Andhra Pradesh Chief Minister Nara Chandrababu Naidu released a White Paper on

the AP Power Sector, highlighting the need for Power Sector Reforms 3.0.
The Power Sector Reforms 1.0
The Power Sector Reforms 1.0 in Andhra Pradesh, implemented between 1995 and
2004, marked a significant transformation in the state's power sector.
Key Features of Power Sector Reforms 1.0:
1. Introduction of Reforms:
o Andhra Pradesh was the first state in India to introduce power sector
reforms in 1998.
2. Formation of Regulatory Commission:
o The state established the Andhra Pradesh Electricity Regulatory
Commission (APERC), an independent regulatory body, to oversee the
power sector.
3. Unbundling of APSEB:
o The Andhra Pradesh State Electricity Board (APSEB) was unbundled to
focus separately on power generation, transmission, and distribution.
This structural change aimed to improve efficiency and accountability.
4. Reduction in Energy Deficit:
o Through energy audits and other measures, the energy deficit was
reduced to 1.5% by the fiscal year 2003-04, compared to the national
level of 7.1%.
5. Reduction in Transmission and Distribution (T&D) Losses:
o T&D losses were significantly reduced from 35% in 1998 to 23% by the
fiscal year 2003-04. This reduction was crucial for improving the financial
health of the power sector.

Power Sector Reforms 2.0 (2014 to 2019)

The Power Sector Reforms 2.0 in Andhra Pradesh, implemented between 2014 and
2019, aimed to address the growing demand for electricity and improve the efficiency
and reliability of the power supply.
Key Achievements:
1. Growth in Demand and Consumption:
o Energy Surplus: The state had an energy deficit of 22.5 million units (MU)
per day in June 2014, which was met by December 2014. By January 2018,
the state achieved an energy surplus.
o Peak Demand: Peak demand grew from 6,784 MW to 9,453 MW, a 39%
increase.
o Consumption: Electricity consumption grew from 40,174 MU to 54,555
MU, a 36% increase.
o Per Capita Consumption: Per capita consumption increased from 1,003
units to 1,234 units (23%), compared to the national average growth from
1,010 units to 1,181 units (17%).
2. No Power Cuts and No Tariff Increase:
o The reforms ensured that there were no power cuts and no increase in
tariffs during this period.
3. Implementation of Government Schemes:

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 oActively implemented Government of India schemes such as Integrated
Power Development Scheme (IPDS), Deen Dayal Upadhyaya Gram Jyoti
Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY), and Power for
All, with a grant of more than Rs. 5,000 Crore.
4. Capacity Additions:
o APGENCO Installed Capacity: Increased from 4,114 MW to 7,213 MW, a
75% increase.
o Transmission Capacity: Increased from 29,863 MVA to 46,987 MVA, a
57% increase.
o Renewable Energy (RE) Capacity: Installed RE capacity increased from
1,342 MW to 7,716 MW, a 475% increase.
o Solar Capacity: Increased from 66 MW to 3,045 MW, a 4514% increase.
o Wind Capacity: Increased from 731 MW to 4,077 MW, a 458% increase.
o Total Generation Capacity: Increased from 5,456 MW to 14,929 MW, a
174% increase.
5. New Thermal Units:
o Planned new thermal units (2x800 MW) at Vijayawada Thermal Power
Station (VTPS) and Krishnapatnam to meet future demand.
6. Awards and Recognition:
o Andhra Pradesh was ranked 1st in 'Energy Efficiency Implementation
Readiness' by the World Bank in 2016.
o The state received several notable awards, including Best Power Utility for
Power Generation, Best Performing Transmission Utility in the Country,
and Best State of India for Energy Security, Governance & Sustainability.

Problems of the Power Sector in Andhra Pradesh from 2019-2024

The power sector in Andhra Pradesh faced numerous challenges between 2019 and
2024. These issues can be categorized into several key areas:
1. Total Losses
• Tariff Burden on Consumers: Rs. 32,166 Crore
• Increase in Debt of AP Power Utilities: Rs. 49,596 Crore
• Losses Due to Inefficient Governance: Rs. 47,741 Crore
• Total: Rs. 1,29,503 Crore
2. Lost Investor Confidence
• Re-negotiation of Solar and Wind PPAs: Led to legal challenges and directives
from the AP High Court to adhere to PPA tariffs.
• Cancellation of 21 Wind PPAs: Further damaged investor confidence.
• Outstanding Dues: APDISCOMs resorted to Rs. 9,000 Crore in OPEX loans to
clear dues.
• Cancellation of Contracts for APTRANSCO Works: Additional cost of Rs. 281
Crore due to halted works.
3. Phenomenal Increase in Tariff Burden
• Tariff Burden on Consumers: Rs. 32,166 Crore
4. Increased Debt of AP Power Utilities

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 • Total Loans: Increased from Rs. 62,826 Crore in FY 2018-19 to Rs. 1,12,422
Crore in FY 2023-24.
• CAPEX Loans: Increased from Rs. 36,792 Crore to Rs. 46,380 Crore.
• OPEX Loans: Increased from Rs. 26,034 Crore to Rs. 66,042 Crore.
• Additional Interest Burden: Rs. 10,892 Crore due to short-term borrowings at
higher interest rates.
5. Exponential Increase in Outstanding Receivables
• Government Subsidy Dues: Increased from Rs. 7,680 Crore to Rs. 12,681 Crore.
• Government Department Arrears: Increased from Rs. 5,265 Crore to Rs. 15,157
Crore.
• True-Up/Fuel Surcharge Dues: Rs. 17,137 Crore.
• Total Outstanding Receivables: Increased from Rs. 12,945 Crore to Rs. 52,091
Crore.
6. Losses Due to Inefficient Governance
• Delay in Commissioning of Thermal Plants (VTPS & Krishnapatnam): Rs.
12,818 Crore.
• Delay in Commissioning of Polavaram Hydro Electric Project: Rs. 4,737 Crore.
• Additional Impact of Short-Term Power Purchases: Rs. 2,691 Crore.
• 7,000 MW Solar Power from SECI: Rs. 3,850 Crore per year.
• Interest Burden Due to Borrowings: Rs. 10,892 Crore.
• Accumulated Losses Due to Poor Performance of APDISCOMs & APPDCL:
Rs. 9,618 Crore.
• Backing Down Cost of All Generators: Rs. 3,135 Crore.
7. Delay in Commissioning of Thermal Power Plants
• VTPS Stage-V Unit-8: Delay of 55 months, additional cost (IDC) of Rs. 2,029
Crore.
• SDSTPS (Krishnapatnam) Stage-II Unit-3: Delay of 44 months, additional cost
(IDC) of Rs. 2,035 Crore.
• Total Additional Burden: Rs. 12,818 Crore.
8. Delay in Commissioning of Polavaram Hydro Electric Project
• Turnkey Contract Terminated: Revised commissioning date of January 2026.
• Ongoing Arbitration: Expected loss up to Rs. 1,500 Crore.
• Impact of Price Variation: Rs. 350 Crore.
• Generation Loss: Additional burden of Rs. 1,155 Crore up to June 2024.
• Total Additional Burden: Rs. 4,737 Crore.
9. Increase in Short-Term Power Purchases
• Short-Term Power Purchases: Increased from 3,373 MU in FY 2019-20 to 11,655
MU in FY 2023-24.
• Average Cost: Increased from Rs. 4.02/kWh to Rs. 7.61/kWh (89% increase).
• Total Cost: Rs. 26,030 Crore, additional burden of Rs. 12,250 Crore on
consumers.
10. Inefficient Governance
• Procurement of 7,000 MW Solar Power from SECI: Additional tariff burden of
Rs. 850 Crore per year.
• Additional GNA (ISTS) Charges: Rs. 3,000 - 3,500 Crore per year.
• No New Capacity Commissioned: Despite sanctioned capacity of 5,287 MW
Wind, 12,075 MW Solar, and 17,550 MW Pumped Storage Projects.

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11. Accumulated Losses
• Losses of APDISCOMs: Increased from Rs. 29,147 Crore to Rs. 34,090 Crore.
• Losses of APPDCL (Krishnapatnam): Increased from Rs. 1,565 Crore to Rs.
6,240 Crore.
• Total Accumulated Losses: Increased from Rs. 30,712 Crore to Rs. 40,330
Crore.
12. Fall in DISCOM Ratings
• Deterioration of Integrated Rating: APSPDCL degraded from B to D.
• Additional Interest Rate: 1.11% led to additional interest cost of Rs. 2,442
Crore.
13. Trust Fund Investments in APSBCL Bonds, Power Cuts, and Low Sales Growth
• Investment in APSBCL Bonds: Rs. 2,513 Crore with a coupon rate of 8.5%.
• Power Cuts: Intentional delays in commissioning power projects led to power
cuts for domestic, industrial, and commercial consumers.
• Low Sales Growth: Limited to 4.8%, one of the lowest in the country.

Power Sector Reforms 3.0: Way Forward

The Power Sector Reforms 3.0 in Andhra Pradesh aim to address the challenges and
build on the successes of the previous reform phases.
Key Objectives:
1. Address Legacy Losses:
o The state needs to tackle the accumulated losses amounting to Rs.
1,29,503 Crore. This includes addressing inefficiencies, reducing debt,
and improving financial health.
2. Rebuild Investor Confidence:
o It is crucial to restore the confidence of investors and rebuild the brand
image of Andhra Pradesh as a reliable and attractive destination for
investment in the power sector.
3. Ensure Reliable and Affordable Power Supply:
o The goal is to provide uninterrupted, high-quality power supply at
affordable rates to all consumers, ensuring no power cuts.
4. Transform the Energy Sector:
o The energy sector is rapidly evolving, and the reforms aim to transform it
to empower society and make Andhra Pradesh an energy hub of the
future.

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