Mr. Ramnath Kovind completes his tenure as President in July.  With the Election Commission of India expected to notify the election dates this week, we look at how India will elect its next President.  

As the Head of the State, the President is a key part of Parliament.  The President calls the two Houses of Parliament into session on the advice of the Council of Ministers.  A Bill passed by the Lok Sabha and Rajya Sabha does not become a law unless assented to by the President.  Further, when Parliament is not in session, the President holds the power to sign a law with immediate effect through an Ordinance.

Who elects the President?

The manner of election of the President is provided in Article 55 of the Constitution.  Members of Parliament and Members of Legislative Assemblies (MPs and MLAs) including elected representatives from the Union Territories (UTs) of Delhi and Puducherry form the electoral college, which elects the President.  At least 50 elected representatives must propose a candidate, who must then be seconded by 50 other electors to run for the President's office.  Members of Legislative Councils and the 12 nominated members of Rajya Sabha do not participate in the voting process.

The history behind having proposers and seconders 
The requirement of having a certain number of electors propose a candidate was introduced after the experience of the first five Presidential elections.  It was common then for several candidates to put themselves up for election when they did not have a remote chance of getting elected.  In the 1967 Presidential elections, 17 candidates contested, but nine of them did not win a single vote.  This repeated again in the 1969 elections, when out of 15 candidates, five did not secure any votes.

To discourage the practice, candidates had to secure at least 10 proposers and seconders each to contest the elections from the 1974 election onwards.  A compulsory security deposit of Rs 2,500 was also introduced.  The changes were brought in through an amendment to the Presidential and Vice-Presidential Act, 1952

In 1997, the Act was further amended to increase the security deposit to Rs 15,000 and the minimum number of proposers and seconders to 50 each.


How are the votes calculated?

The Presidential election uses a special voting to tally the votes.  A different voting weightage is assigned to an MP and an MLA.  The value of each MLA's vote is determined based on the population of their state and the number of MLAs.  For instance, an MLA from UP has a value of 208 while an MLA from Sikkim has 7 (see Table 1).  Due to a Constitutional Amendment passed in 2002, the population of the state as per the 1971 census is taken for the calculation.

The value of an MP's vote is the sum of all votes of MLAs across the country divided by the number of elected MPs.  

How will the numbers look in 2022?

In the 2017 Presidential elections, electors from 31 states and the UTs of Delhi and Puducherry participated. However, in 2019, with the Jammu and Kashmir (J&K) Reorganization Act, the number of states were reduced to 30. The J&K Assembly was dissolved as per the Act and a new legislature for the UT of J&K is yet to be reconstituted. UTs with legislatures were not originally part of the electoral college for the election of the President. The Constitution was amended in 1992 to specifically include the UTs of Delhi and Puducherry. Note that for MLAs from J&K to participate in future Presidential elections, a similar Constitutional amendment would be required to be passed by Parliament.

Based on the assumption that J&K is not included in the 2022 Presidential election, the total number of votes of MLAs in 2022 elections will have to be adjusted.  The 87 Jammu and Kashmir MLAs must be removed from the total number of MLAs of 4,120.  Jammu and Kashmir’s contributing vote share of 6,264 must also be reduced from the total vote share of 549,495.  Adjusting for these changes, 4,033 MLAs will participate in the 2022 elections and the combined vote share of all MLAs will add up to 543,231.

Table 1: The value of votes of elected MLAs of different states at the 2017 Presidential Election

Name of State

Number of Assembly seats

Population (1971 Census)

Value of vote of each MLA

Total value of votes for the state (B x D)

A

B

C

D

E

Andhra Pradesh

175

2,78,00,586

159

27,825

Arunachal Pradesh

60

4,67,511

8

480

Assam

126

1,46,25,152

116

14,616

Bihar

243

4,21,26,236

173

42,039

Chhattisgarh

90

1,16,37,494

129

11,610

Goa

40

7,95,120

20

800

Gujarat

182

2,66,97,475

147

26,754

Haryana

90

1,00,36,808

112

10,080

Himachal Pradesh

68

34,60,434

51

3,468

Jammu and Kashmir

87

63,00,000

72

6,264

Jharkhand

81

1,42,27,133

176

14,256

Karnataka

224

2,92,99,014

131

29,344

Kerala

140

2,13,47,375

152

21,280

Madhya Pradesh

230

3,00,16,625

131

30,130

Maharashtra

288

5,04,12,235

175

50,400

Manipur

60

10,72,753

18

1,080

Meghalaya

60

10,11,699

17

1,020

Mizoram

40

3,32,390

8

320

Nagaland

60

5,16,449

9

540

Odisha

147

2,19,44,615

149

21,903

Punjab

117

1,35,51,060

116

13,572

Rajasthan

200

2,57,65,806

129

25,800

Sikkim

32

2,09,843

7

224

Tamil Nadu

234

4,11,99,168

176

41,184

Telangana

119

1,57,02,122

132

15,708

Tripura

60

15,56,342

26

1,560

Uttarakhand

70

44,91,239

64

4,480

Uttar Pradesh

403

8,38,49,905

208

83,824

West Bengal

294

4,43,12,011

151

44,394

NCT of Delhi

70

40,65,698

58

4,060

Puducherry

30

4,71,707

16

480

Total

4,120

54,93,02,005

 

5,49,495

Source: Election Commission of India (2017); PRS.

The value of an MP’s vote correspondingly will change from 708 in 2017 to 700 in 2022. 

Value of one MP's vote =   Total value of all votes of MLAs      =   543231     =    700 
                                              Total number of elected MPs                 776

Note that the value of an MP’s vote is rounded off to the closest whole number. This brings the combined value of the votes of all MPs to 543,200 (700 x 776). 

What is the number of votes required to win?

The voting for the Presidential elections is done through the system of single transferable vote. In this system, electors rank the candidates in the order of their preference. The winning candidate must secure more than half of the total value of valid votes to win the election. This is known as the quota. 

Assuming that each elector casts his vote and that each vote is valid:

Quota = Total value of MP’s votes + Total value of MLA’s votes + 1                                                        
                                                        2

= 543200 + 543231 +1     =   1086431 +1     =    543,216 
                2                                   2

The anti-defection law which disallows MPs from crossing the party line does not apply to the Presidential election. This means that the MPs and MLAs can keep their ballot secret.  

The counting of votes takes place in rounds. In Round 1, only the first preference marked on each ballot is counted. If any of the candidates secures the quota at this stage, he or she is declared the winner. If no candidate secures the quota in the first round, then another round of counting takes place. In this round, the votes cast to the candidate who secures the least number of votes in Round 1 are transferred. This means that these votes are now added to the second preference candidate marked on each ballot. This process is repeated till only one candidate remains. Note that it is not compulsory for an elector to mark his preference for all candidates. If no second preference is marked, then the ballots are treated as exhausted ballots in Round 2 and are not counted further.  

The fifth Presidential election which elected Mr. VV Giri is the only instance when a candidate did not secure the quota in the first round.  The second preference votes were then evaluated and Mr. Giri secured 4,20,077 of the 8,36,337 votes and was declared the President.

The only President of India to win unopposed 
India’s sixth President, Mr. Neelam Sanjiva Reddy who served from 1977 to 1982 was the only President to be elected unopposed.  37 candidates had filed their nominations for the 1977 elections, however on scrutiny, the nomination papers of 36 candidates were rejected by the Returning Officer and Mr. Reddy was the only candidate standing.

Last week, the Power Finance Corporation reported that state-owned power distribution companies across the country made financial losses amounting to Rs 68,832 crore in 2022-23.  This is four times higher than the losses witnessed in 2021-22, and roughly equivalent to the annual budget of a state like Uttarakhand.   This blog examines some of the causes and implications of such losses.

Overview of financial losses

For several years now, electricity distribution companies (discoms), which are mostly state-owned, have witnessed steep financial losses.  Between 2017-18 and 2022-23, losses accumulated to over three lakh crore rupees.  In 2021-22, discom witnessed substantial reduction in their losses, primarily because states released 1.54 lakh rupees in subsidies to clear pending dues.  State governments provide discoms with subsidies, so that domestic and agricultural consumers receive affordable power.  These payments are typically delayed which creates cash flow constraints, and leads to an accumulation of debt.  In addition, costs incurred by discoms in 2021-22 remained unchanged.

Note: Data from 2020-21 onwards does not include Odisha, and Dadra & Nagar Haveli and Daman and Diu since their distribution function was privatised in 2020-21.  Data for Ladakh is available from 2021-22 onwards.  Data for Jammu and Kashmir is not available.  The Delhi Municipal Council Distribution Utility has been included from 2020-21 onwards.
Sources: Power Finance Corporation reports for various years; PRS.

As of 2022-23, losses have increased again to reach Rs 68,832 crore.   This increase has been driven by rising costs.  At a per unit level, the cost of supplying one kilowatt of electricity rose from 7.6 rupees in 2021-22, to 8.6 rupees in 2022-23 (See Table 1).

Table 1: Financial details of state-owned power distribution companies

Details

2019-20

2020-21

2021-22

2022-23

Average cost of supplying power (ACS)

7.4

7.7

7.6

8.6

Average revenue realised (ARR)

6.8

7.1

7.3

7.8

Per unit loss (ACS-ARR)

0.6

0.6

0.3

0.7

Total losses (in Rs crore)

-60,231

-76,899

-16,579

-68,832

Note: Data from 2020-21 onwards does not include Odisha, and Dadra & Nagar Haveli and Daman and Diu since their distribution function was privatised in 2020-21.  Data for Ladakh is available from 2021-22 onwards.  Data for Jammu and Kashmir is not available.  The Delhi Municipal Council Distribution Utility has been included from 2020-21 onwards.
Sources: Power Finance Corporation reports for various years; PRS.

Purchase of electricity from generation companies (gencos) forms about 70% of a discom’s total costs, and coal is the primary source for generating electricity.  The following chain of events took place in 2022-23: (i) consumer demand for electricity rose by 10% over the previous year, as compared to a 6% year-on-year increase in the past 10 years, (ii) coal had to be imported to meet the increased demand, and (iii) global coal prices were elevated.

Coal imported at elevated prices to keep up with rising electricity demand

In 2022-23, demand for electricity increased by 10% over 2021-22.  Between 2008-09 and 2018-19, demand increased at an annual growth rate (CAGR) of 6%.  Electricity demand grew as the economy grew (at 7%), and largely came from domestic and agricultural consumers.  These consumer categories account for 54% of the total electricity sales, and their demand rose by 7%.

Sources: Central Electricity Regulatory Commission; PRS.

Electricity cannot be stored at scale, which means that generation must be scheduled depending on anticipated demand.  The Central Electricity Authority anticipates annual demand for each year.  It estimated that demand in 2022-23 would be at 1,505 billion units.   However, the actual demand was higher than anticipated in the first few months of 2022-23 (See Figure 3).

To meet this demand, electricity generation had to be ramped up.  Coal stocks had already depleted from 29 million tonnes in June 2021 to eight million tonnes in September 2021, on account of high demand in 2021-22.  To ensure uninterrupted supply of power, the Ministry of Power directed gencos to import coal.  The Ministry noted that without imports, widespread power cuts and blackouts would have occurred.

Sources:  Load Generation Balance Report 2022 and 2023, Central Electricity Authority; PRS.

Coal imports rose by about 27 million tonnes in 2022-23.  While this constituted only 5% of the overall coal used in the sector, the price at which it was imported significantly impacted the sector.  In 2021-22, India imported coal at an average price of Rs 8,300 per tonne.   This rose to Rs 12,500 per tonne in 2022-23, a 51% increase.  Coal was primarily imported from Indonesia, and prices shot up due to the Russia-Ukraine war, and demand surge by countries like India and China.   

Sources: Ministry of Power; Ministry of Statistics and Programme Implementation; PRS.

Coal import situation going forward

In January 2023, the Ministry of Power advised gencos to import 6% of the required coal, to ensure sufficient stock until September 2023.   It noted that due to floods and variable rainfall in various parts of the country, hydro generation capacity reduced by about 14%.   This put additional burden on coal based thermal generation in 2023-24.  Following this, in October 2023, the Ministry directed all gencos to continue using at least 6% imported coal until March 2024.  

image

Sources: Ministry of Coal; PRS.

Structural issues in the power sector and its impact on state finances

Discoms witness persistent financial losses due to certain structural issues.  Their costs are typically high because of old contracts with generation companies (gencos).  Power purchase costs in these contracts  do not account for production efficiencies over the years, and costs remain unchanged.  Tariffs are only revised every few years, to ensure that consumers are protected from supply chain shocks.  As a result, costs are carried forward for a few years.  In addition, discoms sell electricity to certain consumers such as agricultural and residential consumers, below cost.  This is supposed to primarily be recovered through subsidy grants provided by state governments.  However, states often delay subsidy payments leading to cash flow issues, and accumulation of debt.  In addition, tariff recovery from the power sold is not optimal.  

Losses reported in the generation sector have also increased.  In 2022-23, state-owned gencos reported losses worth Rs 7,175 crore, as compared to the Rs 4,245 crore in 2021-22.  Rajasthan accounted for 87% of these, at Rs 6,278 crore.  Note that under the Late Payment Surcharge Rules, 2022, discoms are required to make upfront payments to gencos.  

Risk to state finances

Persistent financial losses, high debt and guarantees extended by states continue to pose a risk to state finances.  These are contingent liabilities for state governments, i.e., in the event a discom is unable to repay its debt, the state would have to take it over.  

Several such schemes have been introduced in the past to bail discoms out (See Table 2).  As of 2022-23, discoms have an outstanding debt worth Rs 6.61 lakh crore, 2.4% of the national GDP.  Debt is significantly high in states such as Tamil Nadu (6% of GSDP), Rajasthan (6% of GSDP), and Uttar Pradesh (3% of GSDP).  Previous Finance Commissions have recognised that strengthening discom finances is key in minimising the risk to state finances.    

Table 2: Key government schemes for the turnaround of the distribution sector over the years

Year

Scheme

Details

2002

Bailout Package

States take over the debt of state electricity boards worth Rs 35,000 crore, 50% waiver of interest payable by state electricity boards to central PSUs

2012

Financial Restructuring Package

States take over 50% of the outstanding short-term liabilities worth Rs 56,908 crore

2015

Ujwal Discom Assurance Yojana (UDAY)

States take over 75% of the debt of discoms worth Rs 2.3 lakh crore and also provide grants for any future losses

2020

Liquidity Infusion Scheme

Discoms get loans worth Rs 1.35 lakh crore from Power Finance Corporation and REC Limited to settle outstanding dues of generators, state governments provide guarantee

2022

Revamped Distribution Sector Scheme

Central government to provide result-linked financial assistance worth Rs 97,631 crore for strengthening of supply infrastructure

Sources: NITI Aayog, Press Releases of the Ministry of Power; PRS.

For more details on the impact of discom finances on state finances, see here.  For more details on structural issues in the power distribution sector, see here.  
 

ANNEXURE

Table 3: Cost and revenue structure of discoms on energy sold basis (in Rs per kw)

Details

2019-20

2020-21

2021-22

2022-23

Average cost of supplying power (ACS)

7.4

7.7

7.6

8.6

    of which

       

    Cost of procuring power 

5.8

5.9

5.8

6.6

Average revenue realised (ARR)

6.8

7.1

7.3

7.8

    of which

       

    Revenue from sale of power

5.0

4.9

5.1

5.5

    Tariff subsidy

1.3

1.4

1.4

1.5

       Regulatory income and revenue grant under UDAY

0.3

0.1

0.0

0.2

Per unit loss

0.6

0.6

0.3

0.7

Total financial losses

-60,231

-76,899

-16,579

-68,832

Sources: Power Finance Corporation reports for various years; PRS.

Table 4: State-wise profit/loss of power distribution companies (in Rs crore)

State/UT

2017-18

2018-19

2019-20

2020-21

2021-22

2022-23

Andaman and Nicobar Islands

-605

-645

-678

-757

-86

-76

Andhra Pradesh

-546

-16,831

1,103

-6,894

-2,595

1,211

Arunachal Pradesh

-429

-420

NA

NA

NA

NA

Assam

-259

311

1,141

-107

357

-800

Bihar

-1,872

-1,845

-2,913

-2,966

-2,546

-10

Chandigarh

321

131

59

79

-101

NA

Chhattisgarh

-739

-814

-571

-713

-807

-1,015

Dadra & Nagar Haveli and Daman & Diu

312

-149

-125

NA

NA

NA

Delhi

NA

NA

NA

98

57

-141

Goa

26

-121

-276

78

117

69

Gujarat

426

184

314

429

371

147

Haryana

412

281

331

637

849

975

Himachal Pradesh

-44

132

43

-153

-141

-1,340

Jharkhand

-212

-730

-1,111

-2,556

-1,721

-3,545

Karnataka

-2,439

-4,889

-2,501

-5,382

4,719

-2,414

Kerala

-784

-135

-270

-483

98

-1,022

Ladakh

NA

NA

NA

NA

-11

-57

Lakshadweep

-98

-120

-115

-117

NA

NA

Madhya Pradesh

-5,802

-9,713

-5,034

-9,884

-2,354

1,842

Maharashtra

-3,927

2,549

-5,011

-7,129

-1,147

-19,846

Manipur

-8

-42

-15

-15

-22

-146

Meghalaya

-287

-202

-443

-101

-157

-193

Mizoram

87

-260

-291

-115

-59

-158

Nagaland

-62

-94

-477

-17

24

33

Puducherry

5

-39

-306

-23

84

-131

Punjab

-2,760

363

-975

49

1,680

-1,375

Rajasthan

-11,314

-12,524

-12,277

-5,994

2,374

-2,024

Sikkim

-29

-3

-179

-34

NA

71

Tamil Nadu

-12,541

-17,186

-16,528

-13,066

-9,130

-9,192

Telangana

-6,697

-9,525

-6,966

-6,686

-831

-11,103

Tripura

28

38

-104

-4

-127

-193

Uttar Pradesh

-5,269

-5,902

-3,866

-10,660

-6,498

-15,512

Uttarakhand

-229

-808

-323

-152

-21

-1,224

West Bengal

-871

-1,171

-1,867

-4,261

1,045

-1,663

State Sector

-56,206

-80,179

-60,231

-76,899

-16,579

-68,832

Dadra & Nagar Haveli and Daman & Diu

NA

NA

NA 

242

148

104

Delhi

109

657

-975

1,876

521

-76

Gujarat 

574

307

612

655

522

627

Odisha 

NA

NA

-842

-853

940

746

Maharashtra 

NA

590

1,696

-375

360

42

Uttar Pradesh 

182

126

172

333

256

212

West Bengal 

658

377

379

398

66

-12

Private Sector

1,523

2,057

1,042

2,276

2,813

1,643

All-India

-54,683

-78,122

-59,189

-77,896

 -13,766 

 -67,189 

Note: Minus sign (-) indicates loss; Dadra & Nagar Haveli and Daman & Diu discom was privatised on April 1, 2022; New Delhi Municipal Council Distribution utility has been added from 2020-21 onwards. 
Sources: Power Finance Corporation reports for various years; PRS.