- State electricity distributors are weighed down by debt
- Power plants are operating at about half of capacity
Fleets of coal trains lie empty across India each day, a sign that Prime Minister Narendra Modi’s landmark reform of the electricity sector remains a work in progress.
Indian Railways used about 188 trains daily in August to transport shipments for state-run Coal India Ltd., less than the 253 per day expected, according to Mohd. Jamshed, a member of the board that helps to run the network. Asia’s No. 3 economy depends on coal for most of its electricity.
“We built up the capacity in consultation with the coal sector, but the demand hasn’t moved as expected," Jamshed said in an interview in New Delhi. Coal shipments were 30 million tons below target in the five months ended August, equivalent to a loss of 30 billion rupees ($449 million) in railway freight revenues, he said.
Provincial electricity distributors in India -- weighed down by debt after years of selling supplies below-cost to keep them within reach of the poor -- are struggling to buy more power from underutilized generators, leaving coal trains stranded. The government’s reform of the distribution sector to alleviate the $64 billion debt burden and curb retailers’ losses is supposed to be completed by 2019.
Sixteen of India’s 29 states and seven union territories have so far agreed to participate in the overhaul of electricity distributors. Utilities had debt of 4.30 trillion rupees as of Sept. 30 last year, according to the government. The 16 provinces will be restructuring 2.51 trillion rupees of that, an official release shows.
Four charts illustrate the progress of India’s power reforms, and why they’re important for the railway’s freight revenue:
- Coal is the key commodity transported by India’s railway:
- More than half of the debt weighing on power retailers is due to be restructured:
- Utilities still can’t afford to buy the supplies power plants could generate:
- A sharp drop in spot power prices is one bright spot for electricity retailers: