Economic Survey of Bihar

Power is a key sector in the development of any country or region. Power generation in the country is mainly through hydro electric, thermal and nuclear power stations. Besides domestic generation, power is also imported from Bhutan. Though the power generation in the country in 2009-10 was targeted to increase by 9 percent, during April-December, 2009 it grew by 6 percent.The generation level which was 540 billion KWh in April, 2008, increased to 572.5 billion KWh in December, 2008. During this period, thermal generation increased by 88 percent. However, hydroelectric power generation recorded a decline, which occurred mainly due to poor monsoon. The Coal based power generation constituted around 80 percent of thermal generation and around 66 percent of total generation of power. Nuclear generation is around 14 billion KWh.

It is worth mentioning that the power sector in the country is undergoing major changes with private participation and diversification of fuel mix, within a conducive policy environment. The public private partnership (PPP) in transmission and distribution system, private participation in nuclear power generation projects, demand side  management, franchise in distribution system, renewable energy and many other activities in Indian power sector have been introduced during the last few years. The Electricity Act, 2003 is the corner stone legislation, and it  provides an enabling legal framework for more efficient and accelerated development of power sector. The Act primarily concerns itself with unbundling of State Electricity Boards and seeks to encourage competition  with  appropriate  regulatory  intervention.  As  a  result,  the  power  sector  is  now becoming competitive and gaining efficiency in terms of supplying quality power to consumers.

Power sector is a critical infrastructure for development of Bihar and supply of reliable and quality power at  reasonable and competitive rate can transform the pattern in agriculture production, village, small and micro industries development and other commercial and industrial activities.

Bihar State Electricity Board (BSEB)

The bifurcation of state in 2000 resulted in major power stations going to Jharkhand, leaving only two old thermal  generating stations in present Bihar. Consequently, the state is lagging much behind other states in the country in terms of power availability and needs to purchase 90 percent of its power requirements from central utilities. At  the  end of 2009, BSEB had 2.96 million consumers and overall sales were at 5325 gigawatt hours (GWh), of  which 33 percent were to domestic, 27 percent to industrial and 15 percent to irrigation . Sales growth  was around 10 percent in the years 2006 to 2009. 

Power Supply Position

The per capita power consumption in the state is around 100 units against an all India average of 717 units. No new generating unit has come up in the state in the last 25 years. The power supply position in Bihar is very poor and the deficit in relation to peak demand is ever increasing. The total installed capacity including hydel is about 600 MW, against the peak demand of 3000 MW. The deficit, which was around 17 percent in 2006-07, increased to 31 percent in 2007-08 and to 40 percent in 2009-10. In 2010-11, the deficit is estimated to be around 45 percent.

Bihar’s current installed generation capacity is only 584.6 MW, including renewable resources owned by the Bihar State Hydroelectric Power Corporation. The state has access to a total of 1846 MW, including capacity allocated from central stations. This has led to severe rationing of power to meet consumer  requirements. While some of the deficit can be attributed to legacy issues arising from the creation of Jharkhand, there has been no major addition to generation capacity.

BSEB’s thermal generating stations at Barauni and Muzaffarpur have undergone major renovation and  modernization.  Rapid augmentation of generation capacity is a prime priority for the state government, which intends to set up joint ventures (3 X 660 MW at Nabinagar), expand existing plants, catalyze Independent Power  Producer (IPPs) projects at Banka (4 x 660 MW), Pirpainty (2000 MW) and Kahalgaon (2 x 660 MW) and seek  allocations from central sector plants to ensure that the state is not required endure the 66 percent peak deficit in 2012, as forecast by the Central Electricity Authority.

The state has to depend entirely on the central sector to meet its power requirements. As per the meter readings, the state government gets 1746-1791 MW power from the central sector. It gets around 40 percent share from  each of Talcher STPS and Kahalgaon STPS-I. However, from Kahalgaon STPS-II, it gets only around 7 percent. The overall share of Bihar from central power stations is around 26 percent.

Improvements in Transmission System

The Bihar State Electricity Board has constructed a total of 14 transmission lines of 220KV with circuit km. length of 1127 kms. and 80 transmission lines of 132 KV with circuit km length of

4350  kms.  in  the  state  in  last  three  years.  Under  Bihar  Sub-Transmission  Scheme,  major strengthening of sub-transmission is underway through RSVY. Under Phase I, 18 new grid sub- stations (GSS) and 876 kms. of new transmission lines have been completed. Under Phase II- Part I, 10 new grid sub-stations and 523 kms. of transmission lines are expected to be completed by December 2010. The capacity augmentation work of 19 and repair and maintenance of old grid sub-stations is also to be completed. Similarly, under Phase II- Part II, construction of 17 new grid sub-stations (GSS) and augmentation of 12 GSS with new transmission lines of 1513  kms. are expected to be completed by September, 2011. The Power Grid Corporation of India is supporting the implementation of this scheme.

Transmission and Distribution Losses

Current power distribution in Bihar is characterized by around 40 percent of system losses, far higher than the  national target of 15 percent. The losses are even higher when one takes into consideration cash realisation. Such a situation calls for a change in the way electricity distribution is managed. The fact is that the Board is not able to measure the actual T&D losses in the absence of measuring system. During 2006-07, the T&D losses were  estimated to be as high as 57.6 percent.

As per the Board’s record, of the total 51,996 existing transformers, only 16,035 distribution transformers are  provided with meters. Management Information System (MIS) has not been implemented in all the districts of Bihar.  Under the Accelerated Power Development and Reforms Program (APDRP) of the central government, the schemes taken up included (i) establishment of new distribution substations, (ii) installation of consumer and feeder metering, (iii) upgrading of overloaded 33 KV and 11 KV lines, (iv) renovation and modernization of existing substations and distribution transformers, and (v) installation of new distribution transformers.

The Bihar Electricity Regulatory Commission was set up in May 2005. The regulator has issued 33 directives, including directives on metering, loss reduction and loss reduction trajectories, and BSEB is working  to comply with the directives. The regulator would also need to review the utility’s resources and performance  framework to bring down losses in line with the 3 percent annual loss-reduction target. In addition, independent studies to establish baseline loss levels and monitoring of targets are also needed.

Financial performance

In spite of improvement, the cost recovery by BSEB through tariffs is still low at 47 percent, with an average cost of  electricity of Rs. 6.55 per KWh and an average tariff of Rs. 3.14 per KWh. Tariffs have not kept pace with increase in cost. For example, employee costs have been raised to 82 percent from 2004 to 2009, largely on account of higher retirement benefits. Interest and finance charges have increased by 68 percent as a result of higher interest on working capital and state government loans. BSEB’s balance sheet has negative reserves and surpluses. Despite this, there  have  been  some  improvements  over  the  last  five  years,  since  the  state  government  is providing funding for the payment of power purchase costs and for paying revenue subsidies to BSEB.

Rural Electrification

Rural electrification has become a priority with the implementation of the Rajiv Gandhi Grameen Vidyutikaran  Yojana (RGGVY) in 2005. The programme is under implementation in all the 38 districts in the state. Under the scheme, out of the target of 29,862 villages, 20,526 villages were either electrified, or if already electrified,  benefited from upgrading. Apart from BSEB, several central  sector  agencies  (Power  Grid  Corporation  of  India  and  National  Hydroelectric  Power Corporation) play a pivotal role in getting rural areas connected to power supply. In Bihar, with a large number of beneficiaries under the scheme, there will be substantial additional demand on the system as new villages and households are given access to electricity.