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India Power Sector

Text Box: PICTURE 3 [Title:] The overall power sector performance in India has been compared to a "leaky bucket", where the more funds are invested into the system, the more quickly they spill out without benefits. Improving the efficiency of the country's power distribution system could bring enormous benefits from the savings, which could be applied to other sectors of the society. Those savings could well be used by the government to increase healthcare services, expand education, and reduce poverty, and in doing so increase the electricity market.

While installed power capacity has greatly increased in the 55 years since India 's independence, most of the population either remains without connection to the public power system or receives infrequent and unreliable service characterized by frequent power cuts and fluctuating voltages. India 's power sector experiences high system losses throughout the country's transmission and distribution (T&D) networks at about 40-50% of the electricity generated. Factors which contribute to such astronomical energy losses are a combination of technical and non-technical issues. Poor metering, lack of investments in distribution networks resulting in overloaded feeders, ill-maintained substations with aging transformers, and other technical shortfalls are further amplified by inefficient billing and inadequate revenue collection as well as simply un-metered supply and wide spread electricity theft. The lack of consumer education in the rural sector, rampant political interference, and inefficient electricity use, among other factors, only further diminish the already weakened power sector.

In this cascade of loss, the state electricity boards (SEBs) are in financial crisis and continue to default on their obligations to central utilities, particularly the National Thermal Power Corporation (NTPC), the largest supplier of power to the distribution utilities in the country. These deficits ultimately lead to the general financial deterioration on the Indian power sector. Hence, any solution that addresses the problem of sector profitability must necessarily target the issue of high transmission and distribution losses.

Power distribution reform is fundamental to improving commercial performance and financial viability of the power sector in India . Recent initiatives include the enactment of the Electricity Act 2003 (PDF), which provides a framework for a more competitive, transparent and commercially driven power sector. The Act recognizes the need for a strategy that distinguishes urban power distribution from rural electricity supply. It also facilitates the establishment of participatory models for rural distribution including rural electric cooperatives (RECs), rural gram panchayats (village level governments), distribution franchisees, etc.

The Accelerated Power Development Reform Program (APDRP) initiative , aimed at financing the modernization of sub-transmission and distribution networks demonstrate s the recognition and commitment by the MoP to urgently address the issue of reducing losses and improving the quality of power delivery. The APDRP program also includes a system of local management and energy accounting through widespread metering in every state utility's distribution systems composed of a number of urban and rural distribution sub-areas, known as "distribution circles".

The National Electricity Policy (PDF) approved by the Union Cabinet of India in February 2005, seeks to expedite rural electrification and ensure supply of power at a reasonable rate for the overall development of rural India . The policy has set the minimum lifeline consumption of electricity at one unit (kilowatt hour) a household a day, and envisions fully meeting that power availability on demand by the year 2012. In addition, the Government of India is in the process of issuing a final policy on rural electrification.

Further details on legal, regulatory and policy framework can be obtained from the Indian Ministry of Power website.

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