Power sector in India: All you wanted to

know in 5 points
In a bid to raise production of green electricity in the state,
the Odisha government has decided to renovate three major
hydro-power stations.
By: Accord Fintech | Published: October 19, 2015 2:55 PM
13 0 G+2 0

Power or electricity is very essential constituent of

infrastructure affecting economic growth and welfare of the
country.
Power or electricity is very essential constituent of infrastructure affecting economic growth and
welfare of the country. Currently, the power sector is at a crucial juncture of its evolution, with
many private producers and domestic manufacturers also playing a significant role in various
capacities, and greater reliance on markets, subject to regulation. Developers of Power Plants
have been facing numerous constraints like coal/gas allocation, environment clearance, land
acquisition, financing and funds tie-ups, etc. for last about 4 years. This has resulted in only very
few new projects coming up.

1. Performance of the industry

India is the 5th largest producer of electricity in the world. At an electricityGDP elasticity ratio of 0.8, electricity will continue to remain a key input for
Indias economic growth. Electricity demand is likely to reach 155 GW by
2016-17 & 217 GW by 2021-22 whereas peak demand will reach 202 GW & 295
GW over the same period respectively. In India, the total power generated has
been 1048.5 BU during the FY 2014-15. There has been a shift to renewable
power as the same constitutes of 27.25% of the total installed capacity.
India has a huge hydro power potential of 148 GW, out of which only 42 G has
been realized till date. Steps have been taken to attract investments into the
hydro sector and increase the falling share of hydroelectricity in the countrys
installed capacity mix. Government is planning Hydropower Purchase
Obligation (HPO), which will obligate the power distribution companies to
purchase power from hydro power plants. This has led to signs of revival in
hydro power segment. However, the Supreme Court verdict staying 23 Hydro
Projects in Uttarakhand has acted as a dampener, thereby delaying the
imminent revival in the sector. The Nuclear business is primarily driven by
government policies, public perceptions and global dynamics.
2. Installed capacity in India
For the 12th plan period (FY 13-17), the Government of India has targeted
capacity addition of 88,537 MW against which capacity addition of 61,014 MW
has been achieved up to FY 14-15. During FY 14-15, a capacity addition of
22,566 MW has been achieved which is 127% of the target of 17,830 MW.
Private sector contribution accounts for 59% in the total capacity addition
during FY 14-15.

India is likely to add 600 GW to 1200 GW of additional new power generation

capacity before Year 2050. The target for 12th Five year plan is that of 118.54
GW out of which 88.54GW is to come from conventional sources while the
remainder to come from Renewable energy. The government plan is not only
on target but seems it will exceed the targeted capacity. Break up of Power
sector is such that 188.90 GW is Thermal power which is 70.6% of the total
installed capacity while Hydro accounts for 41.27GW which is 15.4% of total.
The share of Renewable energy is 31.69 GW which is 11.8%.
Indias around 36 per cent of power capacity is in western region followed by
26 per cent in northern region, 24 per cent in southern region, 12 per cent in
eastern region, and only 1 per cent in north-eastern and island regions.
Western region leads in thermal power and northern region in hydro with
78594.42 MW and 17946.77 MW respectively. Southern region leads in
Renewable Energy Sources (RES), with 42 per cent share in all-India
aggregate, followed by western region (36 per cent) and northern region (21
per cent).
Marking a major change from pattern till recently, private sector has
increasingly forayed into power infrastructure in recent years. Thus, during
the 11th Plan 39 per cent of conventional energy capacity addition was from
private sector, while 35 per cent coming from state government utilities and
around 26 per cent from central government power companies. Most of the
capacity in private sector was in thermal power with 56899.73 MW.
3. Power Generation
The total power generation in the country during FY 14-15 was 1048 BU
(including Bhutan import) as against a generation target of 1023 BUs, about
2.5% above target. The contribution from the private sector was 281.53 BU
which was 109.5% against target of 256.98 BU. Moreover, the government has
set a target of producing 1,098 BUs of power during 2015-16. The central
sector plants will contribute 411 BUs and state sector 401 BUs to the total
targeted capacity. Of the total 1,098 BUs that the government is aiming to
generate in the current fiscal, 965 BUs will come from thermal power and the
remaining from hydel plants (133 BUs). As many as seven hydro projects,
which are likely to come up during the current financial year, will contribute
2,766 million units of electricity to the total generation.
The power generation in September 2015 surged 10 per cent to 95179.43
million units (MU) from 85928.86 MU in same month previous year. The

power generation between April- September 2015 stood at 555447.85 MU, up

by 4.42 percent as compared to 531954.11 MU in year ago period.
4. Government initiatives
Govt. set to allot mines for commercial coal mining to the state
entities
The government, which is armed with Coal Mines Special Provisions Bill,
2015, is all set to allott mines to the state entities for commercial mining of
coal. The government will continue auctioning coal blocks to private
companies after passing of the Coal Mines Special Provisions Bill, 2015 in
Parliament. However, the government has decided to assign mines to private
entities only in second phase. Overall, the centre is in the process of allotting
204 coal blocks in a transparent manner of which 67 blocks have been allotted
by either auction or on a nomination basis to state entities. Till now, 29 blocks
have been auctioned and another 38 allotted to the state-owned entities.
Further, the objective of the government was for a methodology of offering
linkages in a transparent manner and auction was not the only option
available to them. The government had appointed SBI capital to suggest on
this and a policy paper is expected be ready on this by June 30, 2015.
Govt. to invest 1 lakh crore to set up 5new UMPPs
Indian government is planning to set up 5 new ultra mega power projects
(UMPPs), under the plug and play model, entailing investments of around Rs
1 lakh crore. UMPP is coal-based thermal power project that has 4,000 MW
generation capacity. The govt. however did not announce the states where
these projects are proposed to be set up. Under the plug and play system coal
blocks will be auctioned after they are granted various clearances to speed up
and simplify mining and get better valuation. One such project is likely to be
set up in power starved state of Bihar. The proposed plant in Bihar may be fed
from a mine either in Jharkhand or Odisha. Power Finance Corporation (PFC)
is the nodal agency for UMPPs in the country. So far, 4 UMPPs have been
awarded, of which Sasan (Madhya Pradesh), Krishnapatnam (Andhra
Pradesh) and Tilaiya (Jharkhand) have been bagged by Reliance Power. Tata
Power is operating the Mundra UMPP in Gujarat.
Investments
The investment climate is positive in the power sector. Due to policy of
liberalisation, the sector has witnessed higher investment flows than

envisaged. The Ministry of Power has sent its proposal for the addition of
76,000 MW of power capacity in the 12th Five Year plan (2012-17), to the
Planning Commission. The Ministry has set a target of adding 93,000 MW in
the 13th Five Year Plan (2017-2022). The industry has attracted FDI worth Rs
48,357.00 crore or $9,828.08 million during the period April 2000 to June
2015.
5. Recent developments
Cabinet working on proposal to resolve discom issues
The Power Ministry is working on a proposal to deal with over Rs 4 lakh crore
loans of power distribution companies (discoms) with a view to bring down
their liabilities and will put it soon before the Union Cabinet. Hit by subsidised
tariffs, state electricity discoms are facing cash crunch and are incurring
annual losses of about Rs 60,000 crore. This is also affecting public sector
banks as their bad loans are rising. The governments will entirely take over the
debt of power discoms of eight states under the new financial restructuring
plan (FRP) for power distribution companies. These eight states are
Rajasthan, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana, Jharkhand,
Bihar and Telangana.

Taglines
The power generation shortfall in India is estimated at 11% of the total
energy, and 15% of the peak capacity requirements and these figures are
likely to increase. This is despite the fact that the country is already
consuming more than 2 million barrels of imported oil a day - a figure that
is growing by about 10 percent annually.
The Planning Commission of India estimates that the country will have to
increase its capacity for power generation by about seven times its
present capacity to sustain its growth. In the absence of feasible
renewable energy options, this will mean more fossil-fuel based power
plants. This is neither a sustainable proposition nor a climate friendly one.
The way forward is to use conventional energy efficiently while
simultaneously building the country's renewable energy capabilities.

The Power Programme, therefore, prioritises key cross-cutting policy

themes investments in utility-led energy efficiency, mainstreaming
renewable energy and energy access.

While India continues to add generation capacity, the gap between demand and
supply remains wide. A major reason for this chasm is unchecked demand. The
judicious use of electricity needs to be encouraged through an innovative system of
incentives and penalties. Efficient usage will ensure that demand matches supply of
electricity; it will also give the renewable energy sector in India, the much needed
incubation period.
Electric utilities, by virtue of being the supplier of electricity, are the best placed in
the power ecosystem to manage the demand of their consumers through
ingeniously designed Demand Side Management (DSM). Therefore, our Electric
Utility programme is working to build a case for a national mandate on Demand
Side Management so that utilities are both empowered and mandated to manage
the demand of their consumers.
To make this possible, the Electric Utilities programme is supporting enabling
policies and regulations at the central and state level; designing programmes that
can provide evidence for policy adoption, and facilitating implementation tools and
aids for Industry and policy makers.

India's generation capacity will have to increase up to seven times the present
figure to meet our growth needs. The major part of our energy mix consists of fossil
fuels. They are finite sources and have serious environmental consequences. In
times of depleting resources and climate threats, the best way forward for India is to
take the dual path of energy efficiency and renewable power generation like wind
power generation and solar electricity generation. It is imperative to tap into these
huge renewable power sources and judiciously utilize the non-renewable resources,
keeping energy conservation in mind.
To achieve this, the renewable energy programme is investing in supporting
mechanisms that strengthen the call for clean and renewable energy policies
through advocacy and awareness building and creating a supportive renewable
energy implementation environment. Its activities are also aimed at helping
compliance with evolving renewable energy deployment targets; and building
supportive policy evidence through research around grid as well as off-grid business
models.

In recent years, the Government of India has been making aggressive efforts to
expand access to energy through various national and state schemes to enhance
off-grid rural electricity access. Despite these efforts, nearly half of the rural
households in India lacks reliable electricity access and nearly 85 percent depend
on biomass, such as firewood and dung cakes, for cooking fuel. The lack of energy
access not only constrains productive activities, incomes and employment in rural
areas, but also hinders the delivery of essentials such as safe drinking water,
healthcare and education.
Expanding rural energy access or rural electrification is, therefore, necessary for
economic growth and human development. Towards this, the Energy Access
programme focuses on rural electrification through development and promotion of
off-grid solutions using local resources and renewable energy. It works towards
policy, regulatory and institutional interventions to support the governments
initiatives and promote private participation. It also builds technical and
implementation capacity of relevant stakeholders such as state and district-level
energy development bodies, financial institutions and energy service entrepreneurs.