What is the REAL cost of FREE Electricity?
When the great singer Hardy Sandhu said that  lightning is Daughter of the moon and sister of clouds At that time he forgot one thing That the companies involved in the distribution of electricity in our country are suffering a loss of 90,000 crore *I don't agree* How could he even tell this? He do not study the reports given by the authorities I have studied them, let's discuss about those I have called out these big names of reports for pretending to be intellectual But now I would have to also show you some statistics Understand the statistics carefully Look, India is the 3rd largest producer of electricity in the world In spite of this when electricity is distributed within the country Then on an average 22% of power is lost in transmitting and distributing electricity The global average is 8% US,China and Japan suffer only 6,5 and 4 percent losses only And 22% average in India means Some states even lose 40-50% of power in distribution Then we get an average of 22% In spite of this huge loss Your politicians promises you to give free electricity If you live in Delhi then from now there are chances that you may not get free electricity anymore
Arvind kejriwal has told that this benefit would be given to only those people who would Opt in for the benefit Same types of promises have been made in Punjab also Other parties like BJP and Congress are also not far Congress claims that AAP has stolen our idea And BJP is making same type of promises in Uttar Pradesh Because of all such huge freebies the distribution companies are badly affected Huge losses are being faced I would be discussing all types of problems and solutions in this Blog *Wait* Like I gave you a statistical information In the same way let me ask you two philosophical questions And that is very important for this Blog The First question is Should the electricity be looked like a commodity The person who pays for it should get it Or, it is a basic necessity of life so government should provide it to the people cheaply?
The second question is if the government wants to help the poor people then Should the government make poor people financially stable so that they can afford the electricity or Government should provide the electricity to them free of cost inspite of the larger system suffering huge losses Your future would be decided by the way you give your answers If you were running the government then this electricity crises would be faced or not The Indian government have answered both of these questions by selecting option 2 Which means distribute everything free of cost Because we are getting the votes The second, we would provide the electricity in less price forgetting of the damage caused to the larger system After all this let me tell you what I want to say in a simple manner When the electricity is generated and transmitted to your houses In the path a lot of electrical equipments are used Our story has 3 main heroes First hero is the GenCos which are the electricity generating companies These can generate electricity by using coal, solar, wind or water Then comes the TransCos which means transmitting companies These carry the electricity from generating station to a local substation And the third is DisComs which are the distributing companies DisComs are of two types public (state electrical boards) and private( Tata power, etc) These DisComs are the stars of our story because these are suffering the most Many people say these are the weakest link of the system
These DisComs in an ideal situation should Sell you the electricity at a price slightly above the price at which they buy it Earn profit And fulfill its operational cost The problems is that their operational cost is more than their revenue And this difference has increased between the years 2012 to 2016 And this difference on a larger scale can be seen as a loss of 90,000 crore This difference range from 22% to 40% in various states of our country There is very interesting story behind these losses suffered by DisComs So, let's sit like a student in the class of History And let me tell the whole story related with the DisComs Lets go back to 1948 and look at the electricity act Which tells how the electricity related works should go on in the country It suggested that electricity is a concurrent topic so both state and central government should control it Then between 1950 and 1960 electricity state boards were in the making These boards were different at that time Generation, transmission and distribution all three were looked after by these boards Everything was fine upto here But between 1960 and 1970 a situation arose which broke the back bone of these electricity boards In 1960s electricity was provided cheaply to the steel industries So that industrialization and growth happens in our country
But then the government observed that we are not getting votes from these Industries Larger votes are obtained from the ordinary people who uses oil lamps Then the government told them not to light oil lamps anymore we would be supplying electricity to you and would also give you subsidies So, light up electrical lamps If you are a farmer you would be required water for the plants Take the electricity free of cost and spread a lot of water in your field So that the government can take their votes And because of the budget of the state electricity boards started to began to deteriorate Then the government started to increase the per unit cost of electricity for the industries In spite of selling expensive electricity to industrial customers The budget of the state electricity boards did not improved Because the regular people and farmers were large in number Which were enjoying subsidies and many times free electricity Politics was going on All this was going on for around 20 years After that the political parties observed that still electricity boards are facing huge losses Our political minds can't be wrong So, these boards are themselves responsible for this These are inefficient Then they observed carefully even then they didn't understand the actual problem They observed that the state electricity boards are vertically integrated
Which means all the three generation, transmission and distribution are being done by these boards only So they told to disintegrate these boards Which means electricity would be generated by some and distributed by other State electricity boards would now operate like DisComs They would distribute the electricity If the political problem was not present They maybe this problem was solved already But inspite of all this the budget of DisComs didn't improved After this an era of various solutions came In 1998, government brought the Electricity Regulatory Commission Act And between 2001 to 2021, government brought different types of policies and schemes in the three types of solutions The government wanted to solve the technological issues in the overall distribution process The access of energy should be available to everyone And how the problems faced by DisComs can be solved In 2003, government brought the energy act In 2002, the government told to waive off the interest from all the previous amount that is to be paid by these DisComs or PSUs And also proposed of taking 50% of their liabilities And absorbing 70% of their debt All these solutions are like the doctor who treats the patient by giving medicine for reducing the symptoms but cannot Identify the main problem
There are two main aspects of the problem faced by the DisComs The first one is, Operational and technical challenges Somewhere electrical meters are not installed and where the meters are installed no one is appointed to take the readings And many people have intentionally incorrected their meters to steal the electricity The technical challenges like losses in the transmission lines, etc These types of challenges can be faced by any company if it is operated efficiently But the second aspect can be solved at the level of the government only That challenge is the political challenge Government promises of supplying the electricity free of cost by giving subsidies Or the government promises that we would not revise the tariff rates
The cost at which the electricity is being available to customer is not changed by many years In this scenario When the distribution companies buy the electricity from generating companies then that rate keeps on revising Many a times it is very expensive But the price at which the DisComs have to sell the electricity is not changed by the government So, from here they start to suffer the losses The government told the public that the electricity is free upto this unit Then the DisComs supplies the electricity to you free of cost and then they recover their money from the government which is never made on time Because of this delay the DisComs have no money to give to the generation companies And when the payment is not done till the due date then they start to apply interest on the amount If the DisComs take loan to repay the generation companies Then also they end up with paying huge interests because banks charge at a higher interest rate The cumulative effect of all these can be seen in the huge losses suffered by these DisComs To solve this problem government introduces packages of huge amounts But now the cumulative effect is very difficult to solve because it is going on for several years And inspite of solving this problem the government is still offering free electricity and subsidies Just give us votes
We would look at these losses in the future This was the main problem due to which these DisComs are facing huge losses Now, you have understood the problem very well Now let's look at the solution So, I would like to take you back to those two problems which I asked you earlier That if the government wants to help the poor people Then the government should make them capable enough so that they can afford the service or they should offer it free of cost damaging the whole system The governments have chosen the second option According to me the first option should be chosen The second question was that is the electricity a commodity which should be sold or it is basic necessity of life so give it free of cost The governments have again the second option According to me again the first option should be chosen The solution would come from only these two questions The first solution according to me is that the electricity is being used as a political tool by our government Electricity is used for their vote bank politics Should not go on any more Involvement of politics should be completely removed from electricity then only this problem can be solved The second solution is privatization Which is already tested in many cities and has proved right Privatization has two types of models The first type of privatization model is like Government runs everything from generation to distribution and decides the tariff the private company is only involved in installing meters, take readings and reduce the losses in the transmission lines and maintenance Private companies do these tasks beautifully because they earn good money This model has one limitation that still government decides the tariff So, if these private DisComs buy electricity from the generation companies at a rate of 10Rs per unit And then government asks them to sell it further at a rate of Rs 7 per unit Then the losses wouldn't be covered So, there is another privatization model in which everything is owned by the private company Private companies owns the distribution area and decides their tariffs
Buy and sell Electricity on your own, government would only come into action if something wrong happens This model can also solve the problem of transmission losses The electricity may become slightly expensive But the overall operations involved in the electricity would be effective Whenever the faults would occur they would be solved in no time This model is implemented in various regions of our country which has both advantages and disadvantages What you make out of this Blog do let me know in the comment section If you liked this Blog press the subscribe button Like this Blog Write your thoughts in the comment section Share among your friends I would come with more such Blogs Till then take care of yourselves JAI HIND VANDE MATARAM