Prime Minister Narendra Modi’s style is to set ambitious targets with impossible-looking deadlines. Perhaps he is inspired by a Gujarati poet who said, “ Nishaan chuk maaf, nahi neechu nishaan ” (missing the target can be forgiven, setting a low target cannot). This challenges his colleagues and staff to accomplish much more than what they would otherwise.
Thus Mr. Modi was able to get 24×7 electricity to nearly all villages in Gujarat in two and a half years. The targets set for power, coal, and renewable energy show the same determined approach: set up 175 gigawatt (GW) of renewable capacity by 2022 and increase domestic coal production to 1,500 million tonnes (MT) by 2020 from 612.4 MT in 2014-15, the period during which India imported around 210 MT of coal.
Are these targets for coal and renewable energy consistent? How are we to achieve 175 GW of renewable capacity by 2022? If 175 GW of renewable capacity comes on line, do we need 1,500 MT of coal?
Coal production target
The domestic coal production target of 1,500 MT is to be realised in this manner: 1,000 MT by Coal India Limited, 100 MT by Singareni Collieries Company Limited, and 400 MT by captive and private producers.
175 GW of renewable capacity will generate 350 billion kWh of electricity per year as a renewable power plant operates for around 2,000 hours a year. A coal-based plant uses 0.6 kg of coal for generating 1 kWh of electricity. Thus 175 GW of renewable capacity will reduce coal demand by 350 x 0.6 billion kg of coal, namely, 210 MT of coal.
Imported coal has a calorie content of 6,000 kcal/kg compared to domestic coal’s calorie content of 4,000 kcal/kg.
The total coal consumption in India in 2014-15, accounting for the 50 per cent higher calorie content of 210 MT of imported coal, was 924 MT of domestic coal equivalent. In 2010-11, it was 622 MT of domestic coal equivalent giving a compound growth rate of 10.4 per cent over 2010-11 to 2014-15.
If the economy picks up as it is expected to at this rate, the coal demand in 2020 will grow to 1,675 MT of domestic coal. By 2020 we can have 140 GW of renewable capacity if the 175 GW by 2022 target is to be realised. Then the coal requirement it would replace would be around 170 MT. This would suggest that we will need 1,500 MT of domestic coal production if we want to eliminate imports by 2020.
Of course, all imports cannot be eliminated as we need to import coking coal for steel production. If we provide for some 66 MT of coking coal import, we will still need domestic production of around 1,400 MT of coal. Thus the target of 1,500 MT of coal production is a reasonable one.
Renewable capacity
The next question is whether we can have 175 GW of renewable capacity by 2022. We have used three measures to encourage renewable power: feed-in tariff (FIT), renewable portfolio obligation (RPO) and accelerated depreciation allowance.
Under FIT, a fixed tariff is guaranteed to the power producer for a certain number of years. For him or her, this is desirable as it ensures assured income that eliminates market risk and he or she is able to raise finance easily.
In the solar mission launched in 2009, we had ensured that FIT does not compromise the incentive to cut down costs and that competition prevails by requiring reverse bidding for the FIT. Thus firms were asked to bid for the FIT they would need to generate solar power. In the first bidding, where the expected level of FIT was Rs.15/kWhr, the lowest bid came to Rs.13.5/kWhr. In subsequent bids it has come down lower and lower and now a recent bid for a 70 MW project at the Bhadla Solar Park in Rajasthan asked for an FIT of Rs.4.34 per kWhr.
Under the RPO, an electricity distribution company (DISCOM) is required to purchase a certain percentage of its total distributed electricity from renewable sources. The price that a renewable power producer will receive is determined by the market. Thus there is also incentive to supply electricity at completive rates. However, this creates uncertainty of revenue for the power producers, and banks are reluctant to finance them.
The way out is to guarantee a certain minimum price to be paid to a renewable power producer. Also, for RPO to be effective, it should be enforced. This would require that a DISCOM that does not meet its RPO obligation is made to pay a sufficiently high fine for the extent of the shortfall. If properly implemented, RPO will ensure that the renewable electricity generated will have a market and will be paid for.
Another advantage of RPO is that it can be neutral to technology. One does not have to prescribe whether it is solar or wind or biomass. Competitive market forces will select the most economical option. Thus there is no need to prescribe separate levels of RPO for wind, solar, small hydro, and so on.
Accelerated depreciation allowance, which helped boost wind power in the country, provides incentive to set up the plant but not to maintain it or generate electricity.
The new RPO guidelines
If FIT has been so successful, do we need RPO? Setting and enforcing a trajectory of RPO obligations ensures that the target for renewable power generation and capacity will be realised.
The Ministry of New and Renewable Energy (MNRE) has recently announced consultation guidelines for long-term RPO trajectory. The guidelines stipulate separate RPO for solar and non-solar electricity. The guidelines prescribe that 2.75 per cent, 4.75 per cent and 6.75 per cent has to be solar energy for 2016-17, 2017-18 and 2018-19, respectively. The shares of non-solar energy such as wind, biomass, and small hydro for these years are to be 8.75 per cent, 9.50 per cent, and 10.25 per cent, respectively.
While the Central government has issued these guidelines, electricity is a State subject and some States are not happy with the guidelines. States which do not have renewable potential feel that they would have to bear a higher burden for the renewable target. If West Bengal has to import renewable electricity from Tamil Nadu or Rajasthan, it will have to bear a higher burden or transmission charges.
The Centre has said that no transmission charge would be levied on renewable power. While this would allay the concerns of States, it will create a distortion in the location of renewable plants just as freight equalisation of coal and steel created distortion in the past in the location of industries. Many manufacturing industries that would have been located in Bihar were located in western India, far away from the source of the raw material.
The success of the RPO scheme will depend on the specification of a floor price and effective enforcement by States. The Centre needs to create some mechanism to incentivise States to enforce the RPOs. The Centre could provide money from the coal cess revenue to States depending on the extent to which they meet the RPO targets.
Levying no transmission charge on renewable power will create a State-wide distortion just as freight equalisation of coal did in the past.
Recent Posts
- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)