India

Major achievements

In 2003, India passed the Electricity Act, which was a key step in developing the Indian energy sector to reform pricing and introduce more market-based mechanisms. It seeks to establish measures conducive to the development of a competitive electricity market, to protect consumer interests and to supply electricity to all areas. The private sector has reacted positively to opportunities created under the Electricity Act.

A number of steps have been taken to reform the electricity market, including privatizing distribution companies in New Delhi and signing an agreement with 22 states with respect to the payment of current and outstanding electricity bills.

The Power Trading Corporation has also been established and power trading has commenced between surplus and deficit regions.

Major challenges

Electricity generation in India is projected to increase at a rate of 4.4 per cent per year until 2030. The electricity sector faces a significant challenge in meeting the increasing demand. Inadequate reserve margins and the poor performance of the transmission and distribution system cause frequent blackouts and brownouts. Generating units are old, low-quality coal is used and defective equipment and insufficient maintenance exacerbate problems with generation capacity.

India’s state electricity boards suffer from high operating costs and pricing policies that keep consumer tariffs far below the cost of supply. This has contributed to discouraging further investment in the sector.

Pricing reforms will help improve the financial health of the electricity sector, but reducing the cost of the electricity supplied is also important. The high cost of electricity can be attributed to high transmission and distribution losses, theft, the high cost of coal, the low efficiency of power plants and high administrative costs.

Targets and goals

India is currently the sixth largest energy consumer in the world and is planning major infrastructure investments to meet the rising electricity demand. Currently, 80 per cent of India’s electricity is generated by coal and hydropower facilities, though the Government plans to increase the capacity by 100,000 MW by 2012. This will include increasing the use of hydropower, gas-based electricity generation and renewable energy.

In 2001, the Government resolved that all villages should be electrified by 2007, with all households electrified by 2012. As part of the tenth Plan, the Government has proposed to connect 62,000 villages to the grid, with a further 18,000 remote villages to be electrified through nonconventional sources.

Renewable Energy

India has a separate Ministry for Nonconventional Energy Sources and has an extensive programme to promote the use of solar energy. Solar power, particularly in remote areas, is considered a better and less expensive option than constructing new generating facilities or connecting remote areas to the main grid.

The Government is also considering large-scale hydroelectric plants to meet its future energy needs and has set ambitious targets to further utilize this resource.

Rich in wind power potential, India has been installing wind turbines at an impressive rate. It is expected to exceed its target of 1,500 MW of wind power in the period 2002-2007.

Stand-alone electricity supply

The poor reliability of the supply, which does not often meet demand, has led to many industrial facilities investing in small on-site generators. About 10 per cent of India’s electricity generation now comes from these facilities.

Despite the high level of urbanization, more than 70 per cent of India’s population still lives in rural areas. As mentioned previously, the Government plans to fully electrify India by 2012. This will include providing electricity to remote villages utilizing renewable energy sources.

Efficiency measures

In 2002, the Energy Conservation Act of October 2001 came into effect. The aim of this Act is to encourage energy efficiency and energy conservation. The Bureau of Energy Efficiency is responsible for coordinating the implementation of this Act.

Environmental impact

India’s carbon emissions are continuing to grow with the country’s increasing energy consumption. Although the Government recognizes the importance of reducing these emissions, the importance of economic growth to the country means that carbon emissions will likely be projected to continue rising.

India’s economic policies, such as high import tariffs on high-quality coal and subsidies on
low-quality coal, have also led to the increased use of low-quality coal. Power facilities are inefficient and not generally fitted with pollution control equipment and therefore emit large quantities of other air pollutants.

The Government has introduced some initiatives to discourage firms from using older, inefficient coal-fired facilities, and has used other financial incentives to encourage the installation of pollution abatement equipment, such as customs waivers and soft loans.

Other pollution abatement mechanisms being considered are user charges, deposit refund systems, marketable permits and taxes. The Government is also investigating the development of environmental standards for products and processes, requiring environmental impact statements in certain areas, and undertaking environmental auditing.

Financial aspects

India’s electricity demand will increase more than threefold over the next 30 years, and the country will need to invest approximately US$ 665 billion in the power sector to meet the demand. However, the power sector is currently suffering financially, and the availability of the necessary financing is uncertain.

The power sector is funded mainly through budgetary support and external borrowing. Previously, the power sector received between 15 and 20 per cent of the total budget. However, this share has declined in recent years on the assumption that some of the required funding will come from the private sector.

Stakeholders

• Central Electricity Regulatory Commission
http://www.cercind.org/

• Central Electricity Authority
http://www.cea.nic.in

• Bureau of Energy Efficiency

• Ministry of Non-Conventional Energy Sources
http://mnes.nic.in/

• Ministry of Power
http://powermin.nic.in/welcome