Power Scenario in India and its implications

across various states

Submitted to:

Prof. Shailendra Nigam

Submitted By:

Prashant Pandey
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 FPG/0810/112

Acknowledgement

It is privilege to express my gratitude to several people who have helped me directly or

indirectly to conduct this project work.

I express our gratitude to my internal guide Prof. Shailendra Nigam for his co-
operation and encouragement.

. I hereby take this opportunity to acknowledge with my sincere and

deep sense of reverence to all the faculty members and everyone who has helped me
complete my project. You people were an inspiration and helped me a lot by sparing a
lot of your valuable time to guide me throughout my project work

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Table of Contents:

1. Introduction 4

2. Indian Energy Scenario 7

3. Long Term Energy Scenario for India 12

4. Energy Pricing in India 14

5. Energy Pricing across various states 15

6. Power Structure across states 17

7. Power Sector- Changing Scenario 25

a) Captive Power Scenario 14

b) Unscheduled Interchanges 31

c) Electricity Act 2003 34

8. Some Important Facts 39

9. Summary and Recommendations 41

10. Bibliography 42

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Introduction:

Electricity is one of the most vital infrastructure inputs for economic

development of a country. The demand of electricity in India is enormous and is
growing steadily. The vast Indian electricity market, today offers one of the highest
growth opportunities for private developers. Since independence, the Indian electricity
sector has grown many folds in size and capacity. The generating capacity under
utilities has increased from a meager 1362 MW in 1947 to 112058 MW as on
31.3.2004. Electricity generation, which was only 4.1 billion KWh in 1947, has risen to a
level of over 558.134 billion KWh in 2003-2004. In its quest for increasing availability of
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electricity, the country has adopted a blend of thermal, hydel and nuclear sources. Out
of these, coal based thermal power plants and in some regions, hydro power plants
have been the mainstay of electricity generation. Oil, natural gas and nuclear power
account for a smaller proportion. Thermal plants at present account for 70 percent of
the total power generation, hydro electricity plants contribute 26 per cent and the
nuclear plants account for the rest. Of late, emphasis is also being laid on development
of non-conventional energy sources i.e. solar, wind and biomass. In the case of the
developing countries, the energy sector assumes a critical importance in view of the
ever increasing energy needs requiring huge investments to meet them.

Energy can be classified into several types based on the following criteria:

• Primary and Secondary energy

• Commercial and Non commercial energy
• Renewable and Non-Renewable energy

Primary and Secondary Energy

Primary energy sources are those that are either found or stored in nature. Common
primary energy sources are coal, oil, natural gas, and biomass (such as wood). Other
primary energy sources available include nuclear energy from radioactive substances,
thermal energy stored in earth's interior and potential energy due to earth's gravity.
Primary energy sources are mostly converted in industrial utilities into secondary
energy sources; for example coal, oil or gas converted into steam.

Commercial Energy and Non Commercial Energy

The energy sources that are available in the market for a definite price are known as
commercial energy. By far the most important forms of commercial energy are
electricity, coal and refined petroleum products. Commercial energy forms the basis of
industrial, agricultural, transport and commercial development in the modern world. In
the industrialized countries, commercialized fuels are predominant source not only for
economic production, but also for many household tasks of general population.

Examples: Electricity, lignite, coal, oil, natural gas etc.

The energy sources that are not available in the commercial market for a price are
classified as non-commercial energy. Non-commercial energy sources include fuels
such as firewood, cattle dung and agricultural wastes, which are traditionally gathered,

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and not bought at a price used especially in rural households. These are also called
traditional fuels. Non-commercial energy is often ignored in energy accounting.

Examples: Firewood, agro waste in rural areas; solar energy for water heating,
electricity generation, for drying grain, fish and fruits; animal power for transport,
threshing, lifting water for irrigation, crushing sugarcane; wind energy for lifting water
and electricity generation

Renewable and Non-Renewable Energy

Renewable energy is energy obtained from sources that are essentially inexhaustible.
Examples of renewable resources include wind power, solar power, geothermal energy,
tidal power and hydroelectric power .The most important feature of renewable energy is
that it can be harnessed without the release of harmful pollutants.
Non-renewable energy is the conventional fossil fuels such as coal, oil and gas, which
are likely to deplete with time.

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Indian Energy Scenario

Coal dominates the energy mix in India, contributing to 55% of the total primary energy
production. Over the years, there has been a marked increase in the share of natural
gas in primary energy production from 10% in 1994 to 13% in 1999. There has been a
decline in the share of oil in primary energy production from 20% to 17% during the
same period.

Energy Supply

Coal Supply

India has huge coal reserves, at least 84,396 million tonnes of proven recoverable
reserves (at the end of 2003). These amounts to almost 8.6% of the world reserves and
it may last for about 230 years at the current Reserve to Production (R/P) ratio. In
contrast, the world's proven coal reserves are expected to last only for 192 years at the
current R/P ratio.

Reserves/Production (R/P) ratio- If the reserves remaining at the end of the year are
divided by the production in that year, the result is the length of time that the remaining
reserves would last if production were to continue at that level.
India is the fourth largest producer of coal and lignite in the world. Coal production is
concentrated in these states (Andhra Pradesh, Uttar Pradesh, Bihar, Madhya Pradesh,
Maharashtra, Orissa, Jharkhand and West Bengal).

Oil Supply

Oil accounts for about 36 % of India's total energy consumption. India today is one of
the top ten oil-guzzling nations in the world and will soon overtake Korea as the third
largest consumer of oil in Asia after China and Japan. The country's annual crude oil
production is peaked at about 32 million tonne as against the current peak demand of
about 110 million tonne. In the current scenario, India's oil consumption by end of 2007
is expected to reach 136 million tonne(MT), of which domestic production will be only
34 MT. India will have to pay an oil bill of roughly $50 billion, assuming a weighted
average price of $50 per barrel of crude. In 2003- 04, against total export of $64 billion,
oil imports accounted for $21 billion. India imports 70% of its crude needs mainly from
gulf nations. The majority of India's roughly 5.4 billion barrels in oil reserves are located
in the Bombay High, upper Assam, Cambay and Krishna-Godavari. In terms of sector
wise petroleum product consumption, transport accounts for 42% followed by domestic
and industry with 24% and 24% respectively. India spent more than Rs.1, 10,000 crore
on oil imports at the end of 2004.

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POWER SHORTAGE:

The power sector has been characterized by shortage of supply vis-à-vis demand. The
peak shortage has been hovering between 11 to 13% (approx.) and energy shortage
between 6 to 8.5% (approx).

Energy Shortage

Year Demand(billion Available(Billion Shortfall(Billion (%)

Kwh) Kwh) Kwh)
2002-2003 424,505 390,330 34,175 8.1
2003-2004 446,584 420,235 26,349 5.9
2004-2005 480,430 450,594 29,836 6.2
2005-2006 507,216 467,400 39,816 7.8
2006-2007 522,537 483,350 39,187 7.5
2007-2008 545,983 497,890 48,093 8.8
2008-2009 559,264 519,398 39,866 7.1

Peaking Shortage

Year Demand(MW) Available(MW) Shortfall(MW) %

2002-2003 65,435 58,042 7,393 11.30
2003-2004 67,905 58,445 9,460 13.90
2004-2005 72,669 63,691 8,978 12.40
2005-2006 78,037 67,880 10,157 13.00

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2006-2007 78,441 69,189 9,252 11.80
2007-2008 81,492 71,547 9,845 12.20
2008-2009 84,574 75,066 9,508 11.20

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POWER SECTOR SCENARIO:

Reliable and affordable electricity is the backbone of a nation's economy and its
availability has to be ensured on a sustainable basis. The present power scenario is as
under:-

• The installed capacity which was 1713 MW in 1950's has gone up to 112058
MW as on 31.3.04 as shown on chart-1
• The gross electricity generation as on 31.12.1950 was 5106 GWH which was
increased to 558134 GWH in March'04 as on chart-2
• The Transmission & Distribution network has registered a growth of 707752 Ckt.
Kms as on 31.3.04 from 29271 Ckt. Kms. in 1950's as on chart-3
• The per capita consumption of electricity has increased to 506.69 KWh. as on
31.3.03 from 15.6 KWh. as on 31.12.50 as shown on chart-4

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 Chart 2 - GROWTH OF TOTAL ELECTRICITY GENERATION IN INDIA

Chart 3 –Growth of Transmission and Generation lines in India

Note: The circuit kms of lines includes HVDC, 400kV, 220kV, 110kV, 66kV, 33kV,
11kV and distr. lines upto 500 Volts

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 Chart 4- GROWTH OF PER CAPITA CONSUMPTION OF ELECTRICITY

Sector Wise Energy Consumption in India

The major commercial energy consuming sectors in the country are classified as shown
in the figure. As seen, industry remains the biggest consumer of commercial energy
and its share in the overall consumption is 49%.

Long Term Energy Scenario for India

COAL

Coal is the predominant energy source for power production in India, generating
approximately 70% of total domestic electricity. Energy demand in India is expected to
increase over the next 10-15 years. However, to meet expected future demand,
indigenous coal production will have to be greatly expanded. Production currently
stands at around 290 Million tonnes per year, but coal demand is expected to more
than double by 2010. Indian coal is typically of poor quality and as such requires being
beneficiated to improve the quality. Coal imports will also need to increase dramatically
to satisfy industrial and power generation requirements.

OIL

India's demand for petroleum products is likely to rise from 97.7 million tonnes in 2001-
02 to around 139.95 million tonnes in 2006-07, according to projections of the Tenth
Five-Year Plan. The plan document puts compound annual growth rate (CAGR) at 3.6
% during the plan period. Domestic crude oil production is likely to rise marginally from
32.03 million tonnes in 2001-02 to 33.97 million tonnes by the end of the 10th plan
period (2006-07). India's self sufficiency in oil has consistently declined from 60% in the

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50s to 30% currently. Same is expected to go down to 8% by 2020. As shown in the
figure, around 92% of India's total oil demand by 2020 has to be met by imports.

Electricity

India currently has a peak demand shortage of around 14% and an energy deficit of
8.4%. Keeping this in view and to maintain a GDP (gross domestic product) growth of
8% to 10%, the Government of India has very prudently set a target of 215,804 MW
power generation capacity by March 2012 from the level of 100,010 MW as on March
2001, that is a capacity addition of 115,794 MW in the next 11 years. In the area of
nuclear power the objective is to achieve 20,000 MW of nuclear generation capacity by
the year 2020. The National Electricity Policy of the Government stipulates that “reliable
and quality power at affordable price is to be made available to all by the year 2012, i.e.
by the end of 11th Plan. In this regard, the projection of the demand of electricity is
made by 16th Electricity Power Survey Committee.
As per the data made by 16th
Electric Power Survey, energy requirement at the end of 10th Plan, i.e. March'07 is 720
million units (MU), which is likely to increase to 975 MU. Accordingly, a target of
addition of 41,110 MW of generating capacity, comprising of 14,373MW hydro, 25,417
MW thermal and 1300 of nuclear has been planned for the 10th Plan period (2002-07).
However, based on the latest status of monitoring, it is expected that about 40,000 MW
(comprising of 12,000 MW hydro, 25,500 MW thermal and 2500 MW nuclear) is likely to
be added during the 10th Plan period. In order to meet the target of making quality
power available to all by the year 2012 (end of 11th Plan), a capacity addition of 67,439
MW comprising of 23,359 MW hydro, 38,165 MW thermal and 5915 MW nuclear has
been planned for 11th Plan. However, the latest indications suggest that an addition of
61,000 MW comprising of 21,000MW hydro, 35,000 MW thermal and 5000 MW nuclear
could be feasible during 11th Plan period. Even with this level of capacity addition, the
country could face a peaking shortage of about 12.7% and energy shortage of 5.6% by
the end of 11th Plan

INDIA’S PERSPECTIVE PLAN FOR ZERO DEFICIT POWER BY 2011/12(SOURCE

TENTH AND ELEVENTH FIVE-YEAR PLAN PROJECTIONS)

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 Thermal(Coal) Gas/LNG/Diesel(MW) Nuclear(MW) Hydro(MW) Total(MW)
(MW)
Installed
capacity
as on 61,517 Gas: 10,153 2720 25,116 100,01
0
March Diesel: 864
2001
Addition
al
53,333 20,408 9380 32,673 115,79
Capacit
4
y (2001-
2012)

Energy Pricing in India

Price of energy does not reflect true cost to society. The basic assumption underlying
efficiency of market place does not hold in our economy, since energy prices are
undervalued and energy wastages are not taken seriously. Pricing practices in India like
many other developing countries are influenced by political, social and economic
compulsions at the state and central level. More often than not, this has been the
foundation for energy sector policies in India. The Indian energy sector offers many
examples of cross subsidies e.g., diesel, LPG and kerosene being subsidized by petrol,
petroleum products for industrial usage and industrial, and commercial consumers of
electricity subsidizing the agricultural and domestic consumers.

Coal

Grade wise basic price of coal at the pithead excluding statutory levies for run-of-mine
(ROM) coal are fixed by Coal India Ltd from time to time. The pithead price of coal in
India compares favorably with price of imported coal. In spite of this, industries still
import coal due its higher calorific value and low ash content.

Oil

As part of the energy sector reforms, the government has attempted to bring prices for
many of the petroleum products (naphtha, furnace oil, LSHS, LDO and bitumen) in line

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with international prices. The most important achievement has been the linking of diesel
prices to international prices and a reduction in subsidy. However, LPG and kerosene,
consumed mainly by domestic sectors, continue to be heavily subsidized. Subsidies
and cross-subsidies have resulted in serious distortions in prices, as they do not reflect
economic costs in many cases.

Natural Gas

The government has been the sole authority for fixing the price of natural gas in the
country. It has also been taking decisions on the allocation of gas to various competing
consumers. The gas prices vary from Rs 5 to Rs.15 per cubic meters.

Electricity

Electricity tariffs in India are structured in a relatively simple manner. While high tension
consumers are charged based on both demand (kVA) and energy (kWh), the low-
tension (LT) consumer pays only for the energy consumed (kWh) as per tariff system in
most of the electricity boards. The price per kWh varies significantly across States as
well as customer segments within a State. Tariffs in India have been modified to
consider the time of usage and voltage level of supply. In addition to the base tariffs,
some State Electricity Boards have additional recovery from customers in form of fuel
surcharges, electricity duties and taxes. For example, for an industrial consumer the
demand charges may vary from Rs. 150 to Rs. 300 per kVA, whereas the energy
charges may vary anywhere between Rs. 2 to Rs. 5 per kWh. As for the tariff
adjustment mechanism, even when some States have regulatory commissions for tariff
review, the decisions to effect changes are still political and there is no automatic
adjustment mechanism, which can ensure recovery of costs for the electricity boards.

Energy pricing:
The energy pricing in India is basically done by Central Electricity Regulatory
Commission. These rates are then exercised upon various states. The states however,
have the right to file a petition against these rates upon which these rates are reviewed
and if found high, then these rates are further revised. The pricing is basically divided
into two segments as follows:

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1
Energy pricing across various States:

State Energy Charges Demand Charges

(Rs./kVA of Billing
(Paise/Kwh) Demand/Month)

Kerla Rs. 270 Rs. 300

Madhya Pradesh Rs. 385 Rs. 288
Maharashtra Rs. 430 Rs. 290
Uttar Pradesh Rs. 351 Rs. 331
Uttaranchal Rs. 382 Rs. 390

Note: These rates have been taken with respect to High Tension Users and may vary
from state to state and from year to year

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Power Structure across States:

Indian power grid system is divided into five regions namely Northern, North Eastern,
Eastern, and Southern and Western Regions. The state of Uttar Pradesh is situated in
the Northern part of India and forms a major constituent of northern region. These
regions have independent load dispatch centre that manages the flow of power in their
jurisdiction. At present, the inter-regional flows of power are quite low. Hence, each
region may be considered as an island due to which the power generated in each
region is distributed in their jurisdiction only.

Uttar Pradesh

Hydro Nuclear Thermal

Other Central Sector Northern

Regional Generation Regional
Grids Grids

UPRVN UPPCL Private

THERMAL GRID Sector
PROJECTS Generation
(Coal/Gas
based) UPPCL
HCM (Co-generation Project)
DISTRIBUTION
UPJVN
NETWORK
(hydro
projects)

End Users of Uttar

Pradesh

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UP’s Current Delivery System

The Northern Region consists of Delhi, Himachal Pradesh, Punjab, Uttar Pradesh,
Haryana, Jammu & Kashmir, Rajasthan and newly formed Uttaranchal State. Each
state will have their own power generation plants (State Government owned) managed
by respective State Electricity Boards / Corporations. In Uttar Pradesh, power
transmission and distribution is managed by Uttar Pradesh Power Corporation Ltd.
(UPPCL), Lucknow. State government’s thermal power generation plants are managed
by the state authority Uttar Pradesh Rajya Utpadan Nigam (UPRUN) and Hydro power
plants by the state authority Uttar Pradesh Jal Vidyut Nigam (UPJVN).

In addition to the
state govt. owned power generation plants, there are private owned power generation
plants exporting power to UPPCL and central government (Government of India) owned
power generation plants managed by Government of India Enterprises like National
Thermal Power Corporation Ltd., Nuclear Power Corporation Ltd., National Hydro
Electric Power Corporation Ltd. etc. Power generated by all generation units is being
fed to the grid (Northern Grid), which is accessible to all states forming part of the
northern grid. Power mix may be thermal, hydro, wind, nuclear. In India, nuclear power
generation is allowed only by central sector organizations.

Current Power Scenario:

As mentioned, UPPCL distribution network gets major portion of thermal and hydro
power from UPRVUN and UPJVN respectively along with the central sector generation
plants and a small portion from private sector power generation /cogeneration plants
and ultimately distributed to the consumer / end users.

Source wise P resent installed

capacity and power generation in UP shows that the share of UPPCL coal based power

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projects is 73 % of total UPPCL installed capacity and 77% of total generation capacity
in the state. Detailed break-up is as under.

S.NO Energy Source Installed Capacity in MW Net Generation in

Mkwh
A. UPPCL
1. Thermal 4,092 17,565
2. Hydro 1,494.5 5,232
3. Micro Hydel 26.43 29
4. Total(UPPCL) 5,612.78 22,826
B. U.P’s Share in Central 18,087.41
Schemes
(Coal/gas/hydro/nuclear) 3,166.49

C. Import from other - 156.80

sources (incl.
renewable)

TOTAL 8,844.27 41,069.80

Above table shows that present share of Uttar

Pradesh in central power generating schemes is quite substantial i.e. 35% in installed
capacity and 44% in generation. Import from other sources includes power generation
in UP by private sector projects, renewable energy projects (bagasse/biomass based
cogenerations) etc.

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 Energy and Peak Demand Requirements, Availability & Shortages:

Particulars Figures, per day

Energy Requirement,

Million Units (MU) 140.79

Energy Availability, in MU 123.97

Energy Shortage in MU 16.82

(%) (13.56%)
Peak Demand 7,138.00
Registered, in MW

Peak Demand Met, in MW 5,733.00

Peak Demand Shortage, 1,404.00

in MW (24.50%)

Plans of Capacity Additions:

S.No. Ref./Document Name Thermal MW Hydro MW Total MW

As per CEA
A. planning

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1. Ninth 5 year Plan 4,580 2 4,622

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 2. Tenth 5 year 4,250 2,776 7,026
plan

3. Eleventh 5 year plan 500 3,867 4,367.0

0

B. As per UPPCL
planning

1. Ninth 5 year Plan NA NA NA

2. Tenth 5 year 2,050 727.6 2,777.6

plan

3. Eleventh 5 year plan NA NA NA

The above table shows as against the

requirement of 7,026 MW of capacity additions only 2,777.6 MW is planned to be added
by UPPCL (this excludes the additions by centre) This huge gap between capacity
addition plans of central Government and state Government will lead to create a huge
shortfall of demand and supply situation of the state. To reduce this, UP government is
encouraging the private participation in power generation sector, however, yet the due
success is to be achieved.

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 Capacity Additions by UPPCL till the year 2007

S.No Project Details Fuel Used Capacity(MW)

A. Thermal Power Projects Coal
1. Aanpara-c Project Gas 2*500
2. Panki Expansion Project Coal 1*210
3. Parichha Expansion 2*210
Project
Gas
4. Hardua Expansion 2*210
Project
Sub Total 2050
B. Hydel Projects
1. Maneri Bhali- II 304.00
2. Lakhwad Vyasi 420.00
3. Shitala 3.60
4. Sub total 727.60
C. Total (Thermal+Hydel) 2,777.60

The additional data collected from official documents/website of UP Government in

which list of new projects proposed / sanctioned and new expansion proposals which
indicates the future capacity additions. These projects are available for private sector
promoters.

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 Summary of New Projects Available in UP for private sectors

S.No Project Details Capacity Remarks

1. Thermal Projects 1,000 UPPCL Project

50% is expected to be
completed by 10th Pan
and the balance by 11th
2. Hydro Projects 2,023 Plan

The availability of projects and the opportunities regarding generation of power

is immense with the greater emphasis on hydro power projects since the primary
input i.e. water is available in abundance. But due to poor maintenance and lack
of technology and infrastructure, the power scenario in the state of Uttar Pradesh
is still in doldrums wherein some interior places still face acute shortage of
proper supply.

ENERGY SCENARIO OF MAHARASHTRA

a) Power Supply and Consumption Position in Maharashtra

Maharashtra is the largest power generating state in India with the largest
electricity system capacity. As on March 31, 2003, the installed capacity in
Maharashtra is 15,208 MW, which is about 14 per cent of the total installed
capacity in India. The state is generating around 3,500 MU to 4,000 MU per
month. The main source of power generation in Maharashtra is fossil fuels such
as coal and natural gas. A little is being contributed by the hydro and nuclear
energy sources. Fuel-wise installed capacity in Maharashtra is given below:

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 S.No Fuel Capacity MW In percent
1. Coal 9,414 61.9
2. Natural Gas 2,224 14.6
3. Hydro 2,874 18.9
4. Wind 399 2.6
5. Nuclear 297 2.0
Total 15,208 100

As per the above table, fossil fuels viz. coal and natural gas constitute 76.5
percent of the total installed capacity and hydro comprise only 18.9 per cent. In the
above table, share from other sources such as cogeneration is not included due to their
small contribution.

As of March 31, 2002, the total installed capacity of power in

Maharashtra was 14,420 MW. Power generation in the state increased in 2001-02 by
6.72 percent as compared to 2000-01. These figures take into account the contribution
of agencies like Tata Power Company Ltd., BSES Ltd. and Dabhol Power Company
(DPC).

S.No ITEM INSTALLED CAPACITY(MW)

1. MSEB 9,771
2. DPC 728
3. TATA Power 1,774
4. BSES 500
Central Share for 2,375

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 5. Maharashtra(NTPS & NPC)
TOTAL 15148

Electricity Generation Pattern in Maharashtra(2000-2006)

Category MUs In Percent

Thermal(Steam) 53,887 84.20
Gas 2,740 4.28
W.H.R 1,255 1.96
Nuclear 1,138 1.78
Hydro 4,979 7.78
Total 63,999 100.00

Note: The values taken here are average values of generation during the given
time period

Electrical Energy Utilisation Pattern for Maharashtra during 2000-06

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 Category MUs In Percent
Industrial 17,435.1 37.58
Agriculture 8,730.2 18.82
Street Light 648.0 1.40
Domestic 11,901.1 25.65
Commercial 4,393.1 9.47
Railways 1,639.5 3.53
Miscellaneous 1,590.8 3.43
Interstate 62.4 0.13
Total 46,400.20 100.00

Presently, the state of Maharashtra is facing a shortfall of 2,500 MW. In order to

match the demand, new capacity additions to the tune of about 12,500 MW are
slated to come up over the next two Five Year Plans.
The state is facing severe power
deficit and energy shortage. As per the data published by CEA, the power deficit
is as high as 19.8 per cent or 2,718 MW against a peak demand of 13,697 MW and
13.4 per cent energy shortage or 11,680 million units during the period 2002-2006.
This shortfall is so significant that the state cannot ignore the power supply
position from the perspective of development.

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Growth in the energy demand in Maharashtra:

In the 16th Electric Power Survey, the CEA has projected an average growth rate of 5.9
per cent for the period ending 2017 for Maharashtra. Details of energy growth and
capacity requirement up to the end of 12th Five Year Plan is given below:

Plan Period 2001-02 2006-07 2011-12 2016-17

Energy 79,593 1,06,892 1,42,911 1,90,167
Requirement(MkWh)
Peak Load(MW) 12,472 16,716 22,348 29,738
Growth(percent) 7.43 6.03 5.98 5.88
Average Growth

Rate

(Per Cent) 5.95

As indicated above, the present peak demand is 13,697 MW and only 10,979 MW is
met during the period 2002-03. Including the present deficit and projected growth rate,
about 18,759 MW shall be added till the end of 12th Plan Period. Considering the
immediate requirements of energy and till the end of the present 10th Plan Period of
2006-07, about 5,737 MW shall be installed during the next four years. Another 5,632
MW shall be added during 11th Plan period ending 2012.

Investments in Power Projects as planned during the 10th and 11th Five Year Plan

• Approval given to 5 Power Projects of the M.S. Electricity Board;

Expected Capacity Addition – 3,040 MW, Except Urban Gas Based
Project, work order in rest of Projects issued
• Urban Gas Based Expansion Project ( 1,040 MW)
• New Parli Unit II (250 MW)
• Paras Expansion Project II (250 MW)
• Khaperkheda Expansion Project (500 MW)
• Bhusawal Expansion Project (1000 MW)

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 Further generation capacity addition is expected in coming 4 / 5 years,
though 5 Power Projects Planned by the Generation Company

• Chandrapur Expansion Project (800 MW)

• Koradi Expansion & Replacement of Set Project (1,600 MW)
• Parli Replacement of Set Project (250 MW)
• Paras Replacement of Set Project (250 MW)
• Bhusawal Replacement of set project (250 MW)
• Power production from Dabhol Plant commenced
• Policy for development of small (25 MW) Hydro Projects on “Build,
Operate for 30 years & Transfer” Basis
• First State in the country have its own non-conventional energy Policy and
independent Ministry for non-conventional Energy, proposed to establish non-
conventional Energy Generation Projects of aggregate capacity 1,000 MW from
“Urga Ankur Nidhi” of Rs. 418 Crore, 3 Projects have already been sanctioned
recently
• In accordance with the new Wind Energy Policy, Projects of aggregate capacity
1,500 MW commissioned
• Single Phasing Scheme commissioner in the State. Out of 12,617 targeted
villages, the number of beneficiary villages so far is 11,068 which has facilitated
Load Management of about 510 MW and has also facilitated continuous power
supply to Gaothan & Street Light
• Separate Gaothan Feeder Scheme commissioned in the State, out of 7,367
targeted villages, the number of beneficiary villages so far is 1,500 which has
facilitated Load Management of about 250 MW
• Distribution of electricity in & around Bhiwandi City entrusted to Distribution
Franchise, similarly destruction of electricity in some part of the Nagpur city is
also being handed over to Franchisee
• Exemption for five years from payment of Electricity Duty to Captive Power
producers on electricity generated for self use
• Energization of 283326 agricultural pumps in last three years, target for the year
2007-08 is 216000 which is highest in the Country

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Power Sector- Changing Scenario- A Marketing Perspective

From the time the first five year plan was into effect in the early 1950s, there have been
considerable changes the way the power is generated, transmitted and distributed in
the country. During the earlier times, business of generating electricity was purely under
the government’s control but with lighter regulations that provoked the entrance of
private players and continuing effort to improve the losses during generation, power
sector in itself has become very lucrative and a many ways have emerged where power
is not only sold off by the state grid to industrial users but power is also distributed
among the business entities (dealing in power) so as to earn profits. The industries
having their own power plants (Captive Power Plants), if and when have generation of
excess power, they sell off this excess power to generate revenue and ultimately lead
to a rise in their profits. This distribution of power among the private players is termed
as Unscheduled Interchange.

The Indian government is seriously addressing the need to

improve the efficiency of power generation and is focusing on a mix of conventional and
renewable energy. This has opened up some good business opportunities, especially in
power transmission and distribution technology. With the government aiming to double
the level of energy generation from 100,000 to 200,000 megawatts by 2012, India’s
ongoing energy efficiency program offers good prospects for companies involved in
power station construction. Renewable energy is another key focus, and private
investors are being encouraged to get involved in new projects and take advantage of
the significant tax and customs concessions being offered by regional and national
government. India is very keen to develop wind energy, and has set the target of
creating an additional capacity of 10 GW by 2012. Understandably, in a country where
agriculture plays such a key role there is keen interest in biogas. Studies suggest a
potential capacity here of 66,000 MW compared with the 900 MW per year currently
produced in India.
Thus, there are a number of ways through which the power is being
generated and distributed from either the grid to the individual power consumers or
from within one private player to another private player for a certain amount of money
which we refer to as Un-Scheduled interchange. Terms such as Captive power, the
electricity act, 2003 on the basis of which all the operation within the power sector takes
place and the meaning and significance of Un-scheduled interchange are described in
detail as under:

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Captive Power Scenario in India

Captive Power refers to generation from a unit set up by industry for its exclusive
consumption. The estimates on captive power capacity in the country vary with the
Central Electricity Authority putting the figure at about 11600 MW while industry experts
feel that it is much higher, close to 20000 MW. Industrial sector is one of the largest
consumers of electrical energy in India. However, a number of industries are now
increasingly relying on their own generation (captive and cogeneration) rather than on
grid supply, primarily for the following reasons:

• Non-availability of adequate grid supply

• Poor quality and reliability of grid supply
• High tariff as a result of heavy cross- subsidisation

The State Governments and SEBs have been concerned about the growing
importance of Captive Power Plants on account of the following reasons:

• Captive plants may have adverse impacts on the finances of the utility, such as:
• Industrial load is the main source for cross-subsidising revenue flows
• Billing and collection is much more efficient for HT consumers
• SEBs ability to service escrow accounts for security packages is also reduced
• Non-optimal growth of the sector.
• Problems in grid management especially in case of states with surplus power
• Adverse environmental impacts arising from types of fuels used and from
higher emissions per unit of production, as compared to large power
plants
• Reliability of power supply from captive plants as a source of firm power

While the problem of the captive power plant owners stems from:

• Non-remunerative tariff structure for surplus power produced by them

• No risk sharing in case of non-availability of fuel, change in variable cost due to
switching of fuel after entering into power purchase agreement (PPA), etc
• Inadequacies in wheeling and banking facilities
• High contract demand charges.
• High level of duties and taxes on sale of power
• High wheeling losses assumed for power to be sold to grid by captive or co-gen
plant
• Need to devote time and energy to an activity, which is not their core business
• Restrictions on the minimum amount of power to be wheeled
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 • If the captive power plant (CPP) fails, charges for back-up or standby power from
the grid are twice the normal rate for captive plants
• No formal policy for purchase of cogenerated power (in most of the states)

It is estimated that about 30% of the total energy requirement of the Indian industry is
currently met through in house power plants. The state-wise captive capacity is given
as follows:

State Installed Capacity Captive Capacity

Andhra Pradesh 8204 1220
Assam 1078 Nil
Bihar 4656 614
Delhi 1436 Nil
Gujarat 8376 1505
Haryana 882 335
Himachal Pradesh 3570 32
Jammu and
Kashmir
1536 3
Karnataka 3462 1045
Kerala 1766 151
Madhya Pradesh 7173 1333
Maharashtra 11072 570
Meghalaya 239 Nil
Orissa 3243 1544
Punjab 2620 311
Rajasthan 2176 528
Tamil Nadu 8271 1107

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 Uttar Pradesh 12473 1240
West Bengal 6515 786
Total 89167 12322

Rules and Norms for Captive power generation across states:

Maharashtra

• The permission for installation and running the captive power plant will be
granted by the government and the capacity of the CPP will be limited to cover
the existing demand
(MW) plus 1/3 of existing demand in MW or demand in MW for future expansion
• Third party sale is allowed and in this case a tripartite agreement will have to be
signed between the Board, CPP owner and the third party receiving power from
CPP
• CPP can sell surplus power to maximum two industrial units and is also
restricted up to 25 percent of the generated units (kWh)
• Captive generating company or any other company intending to sell surplus
electricity to third parties would require a prior permission from the Energy
Department of the State Government under section 28 of the Indian Electricity
Act 1910
• The wheeling charges and transmission losses are determined in terms of
distance transmitted. The wheeling charges and transmission losses are
determined as 2% and 5% respectively for a distance of 050 km; 4% and 8%
respectively for a distance of 50200 km; and 6% and 10% respectively for a
distance above 200 km
• Rate at which surplus power would be purchased would be decided by MSEB
and it will not purchase any power during night hours, that is 2200 hrs to 0600
hrs

2
 • In case of planned shutdown of the CPP, the excess demand recorded over and
above the revised contract demand will be charged at double the normal
demand charge rate of the respective tariff in force from time to time

Uttar Pradesh

• Presently, the transmission and distribution system of the Uttar Pradesh State
Electricity Board (UPSEB) is not in a position to handle any further load.
However, the wheeling of electricity is allowed on a selective basis provided the
captive developers pay 15% wheeling charges of the energy received
• While fixing the tariff for captive power plant UPSEB will not share the fixed
charges (interest on loans, depreciation, O&M, income tax, etc.) for the captive
power plant. However the UP Government may share this fixed charges by way
of soft loan, subsidy etc. as the consumer is installing the captive power plant
primarily for meeting his load due to sophistication of the plant which may affect
its functioning due to quality variation in UPSEB supply system
• The board control room may direct captive power plant control room to regulate
the export during the night hours from 2200 hrs to 0600 hrs

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Un-scheduled Interchange(UI) and its significance in the Indian Electric Supply
Industry

Introduction:

The two fundamental characteristics of power delivered to a customer are frequency

and voltage. The short run supply-demand balance is indicated by frequency.
Frequency is a ‘public good’ having large external effects. Stable operation of the
interconnected power system, requires that frequency be maintained within a certain
tolerance as defined by the standards adopted in a country.
Power systems all over the world have to make
provisions for achieving a balance between real time demand and supply. Power
markets generally have control areas that are prohibited from deviating from scheduled
interchange. Concept of Area Control Error (ACE) used to measure these
instantaneous deviations takes into account of both frequency and net excess flow out
of a control area. Control areas are required to keep their ACE near zero for
maintaining a constant frequency in the interconnection. This model for load frequency
control used in developed countries may be a good practice but given the techno-
economic and socio- political realities prevailing in India, it is currently incompatible with
Indian power system.

THE IMPACT OF UI MECHANISM

The UI mechanism was brought in to perform under such trying circumstances.

Although the complexities and contradictions in the system still prevail but there is not
an iota of doubt that the scheme has delivered results. The UI mechanism rode on the
chariot of floating frequency and the used ‘the disease’ itself for curing the chronic
illness of the power system operation. It is the bedrock on which the foundation of
competitive electricity market has been built in India and is flourishing. UI mechanism
has assumed cult-like status in the Indian power sector. It is not surprising that the
mechanism has split the Diaspora into ‘believers’ and ‘non-believers’. Everyone has
interpreted the mechanism in his/her own way and in the process certain
misconceptions and misunderstandings have also cropped up. A large section
understands UI mechanism to be merely a penal and disciplinary mechanism to deter
utilities from deviating from schedule.

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UI AS REAL-TIME PRICING MECHANISM

The UI rate is a frequency-actuated signal available at any wall socket. Every utility
reacts to this signal in real time and adjusts its generation/ demand and a new
equilibrium is achieved. The UI curve by virtue of its design empowers every utility that
has some means to regulate supply/demand to readjust its interchange with the grid
and gain from the migration of frequency/UI rate from the earlier level. The decreasing
marginal returns with every additional unit of deviation from the scheduled interchange
acts as a counterweight, which forces the utility to seriously weigh the consequences of
its actions. Thus the collective action by all the players in this non-cooperative zero sum
game, restores the equilibrium to new value, which may or may not be the same as that
before the perturbation. What results is a Nash equilibrium at which every player
emerges a winner by having maximised his pay-off.

UI FOR MERIT ORDER AND EFFICIENCY

Economists consider perfect competition as an instrument to realize productive and

allocative efficiency. A market is considered perfect only when every competitor is small
enough to have no discernible influence against the “invisible hand” of the market. This
implies that every player in a perfectly competitive market is aware of the market
condition and is a price taker.
The UI mechanism adopted in India tries to
fulfill that design requirement in a rather unconventional manner. Every utility is aware
of the UI vector ex ante and in real time (perfect information); the UI rate applies to all
inter utility transactions at the regional level (homogeneity); there are no contracts to be
signed, no access charges fees; no transmission charges; no losses applicable (no
entry barriers); every utility big or small having some control over its generation or load
is transformed into a formidable player in real time. All generators connected to the grid
can contribute to the unscheduled flow of electricity, dramatically increasing the number
of competitors that can serve any customer connected to the grid (atomicity). The UI
mechanism has established a real time balancing market that is workably competitive
and provides a powerful force for efficiency and innovation. While the diligent and
proactive players have derived rich dividends by being proactive, a large number of
players are yet to realize this aspect of UI mechanism. This also explains the
unpopularity of UI mechanism in some quarters.

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POWER EXCHANGE AND UI MECHANISM

There seems to be some substance in the argument put forth by the proponents of
Power Exchange in the country that the absence of an organised day ahead-market is
one of the reasons for the lack of investor confidence in the Indian market. Bilateral
trading is being used for increasing the availability of power for a load serving utility
especially after the enactment of the short term open access regulations but the
exorbitant transaction costs and lack of transparency in price setting are a big deterrent.
(Transaction costs are the costs of negotiating, executing and enforcing payment for
each purchase.) The setting up of the Power Exchange could provide another option for
power procurement. It could promote further competition on the supply side as well as
on the demand side by bringing all sellers and buyers together on a common
marketplace with standardized contracts, bid formats, and trading procedures. This
would set up a transparent price discovery mechanism in day ahead exactly as UI
mechanism is doing in real-time.

CONCLUSION

The UI mechanism has been a good course correction for the Indian power market and
therefore we need to take further steps to reinforce the gains. It is time we started
planning for the next step in this initiative. There are other difficult jigsaw pieces that
have to be placed rightly before we can entirely solve the Indian power sector puzzle.
We need to revisit and probably redesign the transmission pricing and hydro tariff to
make it more scientific and effective. Intra state ABT and open access are essential for
getting a stronger demand side response. With the interconnection of the Northern and
Central grid in near future we would need to reconsider the reactive tariff to suit the new
circumstances. Thus a lot more need to be accomplished to realize the vision of power
to all by 2012.

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Electricity Act 2003

The electricity act which came into force in India in mid-June 2003 consolidates and
removes a lot of older legislations on electricity. The act has introduced significant
changes in industry structure by moving from a single buyer market to a multi-buyer
multi-seller system. The regulatory regime has been made flexible, with a multi layer
approach and without requiring a regulatory commission to follow rate-of-return
regulations. The act brings clarity to the roles of different organizations and provides for
better financial management of the regulatory commissions. The penal provisions for
the dishonest use of electricity have been tightened and special courts are provided to
deliver speedy justice. The act puts in place some, time bounded targets for licensees
and for the restructuring of the electricity industry.

Early developments

The developments of electricity in India was fashioned in India by two legislations

namely the Indian electricity act, 1910 and the electricity supply act, 1948. The IE-1910
introduced the licensing system in the country while IE-1948 was responsible for
greater state involvement in the industry. The 1910 act was introduced at a time when
the electricity industry of India was fragmented and mostly concentrated in urban areas.
The industry at this phase was highly competitive and the act attempted to instill some
cohesion in the industry by introducing licensing mechanism and promoting safety
standards.

In the mid-1990s, some states took the initiative to restructure their electricity
supply industry through promulgation of reform acts. These reform acts chartered
restructuring of the state’s electricity industry by de-integrating the SEBs into separate
generation, transmission and distribution companies. Generation segment was
considered as potentially competitive and kept outside the purview of the regulatory
supervision. Transmission and distribution are considered as monopolistic activities
within the geographic area and regulated businesses. Licensing was chosen as the
form of regulatory control and rate of return regulation was introduced. All the reform
acts introduced a single buyer model, where the transmission and bulk supply licensee
acts as the buyer of all electricity produced by the generators and sell electricity to the
distribution and retain supply licensees for further supply and distribution. Transmission

1
and bulk supply was controlled by a single company while a number of distribution
companies were introduced having monopoly supply rights.

This was followed by a central act called Electricity Regulatory Commissions Act,
1998(ERC-1998 for short). Although this is a new piece of legislation, its scope was
limited to install an independent regulatory set up at the central level and state level,
without each state requiring its own legislation and without any prior restructuring of the
electricity industry.

Industry Structure as envisaged in the electricity Act, 2003

The act has made an attempt to create a multi-buyer, multi-seller system of some sort
without introducing any sort of balancing system and provided for some retail
competition by allowing them choice of supply to certain consumers.

Generation

Electricity generation has been made a non-licensed activity and the techno-economic
clearance from the Central Electricity Authority (CEA) has been done away with for any
power plant, except hydro-electric power stations above a certain amount of capital
investment. The generators can sell electricity to any licensees or where allowed by the
state regulatory commissions, to consumers directly. The provision of direct sale of
electricity by the generators, when and where allowed, would promote more IPP
participation in the power generation, as these consumers are more credit worthy and
bankable compared to many SEBs. However, the act provides for imposition of a
surcharge by the regulatory body to compensate for some loss in cross-subsidy
revenue to SEBs due to direct sale of electricity to consumers.

Transmission

Transmission, both at the inter-state and the intra-state level is a regulated activity
requiring a license. The act prohibits a transmitting utility to undertake generation or
trading. This provision is quite contrary to the state reform acts, where the state
transmission utility performs both the functions of transmitter and bulk supplier. This
condition helps avoiding conflict of interest in transmission and supply activities but as
this condition is in contradiction with the state reform acts , the state transmission
utilities of those states where the reform act is in operation would have to undertake
necessary changes to rectify the contradiction.

Trading:

2
The act specifies trading as a licensed activity but provides little detail about traders
functions. Trading has been defined as purchase of electricity for resale. This could
involve wholesale supply (i.e. purchasing power from generators and selling to the
distribution licensees) or retail supply (i.e. purchasing power from generators or
distribution licensees from sale to end consumers). As the act does not make distinction
between distribution and retail supply, it is not clear whether a licensed trader would
require a distribution license for retail supply.

Distribution and Retail Supply:

The act does not make any distinction between distribution and retail supply of
electricity. It appears that distribution has been considered to imply both distribution and
supply activities. Distribution is a licensed activity and distribution licensees are allowed
to undertake trading without any separate licensee. Thus a distribution licensee can
undertake trading three activities: trading, distribution and supply through one license.
The reason for combining these three activities in a license is not clear. A distribution
licensee is also an agent , who does not require a license. The licensee is responsible
for the functioning of the agent. This new provision is somewhat awkward as it leaves
room for misuse.

Role of Central and State Governments:

The act reserves a significant involvement of the central government in the functioning
of the power sector. It has been assigned a number of duties, including plan and policy
formulation and approval, rule making, appointing designating authority, prescribing
duties and other tasks, funding and issuing directions.

On the policy front, the central government is responsible for preparing, publishing and
revising the following:

a) National Electricity policy and Tariff policy

b) National policy for stand-alone system for rural areas based on renewable and
non-conventional energy sources
c) National policy for rural electrification and local distribution in rural areas

2
Central Electricity Authority:

The Central Electricity Authority (CEA) was an agency created under the ESA-1948
and the present act retains the agency by relegating it mostly to a consultative role.
There was some overlap of duties and power between the central commission and the
CEA which has now been removed. The CEA is responsible for preparing a national
electricity plan every 5 years and shall seek central government’s approval on the plan.

Commissions:

The act retains the two-level regulatory system for the power sector. At the central
level, the Central Electricity Regulatory Commission ( CERC) would be responsible for
regulating tarriff of generating stations owned by the central governement, or those
involved in geneerating or supplying in more than one states, and regulating inter-state
transmission of electricity. The state commissions on the other hand regulate intra-state
transmission and supply of electricity within the jurisdiction of each state. The
commissions would have quasi-judicial powers as before and the act provides
protection to members against any arbitary removal.

Appellate Tribunal:

This is a new organisation created by the present act to deal with appeals against the
orers of the commissions or adjudicating officers set up by the commissions in settling
sidputes. Earlier the High Court was the appellate authority and they have dealt with
most of the cases quite logically. The appellate tribunal would help reduce the burden
on High Courts and should settle the disputes more expeditiously. The tribunal would
produce certain amount of sector specific expertise, which should help in discharging its
duties better than a High Vourt. The orders of the tribunal can be challenged in the
Supreme Court by the aggrieved party. The act however does not specify any funding
mechanism for the Appellate Tribunal.

LOAD DISPATCH CENTRES:

The act has created a three-tier load dispatching system, namely a National load
dispatch centre (NDLC), a regional load dispatch centres (RLDC) and the state load
dispatch centres (SLDC). RLDC and SLDC were already exsisted under the earlier act

1
but there was some confusion about their power and organisation hierarchy. The
present act has attempted to resolve the problem.

CONCLUSION:

The recently introduced Electricity Act 2003 of India has consolidated a number of
legislations on electricity in India. The new act has attempted to move away from the
single buyer model being followed so far and has allowed relatively free entry to
generation and captive power generation. Removal of restriction on captive power and
broadening the scope of captive generation by including association of consumers
would help promote proliferation of captive power, which in turn would reduce the
creamy consumers providing cross-subsidy to the distribution companies. Loss of
creamy consumers would allow introduction of open-access to certain class of
consumers and perhaps entry of IPP’s in generation. The above phenomenon is
expected to allow removal of cross-subsidies and promotion of cost-reflective tariff
regime in the distribution business. In absence of such tariffs, the distribution business
is expected to suffer and thereby affecting the entire supply chain. However, the
acceptability of such tariff to consumers would remain an issue.

The act introduced a

few new entities and has clarified the roles of different players. It has introduced a
better arrangement for funding of commissions and strict provisions for subsidy
provision by governments. The tariff determination has been made flexible and
commissions are now empowered to move a multi-year tariff regime and decide the
tariff principles. The provisions related to thefts, collusion of employees are also string
and should help check the menace.

2
2
 Some Important facts:

• Commercial sources of Energy (sources that cost i.e. coal, petroleum, electricity)
are only 50% of total energy consumption in India. Means non-commercial
sources like fuel wood, agricultural waste & animal dung constitute ½ of the total
energy consumption in India
• More than 60% of Indian households depend on traditional sources of Energy for
cooking & heating needs
• At current rate of consumption & production, coal reserves in India would last for
about 130 years
• At current rate of consumption & production, oil in India would last only for about
20 to 25 years
• In commercial energy consumption, coal constitutes 29%, Oil & gas 54% &
electricity 17%
• We are using only 20% of total hydro-power potential. (Estimated annual energy
potential from hydro-electric sources is around 90000 MW while we are currently
producing only 18000 MW)
• Out of total electricity production, 65.8% comes from thermal power plants,
26.3% from hydro electricity & only 3.1% from nuclear power. Non-conventional,
renewable energy sources like solar, wind energy constitute nearly 4.9%. (As per
NIC site on Ministry of Power)
• Public sector produces 558 billion kWh of electricity while private sector only 58
billion kWh
• Uranium reserves in country – 70,000 tonnes (equivalent to 120 billion tonnes of
coal) and Thorium reserves – 3, 60,000 tonnes (equivalent to 600 billion tonnes
of coal) – which is about 5 times the coal reserves in country
• 65% of total rural energy consumption is met from fuel woods- (180 million
tonnes for households + 43 million tonnes for cottage industry, hotels etc). At this
rate, in near future, fuel wood could be a greater constraint than availability of
food grains. (The problem can be solved by government spending of around Rs.
1000 crore annually)
• If animal dung is not utilized for burning and is used as fertilizer, food production
would increase considerably because 73 million tonnes of animal dung is burnt
every year for energy purposes, which is far more than total fertilizer consumed
in agriculture production in India
• From 1951 to 2004, the coal production has increased 12 times, crude oil 110
times & electricity 65 times

1
• In 1973, price for petroleum crude oil in global market was only $2 per barrel
($2.09 exactly)
• India has not experienced a sudden shock in its balance of payments after
steep increase in global oil prices thanks to large inward remittance of foreign
currencies by Indians working abroad
• Only 0.3% of world’s known oil reserves are in India
• Transport sector accounts for 56% of total oil consumption in India
• Millions of poor people in India spend up to 100 man-days every year in
gathering fuel wood for cooking purposes.
• Demand for coal rises @ 4 to 5% per year, for petroleum products 6 to 7% per
year & for electricity 9 to 10% per year.
• India is second largest exploiter of Wind Energy – 1000 MW (70% by private
sector).
• There are 33 lakh bio-gas plants, 2 lakh solar cookers & 10000 street lighting
systems using solar photo-voltaic technology.
• Out of total electricity consumption in India, 34% goes to Industry, 24% to
agriculture, 21 % to domestic use, 12% to public lighting & 2% to railway traction.
These figures do not include captive (i.e. private sector) power generation.
• Currently 5, 87,560 villages in India have electricity. Still 1, 12,400 villages
haven’t seen what electricity is(Most of these are in Assam, Orissa, UP, MP and
Rajasthan). And that does not mean that every house in those 5, 87,560
electrified villages has electricity, even if 10% of the households get electricity,
government declares the village electrified (This is as per ‘new modified’
definition of ‘electrified villages’ formulated in 2003-04.)

1
Summary and Recommendations:

The power sector of India has come a long way since the first electricity act first came
into force in the early 1948. Even with the generation of electricity with non-
conventional sources, electricity produced in thermal power plants still constitute a
major proportion of the total electricity produced. Now, this is good as good as the
major input i.e. coal is present in abundance. That not being the case, emphasis is now
slowly turning towards other methods of production such as co-generation. Having said
all that, the condition of electricity in the rural and remote parts of India is still very awry
with more than one lakh villages not having any relevance to electricity. The situation is
worsening in the urban parts of the country where the sector badly suffers from lack of
technology, skilled and technical labor and lack of proper infrastructure. The variation in
pricing of electricity across states is prompting the industrial users to buy electricity from
within the private players’ thus giving rise to unscheduled interchanges. This in turn
makes sure that no proper idea of the demand of electricity can be made and hence the
pricing of electricity in most spheres, be it industrial or non industrial suffers. All of these
reasons and many more make us believe that even with the introduction of the recent
electricity act, which has made the electricity policy of the country more transparent and
with special courts being set up, the situation of electricity, in general is not going to be
any better.
The
good part though is the recent shift towards co- generation from sugarcane waste and
waste from rice husks. This has somewhat reduced the burden on the bigger grids to
supply excess power for the heavy consumers. With the privatization of this sector and
with many private players coming up in many states, the onus is now on the state
electricity boards’ to perform well and distribute uninterrupted power supply. Overall,
the future is potentially promising and there has to be a more transparent approach and
the government must look towards this sector with utmost importance as the situation of
electricity is a major driver for the economic growth in the future. The idea should be
more or less oriented towards building a better infrastructure and focusing more on
non-conventional sources of power to generate electricity. The government must
manipulate their policy and relax their norms so as to bring participation from foreign
players though this plan might expose the weak Indian power sector and could
deteriorate it even further. The large number of losses during generation as well as a
huge amount of power loss during distribution must be checked and the sector
especially the state electricity boards must be made more attractive to involve people
with a more technical interface and a better knowledge about the overall processes
starting from generation of electricity to its final distribution towards the end consumers.

1
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