The Indian power sector is remarkably characterised as one where electricity availability has always lagged behind demand. India still has close to 75 million households (almost 45% of all rural households) with no access to electricity, but the existing system is stumbling in its efforts to even cater to the demand of the population currently connected to the grid. Given this background, the overarching objective of any forthcoming electricity policy must be to provide 24x7 power to all the sectors of the country at adequate price levels, in a cost effective, resource efficient and financially sustainable manner.
In order to achieve such an objective, there is a need to simultaneously tackle two challenges. The first is to ensure that the entire population base has access to electricity and, thus, the intensive electrification of rural households needs to be a priority. The second is to ensure sufficient availability of power to meet the nationwide demand, in an efficient manner.
Based on our assessment of the challenges facing the power sector, we focus on: i) the low level of utilisation of the stock of generation assets; ii) the inability of power deficit states (or utilities) from being able to procure power owing to their poor financial health; iii) the poor implementation of non-discriminatory open-access that would have facilitated a competitive electricity market; and iv) the overarching issue of the exposure of the banking sector to a flailing power sector and the inability to fund future development of the sector.
This policy report attempts to provide an overview of the issues that have resulted in the status quo of the power sector and provides a time-bound suite of recommendations, which can set future developments on the right course.
Read: Agenda for a Reformed Power Sector in India: Risk, Resource, Relay, and Restructuring