What are the challenges facing the power sector in India? Discuss solutions for each and every stage of power sector development keeping in mind the future energy requirements of the country. (250 Words)

Mentors Comments:
1. Mention a few vital stats or reports highlighting the state of the power sector in India.
2. List down the challenges from T&D losses, Discom trouble to the challenge from renewables and climate change
3. Offer solutions to ti each and every problem. Highlight need for diversification of energy sources

https://www.livemint.com/opinion/online-views/opinion-it-s-time-to-look-for-permanent-solutions-to-fix-an-ailing-sector-1568141712336.html

Answer:

India’s power sector is one of the key sectors which form the foundation of the growth of the country. Despite the fact that India has surplus energy, it is facing huge problems that serve as an obstacle for supplying electricity to all needy people.

Problems faced by the power sector:-

  • The troubles of power companies can be traced to structural issues such as the
    • Absence of meaningful price reforms
    • Unreliable fuel supply and
    • The unsustainable finances of public sector power distribution companies.
  • Stressed accounts:-
    • The power sector, which has around 34 stressed accounts worth Rs 1.8 lakh crore, is the biggest worry for the banks since resolution through IBC will erode the true value of assets. This can lead to more bottlenecks in projects as well as operations.
  • The Standing Committee on Energy observed that development in the power sector has not been balanced.
    • While de-licensing generation helped increased generation activities, the other segments (transmission and distribution) have not been given much attention.
  • The Electricity Policy does not look into the issues around clearances, land acquisition, continuance of old and inefficient plants, instability in FSA policies, and other regulatory challenges and delays.
  • Cost of supply:-
    • Electricity distribution companies (discoms) in some States (Seven States (Uttar Pradesh, Bihar, Odisha, Jharkhand, Assam, Rajasthan, and Madhya Pradesh) ) are already highly indebted. Their debts account for 17% of the accumulated liabilities of the States.
    • Despite continued State subvention (except by Odisha), all these discoms have been consistently running at a loss, accounting for about 47% of the loss in electricity distribution business.
    • Existing subsidized lifeline tariffs in these States appear unaffordable to the poor and certainly higher than in States with universal (or high) access.
    • The average plant load factor (PLF) across the country has fallen to a multi-decadal low of 58%. This implies inefficiency and extra burden of fixed costs.
  • Coal:
    • The shortage of fuel for power plants has become very critical in recent months. Many of the coal mines sold off in auction, mandated by the Supreme Court verdict, are simply not operational.
    • Continued and increased dependence on imported coal points to deficiencies in augmenting domestic capacity.
    • Mining in a number of coal blocks was stuck up for want of clearances
  • The Parliamentary Standing Committee has identified the following major reasons for the crisis:
    • Insufficient number of power purchase agreements (PPAs) made available by states
    • Inability of the promoters to infuse equity and working capital.
    • Contractual and tariff-related disputes.
    • Delays in project implementation, leading to cost overruns.
  • Measures taken are not sufficient:-
    • The focus, so far, has been to grapple with some of the issues for select few generating companies in the following manner:
    • Special linkages for some entities by Coal India;
    • The recent move to allow cost pass-through to some entities to relieve them of the burden of increased import price.
    • The grid balancing that could have been done through hydroelectric power for renewable energy is now being “enforced” on coal-based power plants.

Way forward:

  • The standing committee on energy recommended that the process of grant of loan, supervisory mechanism, and its subsequent monitoring should be revisited.
  • The supply of coal will have to be increased by Coal India by following a strategy pursued during 2014-15 and 2015-16 when coal production saw an unprecedented increase.
  • Set up a high-level empowered committee to examine each stressed project and work out a rehabilitation package. Only financial restructuring will not help. The package has to be a comprehensive one. This could even entail a change of ownership/management and/or adequate sanction of funds that are required for the projects.
  • Power-generating companies should not be saddled with the burden of cross-subsidizing the renewable sector. This can be borne by society (through taxation) and not by the entities that are already in trouble.
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9 months ago

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9 months ago

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