The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Akhil Verma, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
Electricity plays a major role in economic growth & social well being of a nation. If India has to achieve GDP growth of 8%, it is necessary to solve the issues in plaguing power sector. Also, with government promoting ‘Make in India’ at a global scale, it becomes all the more necessary to rectify problems in power sector. Let’s try to look at them one by one. Electricity supply chain can be divided into three parts:
- Generation: Major components of expense in power generation are fuel costs. Coal supply constraint must be sorted out as the thermal power generation is & will be the mainstay for generation in the coming years. While coal is by far the most important fuel in the energy mix, India’s recent climate pledge underlined the country’s commitment to a growing role for low-carbon sources of energy. For this, government must create a favorable climate for renewable energy.
- Transmission: State level transmission is a concern. This sector needs new capacity addition with generation picking up in the last few years.
- Distribution: This sector is the main leakage point with average technical & commercial losses as high as 30%. The focus of the government over the years has been on ramping generation capacity. The situation has become similar to a bucket with many holes. One can increase the flow of water by increasing generation capacity but as long as the holes are there in the bucket (distribution), it is not of much use. Problems in distribution sector include cross-subsidization by industries to agricultural & residential customers, power theft, metering etc. This has financially crippled the distribution network. Recent initiative by government such as UDAY (Ujwal Discom Assurance Yojna) scheme in November 2015 to ease the financial crunch faced by DISCOMs is a welcome step but it remains to be seen whether it is of much help or not.
The ball is clearly in government’s court. Careful supervision and political will is required so that the critical element to India’s development is not ignored.