India eyes guaranteed power supplies ahead of elections

State-controlled utilities will start supplying 24/7 electricity to all households from April under an agreement with Delhi, power minister RK Singh said this week.

This could theoretically lead to a surge in demand for coal-fired generation, the mainstay of India's power mix. And some LNG traders said the government may be putting pressure on utilities and importers to buy LNG to support the goals.

But the agreement exempts utilities from supplying continuous power to agricultural users, which total around 120mn-130mn households. These users will get only 8-10 hours of power each day because of a lack of metering and to conserve ground water, Singh said.

Most agricultural households pay nothing or only small amounts for electricity. The government is likely to be unwilling to impose new tariffs ahead of elections in April-May.

The move towards 24/7 power comes after Delhi claimed that the country will be 100pc electrified by 31 March this year. But this only mandates providing electricity for a minimum of 10pc or households each village, casting doubt on how much the policy will boost power use.

Indian coal-fired power generation fell on a year-on-year basis in January for the first time in five months to 83.07TWh, down by 1.2pc or 992GWh on the year. Coal burn fell short of its 89.17TWh target, according to preliminary data from the government's Central Electricity Authority. Coal-fired power in January made up 82.8pc of India's total 100.36TWh output.

Coal-fired generation using domestic fuel costs an average of less than 3 rupees/kWh (4¢/kWh). This makes it the first choice for utilities needing to guarantee supplies after accounting for theft, transmission losses and a poor payment record by households and businesses, especially in towns and villages. Power generation using LNG costs more than Rs5.50/kWh at import costs of around $8/mn Btu.

But the availability of cheaper domestic coal is limited because of production and transportation constraints, and many generators typically face severe fuel shortages in the summer that lead to blackouts and load shedding.

It is also unclear how Delhi will keep tabs on whether electricity is being provided on a continuous basis, or what measures it can take to force state utilities to comply with the mandates. Electricity supply is governed by states and the federal government has no formal authority over state utilities.

The new electricity policy also calls for the imposition of penalties on utilities for load shedding, but has yet to be implemented. It is crucial to collect tariffs for every unit of power sold and shift to a prepaid metering system in villages and small towns, Singh said. This would prompt households to conserve power and reduce electricity theft.

The prepaid system will also be imposed on utilities at a later date, requiring them to pay upfront for power. Many state utilities currently owe hundreds of millions in dollars to generators for electricity, while power subsidies offered by states must be deposited directly in beneficiary accounts.

The government also wants to save around 90mn MWh/yr of power by 2030 and reduce CO2 emissions by 320mn t/yr by introducing energy efficiency measures in residential buildings.