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Judicial’ regulation at Sebi

A mechanism to separate Sebi’s judicial and executive powers is central to creating a regulator more in tune with the rule of law

In 1748 the French philosopher Montesquieu proposed a form of government where powers were not excessively concentrated. The legislature defines what is forbidden in laws. The xecutive administers laws investigates violations and prosecutes them. The judiciary determines if the accused is guilty. Separating out these three branches of government creates checks and balances and is seen in most liberal democracies. Separation of powers was part of the thinking of the framers of the Constitution of India and is part of the basic structure of the Constitution.

However some bodies of the Indian state themselves write law conduct investigations and inflict punishments. This creates a new level of risk for people and raises concerns about constitutional propriety.

The Security and Exchange Board of India (Sebi) as a statutory body was created in 1992. In addition to the power to make regulations on securities market as well as implement them the 1992 Act required market intermediaries to obtain a certificate of registration and empowered Sebi to suspend/cancel registration for prescribed misdemeanours. At this point there was a certain fusing of legislative powers (to write law in the form of regulations) executive powers (to choose an intermediary that should be investigated) and judicial powers (to award punishment in the form of suspension/cancellation of registration).

When a system of punishment has only two options: To do nothing or to do something that is tantamount to death sentence (cancellation of registration) it is hard to create incentives for compliance. It was felt that a more nuanced form of punishment — monetary penalties — was required. Accordingly in 1995 a major amendment to the Sebi Act was passed by Parliament. It added two sets of provisions to the laws administered by Sebi.

The first was insertion of a new chapter VIA. This chapter listed a set of contingencies and authorised a senior Sebi officer to be an Adjudicating Officer (AO) to hold an inquiry and pass orders imposing monetary penalty whenever warranted. The second was addition of a few sections enabling Sebi to issue directions after conducting due inquiries to any person associated with the securities market. These directions could be for securing proper management of any securities market intermediary or in the “interest of investors” and “orderly development of securities market”. This amendment formally conferred powers of a civil court on Sebi and similar powers on the AO for securing attendance of persons and examining and inspecting books and records. As terms like “interest of investors” are undefined the amendment sharply increased the powers of Sebi. Further amendments to the law in 2002 and 2014 included in Sebi’s ambit even “persons” who were not market intermediaries but are considered to be “associated” with securities markets (not defined) and allowed Sebi to pass ex-parte orders.

While these amendments created an empowered mini-state within Sebi it runs contrary to the traditional view that an independent judiciary is an essential requirement of “due process” and fairness. A Sebi officer adjudicating on a finding of another Sebi officer is prima facie violative of the principle that no one (including an institution) shall be a judge in his own cause. A Sebi officer who has an executive role today could become an adjudicating officer tomorrow and return as an executive officer the day after. This is unlike other jurisdictions —for example in the US Securities and Exchange Commission (SEC) while officials of the SEC make investigative and prosecutorial decisions the hearing before an administrative law judge is by a person ring-fenced from the investigators through the career track.

The argument in favour of the existing arrangement at Sebi is based on the idea that securities markets are complex and the unique knowledge required to adjudicate these cases is not readily found among external judges. Sebi has passed nearly 20000 orders under these sections. It is estimated that these orders have taken about 18 months from the date of the investigation report — although it is not unknown for investigations to be conducted a decade after the event.

In the absence of data it  is estimated that enforcement orders are issued within three years of complaint and that in recent times this time period has come down. The Yes Bank adjudication order came within 13 months of the complaint being filed though the order is about alleged actions which occurred years ago.

In recent times some important procedural reforms have been undertaken by Sebi. About 10 senior officers of Sebi are full time AOs with a dedicated machinery to deal with adjudication cases. It is true that these officers can get back to being executive officers later in their career but even the current segregation is a start of some form of separation of powers. Having spent over 15 years in the regulation of securities markets AOs are expected to bring both expertise and some balanced and judicial temperament to the table. Unlike many other regulators who only put out a press note on punishments inflicted every adjudication order of Sebi is published on its website the day it is issued and has to be reasoned because of a statutory right to appeal in the Securities Appellate Tribunal. The recent orders are also machine readable and Sebi is actively engaging with researchers and making all this data available for examination and research.

Sebi is thus improving its game from the viewpoint of transparency and efficiency. The agenda lies in now achieving some firm internal separation of the judicial and executive powers. The recommendations in the Financial Sector Legislative Reforms Commission are a good path through which the objectives of an effective regulator can be reconciled with the rule of law and constitutional morality and the basic structure doctrine.

It is useful to remember here that more than a decade ago the Supreme Court had cautioned that “integration of powers by vesting legislative executive & judicial powers in the same body in future may raise several public law concerns as the principle of control of one body over the other was the central theme underlying the doctrine of separation of powers”.

The writer a retired secretary to GoI is now a professor at the National Council of Applied Economic Research and non-executive chairman of Shriram Capital

The post-pandemic economy needs a new fiscal policy framework

Aiming for an absolute fiscal-deficit target rather than a ratio would let counter-cyclical stabilizers kick in automatically

India’s second wave of the covid pandemic is advancing at a frightening pace. On the economic policy front a sharp contraction has upended the Fiscal Responsibility and Budget Management (FRBM) Act. As Arvind Subramanian and Josh Felman have suggested after the ongoing crisis our dysfunctional FRBM framework should be completely reformed (‘A Post- Covid Fiscal Framework’ Indian Express 7 April 2021). Their proposed framework rigorously derived from debt-sustainability conditions is an important step forward in this direction. But some issues remain. The alternative approach suggested here also derived from debt sustainability requirements is less discretionary simpler to implement and additionally builds in automatic stabilization.

The original FRBM Act set a target for the Centre’s annual fiscal deficit ratio (FD) at 3% of gross domestic product (GDP). The states were subsequently persuaded to legislate their own FRBM Acts limiting a state’s FD to 3% of its own GDP. This translated to a combined FD target of 5.8%. Such an arbitrary setting of FD targets unrelated to the actual requirements of debt sustainability and independent of the prevailing state of the economy makes fiscal policy pro-cyclical and inherently destabilizing.

When GDP growth and hence revenue growth are high a fixed FD target translates to high expenditure growth pump-priming even higher growth. Conversely when GDP and revenue growth are low the fixed FD translates to slow expenditure growth which tends to further reduce growth. Successive finance ministers have tried to get around this problem by amending the FRBM Act or by pushing some borrowing off-budget a practice fortunately discontinued by current finance minister Nirmala Sitharaman.

Subramanian and Felman’s proposal is derived from the Domar-Blanchard condition that debt will be sustainable if the primary balance (PB)—fiscal balance net of interest cost—is greater than the interest rate-growth rate differential (r-g). This condition was violated in India in 2020- 21 because the PB remained negative while r-g turned positive consequent to the steep decline in growth. Hence the authors have argued that the PB should be increased. But instead of setting yearly PB targets they propose the PB be raised gradually by half a percent of GDP per year on average allowing for fiscal consolidation to be accelerated or moderated when the economy is more or less buoyant till PB becomes positive.

The proposal is logically sound but too discretionary to serve as a rule for guiding annual budget-making. Deciding whether the PB target should be accelerated or moderated in a given year would require ex ante application of debt dynamics math to reliable forecasts of interest rates and growth. It would be preferable for the budget team typically led by a generalist civil servant to have a more clear-cut non-discretionary rule.

In an alternative framework which I have often suggested since the FRBM was first enacted in 2003 the Act would specify for say five years the absolute amounts as warranted levels of fiscal deficit (WD) each year. The WD can be derived from the warranted nominal growth rate which in turn is calculated as the required growth rate for debt sustainability. This framework can also be extended to derive the warranted primary balance (WPB) path i.e. FD net of the interest cost of past debt. Such a rule builds in automatic stabilization since the fixed WD in a given year will automatically raise the FD (or PB) when actual growth is lower than warranted growth and lower the FD (or PB) when growth is higher than warranted growth thereby tending to drive actual growth back towards the warranted growth path. Note that the WD is an absolute level while the FD and PD are ratios of GDP.

How are the warranted growth rate and the WD to be determined? In their recent paper (‘Fiscal Policy and Growth in a Post-Covid-19 World’ Economic and Political Weekly 27 February 2021) which also applies the PB>(r-g) rule Chinoy and Jain identified 9% as a knife-edge growth rate. Assuming a high debt-to-GDP ratio of 85% in 2021-22 and allowing for annual reduction of the FD by 0.5% of GDP as per the 15th Finance Commission recommendation accepted by the government they show that with nominal growth of less than 9% the debt-to- GDP ratio will rise while at growth over 9% that ratio would gradually decline. So 9% is the warranted nominal GDP growth rate. If the Reserve Bank of India can maintain an average inflation rate of 4% as specified in its monetary policy framework then the required warranted real growth rate would be 5% which is quite feasible. The warranted growth rate also defines a warranted nominal GDP path. Applying the consensus FD path—declining by 0.5% of GDP per year—to this warranted GDP path determines the warranted fiscal deficit level or WD for each year.

This 5-year series of WD consistent with a gradually declining debt-to-GDP ratio can serve as a reformed FRBM framework. It can be apportioned between the Centre and states in accordance with the 15th Finance Commission’s recommendation for their respective FRBM Acts. This is a simple non-discretionary deficit rule that is also automatically stabilizing. FRBM Acts should also provide escape clauses to deal with extreme shocks like the present pandemic.

Sudipto Mundle is a distinguished fellow at the National Council of Applied Economic Research. These are the author’s personal views.

Indian states taking ownership of land records digitisation, up to govt to expand it now: Study

The NCAER’s second Land Records and Services Index 2021 has found that states and Union territories have made considerable progress in digitising their land records and services over the course of one year despite the Covid-19 pandemic.

Bihar and Odisha now offer the facility of a web portal to register a transaction the N-LRSI 2021 found. Three UTs have made their circle rates available on their websites for the first time (Chandigarh Andaman and Nicobar Islands and Dadra & Nagar Haveli and Daman & Diu) while four other states have enabled online payment of registration fees and duties (Bihar Himachal Pradesh Delhi and Punjab). These are important steps in facilitating citizens and easing the process of transaction in land. States are also taking more interest in upgrading the integration between their textual records and the registration process. Three more states — Sikkim Odisha and Bihar (in addition to the seven as mentioned in the N-LRSI 2020 report) — now ensure automatic generation of a note in the Record of Right (RoR) when a transaction is registered.

The N-LRSI first unveiled in 2020 is an attempt to measure the performance of all states/UTs in digitising their land records. The index looks at two aspects of the supply of digitised records — first the extent of digitisation of land records comprising the textual and spatial land record and the various stages of the registration process; and second the quality of the land record evaluated on the basis of five proxy indicators for accuracy of reflection of ownership possession use extent and encumbrances.

The N-LRSI not only helps each state know where it stands in terms of providing digitised land records and associated services but also suggests the specific steps that can help the state improve its performance.

Digitised land records a critical step

Land market imperfections have often been highlighted as one of the foremost constraints affecting investment and growth in India. Since the McKinsey report of 2001 to the recent World Bank Ease of Doing Business reports the difficulty of transacting in land and property in India continues to be pointed out as a major area of concern.

The digitisation of land records is a critical first step in addressing this issue because it lays the foundation for the creation of a more accurate and comprehensive property record that can with appropriate database linkages be updated in real time. This will reduce the possibility of disputes leading to litigation and the delay inherent in attempting a proper title search. At the same time using property as collateral becomes easier. Not only does this facilitate starting new business digitised records offer the prospects of long-term spin-offs in lowering transaction and litigation costs for individuals and the economy as a whole. Moreover accurate records that reflect the on-ground situation can speed up infrastructure creation under various government programmes facilitating both planned urban growth and industrialisation.

Computerisation and modernisation of land records have been targeted through central programmes for over three decades now. The latest incarnation is the Digital India Land Records Modernization Programme (launched in April 2016 to replace the National Land Records Modernisation Programme). The progress made by states under these programmes has for many years been reported on the website of the Department of Land Resources (DoLR) but obviously this has not been considered sufficient to address the issues that bedevil land markets.

N-LRSI a success story

Is there another way to secure better results? An experiment in this direction is the idea of subjecting the progress reported by states to a credible verification and using it to rank the relative performance of states. Presenting a credible ranking of performance can be a useful instrument to create a spirit of competition among states and even become a means to offer rewards as an incentive for better performance. And the success of the N-LRSI experiment proves it.

The N-LRSI 2021 enabled both measurement of states/UTs’ progress on the parameters that formed the basis of N-LRSI 2020 and an assessment of the extent to which the recommendations for further improvement received attention. The exercise brings out that on the 100 point N-LRSI the average score has improved by more than 16 per cent in one year — from 38.7 in 2019-20 to 45.1 in 2020-21. Twenty-eight states/UTs (out of 32) have shown at least some improvement in N-LRSI scores. Madhya Pradesh once again emerged as the top performer scoring over 80 points while the number of states scoring over 70 points increased from one to five.

The considerable countrywide progress in making available digitised RoRs to the public was evident even last year. Since then states have shown considerable improvement in making available digitised cadastral maps to the public and in offering online facilities for the various stages of the registration process. Karnataka Tripura and Bihar are new additions to the list of states that have uploaded the digitised copies of their cadastral maps on their websites. Test checks verify the achievement reported by states/UTs to the extent of 87.8 per cent in 2020-21 as compared to 63.9 per cent in 2019-20. In other words reporting progress on the DoLR website is now taken more seriously. More states are now making the cadastral maps available in mosaic format with the actual measurement of plot boundaries than was the case last year. In improving the services offered West Bengal has upgraded the value of its digitised records by making digitally signed copies of both RoRs and cadastral maps available on its website and Himachal Pradesh has started providing legally signed copies of the maps from its Citizen Services Centres as well instead of only from the departmental offices.

The N-LRSI gauges the extent of digitisation of the registration process along five steps. This year’s edition notes that West Bengal has become the first state in India to introduce a provision for compulsory digital signature by the Sub Registrar’s Office (SRO) at the time of registering a transaction and online delivery of the registered document. Bihar has joined the list of states giving out a soft copy of the registered document.

A roadmap for govt

The N-LRSI has shown that credible efforts at measuring performance can become a means to secure better performance by states. It has demonstrated receptivity to the areas that it has highlighted as deserving attention. States have taken ownership of the process to the extent that the progress reported in the last one year is not based on even a single rupee being claimed under the central Digital India Land Records Modernization Programme. Going forward it is evident that there is reason to continue bringing out the N-LRSI. Adding a survey of users of land records and related services can show the value to the public of the ongoing digitisation efforts and further highlight matters that require greater attention.

The government of India can profitably look at the N-LRSI experience as an instrument to secure improvement in the domain of land records and services. It can be a useful adjunct to a central programme like the Digital India Land Records Modernization Programme to reward better performing states. At another level it is a principle that can be extended to other sectors to motivate improved performance by states.

Charu Jain is an Associate Fellow at National Council of Applied Economic Research. Deepak Sanan is Senior Advisor at National Council of Applied Economic Research. Views are personal. 

Covid-19 vaccine hesitancy: Trends across states, over time

Delay in acceptance or refusal of vaccine against Covid-19 despite its availability is a key hindrance in achieving optimal vaccination coverage among populations around the globe. Using data from a Facebook survey – conducted in partnership with University of Maryland and Carnegie Mellon – this article explores vaccine hesitancy in India and trends across states and over time

On 16 January 2021 India rolled out the world’s largest vaccination programme marking the beginning of an effort to vaccinate a population of 1.3 billion against Covid-19. The central government’s strategy was to first vaccinate the health workers and the frontline workers followed by people above 60 years of age and those over 45 years with comorbidities from 1 March onwards. Phase three of the vaccination drive starting from 1 April focusses to cover all people more than 45 years of age. Some states have fared better than others during the first phase of the drive with a little over 11 million vaccinated until 28 February against a target of 30 million. Various media reports and anecdotal evidence suggest that lack of confidence and trust in health services concerns regarding safety and efficacy of vaccines and complacency of not being infected so far were the major challenges in the first phase. The second phase of vaccination drive kicked off with the Prime Minister of India being vaccinated on 1 March – a step that might go a long way in building public trust.

In the period before the vaccine was rolled out most dialogue and public discussion was centred around the supply-side constraints that the government was expected to face. Therefore to smooth out the massive drive of vaccinating a large population the Ministry of Health and Family Welfare (MoHFW) has tried to ensure that all logistical arrangements are in place by ramping up vaccine storage facilities developing the Co-WIN web portal and mobile application for registration conducting trainings of vaccinators and undertaking dry runs of vaccination activities in states (MoHFW 2020a). However insufficient attention was given to the demand-side hurdles such as vaccine hesitancy (MacDonald 2015 Schuster et al. 2015).

Vaccine hesitancy defined by the World Health Organization (WHO) as a “delay in acceptance or refusal of vaccines despite availability of vaccination services” is a key hindrance in achieving optimal vaccination coverage among populations around the globe (Larson et al. 2018). In the first few weeks of vaccine roll-out media reports indicated vaccine hesitancy among healthcare workers in states such as Tamil Nadu and Punjab. Several state-level and regional surveys have since corroborated these anecdotal reports (Jayadevan et al. 2021).

In this article we report findings from an ongoing global online survey of Facebook users exploring the spatio-temporal trends in vaccine hesitancy the reasons behind vaccine hesitancy and its association with actual coverage of Covid-19 vaccination in India.

The COVID-19 Symptom Survey: A unique data source in challenging times
University of Maryland and Carnegie Mellon University (Reinhart and Tibshirani 2020)1 in partnership with Facebook have been conducting the COVID-19 Symptom Survey (CSS) daily in more than 200 countries and in over 50 languages since April 2020. Facebook users around the world are invited to take part in this voluntary survey to self-report Covid-19-related symptoms experience with Covid-19 tests contact with others mental health and economic security disruptions in routine health services vaccine hesitancy and other related topics. The survey is designed to provide valuable information to help monitor and forecast how Covid-19 may be spreading without compromising the privacy of the people who participated in the survey. Facebook does not share background information2 of the survey respondents with the academic partners of the study and in turn the latter do not share individual survey responses with Facebook.

The CSS data present a unique opportunity to explore the spatio-temporal variation in vaccine hesitancy in India particularly at a time when large-scale data collection is challenging. India has traditionally relied on in-person data collection for household surveys; in the absence of reliable sampling frameworks web surveys have generally been on the sidelines (Couper 2000 Couper and Miller 2008). CSS leverages Facebook’s active user base (FAUB) of over 300 million users (Keelery 2020) as the sampling frame which gives it a unique advantage. However since the FAUB may not be representative of the general population at the state and national levels the dataset includes a survey weight for each respondent so that any weighted analysis based on the CSS sample can be used for drawing inference at the level of the target population (Barkay et al. 2020). The survey was launched on 23 April 2020 in India and is currently ongoing with more than 1.5 million interviews as of 27 Feb 2021. The survey is modified from time to time through the inclusion of new sets of questions. Questions on vaccinations have been fielded since 21 December 2020 and have thereafter been asked daily. We base our analysis on 277844 responses from Facebook users on questions regarding vaccination until 27 February 2021.

What is the extent of vaccine hesitancy?
The aggregate weighted estimates at the national level suggest that about 45% of those surveyed would definitely choose to get vaccinated if it were available on the day of the survey and this figure goes up to 71% if we also take into account the ‘Probably Yes’ responses. A significant proportion of individuals (29%) showed hesitancy in taking up the vaccination. More than 16% showed reluctance (‘Probably Not’) and 12% were definite about not taking the vaccine (Table 1). We also looked at the estimates of people expressing vaccine hesitancy from other data sources. The Delhi NCR (National Capital Region) Coronavirus Telephone (DCVTS)- round 4 conducted between 23 December 2020 and 4 January 2021 estimated 39% vaccine hesitancy among people in Delhi NCR. This includes 20% who were certain about not taking the vaccine.

To those who responded by saying they would definitely not get vaccinated (if offered on the day of the survey) CSS included a question about the reasons behind their hesitancy (Figure 1). The top three responses included “I plan to wait and see if it is safe and may get it later” “I think other people need it more than I do right now” and “I am concerned about possible side effects of a COVID-19 vaccine”. However there might be a silver lining to this growing concern of reluctance – the responses indicate that although they were not ready to get vaccinated at the time of the survey conditional upon the proof of safety and efficacy of the vaccines and lack of adverse side effects after vaccination they might choose to get vaccinated in the near future.

Spatial variation in vaccine hesitancy
Next we explore the spatial variation in vaccine hesitancy by estimating the prevalence of vaccine hesitancy across states in India. From Figure 2 below it is clear that Tamil Nadu Punjab Jammu and Kashmir Haryana and Andhra Pradesh are the top-five states in terms of vaccine hesitancy. On the other hand vaccine hesitancy is lower in Kerala Chhattisgarh and Odisha.

Temporal trends in vaccine hesitancy
Since the vaccine hesitancy questions were added to the CSS questionnaire on 21 December 2020 and continued to be part of the survey we explored the temporal trend in vaccine hesitancy in selected states. We plot the seven-day moving average in vaccine hesitancy for selected states from different regions of India. This includes states that reported the highest (Tamil Nadu) and the lowest (Kerala) vaccine hesitancy.

Figure 3 suggests a declining trend in vaccine hesitancy in states like Uttar Pradesh Maharashtra and Gujarat. On the other hand in Andhra Pradesh and to some extent in Tamil Nadu the level of hesitancy is increasing with time. In many states such as West Bengal Maharashtra Andhra Pradesh Delhi Punjab and Tamil Nadu we see a sharp uptick in hesitancy around the time when the vaccination drive was launched in India on 16 January 2021.

Association between vaccine hesitancy and actual level of vaccination
We explored the impact of vaccine hesitancy on actual vaccination coverage in the first phase of the vaccination drive. State-level vaccination numbers were obtained from the widely used covid19india.org. We consider two different denominators3 to measure actual vaccination coverage: (i) in the left panel of Figure 4 we use state-level 2019 population projections as a proxy for the first phase target beneficiaries across states and (ii) in the right panel we considered the state-wise target population of healthcare workers. In both graphs of Figure 4 the horizontal axis is the weighted prevalence of vaccine hesitancy as obtained from the CSS data and the vertical axis is the actual number of vaccinations per million and vaccination coverage rate respectively. The scatter plot and the spline regression function suggest a negative association between vaccine hesitancy and actual vaccination coverage.

Policy implications
Vaccine efficacy is the key to any vaccine approval process. Transparent and accurate information about the vaccine(s) will help alleviate apprehensions and will encourage uptake among the public. The MoHFW has identified four key areas of an effective communication strategy with regards to the Covid-19 vaccine. One of these is to address the issues around the efficacy and safety of the new vaccines. The suggested actions include identifying the traditionally known vaccine-hesitant groups and orienting credible ‘influencers’ to build trust via community engagement practices (MoHFW 2020b). This is an important step that needs to be implemented with full effort. The CSS data also indicate that recommendations coming from WHO officials and government health officials on vaccination uptake is paid more heed as to compared to those of politicians. Disparities across states in hesitancy and in coverage tell us that state-level targeted measures are needed to address the issues in a context-specific manner. Effective communication by building trust is paramount for alleviating confusion and hesitancy around vaccination.

Notes:

  • Both universities collaborated with the broader public health community in designing the survey.
  • Information that was part of a user’s profile but not part of the survey.
  • Ideally one would use the estimated number of target beneficiaries (health workers and essential workers) in the denominator to calculate the Covid-19 vaccination coverage rate. However reliable figures for each state on health workers and essential workers are not readily available.

Do away with flaws in energy policy

In recent years India has been increasingly focussing on augmenting its capacity of producing electricity from renewable energy. As of November 27 2020 38 per cent of India’s installed electricity generation capacity is from renewable sources — 136 gigawatt (GW) out of 373 GW. To some extent this push is due to Paris Agreement where India has committed to an Intended Nationally Determined Contributions target of achieving 40 per cent of its total electricity generation from non-fossil fuel sources by 2030. However it is aiming for even more ambitious target of 57 per cent of the total electricity capacity from renewable sources by 2027. The 2022 electrical power targets include achieving 227 GW (earlier 175 GW) of energy from renewable sources — nearly 113 GW through solar power 66 GW from wind power 10 GW from biomass 5GW from small hydro and 31GW from floating solar and offshore wind power. 

The grid-connected solar power provides electricity at best for eight-ten hours a day. For grid stability as well as providing power to the consumers for the remaining hours of the day the electricity authority has to depend on alternative source which needs to be such that switchover is possible in a short span of time. Technically this is not possible with thermal power plant as it takes more time to build up the load. The ideal candidates are gas-based power plants wind-based power plants and hydroelectric power plants. Thus in other countries where the emphasis is on producing electricity from renewable sources solar capacity augmentation goes hand in hand with other sources like wind-based power hydro power or particularly pumped hydroelectric energy storage (PHES). It has emerged as one of the most important sources of hydroelectric energy storage used by electric power systems for load balancing. The method stores energy in the form of gravitational potential energy of water pumped from a lower elevation reservoir to a higher elevation. Low-cost surplus off-peak electric power is typically used to run the pumps. During periods of high electrical demand the stored water is released through turbines to produce electric power. Although the losses of the pumping process make the plant a net consumer of energy overall the system increases revenue by selling more electricity during periods of peak demand when electricity prices are highest. Pumped-storage hydroelectricity allows energy from intermittent sources (such as solar wind) and other renewables or excess electricity from continuous base-load sources (such as coal or nuclear) to be saved for periods of higher demand. The reservoirs used with pumped storage are quite small when compared to conventional hydroelectric dams of similar power capacity and generating periods are often less than half a day. 

Unlike other countries focusing on renewable energy PHES does not favour well in India’s policy frame. India’s power corporation does not insist on power agreement for 24 hours. Instead they take the burden on themselves to tie up with alternative sources when power from renewable source is not available. They assume that they get a better deal this way from renewable source. However it may not be so when the cost of buying power from alternative source is included. Moreover this encourages lopsided capacity augmentation of solar power. This aggravates load balancing situation in India’s power system. It is of utmost importance to take into account the load balancing aspect to encourage capacity expansion of electricity generation from renewable sources. Thus the increase in solar electricity capacity should go in tandem with other renewable electricity sources. 

The writer is a Professor at the NCAER. The views expressed are personal.

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