Problems faced by the power sector in India

Problems faced by the power sector in India

Power or electricity is a very essential constituent of infrastructure affecting the economic growth and welfare of the country. India’s power sector is one of the key sectors which form the foundation of the growth of the country. The installed power capacity of the country is around 331GW. Despite the fact that India has surplus energy, it is facing huge problems which serve as an obstacle to progress such as high transmission losses, inadequate distribution coverage, shortage of power plants, high rate of unemployment, and so on.

Challenges faced by the Power Sector

Fuel Security Concerns: Fuel security in India has been a serious concern for a long time. The availability of natural gas is a major constraint in the Power Sector and given that 20,000 MW of thermal capacity now runs on non-availability of natural gas, the Power Sector is staring at a huge capacity addition crisis. Electricity generation costs are also going up due to the increased reliance on imported coal. This has prompted power companies to raise tariffs for electricity delivered to customers.

Transmission & Distribution Losses: Distribution line losses are among the most vexing problems in the Indian power sector. High distribution-line losses are huge in electricity produced in India. This is a serious issue that is not only causing an enormous loss for the power distributors (state electricity boards) but also endangering consumers with poor quality of supply.

Financial Health of State Discoms: Financial sluggishness and operational challenges have hampered the capacity of State Discoms to bring power from surplus generators onto the transmission network resulting in their inability to fulfill genuine transmission/supply.

Aging Power Plants: Power and Energy Sector in India faces various challenges, the number one being the energy demand-supply gap. The sector is experiencing low growth due to myriad of reasons like aging power plants and transmission network.

Under-procurement of Power by States: The State Power Providers have faced continuous under-procurement of power from the distribution companies resulting in a significant gap between committed supply and realizable demand.

Interstate Disputes: The power sector in India is facing a number of challenges, including the fact that India is a federal democracy, and therefore due to this, there is not the availability of water all the time to operate hydro plants. The inadequate transmission capacity and the lack of cumulative generation capacity above the peak demand also contribute to high costs and less efficiency. The government needs to address national-level policy measures to make sure electric power is inexpensive, reliable and sustainable.

Policy Paralysis: When the government is not having a cohesive macro-level policy and with a huge gap in the guidelines set by the central government of India and states, it has led to policy paralysis and rising electricity tariff.

Coordination Issues: Coordination issues are a result of the responsibilities for energy sector management being divided between various ministries (such as those of Petroleum and Natural Gas for oil, Ministry of Coal for Coal, Ministry of Power for conventional power sources, and Ministry of New & Renewable Energy (MNRE) and Central Electricity Authority (CEA) for renewables).

Steps to tackle the Foregoing Challenges

Fuel Reforms: Energy reforms are being envisaged at present to ensure the availability and purchase of electricity in the country. While some measures have been taken by the Government so far, certain challenges and difficulties are yet to be overcome and resolved. These include increased participation of the private sector in coal production, easing of the regulatory framework for allocation and development of coal blocks & gas infrastructure as well as ramping up coal production by both public and private sector in a time-bound manner.

Balanced Regulatory Interventions: The power sector is in one of its most crucial phases. It has completely transformed from the traditional to the competitive generation and transmission sector. Technological transformation, globalization and liberalization have sprung several opportunities for the sector to grow exponentially.

Increased Financing Facilities for Energy Sector: Finance is not free-flowing into the sector and there are various reasons for it. The lack of availability of long-term credit lines, the risk perception in financing non-traditional energy projects, lack of banking infrastructure, etc., are some of them. Financing has to meet certain critical objectives such as enhancing the country’s access to finance for sustainable development; increasing energy generation capacities at highly competitive prices for decarbonized energy; produce sufficient renewable electricity, enhance further integration of grid and strengthen existing transmission links with neighboring countries to work as a regional interconnected grid and therefore; tendering transparent bidding process with strong technical and financial support from Investment banks, private equity firms, developers, banks, etc., need to be ensured to get the projects constructed on time.

Public private partnership: A collaborative effort between the private sector and the government is necessary for the development of this critical sector. Age-old processes will also need to be reworked, since efficiency is directly proportional to technology advancements. A paradigm shift from big power plants to microgrids with distributed generation is going to help in achieving greater efficiency and reducing costs.

Taxation: The PSUs are the power-generating companies in India. They provide electricity to their customers at a tariff lower than what is charged by the private sector. However, this is because they cross-subsidise more expensive tariffs for their large corporate customers, as well as renewable energy.

Cooperative federalism: Cooperative federalism is an arrangement between the Centre and the states without diminishing the dignity, honor, and prestige of the states. It provides a practical approach to resolve inter-state water disputes in a manner that promotes cooperative spirit among the states.

Merger of ministries: The decision of the Government to subsume the Ministry of Power under a mega 'Energy Ministry' is a welcome and long-overdue correction. It makes sense to bring all the policy-related activities into one ministry for better coordination and implementation.

Reduction of transmission losses: Transmission losses have an important role in discussing and reviewing the electric power sector problems. Transmission and distribution losses are part of the load that is proposed by the authorities who are in charge of the various regions. The purpose is to share their load with other countries while observing the necessary standards and regulations.