Contemporary issues related to human development , regional and global.

Month: December, 2014

Kerala Power Sector: Recipe for a culture change

Kerala Power Sector: Recipe for a culture change

1. Introductory: The colloquium held on 16th October 2014 at Anugraha Hotel, Vyttila was a joint initiative of individuals and organizations, who believed that KSEB is facing a crisis situation today, like many of its counter parts elsewhere in the country. During the sixth and seventh five year plans, KSEB could put to use nearly a third of the hydro-electric potential of Kerala and developed substantial capabilities in the design and construction of hydroelectric power stations as well as the T&D network needed for a fairly efficient state power grid. The State had also built up, during this period, substantial capabilities not only in the design and building of reservoirs, dams, tunnels, penstocks and other auxiliary equipment but also in the manufacture of electrical equipment as well as complex T&D systems.

2. Decline from mid-eighties: By the early eighties Kerala was exporting not only the cheap electricity generated in its hydro plants to the neighboring states but also a host of electrical engineering equipment like transformers, transmission lines and switch gear. However, after the Silent valley controversy, capacity addition by KSEB was only marginal and even this was mostly thermal based. As on now bulk of the electricity sold by KSEB is imported from outside. This prolonged dependency on purchased electricity, coupled with the uncertainties created at the national level by the structural reforms of nineties and the new Electricity Act 2003 have destabilized KSEB, financially as well as organizationally.
3. Present situation: Faulty HRD and HRM policies have led to serious shortages of trained and experienced cadres to manage key positions in this public utility, especially at the top. Computerization programs including ERP at various levels could not take off or was abandoned half-way through, due to lack of understanding or seriousness at the director board level. Delays as well as non-execution of generation projects, hydro as well as fossil fuel plants, are the result of lack of experienced manpower at the top, familiar with power development projects, thermal as well as hydro. There is an urgent need for capacity building and cadre development in almost all disciplines of power systems development and management: engineering design, technology, project planning, finance and general management as pointed out by many. Employees are well organized, disciplined and prepared to accept quality leadership. There is the need for a total culture change in the organization, from top to bottom.

4. Situation at the national level: A World Bank study of June 2014 has virtually admitted the near-total failure of power sector reforms initiated in early nineties and the new electricity act, in meeting even their own declared objectives: Debts of electricity utilities have ballooned to Rs. 3.5 Trillion or five percent of GDP by 2011, the target of full electrification by 2011 was miserably missed with some 300 million households remaining non-electrified, and the objective of an integrated all India power grid remain a pipe-dream despite massive investments in T&D gear.

5. World Bank View on KSEB: Surprisingly, the above said report has identified KSEB as the best performing power utility in the country on several counts, even though under pressure from employees, it did not to trifurcate itself into separate generation, transmission distribution utilities. The box item on KSEB in this report had concluded: “since 2011 its finances have been constrained due to the states declining hydro generation, forcing the utility to purchase power from external sources and draw down surpluses earned in earlier years. Inadequate planning for power procurement to address demand growth has exacerbated the change in fortune of the utility, which remains well managed is but is now suffering from external shocks.”

6. Reorganizing Kerala’s power sector: Any major course correction of the current reform process at the national level is unlikely in the immediate future under the present circumstances, though there is every indication that the country will be under compulsion to limp back to the old federal system with more autonomy for the state governments, and CEA playing once again the key role of a federal authority. Taking into account the observations in the present WB study referred to above, and based on the findings of the Colloquium, it will be prudent for Kerala Government to launch a program for re-organizing KSEB on the following lines,

(a) KSEB will be reconstituted as a holding company, one hundred percent shares owned by GOK as on now but with an expanded board of directors giving equal representation for government, employees and consumers as in the French Electricity Board (EDF), and as recommended by the High Power Committee appointed by the previous Government. KSEB could function as the TRASNCO of Kerala as spelt out in the Electricity Bill, dealing with the T&D responsibilities directly and leaving generation responsibilities to two specialist joint venture subsidiaries, one for thermal generation and the other for hydro generation. KSEB will retain majority shares in both the subsidiaries.

(b) KSEB employees who work for the T&D functions that constitute around 85 percent of the present work force will continue as direct employees of the holding company: Participation of the representatives of employees and customers at the top level management of KSEB, will improve its accountability and sense of responsibility as a public utility, and also help in a big way to launch and implement system improvement programs in a far more meaningful and effective manner. The holding company should be held responsible for addressing the environmental concerns with the help the two subsidiaries, specializing in Hydro and Thermal generation.

(c) A Kerala Hydro Power Corporation (KHPC) may be floated as joint venture with National Hydro Power Corporation (NHPC) for the operation and modernization of existing hydro plants and for taking up new hydro projects within the state, including the augmentation and modernization of the existing plants. Projects of less than 500 KW or so can be left to ANERT for non-grid power development. As an organization specializing in hydro generation, KHPC will be useful in augmenting specialist manpower needed for the design and operation of hydro power plants and also for addressing the environmental concerns in a more effective manner.

(d) A Kerala Thermal Power Corporation (KTPC) may be setup as joint venture with National Thermal Power Corporation (NTPC) with similar objectives as for Hydro. Even NTPC Kayamkulam could be brought under the purview of KTPC. As an organization specializing in thermal generation, KHPC will help in augmenting specialist manpower needed for design and operation of thermal power plants and also in addressing environmental concerns related to thermal power generation in a more effective manner

(e) KSEB will buy power from its two subsidiaries, KHPC and KTPC, on a cost plus basis. NTPC and NHPC being Navaratna companies and technology generators for the country will be in a position to help the capacity buildup of these state level subsidiaries rather quickly and effectively. It will facilitate a major culture change in Kerala’s power sector.

(f) Activities of ANERT may be brought under a commercial undertaking jointly owned by Central and State Governments to continue the promotional and R&D work on renewable energy and distributed generation program for remote and rural communities in conformity with the policies of the ministry for renewable energy and, supplementing the power development programs of KSEB

7. Summing up: The above re-construction plan of the states electricity sector will conform to the state level objectives of Electricity Act 2003 and will be in harmony with the aspirations, wishes and preferences of KSEB employees. The proposed joint ventures will help Kerala to develop quickly the much needed specialist manpower, expertise and technology needed for the healthy development of its power sector.

8. The next step: CEA may be assigned the lead responsibility for finalizing this conceptual plan and requested to prepare detailed operational plans for implementing it.

9. Colloquium participants: PC Syriac, K Vijayachandran, MP Sukumaran Nair, P Parameswaran, KR Unnithan,
KS Damodaran Nampoothiri, Philip P Paulose, S Balakrishna Menon, G. Sudhadevi, G Balachandran, Anilkumar P.Kv,
S Jayathilakan, MT Varghese, AR Unnikrishnan, CV Usha, PR Shaji, KK James, EV Mohandas, Malippuram Khalid, G. Ram Mohan Nair, AV Narayanan Nair, CK Raghavan, MV Varghese, CK Joseph, PD Aruna, K Asokan, MK Parameswaran Nair,
EN Gopinathan Nair, KK Karuppankutty, PH Abdul Rasheed, MA Abdulkhader, Roy Xavior T, VV Satyarajan, Sivarajan,
John Darrel, TK Moidu, AR Satheesh, George Thomas, Robin Sebastian, CV Subramanian



Er. K Vijayachandran FIE

Prime Minister Narendra Modi has reportedly firmed up, during his recent Australian visit, several construction projects and foreign investment proposals that were hanging fire for long, ever since the economic reforms got initiated by the UPA Government.

Construction of a 2000 KM mountain road along the China boarder proposed to be built with Japanese help was a long pending project proposal, possibly waiting for clearance by China. It was included in Prime Minister’s priority list when he went to the recent G20 summit meet in Brisbane. Soon after the summit, it was clarified from Beijing that Japan’s road project cooperation with India, will not be in the disputed China-India border area. Foreign Ministry spokesman Hong Lei made these remarks at a press briefing, when asked about a recent report that, Japan International Corp. Agency (JICA) had a contract to build roads on the China-India border. JICA will provide financial assistance and technical expertise to this border road project.

Japan is evidently happy because, this multi billion dollar assignment on the foot hills of Himalayas will benefit its recession hit construction and heavy engineering industry. And, Indian loan will provide its finance capital a top class investment outlet. China’s neutral attitude indicates that the project is unlikely to affect their strategic interests in any manner: Being a border road, it is likely to serve the interests of both sides in war and in peace. There is no logic, whatsoever, for India unilaterally bearing the capital and maintenance costs of a high-cost border road, especially, when Indo-China friendship and cooperation is being taken to new heights through the BRIC and its New Development Bank.

And, insisting on foreign collaboration and Japanese technology makes little sense, when our own public sector enterprises like the Border Roads Organization and BEML of Bangalore, as well as other Indian construction firms in public as well as private sector, have proved their mettle in road construction on our Himalayan borders. It is foolish to speed up with the project under the changed circumstances: Civilian needs of the NE states as well as defense priorities of the country should have been re-assessed before taking a final view of this project proposal, which was a product of our infamous war with China. Perhaps, business pushers and fixers of big contracts in Delhi continue on their jobs, as usual, unmindful of regime changes and even fundamental changes in political environment.

The boarder road contract was only a small fish in the list of big projects, got ready for Prime Minister’s Australian tour. There were also the multi-billion dollar high-tech railway projects in his priority list. Most of these were under suspended animation during the UPA Government, for a variety of reasons. There was the 534-km-long Mumbai-Ahmedabad high speed corridor project estimated to cost Rs 63,180 cr, for which the Japan International Cooperation Agency (JICA) is currently conducting a feasibility study. Them there was the 1,754 km-long Delhi-Chennai route which was being allotted to China for conducting feasibility study and is proposed to be developed jointly with China.

The Delhi-Chennai route was part of a much larger scheme: The Diamond Quadrilateral Project, which aims to build a high-speed train network between different cities, including Delhi-Mumbai, Mumbai-Chennai, Chennai-Kolkata, Kolkata-Delhi and Mumbai-Kolkata. It is likely to cost Rs 2 lakh crore. The 28 hour run of Delhi-Chennai Rajdhani will be reduced to a mere six hours. While the cost of construction of a normal railway route is Rs 5 crore per km, the estimated expenditure on the high speed line will be Rs 120-126 crore.

Most of the projects in Prime Minister’s travel bag were hardly in tune with the development aspirations of our people. In fact North-Eastern states are crying for basic infrastructure, especially transport and communications but a boarder road is unlikely to be solution. NE states are poorly connected to the national rail system: situation in many other Indian states is also not very different. Even a casual examination of basic rail statistics will reveal this disquieting situation.

Census 2011 had counted a total of 598,110 census villages and towns in the country and we have only 7172 railway stations in the country. This means, close to 99 percent of our population centers are unlikely to have a proper rail link. After the British left, only 11,000 route KM was added to the Indian rail system. Most of this 20 percent increase took place during the first four decades of national independence. During the twenty five years of economic reforms; annual addition was only around 100 KM or at the best around some ten new railway stations per year.

In fact this new additions did not even compensate for the closure of rail stations, during this period, in the name of economic viability. With the stress on express and super fast trains and neglect of passenger trains, a large number of rural railway stations have a deserted look today and are facing closure. At the same time, many of the large stations look dirty, ill-maintained, user-unfriendly and overcrowded, despite the best efforts of the employees whose strength was being arbitrarily cut down at an average rate of 17,000 per year during the past two decades.

Rail penetration in the country continues to be far below global development experience, on the basis of geographical area as well as population. India has 60 route km of railway per million people, and 20 route km per 1000 sqkm of land area. This is far below that of USA (803/22), France (603/63), Germany (520/117) or Japan (192/63). China was far behind India in rail penetration at the time of its revolution, but it has more than doubled its route rail length during the past sixty years to around 65,000 KM. The more recently added (2008) Lhasa -Xining train over the Tibetan highland had caught global attention. (http://en.wikipedia.org/wiki/Qinghai%E2%80%93).

Development priorities on our rail front are thus clear: Launching massive high speed trains on the Golden Triangle and other luxury trains with borrowed capital and imported technologies could hardly be a priority, compared to increasing the rail penetration to a respectable level of at least five percent of the population centers, using our own resources. Our urban centers are developing into massive slums in the absence of efficient urban transport systems. Suburban trains or Metro Rails has to be developed in 40 cities with population exceeding two million if we are to fight against slums and we have the technology and resources to do this, Then there is a big backlog of quality improvement. All these need careful planning as well as development of appropriate technologies: Human resources development and capacity building being the most fundamental.

Prime Minister Modi and his advisors seem to believe that high-cost sophisticated infrastructure, with imported equipment and technology, foreign loans, FDI etc etc are essential for economic growth and will easily yield popular applause. Such projects remind us of the Latin American dictators of last century who led their countries into deep debt traps by pursuing all sorts of fancy projects. Many of these countries continue to be severely indebted and backward even today, despite being blessed with valuable mineral resources including gas and oil.



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