressed, it is a thoroughly revamped T&D sector that will bring results.

The Centrally-sponsored R-APDRP (Part A) project that aims to baseline data for the implementation of IT-enabled infrastructure in the power distribution sector was launched with much delay in Bihar. The project will cover 70 towns including capital city Patna. However, it is unlikely that the project will be anywhere close to completion by its scheduled date of March 2012.

Experts feel that power availability in Bihar can also be augmented through mega hydropower projects in Nepal that borders the eastern state. Hydropower within the state can play only a limited role as its main river (Kosi) can only support medium-sized schemes. Renewable energy, mainly solar and biomass, could make a small contribution towards improving power availability in off-grid areas.

Impact of tariff-based guidelines

As already discussed, the Centre has stipulated that all power purchases made after January 5, 2011, will need to be done by the tariff-based competitive bidding route. This cut-off date leaves a big question mark on the status of power purchase agreements reached using the MoU route. This is not just for Bihar but for all procurement agencies nationwide. Electrical Monitor sought guidance from BSEB officials in this regard. In response, a senior BSEB advisor explained in general terms, that "power" as a subject is part of the Concurrent List. This means that power is a Central as well as a state subject. In fact, ensuring power availability is the primary responsibility of state government. Central assistance should be sought only when the state government is unable to provide for the state's power requirement. "Reliance on Central government projects should be more of an exception rather than rule," the BSEB advisor who chose not to be quoted said.

Speaking on the fate of MoUs signed before January 5, 2011, the official noted that it is up to individual state governments to work out a policy framework to deal with these cases. Regarding Bihar, he said that a policy to address these cases is being formulated and should be formalized in the next two months. The official reiterated that all power purchase agreements in Bihar signed after the said cut-off date will be done on the tariffbased route. It is likely, although the official did not confirm, that for MoU-based private power projects that have recorded progress on ground would be left untouched. However, the state government might like to rework old MoUs where not much progress has been made, and convert these projects (power purchase agreements) into the tariff-based model.


Bihar needs to act really fast if it wants to avert the impending power disaster. The new Nitish Kumar-led government that came into power through a landslide victory in November last year is already seen making a positive difference to the road sector. The power sector is next on the government's agenda. The new NDA-led state government has an opportunity on hand to transform the ongoing power crisis into an opportunity to at least initiate radical transformation. Bihar has spent long decades in darkness and socioeconomic privation; a better standard of living for the 104 million people inhabiting India's third mostpopulated state is long overdue.

Untitled Document
IPP Projects in Bihar under Case-2
Shell Company Location District Capacity Cost
      (MW) (`crore)
Buxar Bijlee Company Pvt Ltd Chausa Buxar 2x660 6,791
Lakhisarai Bijlee Company Pvt Ltd Kajara Lakhisarai 2x660 6,810
Pirpainti Bijlee Company Pvt Ltd Pirpainti Bhagalpur 2x660 6,820
 
                 
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