Power surplus Karnataka loses ₹15,000 crore buying units from Centre

The Karnataka government has cost the state exchequer ₹15,000 crore in the last 18 months by not cancelling the power purchase contract with central agencies despite having surplus electricity.

This comes in the backdrop of state Karnataka Electricity Regulatory Commission (KERC) increasing the power tariff by 5.40 per cent, which will be passed on to end consumers amid the pandemic, inducing stress on both domestic and industrial consumption.

An application under Right to Information (RTI) revealed that the state procured additional power (electricity units) from central agencies like NTPC, NLC, NPCIL, at a higher cost despite the expiry of 12-year purchase agreement. It continues to buy power from the companies despite the contract having lapsed.

Also, if the state fails to act on the power purchase agreements with central power generating stations, it may incur an unnecessary expenditure of Rs 44,000 crore over the next four years, V Ponnuraj, managing director of Karnataka Power Corporation Ltd warned the government.

In a letter written to the additional Chief Secretary of the Energy Department (as obtained under RTI Act), Ponnuraj said that Karnataka had a surplus, not utilized, power to the extent of 55,387 million units (since August 2019). The government could have averted paying the central agencies a sum of Rs 1,10,69 crore in the current year and about Rs 5,000 crore last year, had it cancelled or relooked at the power purchase agreement with central agencies.

Also, if the state proceeds with the solar power generation of 10,000 megawatts under the PM- Kisan Urja Suraksha evem Utthan Mahabhiyan (KUSUM) scheme, the non-utilisation capacity will increase to 81,667 million units, resulting in a loss of Rs 17,900 crore a year, the letter said.

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Experts believe that with the industrial consumption falling in the wake of COVID-induced stress, the government should offer electricity to the industry at a cheaper rate instead of increasing the tariff.

The Karnataka Small Scale Industries Association (KASSIA) called it a disastrous move for the MSMEs as it could hamper the revival operations from the COVID pandemic and slowdown in the economy.

The state procures power from Central Generating Stations at Rs 5.31 per unit, about 50 paise higher than the cost incurred to purchase from Karnataka’s thermal power plant at approx Rs 4.8 per unit.

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Energy experts called for an urgent relook at the policies to reduce the burden on the state and consumers. Meanwhile, the Congress and the Aam Aadmi Party’s state unit demanded a judicial probe into the matter alleging that the state purchased power from central agencies despite the expiry of contracts.

The state, however, denied the allegations and maintained that cancelling/revising the power purchase agreements will result in penalty and will have serious implications if the state fails to foresee the future requirement. It said the state is forced to rely on external sources as the electricity generated through renewable sources is still not stable and reliable.

Energy expert M G Prabhakar, who was part of the advisory committee at KERC, said the state’s decisions on tariff hike and power purchase agreement does not augur well for the domestic and industrial consumers in the long run.

“The state should offer excess power generated to industries at a cheaper rate (about 15-20%) at night at least, instead of increasing the tariffs. That way, the state could boost the manufacturing, make production competitive resulting in higher GST collection and generating employment,” Prabhakar said.