[Answered]Discuss the problems faced by the power sector in India. Suggest some measures to tackle these problems.

Demand of the question

Introduction. Contextual Introduction.

Body. Discuss various problems faced by the power sector in India. Suggest some measures.

Conclusion. Way forward.

Power or electricity is very essential constituent of infrastructure affecting economic growth and welfare of the country. India’s power sector is one of the key sectors which forms the foundation of the growth of the country. Installed power capacity of the country is around 331GW. Despite the fact that India has surplus energy, it is facing huge problems which serves as an obstacle for supplying electricity to all needy people.

Challenges faced by the Power Sector:

  1. Fuel Security Concerns: Thermal capacity addition is plagued by the growing fuel availability concerns faced by the Industry. A significant natural gas based capacity of more than 20,000 MW is idle due to non-availability of natural gas. Coal supply is restricted, leading to increased dependence on imported coal with the cascading result of high power generation costs.
  2. Transmission & Distribution Losses: High distribution-line losses are among the most vexing problems in the Indian power sector. India’s aggregate technical and commercial losses average about 32% of electricity which is very high as compared to those of the developed countries (6-11%).
  3. Financial Health of State Discoms: Years of populist tariff schemes, mounting losses and operational inefficiencies have adversely affected the financial health of State Discoms which are currently plagued with humongous out-standing debts. As of June 2017, NPAs in the electricity sector amounted to Rs 37,941 crore.
  4. Aging Power Plants and Transmission network: Since most of the power plants and transmission lines have been installed immediately after independence, they have become old and inefficient. This is the main reason for low growth and transmission rate in electricity generation and transmission during the recent years. About half of the power plants need to be upgraded or shut down as quickly as possible.
  5. Under-procurement of Power by States: Increasing power generation costs due to limited fuel availability, poor financial health of State Discoms, have contributed in suppressed demand projections by State Discoms.
  6. Interstate Disputes: India is a federal democracy, and because rivers cross state boundaries, constructing efficient and equitable mechanisms for allocating river flows has long been an important legal and constitutional issues. Due to this there is not availability of water all the time to operate hydro plants. Inter- state disputes also restrict the excess power exchange between the states. For example, Mahanadi water dispute.
  7. Policy Paralysis: The micro level policies governing the fuel cost pass-through, mega power policy, competitive bidding guidelines are not in consonance with the macro framework like The Electricity Act 2003 and the National Electricity Policy.
  8. Coordination Issues: Multiple ministries and agencies are currently involved in managing energy-related issues, presenting challenges of coordination and optimal resource utilisation, hence undermining efforts to increase energy security, as reported by the Kelkar Committee in 2013.

Solutions to tackle the Foregoing Challenges:

  1. Fuel Reforms: Various aspects like ramping up coal production by both public and private sector in a time-bound manner, increased participation of private sector in coal production and easing of regulatory framework, clearances and approvals for allocation and development of coal blocks & gas infrastructure need to be addressed while formulating such reforms.
  2. Balanced Regulatory Interventions: Regulators need to be sensitised to the challenges faced by the sector and policy framework needs to be crafted and enforced to ensure a win-win situation for all the stakeholders. They must pro-actively intervene to resolve the immediate issues ailing the power sector.
  3. Increased Financing Facilities for Energy Sector: A robust and sustainable credit enhancement mechanism for funding in Energy Sector needs to be put in place through increased participation by global funding agencies like The World Bank, ADB etc. in the entire value chain.
  4. Public private partnership: There is a strong need to push for wider-scale implementation of public private partnership models. The private sector has been playing a key role in generating power, a more supportive environment will help in bridging the energy deficit of the country.
  5. Taxation: Power-generating companies should not be saddled with the burden of cross-subsidising the renewable sector. This can be borne by the society (through taxation) and not by the entities that are already in trouble.
  6. Cooperative federalism: To resolve water disputes, government must help states to come to a common ground. Emphasis should be on cooperative federalism with shared benefit to all the states.
  7. Merger of ministries: There should be only one energy ministry to make coordination and implementation of policies better. It will remove policy paralysis too.
  8. Reduction of transmission losses: This should be achieved by better infrastructure and technological efforts. Old plants should be shut and should be replaced with new.

In the recent past, several initiatives have been taken to address the challenges in the power sector.These include structural changes in the regulatory framework, and the UDAY scheme to address financial issues being faced by companies distributing electricity. But power sector still face loses and old issues. Government must effectively replace and modernise old and inefficient plants and lines to achieve the electricity production and demand target.

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