POWER SECTOR

DR. AHINDRA CHAKRABARTI

PROF. FINANCE AND ENERGY, GREAT LAKES
INSTITUTE OF MANAGEMENT, GURGAON

Overview of Energy Sector in India

The demand for electricity in the country has been growing at a rapid rate and is expected to
grow further in the years to come. The Indian power sector is one of the most diversified in the
world, compared to many developing countries where crude oil and natural gas and renewables
play a major role.

E
lectricity underpins modern civiliza- as concurrent lists (List III). Electricity is with the states has pursued development
tion if we consider what would not under concurrent jurisdiction of the Union of electricity in the country. In the first
work and would not happen with- and the State. five year plan country’s installed capacity
out electric power. The demand for elec- Energy sector is manged at the Central were 2.3 thousand megawatt of which
tricity in the country has been growing at a Government level, by internal coordination utilities would contribute 1.7 thousand
rapid rate and is expected to grow further among five ministries: Ministry of Power, megawatt and non-utilities contributed
in the years to come. The Indian power Ministry of Coal, Ministry of Petroleum 0.6 thousand megawatt. This capacity
sector is one of the most diversified in and Natural Gas, Ministry of Renewable has increased to 258701.46 megawatt at
the world, compared to many developing Energy, Department of Atomic Energy. the end of January 2015. Of this thermal
countries where crude oil and natural gas Each state has their own power ministers comprises of 180361.89 megawatt , hy-
and renewables play a major role. Sources and related departments. dro electric 40867.43 megawatt; nuclear
for power generation in India range from India’s commercial energy consumption 5780.00 megawatt and renewable sourc-
conventional sources like coal, lignite, nat- basket comprises of coal, oil, natural gas, es 31692.14 megawatt. Thermal genera-
ural gas, oil, hydro and nuclear power to nuclear power, hydro electricity and renewa- tion capacity constitutes 69.72%; hydro
other viable nonconventional sources like bles. In terms of million tonne oil equivalent constitutes 15.80%; nuclear constitutes
wind, solar and agriculture and domestic (MTOE) it has gone up from 320.8 in 2003- 2.23% and renewable constitute 12.25%
waste. Because of insufficient fuel sup- 04 to 595.0 MTOE in 2012-13. Table -1 be- of the total. Among the thermal capacity
ply and power generation and transmis- low shows over this period growth in the to produce power from coal is 60.37%;
sion capacity, the country has problems of commercial energy basket has registered a gas 8.88% and diesel 0.46 %.
electricity shortage. CAGR of 6.37%; but highest growth has Generation of power was 6.6 Billion Kilo-
As the growth of the economy in gen- taken place in renewables followed by coal, watt on 1950-51 increased to 1160.00 B
eral and the manufacturing sector in par- hydro-electricity, nuclear, natural gas and kwH by 2013-14. Latest information as
ticular is largely dependent on creation of oil. Coal retains largest share in the com- available show that at the end of Novem-
suitable power/energy infrastructure, the mercial energy consumption basket fol- ber 2014 power generated was 846.4 B
policy focus in India has been on infra- lowed by oil. Coal and Oil taken together kwH for eight month period. In all likeli-
structure and energy investment. Such in- forms around 85% and 84% vin 2003 and hood the financial 1014-15 will generate
vestment has increased manifold over time 2013 respectively, though over this period 1269.6 BkwH. India has constantly been
with increased private-sector participation consumption of natural gas and hydro elec- plagued with a demand supply gap in
in the country. The Constitution of India tricity has gone up substantially. the Power sector. Such a gap is a major
determines the jurisdiction over infrastruc- hindrance to the growth of a developing
ture sectors in the country exclusively for Installed Capacity and Generation of economy like India, though of late data
Central (Union )Government (List –I), some Power show that shortage is coming down with
sectors exclusively for State Governments India has followed five-year plan based increase in generation of electricity.
(List –II), and some sectors for both Central economic growth model. As result of Consumer profile of India’s electricity is:
and State Governments commonly known this Central Government in collaboration Industry 45% followed by 22% domestic

TABLE- 1: INDIA’S COMMERCIAL ENERGY CONSUMPTION BASKET

Consumption (MTOE)
Coal Oil Natural Gas Nuclear Hydro Electricity Renewables Total
2003 156.8 116.5 26.6 4.1 15.7 1.2 320.8
2013 324.3 175.2 46.3 7.5 29.8 11.7 595
Source: BP- World Energy Statistics 2030

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 POWER SECTOR

consumers and 18% consumed by agricul- dition target was revised to 62374 MW. In from Internal and Extra Budgetary Re-
ture sector. Rest of the Electricity is con- actual terms capacity addition during XI sources (IBER).
sumed by commercial sector, railways and Five Year plan was 54964 MW.
others. In the 12th Five year plan (2012-17), Ultra Mega Power Project: To acceler-
To fulfill the objectives of National Elec- country targeted to install 88537mega- ate power generation of power earlier
tricity Policy, a capacity addition of 78,700 watt of power capacity with proposed the Government of India had launched
MW had been proposed in the XI Five year outlay of Rs.11,35,535 crores comprising an initiative for the development of coal-
Plan. During Midterm appraisal carried out Rs. 124771crores from Government Budg- based Ultra Mega Power Projects (UMPPs),
by Planning Commission, the capacity ad- etary Support and Rs. 10,10,764 crores each with a capacity of 4,000 MW. The

TABLE-2: INSTALLED CAPACITY (IN MW) AS ON 31 JANUARY, 2015

Modewise Break Up
Ownership Thermal
Sector Coal Gas Diesel Total Nuclear Hydro Renewable Grand Total
State 55890.5 6974.42 602.61 63467.53 0 27482 3803.67 94753.2
Private 53525.38 8568 597.14 62690.52 0 2694 27888.47 93272.99
Central 46775.01 7428.83 0 54203.84 5780 10691.43 0 70675.27
Total 156190.89 22971.25 1199.75 180361.89 5780 40867.43 31692.14 258701.46
Source: CEA Report

TABLE- 3: AVERAGE TARIFF AND AVERAGE COST

Unit 2009-10 2010-11 2011-12 2012-13 2013-14
A.Average Tariff Paise 327 367 387 439 480
B.Average Cost Paise 471 506 570 593 593
C.Gap(A-B) Paise -56 -261 -183 -154 -113
D.Commercial Loss
Rs. in Crores 63914.9 65997 93868 86906.2 71270.8
Without Subsidy
Source: Annual Report (2013-14) on the working of State Power Utilities & Electricity Departments ; (Power & Energy Division) Planning Commission, February 2014. Pg. no. 159.

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POWER SECTOR

TABLE -4 : TENTATIVE REGION-WISE BREAK-UP OF RENEWABLE POWER TARGET TO BE ACHIEVED BY THE YEAR 2022
Solar Power (MW) Wind (MW) SHP (MW) Biomass Power (MW)
Northern 31120 8600 2450 4149
Western 28410 22600 125 2875
Southern 26531 28200 1675 2612
Eastern 12237 135 244
North Eastern 1205 615
Island 31 600 120
All India 99533 60000 5000 10000

objective behind the initiative was to en- to be augmented to about 72,250MW responsibility for distribution and supply of
sure cheaper tariffs utilizing economies of by the end of the XII Plan (2016-17).  power to rural and urban consumers rests
scale, catering to the need of a number of with the states. The distribution arm of the
States and to mitigate the risk relating to Grid Code: The Indian Electricity Grid power sector had been the domain of the
tie up of land, fuel, water and other statu- Code (IEGC), a regulation made by the SEBs for a very long time which faced fi-
tory clearances etc. Central Commission in exercise of powers nancial problems due to lack of efficient
conferred under the Electricity Act 2003, pricing mechanism, its implementation
Transmission Sector: Development of lays down the rules, guidelines and stand- and collection of revenues. Over and above
transmission sector did not get due impor- ards to be followed by various persons and distribution and supply losses also poses a
tance earlier which has led to some imbal- participants in the system to plan, develop, threat. Consequently the SEB’s financial
ances. Investments in the transmission sec- maintain and operate the power system, and technical difficulties led to financial
tor have been therefore been inadequate in the most secure, reliable, economic and problems for generating companies also.
due to the heavy emphasis on generation efficient manner, while facilitating healthy To alleviate this situation, SEBs were un-
capacity. In most states, the existing dis- competition in the generation and supply bundled known as DISCOMs ; in some
tribution network has been formed by ex- of electricity. cases were encouraged to be privatized.
panding and interconnecting smaller and Along with this to reduce transmission
disjointed networks. Consequently, there Distribution Sector: Power being concur- and distribution losses, the Accelerated
are several deficiencies in the transmission rent subject under Indian Constitution, the Power Development & Reform Programme
system, such as high losses and low reli-
ability. At the end of 31st December, 2014
total transformation capacity measured in
MVA were 2,19,579.2 spread over differ-
ent regions of the country.

Creation of National Grid: Develop-

ments in power sector emphasize the
need for accelerated implementation of
National Power Grid on priority to en-
able scheduled/unscheduled exchange of
power as well as for providing open ac-
cess to encourage competition in power
market. In view of above, nationwide
synchronous power grid, interconnecting
all the five regional grids of the country,
has been established on December 31,
2013.  Powergrid Corporation, a cen-
tral level undertaking is strengthening its
transmission network to establish inter-
state and inter-regional links for enhanc-
ing the capacity of National Grid in a time
bound manner to ensure optimal utili-
zation of uneven distribution of energy
resources. As on December 31, 2014,
National Grid with inter-regional power
transfer capacity of about 46,450 MW
has been established. The inter-regional
power transfer capacity is envisaged

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 POWER SECTOR

Application Segment Target For Phase I (2010-13) Achievements still March 2013

Grid Solar Power (large plants;roof top ;distribution grid plants) 1100 MW 1644.86 MW

Off Grid Solar Applications 200 MW 252.5 MW

Solar Thermal Collectors (Solar Cooking ;Solar Cooling ;SWHS;industrial

7 million sq mtrs 7.01 million sq mtrs
process heat applications)

(APDRP) was launched in 2001, for the tricity generation. The research and devel- mercial losses established IT-enabled en-
strengthening of Sub Transmission and opment in this sector have also helped in ergy accounting /auditing, and improve
Distribution network and reduction in better efficiency, affordability and quality collective efficiency, a new scheme, which
AT&C losses; which was relaunched af- of the products. As a result many solar en- subsumes the R-APDRP and named, as
ter a period in the name of Restructured ergy systems and devices are commercially Integrated Power Development Scheme
–APDRP. available with affordable cost in the mar- (IPDS). To boost agricultural production
Performance of the State Power Utili- ket. Keeping this in view Jawaharlal Nehru and protect the interest of rural masses
ties: A cursory look at the Report by erst- National Solar Mission was launched on a new programme has been launched
while Planning Commission show that the 11th January, 2010. named Deendayal Upadhyaya Gram Jyoti
average tariff over the past few years has The Mission target included (i) deploy- Yojana (DDUGJY) focuses on separating
undoubtedly increased (see Table-3 be- ment of 20,000 MW of grid connected agricultural and non-agricultural feeders
low), but the rise has not been commen- solar power by 2022, (ii) 2,000 MW of and strengthen rural electrification efforts
surate with the increase in the cost of sup- off-grid solar applications including 20 in the country. Taking advantage of the Su-
ply. As a result, the gap between the cost million solar lights by 2022, (iii) 20 million preme Court decision to cancel 214 coal-
of supply and the average tariff has been sq. m. solar thermal collector area, (iv) to mining licences granted between 1993
widening over the years. The gap has in- create favourable conditions for develop- and 2010, the new government had in-
creased from 56 paise/kWh in 2009-10 to ing solar manufacturing capability in the troduced a new regime of auctioning of
183 paise/kWh in 2011-12. It is expected country; and (v) support R&D and capacity coal mines for power sector.
to decline to 113 paise/kWh in 2013-14. building activities to achieve grid parity by The new government marked a funda-
2022. The Mission was to be implemented mental shift, a leap forward in the energy
Commercial losses and Issue of Subsi- in three phases. For the first phase of the policy, to promote solar and renewable
dy: State governments provide Subsidy on Mission, the target was to achive Grid So- energy as the prime driver of energy se-
energy sales to the distribution companies, lar Power 1100 MW and achievement was curity for the country. The government
where some of the States direct electric- 1644.86 MW till March 2013. In addition, plans to achieve 1,75,000 MW of power
ity companies to provide electricity at sub- a target for Off Grid Solar applications by 2022, from current installed capacity of
sidized rates to agriculture and domestic of 200 MW capacity equivalent where 31692.14 MW. Solar power will be around
consumers. The gross subsidy on agricul- achievement were 252.5 MW and 7 mil- 56 % plus 99588 MW in the total. Below
ture, domestic and inter-state is likely to lion square meter Solar Thermal Collector presented (see Table -4) regional distribu-
increase from a level of Rs.70,012 crore in area; the achievements were 7.01 million tion of different renewable energy sources
2009-10 to Rs.1,19,621 crore in 2013-14 sq mtrs. the country wants to achieve.
(AP). Distribution companies also make
efforts to recover the shortfall of revenue New Government’s proactive stance: Conclusion
due to the subsidized power supply, from With the new government assumed pow- Ever since Thomas Edison fired up his
the industrial and commercial consumers er in the centre, optimism grew all accorss power station in Lower Manhattan, the
pay a tariff higher than the cost of supply. the sectors of the economy and power world has become progressively more
sector in particular. The new government’s electrified. In the developed part of the
Solar and renewable Energy: India aim is to achieve energy security and gen- world it is taken for granted and yet the
is endowed with a very vast solar en- erate enough power to keep the country’s world cannot operate without it. For de-
ergy potential. Most parts of the country economic engine chugging and at afford- veloping countries, shortages of electric-
have about 300 sunny days. Hence solar able price that would make the country ity take their toll on people’s lives and on
energy has high potential, which can be competitive in manufacturing arena. Cur- economic growth. India one of the world’s
utilized through solar photovoltaic tech- rent focus of the power ministry is to put biggest green house gas emitter after US
nology which enables direct conversion national assets to good use to keep energy and China, when emphasizes on solar and
of sunlight into energy and solar thermal costs affordable and address peak shortag- wind power is also expected to strengthen
technologies. Over the last three decades es. The new government has taken a few the country’s standing at global climate
several solar energy based systems and de- steps : To bring cohesiveness power, coal change negotiations. Meeting future
vices have been developed and deployed and renewable ministry has been brought electricity needs means challenging and
in India which are successfully providing under one minister to take a comprehen- sometimes wrenching decisions about the
energy solutions for lighting, cooking, wa- sive view about power sectors problem. choice of fuel required to keep the lights
ter heating, air heating, drawing and elec- To reduce aggregate technical and com- on and power flowing 

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