What is the Real cost of Free Electricity by the Government , at Home ?


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  


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