Power Theft in India

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In the last article I gave you an overview of the electricity sector in India. In this article, I will tell you what is holding it back. And the short answer is: power theft and the political patronage of it.

Losses in power sector can be classified in two categories: technical and non-technical. Technical losses are losses in transmitting power from power plants to the end consumers. These losses are unavoidable; they will happen no matter what. But the reasons for the losses and their mitigation mechanisms are very well understood. It is the non-technical losses that are hard to understand, and much harder to fix.

non technical lossesNon-technical losses essentially mean monetary or commercial losses; they arise when distribution companies supply electricity but don’t get paid for it, because of “non-paying” consumers. You can call these losses non-technical or monetary or commercial or whatever else strikes your fancy, but they are essentially theft of power; there are no two ways about it. These losses are pretty much non-existent in developed countries. So simplistically, I can say that India is not yet “developed” as a nation. Once it gets there, these losses will somehow disappear on their own. But how does India get there if we don’t delve into it, talk about it, and try to find remedies? So let’s try and do that.

People don’t pay for two main reasons: they can’t pay, and they don’t want to pay. I can imagine that there must be a lot of people in India who genuinely can’t pay, like those below the poverty line. Farmers could also come into this category, at least in times of distress – due to famine or hailstorm – if not all the time. What to do about these people can be a topic for a different discussion altogether, but in India a good percentage of the losses can be attributed to the latter category, i.e. people who don’t want to pay.

outstanding payments MSEBI imagine that it must have started out with people who didn’t want to pay just to “assert their authority”. “If I pay for electricity just like everybody else, how am I different from them, the bourgeois? After all, I belong to the elite, don’t I?” There are quite a few people in India who have this sick, demented thought process, quite unfortunately I might add. These people feel that rules are for everybody except them. (And this applies to all types of rules like traffic, FSI, hunting blackbucks or other endangered species, etc.) Over a period of time, the privileges of these “elite” got extended to their kith and kin, and then to people who simply “knew” them. Today, it has spread like cancer and the mass theft of power has reached frightening proportions to say the least. As of today, the total outstanding payments due to Maharashtra State Electricity Board (MSEB) are supposedly in excess of 20,000 crores, and to all the state electricity boards (SEBs) combined in excess of 3 lakh crores!! If that isn’t jaw-dropping, I don’t know what is!

power theft

Figure 7.1

Gradually, the bourgeois started demanding “their share” of this loot of the public exchequer. “You guys are having a party. Why shouldn’t we?” So come election time, candidates of all parties started giving generously to the bourgeois in cash and kind. We all know how much cash is confiscated during election times. That is only tip of the iceberg, metaphorically and literally; unimaginable sums of money are actually distributed during the elections without getting caught, as we all know. As far as things in kind are concerned, liquor tops the chart, the “dry days” on election days notwithstanding. The other thing that they demand is that the state pay their outstanding electricity bills, which is agreed to. Sometimes it is paid off by the politicians, while sometimes it just gets added to the outstanding amount due to SEBs.

Mr. Eknath Khadse, Minister of Revenue, Agriculture, and State Excise, made a statement in Feb 2014 which sparked a controversy. He said, “People have money to pay their mobile bills, but not to pay their electricity bills.” Although I can understand why it sparked a controversy, he has a valid point; there’s no denying that. People pay their mobile bills because otherwise they won’t get to talk on their mobiles. It’s as simple as that. Private mobile companies aren’t going to give them services for free. Electricity, on the other hand, is a commodity produced by SEBs, which are public enterprises, and politicians have the option of giving it away for free, which is precisely what they do. “We are people’s elected representatives, and if people demand free power (or anything else for that matter), we have to oblige them, don’t we?” This argument is the essence of vote bank politics.

Electricity in mumbaiA shining example to the contrary is Mumbai, which gets the most reliable electricity supply in India. Why? Because non-technical losses are the lowest in Mumbai, despite the fact that tariff is very high, especially for commercial consumers, some of whom pay as high as Rs.15 per unit! This, if you didn’t know, is higher than that even in some of the most developed countries! But commercial consumers pay this high tariff because the loss that would result if this supply became unreliable would be a lot higher and effectively kill their businesses. So in the grand scheme of things, high cost of electricity is actually a small price to pay. Therefore, the utility companies who supply power to Mumbai – BEST, Tata Power, and Reliance – do everything in their power to ensure that power supply to Mumbai is not interrupted, because it means loss of real revenues to them. But do you think MSEB officials think twice before shutting off the feeders to areas where commercial losses are very high? I think you know the answer.

There’s a song by Billy Joel from his Storm Front album titled, We Didn’t Start the Fire. “It was always burning, since the world’s been turning,” goes the next line. People can say the same about the power theft situation in India today. We didn’t start it. It seems like it’s been always happening. While that might be true, are state governments and SEBs going to do something about it? That’s the million dollar question.

So can power theft be avoided? Absolutely! How? Just replace today’s meters with “prepaid” meters in areas with high commercial losses. If you have heard about prepaid meters for the first time, they might sound “high tech” and “fancy” to you, but they are not; they are fairly easy to make and there are many companies in India who make accurate, reliable, and cost-effective prepaid meters.

As their name suggests, with prepaid meters you first pay and then get electricity. As you consume electricity, the meters reduce your balance and when it becomes zero, you have to “charge” them again; they are very similar to prepaid mobiles. Technically, one can allow the balance to become negative, the maximum negative balance being equal to the security deposit that the consumer has paid. That makes it “equivalent” to the current situation.

power theft

Figure 7.2

So you might ask: if this technology exists, why hasn’t it been implemented? The simple answer is: because it is a political “hot potato”. This move, by definition, is “unpopular”, and therefore the question, as they say, is: who will bell the cat? My simple answer is: any government that really wants to do something good for the state. What is right, is right. And what has to be done, has to be done. If people don’t act honestly, then they should be made to. It’s as simple as that. Besides, if a good chunk of a state’s population is dishonest, then that state is sure to go to the dogs anyway. If the state government doesn’t want that to happen, they have to take “firm” steps. Some people will grumble in the short term, but that can’t be helped.

Having said that, should some special concessions be given to farmers? Absolutely! IT industry has given employment and a good life to hundreds of thousands of people, contributed handsomely to our exports, and put us on the world map. But we can’t eat software, can we? So agriculture has to be given priority status because it would be terribly stupid to lose our agricultural self-reliance and start depending on other countries for food.

Maharashtra, like most other states, gives special consideration to agricultural consumers; farmers get charged on a “per HP basis” as opposed to “per unit basis” like most of us. (HP is short for “horsepower” and is a unit of power. 1 HP = 746 watts.) So if a farmer has a 3 hp pump in his farm – to pump water from underground well and water his crops – and if the per hp rate is Rs.3,000 per year, he has to pay Rs.9,000 per year for electricity. In return, they are supposed to get 24/7 electricity supply, which they don’t; typically, they get electricity for only 8 hours per day, and many times it is from midnight to 8 a.m. To that, the farmers say, “This is not what we bargained for. Our helpers refuse to go to the farm at night. If they don’t, then we have to do it. Irrespective of who does it, it has risks, with snake bites being at the top of the list.” Therefore, citing one reason or the other, they don’t pay what they are supposed to pay. That is the crux of the problem.

Unlimited electricityTo resolve this situation, two things need to happen: SEBs need to provide electricity to farmers when they need it, and farmers need to pay for what they use. Giving them unlimited electricity is a bad idea any way you look at it because we don’t optimize anything that we have an abundance of, do we? So the current scheme leads to wastage of electricity and water, both of which are precious resources. A more rational approach would be to give “reasonable” amounts of electricity at highly subsidized rates, but heavily penalize overuse beyond that.

Government of Gujarat (GoG) launched the Jyotigram Yojana in 2003 with the aim of solving all the above-mentioned problems and turning Gujarat from a power-deficit state – like all others – to a power-surplus state. One of the first things that GSEB did was to have separate feeders for agricultural consumers, i.e. farmers, using which they gave them free electricity but for only 8 hours, on a pre-announced schedule that was designed to meet their peak demands. Usage outside the free hours was metered and charged. Promise of free but quality power when they wanted it was more than enough to get political and social backing for the implementation of this scheme.

Jyotigram YojnaNext, GSEB connected all its 18,065 villages to the grid. It initially started with people’s participation but eventually GoG ended up giving 100% grant which incurred an expense of 1,500 crores! GSEB gave uninterrupted power to schools, hospitals, and industries in the village, all at metered rates. There was no talk of free power. Instead, the focus was on explaining how uninterrupted power would transform their economy and improve their lives. The scheme was, and still is, a big success. Non-technical losses are the lowest in Gujarat. The scheme had many other positive effects as well: promotion of industrial and commercial activities leading to local employment generation, which in turn reduced migration to urban areas; improved standard of living; improvement in quality of education, health services, and sanitation facilities; enhanced exposure to the latest information through electronic media.

Because of the success of the Jyotigram Yojana, GSEB is the only profitable SEB in the country (to the best of my knowledge). That is because GSEB and GoG do not view subsidies as a default component. The focus is on providing rationally managed subsidies where needed, and pricing where possible. Interestingly enough, tariffs are fairly low in Gujarat despite, or probably because of, that policy!

If it can happen in Gujarat, why can’t it happen in all other states? Are the people of Gujarat any different from people of other states of India? Or is GoG fundamentally different than governments in other states? I think not. Jyotigram Yojana only reinforces my belief in the age-old proverb: where there is a will, there is a way!

In the next article, I will tell you about the various sources of electricity and their pros/cons.

Sustainably yours,
Prashant Karhade.
Writer, Publisher, Entrepreneur

10 Responses

  1. Dr. S.K.Modak 3 years ago
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