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    Systemic Issues Faced by Power Sector in India

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    Yuvraj Gogoi
    The document discusses challenges facing India's power sector and potential solutions. It notes that India's power generation relies heavily on fossil fuels like coal, which are expensive to extract. Transmission and distribution face issues like high technical and commercial losses. Discoms operate at a loss due to low tariffs that do not cover costs. The draft Electricity Amendment Bill aims to address some issues but may not solve systemic flaws. Reforms around subsidy rationalization, cross-border trade, and performance incentives could help achieve the goal of power for all by 2022.

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    Systemic Issues Faced by Power Sector in India

    Uploaded by

    Yuvraj Gogoi
    71 views3 pages
    The document discusses challenges facing India's power sector and potential solutions. It notes that India's power generation relies heavily on fossil fuels like coal, which are expensive to extract. Transmission and distribution face issues like high technical and commercial losses. Discoms operate at a loss due to low tariffs that do not cover costs. The draft Electricity Amendment Bill aims to address some issues but may not solve systemic flaws. Reforms around subsidy rationalization, cross-border trade, and performance incentives could help achieve the goal of power for all by 2022.

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    Power-sector-in-india

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    The document discusses challenges facing India's power sector and potential solutions. It notes that India's power generation relies heavily on fossil fuels like coal, which are expensive to extract. Transmission and distribution face issues like high technical and commercial losses. Discoms operate at a loss due to low tariffs that do not cover costs. The draft Electricity Amendment Bill aims to address some issues but may not solve systemic flaws. Reforms around subsidy rationalization, cross-border trade, and performance incentives could help achieve the goal of power for all by 2022.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    71 views3 pages

    Systemic Issues Faced by Power Sector in India

    Uploaded by

    Yuvraj Gogoi
    The document discusses challenges facing India's power sector and potential solutions. It notes that India's power generation relies heavily on fossil fuels like coal, which are expensive to extract. Transmission and distribution face issues like high technical and commercial losses. Discoms operate at a loss due to low tariffs that do not cover costs. The draft Electricity Amendment Bill aims to address some issues but may not solve systemic flaws. Reforms around subsidy rationalization, cross-border trade, and performance incentives could help achieve the goal of power for all by 2022.

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    You are on page 1of 3

    Power Sector in India

    drishtiias.com/printpdf/power-sector-in-india

    This article is based on “Toothless reform move for power sector” published in The Economic Times on
    29/04/2020. It talks about the challenges and solutions pertaining to India’s power sector.

    Indian government’s Power for all by 2022 vision, aims to provide access to affordable, reliable, sustainable
    and modern energy. In order to achieve this mission, the government has recently announced to make certain
    amendments to the Electricity Act 2003.

    Some major changes being proposed by draft Electricity (Amendment) Bill, 2020, includes the constitution
    of the Electricity Contracts Enforcement Authority, the appointment of distribution sub-franchisees,
    development of an exhaustive National Renewable Energy Policy, and rationalisation of tariffs, among
    others.

    The draft is well-intentioned but it may not address the systemic flaws in the power sector.

    Systemic Issues Faced by Power Sector in India


    Power Generation Issues

    Fossil fuel derived energy generation: Thermal power based on fossil fuel such as coal, natural gas and
    diesel accounts for 80% of the country's generation.
    Moreover, the majority of plants in India are old and inefficient.
    Higher Cost of Fuel: Coal extraction from state-run Coal India (a near-monopoly), has stagnated due to
    delayed environmental clearances, land acquisition troubles and little investment in advanced
    technologies.
    Many power companies have to look for coal mines overseas and source more expensive imports
    (despite having abundant coal reserves).

    Transmission and Distribution Issues

    Tariffs haven't risen enough for years to cover costs for subsidies in the agriculture sector. Also, high
    aggregate technical and commercial (AT&C) losses, has forced electricity distributors (discoms) into
    losses as high as 40% in some states, while the country-wide average is 27%.

    Note:

    The discoms suffer Aggregate Technical and Commercial (AT&C) Losses.

    Technical Loss: It is due to the flow of power in transmission and distribution systems.
    Commercial Loss: It is due to the theft of electricity, deficiencies in metering, etc.

    1/3
    Discoms are not able to pay the power generators regularly simply because they have a cash flow
    problem, which stems from the low tariffs awarded by the regulatory commissions.
    Such low tariffs result in a wide gap between the average per-unit cost of supply (ACS) and
    average revenue realised (ARR).
    These issues have resulted in the outstanding dues of discoms, which has even increased after the
    implementation of UDAY (Ujwal Discom Assurance Yojana).
    Owing to the poor financial health of the dicoms, there are less new investments in the electricity sector
    (particularly by the private sector).
    High industrial/commercial tariff and the cross-subsidy regime have affected the competitiveness of the
    industrial and commercial sectors.

    Way Forward
    Subsidy Reforms: For agriculture, the direct subsidy per acre of land through Direct Benefit Transfer
    (DBT) may be considered instead of providing separate subsidies for fertilizers, electricity, crop insurance
    etc.
    The KUSUM scheme provides a suitable alternative to the power subsidy model in agriculture.
    The scheme intends to promote the use of solar pumps for agriculture and make provisions the
    local discoms should buy surplus power from the farmer.
    There is a need to ensure effective enforcement of rationalization of cross-subsidy.
    The government needs to actively promote cross-border electricity trade to utilize existing/upcoming
    generation assets.
    The SAARC electricity grid is a step in the right direction.
    To manage the demand for power, it is necessary to introduce 100% metering-net metering, smart
    meters, and metering of electricity supplied to agriculture.
    There is also a need to Introduce performance-based incentives in the tariff structure.

    2/3
    Drishti Mains Question

    Discuss the challenges in achieving the Indian government’s vision of Power for all by
    2022.

    Watch Video At: https://youtu.be/jh_IHIcZ5GQ

    This editorial is based on “Strategic shift: On home isolation of mild coronavirus cases” which was
    published in The Hindu on April 30th, 2020. Now watch this on our youtube channel.

    3/3

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