Policy Wise: India’s Power Sector

Power Sector’s Policy making needs to give a good look to long-pending structural reforms. Greater power generation will not help unless distribution issues are sorted.

Policy Wise: India’s Power Sector

Power crisis in India


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Lesson from the power shortage crisis


The power crisis has taken us by surprise. The question in everyone’s mind is: where did we go wrong? And who slipped up?

Responsibilities in supply chain

  • Under the Electricity Act, it is the responsibility of the Distribution Licensee/Company (Discom) to provide reliable quality and round-the-clock electricity to all consumers to meet full demand.
  • To do so, they enter into contracts with a number of generating companies in order to ensure adequate supply.
  • These Discoms work under the oversight of the State Electricity Regulatory Commissions.


1] Dealing with the challenge of demand prediction

  • Qualitative transformation in demand: With higher incomes and the consequent increase in the use of air-conditioners and other electrical appliances, the nature of electricity demand is undergoing a qualitative transformation with rising daily and seasonal peaks, and spikes on very hot or cold days.
  • While demand prediction is inherently uncertain, the questions to ask are whether Discoms have been making and updating their demand growth projections and scenarios over the medium term with adequate supply arrangements in a robust manner.
  • This needs to become central to the regulatory process.
  • Ensuring reliable supply to meet unanticipated peaks, as have occurred now, requires making supply arrangements with reserve margins that are adequate.
  • The Regulatory Commissions need to provide for such expensive peaking power arrangements in the tariffs they approve.
  • It is also time to move towards separate peaking power procurement contracts in addition to the present system of long-term thermal power contracts.

2] Demand-based time of day rates of electricity

  • A transition to demand-based time of day rates of electricity for generators as well as consumers would help.
  • These should be brought in by the Regulatory Commissions.
  • Flattening of demand curve: Peak demand moderation and flattening of the demand curve through a change in consumer behaviour is feasible with smart meters.
  • But this would take place only with a strong price signal, a large differential in peak and off-peak rates.

3] Subsidies and politics

  • Free supply of electricity to farmers and households up to a specified level is not a problem as long as State governments pay for it as provided in the Act, and the Regulatory Commissions do not at the same time act from a political point of view and shy away from determining cost-reflective tariffs.
  • While the problem of delayed payments by Discoms is getting highlighted and needs to be resolved with a sense of urgency, the coal supply problem is not due to this.
  • Coal India needs to create capacities to rapidly ramp up production; and the Railways need to carry larger quantities of coal when demand surges, as has happened now.
  • Imported coal and gas generated electricity: There is idle but expensive generating capacity available — about 15-20 GW of gas-based power plants which can run on imported liquefied natural gas, and 6 GW-8 GW of thermal plants which can run on imported coal.
  • Consumers who are willing to pay more could be kept free of power cuts with purchase and supply of more expensive electricity generated from imported coal and gas.
  • To improve reliability, Discoms, with the approval of the Regulatory Commissions, need to go in for bids for storage.


A lesson is that demand growth projections and supply arrangements need to become central to the regulatory process.

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Policy Wise: India’s Power Sector

The supply bottlenecks causing power shortages


From UPSC perspective, the following things are important :

Prelims level : Power generation in India

Mains level : Paper 3- Coal shortage crisis


The power sector in India is going through a crisis. Peak shortages in some states have reached double digits.

Chronology of the crisis

  • First, with summer approaching before time, power demand has shot up to record levels.
  • The second reason for the rise in power demand is that the economy is recovering, and demand from the industrial sector is going up.
  • All things put together, power demand crossed 207 GW on April 29, which is about 14 per cent higher than what it was a year ago.
  • Experts feel that the peak demand may even touch 215 GW in the coming months.

Coal shortage crisis

  • On average, coal stocks available are only good enough for about eight days’ generation against a norm of 24 days.
  • In some plants, the stocks available are just about enough to run the plant for a day or two more.
  • Part of the problem of poor coal stock is also rumoured to be on account of the non-payment of dues of coal companies.
  • But this is not the major cause of the shortage.

Reasons for coal shortage and fall in generation

  • The fall in coal stock in power stations is because of two main reasons.
  • 1] Rise in international price of coal: The first is that due to a rise in the international price of coal on account of the Ukraine crisis, all plants that were importing coal have either stopped generating completely or are generating at much lower levels.
  • We have a sizeable generating capacity based on imported coal, estimated at about 16 GW to 17 GW.
  • All these plants after stopping imports are now looking for domestic coal, creating pressure on domestic coal.
  • 2] Non-availability of rakes with Indian railways for transporting coal: Though about 22 MT of coal may be available in power stations, if one includes the stocks available with mining companies, the figure is well over 70 MT.
  • So, it is all a question of transporting the coal to the power stations.
  • 3] Fall in generation from gas-based plants: To make matters worse, generation from gas-based plants has also fallen due to high gas prices in the world market.
  • 4] Impact on hydro generation: Reservoirs, too, are drying up due to intense heat which will adversely affect hydro generation.

Transportation problem faced by Indian railways

  • The railways have about 2,500 rakes which can be used for coal transportation.
  • With a turn-around time of about four-and-a-half days which goes up to nine days for coastal regions, the railways can provide only about 525 rakes on any single day. 
  • Of this, about 100 rakes are used for transporting imported coal and therefore, only about 425 rakes are available on a daily basis for transporting domestic coal.
  • But only 380 rakes were being provided in the first half of April this year, though efforts are on to increase this to about 415 rakes.
  • The railways prefer to transport coal over short distances in order to save on the turn-around time.
  • There is also the issue of availability of tracks since they are being used on a back-to-back basis.
  • Thus production has to be enhanced so that the replenishment rate is higher than consumption.
  • Unless we do that, the total stock of coal in the country will deplete further and it will no longer be a mere transportation problem as it is now, but a general lack of supply of coal.


This is the right time to enhance coal production and build adequate stocks because once the monsoon sets in, production will fall.

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Policy Wise: India’s Power Sector

How to shock-proof India’s power sector


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Reforms in India's power sector


The reports of coal-shortage induced power outages across states continue to pour in.

Reasons for volatility in the power sector

  • Demand-supply mismatch: As economic activity resumed after the Covid-induced lockdowns, the demand-supply mismatch for commodities such as coal widened globally, leading to a surge in prices.
  • Geopolitical factors: Global supply disruptions due to the Russia-Ukraine conflict have sent coal prices touching historical highs.
  • The cost of imported coal in India is expected to be 35 per cent higher in the fiscal year 2022-23 compared to the past year.
  • Sudden rise in energy demand: Even as coal stocks available with state thermal power plants fell, India also witnessed a sudden rise in energy demand in March — the hottest in its recorded history.

Suggestions to make the power sector resilient

  • The Ministry of Power has taken a host of measures to alleviate the crisis.
  • This includes giving directions to ensure maximum production of coal at captive mines, rationing of coal to non-power sectors, and a price cap of Rs 12 per unit on electricity traded on exchanges.
  • But we need to do more to enhance the sector’s resilience to such disruptions from exogenous factors.

1] Create an enabling ecosystem to ensure power plants work efficiently

  • India has about 200 GW of coal-based generation capacity which accounts for nearly 70 per cent of the total electricity generated in the country.
  • However, according to a CEEW assessment, a disproportionate share of generation comes from older inefficient plants, while the newer and efficient ones remain idle for want of favourable coal supply contracts or power purchase agreements.
  • Revisiting fuel allocation and supporting the priority dispatch of efficient plants could help India reduce coal demand by up to 6 per cent of our annual requirement, and set aside more coal for the proverbial rainy day.

2] Smart assessment and management of demand

  •  Enable discoms to undertake smart assessment and management of demand.
  • We have advanced tools for medium- and short-term demand forecasting.
  • However, few discoms have embraced these to inform their procurement decisions.
  • Introducing time-of-day pricing and promoting efficient consumption behaviour would help shave peak demand and avoid panic buying in the market.

3] Empower electricity regulators to help bring down discom losses

  • Despite two decades of sectoral reforms, the aggregate losses of discoms stand at 21 per cent (2019-20).
  • This is reflective of both operational inefficiency and poor recovery of dues from consumers, including those affiliated with state governments and municipal bodies.
  • These losses are also the reason for discoms not being able to pay the generators on time, resulting in payment delays to Coal India, which, in turn, is reluctant to supply coal on request.
  • Infuse payment discipline: Besides the ongoing initiatives like introducing smart meters and network strengthening, empowering regulators would be critical to infuse payment discipline across the supply chain of the electricity sector and to keep cost recovery as a key metric.


Given the country’s development aspirations, India’s power demand is set to rise substantially and become more variable. We need to act now for the long-term resilience of India’s power sector.

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Policy Wise: India’s Power Sector

How uniform power cost and electricity duty can achieve higher growth


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Uniform energy tariff and inclusion of electricity duty in GST


Electricity prices vary not just among end users, but also between states, where a complex patchwork of different taxes and subsidy regimes can leave consumers in some states paying five times more for their electricity than their counterparts in neighbouring states.

Deprivations faced by Low Income States in India

  • The low-income States (LIS) are deprived on many fronts.
  • They have low accessibility to credit, low investments, low power availability and accessibility, and high energy costs.
  • The high-income States (HIS), on the other hand, have a big share in industry and commerce because they are not deprived on the same fronts.
  • The six HIS (Maharashtra, Tamil Nadu, Gujarat, Karnataka, Andhra Pradesh and Telangana) together account for 56.4% of factories and 54.3% of the net value added to the country, while their share in population is only 32.3%.
  • Among other reasons, this is because they have higher credit and financial accessibility (55% of total institutional credit and 56% of total industrial credit went to these five HIS) at the credit-deposit ratio.
  • On the other hand, the six LIS (Bihar, Jharkhand, U.P., M.P., Odisha, and Rajasthan) access only 15% of total institutional credit and barely 5% of total industrial credit, while their share in population is 43%.
  • The maximum benefit of the Atmanirbhar package (₹20 lakh crore) also went to the HIS as they have a higher share in industry.

Role of power supply in disparity among states

  • Among other reasons, the availability of adequate quality power at the cheapest rate attracts investments, either private or public, in a particular location.
  • Due to a complex patchwork of different taxes and subsidy regimes, electricity prices vary not just among end users, but also between states.
  • This can leave consumers in some states paying five times more for their electricity than their counterparts in neighbouring states.


  •  Energy India Outlook 2021 provides two solutions.

1] Eliminate price discrimination by synchronising all regional grids

  • The power-producing States have the advantage of power,  being available at lower prices.
  • This problem can be addressed by synchronising all the regional grids.
  •  This will help the transfer of energy (without compromising quality).
  • The idea is of ‘One Nation, One Grid, One Frequency’.
  • Further, this will pave the way for establishing a vibrant electricity market and facilitate the trading of power across regions through the adoption of the ‘one tariff’ policy.
  • The Central Electricity Regulatory Commission is in the process of implementing a framework of the Market-Based Economic Dispatch and moving towards ‘One Nation, One Grid, One Frequency, One Price’.

2] Include electricity duty in GST

  • Apart from uniform cost, the power sector also needs uniformity in electricity duty charged by different States.
  • In general, the association between income and electricity consumption is direct.
  • Thus, only 32% of the population used 50% of power.
  • Contrary to this, six backward States got only 25% of the power though their share of the population is 43%.
  • Therefore, it is clear that the substantial proportion of the power cost incurred in HIS is also borne by the LIS which buy those industrial products, as the input cost of power has already been included in the product’s price.
  •  Further, this situation justifies the fact that the final costs of power consumption are also borne by other States.
  • Thus, the electricity duty should be redistributed among the States under the ambit of GST equally shared by the CGST and SGST.


In order to attain higher economic growth, the States should raise the issue of uniform energy tariff and inclusion of electricity duty under the ambit of GST.

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Policy Wise: India’s Power Sector

Revamped Distribution Sector Reform Scheme (RDSS)


From UPSC perspective, the following things are important :

Prelims level : RDSS

Mains level : Paper 3- RDSS for discoms


Launched in July 2021, the Revamped Distribution Sector Reform Scheme (RDSS) is the latest of many central government grant-based programmes towards electricity distribution network investments.

 RDSS overview

  • Revamped Distribution Sector Reform Scheme (RDSS) has an outlay of Rs 3 lakh crore for five years.
  • Half of the outlay is for better feeder and transformer metering and pre-paid smart consumer metering.
  • The remaining half, 60 percent of which will be funded by central government grants, will be spent on power loss reduction and strengthening networks.
  • RDSS stipulates universal pre-paid metering but post-paid options may be suitable in many contexts.
  • RDSS suggested measures such as privatization and franchisee adoption.

Legacy design issues in RDSS

  • Design issues: Complex processes and conditions for fund disbursal: Only 60 percent of the total Rs 2.5 lakh crore grants allocated in past schemes were disbursed.
  • Lack of review and regulatory oversight: Lack of public review and regulatory oversight in states is another issue.
  • Prescriptive approach: The prescriptive approach of the scheme design impedes effective implementation. For example, RDSS emphasizes loss reduction investments over system strengthening.
  • However, high losses are typically connected to sustained poor quality service which, in turn, is affected by inadequate investment in system strengthening.

Opportunities for discoms under RDSS

1] Strengthen rural networks

  • It is important to strengthen rural networks to meet growing demand.
  • In the past decade, 4.9 crore poor households have been electrified and more than Rs 50,000 crore has been invested in rural networks.
  • However, actual investments have been much less than planned.
  • Transformer and sub-station capacities were designed to meet the minimal demand assuming few lights, fans, and TV.
  • Increased supply hours, appliance usage, and the needs of rural enterprises will need more network investment.
  • Without this, the risk of power outages is high.
  • The RDSS system’s strengthening plans can focus on this challenge.

2] Opportunity to provide reliable supply and reduce subsidy requirements for agriculture

  • About 25 percent of electricity sales is to be highly subsidized, agricultural consumers who also receive an erratic, poor quality supply.
  • Under the national KUSUM scheme, day-time, low-cost supply can be provided to a large number of farmers by installing megawatt scale solar plants.
  • For this to work, separate feeders for agricultural consumers are needed. RDSS prioritizes investments and grants towards dedicated agricultural feeders to accelerate feeder solarisation.
  • States must leverage this grant support to provide reliable supply and reduce subsidy requirements.

3] Automatic metering of distribution feeders

  • Often, discoms under-estimate losses by over-estimating unmetered consumption in a bid to demonstrate loss reduction.
  • For greater veracity, all feeders must be equipped with meters capable of communicating readings without manual intervention.
  • States should leverage RDSS’s emphasis on automatic meter reading for this.

4] Smart metering

  • RDSS prescribes a phase-wise roll-out of consumer smart meters, starting with commercial and industrial consumers and urban areas.
  • Such an approach provides states with an opportunity to understand implementation issues, adopt suitable strategies for metering and evolve frameworks for assessing benefits vis-a-vis the costs.

5] Network for charging EVs

  • Discoms can avail 60 percent of grants under RDSS for network investments required to address the demand of charging infrastructure for electric vehicles.
  • This can accelerate a shift away from petrol and diesel fuels.

Way forward

  • Flexibility: To leverage various opportunities, states must emphasize the need for flexibility in prioritizing investments in their action plans.
  • Central government agencies should also be flexible in the monitoring, tracking, and fund disbursal mechanisms.
  • Accelerated implementation: This should be accompanied by state-level commitments towards accelerated but deliberate implementation.


Despite the challenges, there are opportunities for discoms under RDSS. However, without these efforts, despite its potential, RDSS will likely be important but limited in its impact, like its predecessors.

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Policy Wise: India’s Power Sector

India needs a coordinated approach for decarbonisation of economy


From UPSC perspective, the following things are important :

Prelims level : Emission intensity

Mains level : Paper 3- Decarbonising the Indian economy


The announcement of enhanced targets for climate action by India, particularly for achieving net-zero emissions by 2070, has highlighted the importance of long-term planning for decarbonising the economy.

Why do we need a decarbonizing strategy

  • The Government of India has responded to rapid reductions in the cost of renewable energy (RE) based power, with dramatic enhancements in the targets for RE.
  • With this approach, India has done well and is on a path to fulfilling its Paris Agreement commitments for 2030.
  • However, the road ahead will be challenging, and therefore, a coordinated strategy for decarbonising the economy efficiently and effectively will be required.

Strategy for decarbonising the economy

  • Factoring in the changes: By 2070, there will be many changes in technology, environmental conditions, and the economy.
  • The planning horizon of about 50 years will need to be broken up into shorter periods so that new knowledge about emerging technologies can be incorporated into plans.
  • Monitoring of the progress: Plans will need to be monitored so that the course can be corrected to respond to any unforeseen problems.
  • Five years, as the UK has used, seems like a reasonable “Goldilocks ideal.”
  • An autonomous and technically credible agency, like the Climate Change Committee (CCC) in the UK, should be set up.

Decarbonising the power sector

  • Biggest source of GHG: The power sector is the biggest source of GHG emissions and also the easiest one to decarbonise.
  • Reducing emission intensity is a good overarching objective; increased use of RE or non-fossil-fuel generation is a means to that end.
  • The four 2030 targets: Non-fossil fuel generating capacity to be 500 GW, RE capacity to be 50 per cent of all generation capacity, reduction in emission intensity by 45 per cent, and avoidance of GHG emissions by 1 billion tonnes — are inter-related.

Suggestions to decarbonise the power sector

  • Set emission intensity targets: Setting permissible emission intensity in terms of grammes of carbon dioxide equivalent per kWh of electricity sold, would be a good option for targets in the power sector.
  • Single emission-related objective: In order to decarbonise the power sector, it would be best to have a single emissions-related objective so that an optimal strategy can be developed to achieve the objective at the lowest cost.
  • Avoid separate targets: Currently there is a profusion of separate targets for almost every resource used to generate electricity.
  • For example, there are separate renewable purchase obligations (RPOs) for solar, non-solar RE, and hydropower.
  • Such an approach reduces the flexibility of distribution companies to select resources to meet their loads, resulting in a non-optimal resource mix, and a higher cost of electricity.
  • Reconsider RPO: RPOs are usually imposed to support nascent technologies, and because RE is now competitive on costs with conventional generation, the need for RPOs should be reconsidered.
  • The use of emission intensity targets is a better approach.

Consider the question “Why power sector holds the key to decarbonising the Indian economy? Suggest the strategy India should follow to decarbonise the power sector.”


The use of five-year interim targets for permissible emission intensity and the establishment of an autonomous and credible agency to advise the government on targets and policies and to monitor progress will greatly facilitate an effective, economic, and smooth transition to decarbonisation of the power sector first, and the Indian economy later by 2070.

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Policy Wise: India’s Power Sector

India’s power discoms are at a critical point


From UPSC perspective, the following things are important :

Prelims level : SECI

Mains level : Paper 3- Challenges facing discoms


The power sector in India is at an inflection point. Three developments are triggering a shift across the power chain, generation and distribution in particular, and are in the process deepening existing faultlines, and exacerbating the distress.

Three changes driving the shift in power sector

1) Central government’s approach towards distribution segment

  • Till recently, the Centre had preferred to incentivise states, nudging them to address the issue that lies at the heart of the power sector’s woes — turning around the operational performance and financial position.
  • However, despite multiple attempts, not much has changed.
  • But over the past few months, the Centre appears to have changed tack.
  • The Centre no longer appears content to simply nudge states into acting.
  • This change in stance is evident from enforcing the tripartite agreement to recover the dues owed to power producers like NTPC by discoms in Jharkhand, Tamil Nadu and Karnataka to now regulating coal supplies to states where power generating companies have been delaying payments.

2) Covid impact on government finances and ability to support discoms

  • Notwithstanding buoyant tax revenues this year, Covid has wreaked havoc on government finances.
  • The general government debt stands at 90 per cent of GDP.
  • Add to this demands for greater welfare spending, uncertainty over state government finances once the five year GST compensation period ends next year, and the limits to which states can continue to support discoms will increasingly be tested.
  • To what extent accounting jugglery can be used once again to clean up discom debt is debatable.
  • After all, even the liquidity facility arranged by the Centre to help discoms pay off their obligations will have to be paid back.

3) Loss of monopoly and shift towards renwable

  • Until now, consumers had little recourse to alternate sources of supply.
  • Consequently, discoms, which are essentially geographical monopolies, were able to charge higher tariffs from commercial and industrial consumers to cross-subsidise agricultural and low-income households.
  • But the situation appears to be changing.
  • Migration of high tariff paying consumers through open access and investments in captive power plants is gaining traction, driven in large part by the emergence of solar as an alternative at seemingly competitive tariffs.
  • This reduced reliance of high tariff paying consumers on discoms will only exacerbate their already precarious financial position.
  • The pace at which this transition is occurring will only accelerate in the coming years.
  • On the supply side, at the global and the national level, there is a push towards cleaner fuel, solar in particular.
  • Flowing from this — though with debatable relevance given the current levels of per capita emissions — is the domestic policy thrust towards renewables.
  • Solar, in particular, benefits from both explicit and implicit subsidies — land at concessional rate, exemption from interstate transmission charges, discounted wheeling charges, cross-subsidies for open access, SECI taking on counterparty risk, and others.
  • It also enjoys “Must Run” status.
  • On the demand side, at current tariffs, solar is emerging as an attractive alternative for the high tariff paying commercial and industrial consumers.
  • On their part, discoms are trying to salvage a losing situation.
  • To stem the flow of high paying customers, some have begun levying an additional surcharge on whoever opts for open access to lower the cost differential.
  • Others are shifting from net metering to gross metering — essentially charging consumers higher tariffs — above particular consumption levels.


Continuously subsidising discoms for their AT&C losses (operational inefficiencies), and for not supplying power at commensurate tariffs to low-income households and agricultural customers (for political considerations) will become fiscally untenable.

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Policy Wise: India’s Power Sector

Why India needs a Ministry of Energy?


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Coal shortage issue


The blame cannot be placed on the doors of any one entity or ministry for the shortage of coal.

Ministries linked with coal shortage issue

  • The Ministry of Coal and Coal India must certainly accept that they slipped up somewhere — whether in managing the production process, planning supplies or leaving vacant crucial leadership positions.
  • The Ministry of Power/NTPC should also accept responsibility as they allowed coal inventories to fall below the recommended minimum in an effort to better manage their working capital.
  • But they can claim they had no other option because the state government electricity distribution companies do not pay their dues on time or fully.
  • The discoms will point a finger at their political bosses, who compel them to sell electricity to residential and agricultural sector consumers at subsidised tariffs.

Structural issues

  • There is no one public body at the central or state government level with executive oversight, responsibility and accountability for the entirety of the coal value chain.
  • This is a lacuna that afflicts the entire energy sector.
  • It will need to be filled to not only prevent a recurrence of another coal crisis but also for the country to realise its “green” ambition.
  • The word “energy” is not part of the political or administrative lexicon.
  • At least not formally. As a result, there is no energy strategy with the imprimatur of executive authority.
  • The NITI Aayog may well challenge this statement.
  • For they have produced an energy strategy.


  • Energy act: The government should pass an Act (possibly) captioned “The Energy Responsibility and Security Act.”
  • This Act should elevate the significance of energy by granting it constitutional sanctity; it should embed in law, India’s responsibility to provide citizens access to secure, affordable and clean energy.
  • The law should lay out measurable metrics for monitoring the progress towards the achievement of energy independence, energy security, energy efficiency and “green” energy.
  • Ministry of energy: Towards the fulfillment of this mandate, the government should redesign the existing architecture of decision-making for energy.
  • Preference would be for the creation of an omnibus Ministry of Energy to oversee the currently siloed verticals of the ministries of petroleum, coal, renewables and power.
  • The department would have a narrower remit than the other energy departments but by virtue of its location within the PMO, it would, de facto, be the most powerful executive body with ultimate responsibility for navigating the “green transition”.


  • It is important to stress the positive impact the above redesign will have on investor sentiment.
  • Several corporates have signaled their intent to invest mega bucks in clean energy.
  • Reliance has committed $10 billion, Adani $ 70 billion over 10 years; Tata Power, ReNew Power and Acme Solar have also placed their stakes in the ground.


Energy sector will be immensely benefited if the current fragmented and opaque regulatory, fiscal and commercial systems and processes were replaced by a transparent and single-point executive decision-making body for energy.

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Policy Wise: India’s Power Sector

A clean energy transition plan for India


From UPSC perspective, the following things are important :

Prelims level : HELE power plants

Mains level : Paper 3- Clean energy transition plan


India has a long way to go in providing electricity security to its people since its per capita electricity consumption is still only a third of the global average.

Ensuring energy security and role of coal

  • Energy security warrants the uninterrupted supply of energy at affordable prices.
  •  Thanks to the Electricity Act of 2003, the installed coal-fired thermal power plant (TPP) generation capacity in India more than doubled from 94 GW to 192 GW between March 2011 and 2017.
  • This sharp increase in the installed capacity has enabled the government to increase per capita electricity consumption by 37% while reducing peak demand deficit from 9.8% (2010-11) to 1.6% (2016-17). 
  • TPPs contributed 71% of the 1,382 billion units (BU) of electricity generated by utilities in India during FY 2020-21 though they accounted for only 55% of the total installed generation capacity of 382 GW (as of March 2021).
  • Coal, therefore, plays a vital role in India’s ongoing efforts to achieve Sustainable Development Goal 7, which is “to ensure access to affordable, reliable, sustainable and modern energy for all”.

Renewable energy utilisation issue and implications for consumers

  • While variable renewable energy (VRE) sources (primarily, wind and solar) account for 24.7% of the total installed generation capacity, as of March 2021, they contributed 10.7% of the electricity generated by utilities during FY 2020-21.
  • However, the ramp-up of VRE generation capacity without commensurate growth in electricity demand has resulted in lower utilisation of TPPs whose fixed costs must be paid by the distribution companies (DISCOMs) and passed through to the final consumer.
  • The current level of VRE in the national power grid is increasing the cost of power procurement for DISCOMs, leading to tariff increases for electricity consumers. 
  • Therefore, India must implement a plan to increase energy efficiency and reduce the emissions of carbon dioxide (CO2) and airborne pollutants from TPPs without making power unaffordable to industries that need low-cost 24×7 power to compete in the global market.

Way forward: time-bound transition plan

  • Phasing out: The plan should involve the progressive retirement of TPPs(unit size 210 MW and below) based on key performance parameters such as efficiency, specific coal consumption, technological obsolescence, and age.
  • Increasing utilisation: The resulting shortfall in baseload electricity generation can be made up by increasing the utilisation of existing High-Efficiency-Low-Emission (HELE) TPPs that are currently under-utilised to accommodate VRE and commissioning the 47 government-owned TPPs.
  • In addition, the Nuclear Power Corporation of India Limited (NPCIL) is also constructing 11 nuclear power plants with a total generation capacity of 8,700 MW that will supply 24×7 power without any CO2 emissions.
  • The combined thermal (220 GW) and nuclear (15 GW) capacity of 235 GW can meet the baseload requirement (80% of peak demand) during the evening peak in FY 2029-30 without expensive battery storage.
  • The optimal utilisation of existing and under-construction HELE TPPs with faster-ramping capabilities and lower technical minimums also facilitates VRE integration.
  • Since HELE TPPs minimise emissions of particulate matter (PM), SO2, and NO2, the transition plan offers operational, economic, and environmental benefits including avoidance of sustenance Capex and FGD costs in the 211 obsolete TPPs to be retired besides savings in specific coal consumption and water requirement leading to reductions in electricity tariffs and PM pollution.


The implementation of transition plan will enable India to safeguard its energy security and ensure efficient grid operations with lower water consumption, PM pollution, and CO2 emissions.

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Policy Wise: India’s Power Sector

Lessons from the coal shortage


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Coal shortage issue


Normally, the power-generating companies maintain around 30 days of inventory of coal, but, currently, this has come down to three days.

Factors responsible for the crisis

  • Supply side issue: On the supply side, because of low investment, coal cannot be mined more than the capacity which exists today. Hence, the increase in supplies will be gradual.
  • High global prices: The global coal crisis has led to higher prices.
  • Here, too, a sudden resurgence in demand after the pandemic has exposed the supply limitations.
  • The international price has gone up by almost 40 per cent in the last month.
  • China factor: China – a major producer and consumer – has also faced this problem as it has tried to save coal for the future and imposed restrictions on mining to go green.
  • Emphasis on lowering the dependence on import:  In India, coal imports have been traditionally high.
  • Under its atmanirbharta drive, the government has voiced concerns on this issue and asked generators to be more self-reliant.
  • Coal dependency came down over time, which also coincided with a lower phase of economic growth.
  • The same has happened in China where the government has taken the greening concept seriously and asked coal producers to control production and power generators and move over to other greener fuels.
  • This has made coal producers less willing to increase investment.

Why power companies are reluctant to import coal?

  • Ideally, power companies should import coal.
  • But that increases the cost of power production and power tariffs cannot be revised easily, like in the case of crops.
  • The power sector, however, already has its woes.
  • Distribution companies have been running losses due to their inability to cut down on transmission losses or increase tariffs.
  • As their losses mount, the amount overdue to the generators increases.
  • Therefore, the producers are not willing to increase their costs.

How it would impact the economy?

  • The economy has been showing signs of recovering and the October-December period is crucial because there are expectations of pent-up demand helping to accelerate growth.
  • Any disruption in the power supply can push back this process.
  • The challenge is that today all the three sectors, agriculture, industry and households, are equally important.
  • A lot of business is being conducted from home after the pandemic, and power disruptions will come in the way of work.
  • If power companies start revising their tariffs, inflation will shoot up.


The coal shortage problem is very serious as it affects power supply, which is the backbone of all economic activity. All stakeholders – the Centre, states, miners and power generators – must work together and plan the strategy going ahead.

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Policy Wise: India’s Power Sector

Electricity (Amendment) Bill 2020


From UPSC perspective, the following things are important :

Prelims level : AT and C losses

Mains level : Paper 3- Salient features of Electricity (Amendment) Bill 2020


Most discoms are deep into the red as high aggregate technical and commercial (AT&C) losses are chipping into their revenues. Against this backdrop, the Electricity (Amendment) Bill of 2020 is a game-changing reform.

Why the Electricity (Amendment) Bill of 2020 is a game-changing reform

  • De-licensing power distribution: This will provide the consumers with an option of choosing the service provider, switch their power supplier and enable the entry of private companies in distribution, thereby resulting in increased competition.
  • In fact, privatisation of discoms in Delhi has reduced AT&C losses significantly from 55% in 2002 to 9% in 2020.
  • Open access for purchasing power: Open access for purchasing power from the open market should be implemented across States and barriers in the form of cross-subsidy surcharge, additional surcharge and electricity duty being applied by States should be reviewed.
  • Issue of tariff revision: The question of tariffs needs to be revisited if the power sector is to be strengthened.
  • Tariffs ought to be reflective of the average cost of supply to begin with and eventually move to customer category-wise cost of supply in a defined time frame.
  • This will facilitate a reduction in cross-subsidies.
  • Inclusion in GST: Electrical energy should be covered under GST, with a lower rate of GST, as this will make it possible for power generator/transmission/distribution utilities to get a refund of input credit, which in turn will reduce the cost of power.
  • Use of smart meters: Technology solutions such as installation of smart meters and smart grids which will reduce AT&C losses and restore financial viability of the sector.
  • The impetus to renewable energy: The impetus to renewable energy, which will help us mitigate the impact of climate change, is much needed.
  • Despite its inherent benefits, the segment has shown relatively slow progress with an estimated installed capacity of 5-6 GW as on date, well short of the 2022 target.
  • The Bill also underpins the importance of green energy by proposing a penalty for non-compliance with the renewable energy purchase obligations which mandate States and power distribution companies to purchase a specified quantity of electricity from renewable and hydro sources
  • Strengthening the regulatory architecture: This will be done by appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity.
  • This will ensure faster resolution of long-pending issues and reduce legal hassles.
  • Authority for contractual obligation: Provision in the Bill such as the creation of an Electricity Contract Enforcement Authority to supervise the fulfillment of contractual obligations under power purchase agreement, cost reflective tariffs and provision of subsidy through DBT are commendable.


Early passage of the Bill is critical as it will help unleash a path-breaking reform for bringing efficiency and profitability to the distribution sector.

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Policy Wise: India’s Power Sector

Issues with Free power


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues with free power


With elections around the corner in many States, political parties are competing with one another in promising free power.

Problems with free power

  • Supported by state subsidy, electricity tariff to agriculture is low in most States – often less than ₹1/unit – and is free in some States such as Punjab, Tamil Nadu and Karnataka.
  • There is inefficient use of electricity and water, neglect of service quality by the distribution companies leading to frequent outages and motor burn outs, and high subsidy burden on the State governments.
  • Inflated consumption estimates: Since nearly three-fourth of the agriculture connections in the country are unmetered, consumption estimates are often inflated by distribution companies to increase subsidy demand and project low distribution losses.
  • Any metering effort faces resistance as it is perceived as the first step towards levying charges.
  • Opting-out schemes are being made but do not seem to have uptake.
  • Difficulty in implementing DBT: Free power provision along with issues of metering make implementation of Direct Benefit Transfer difficult.
  • All this leaves farmers, distribution companies and State governments frustrated.
  • Subsidy burden on Governments: Due to free power in Delhi, the total state subsidy amounts to 11% of the total expenses.
  • In Tamil Nadu, where free power is available to households, half of the total subsidy is earmarked for this.
  • If there is further increase in number and consumption limits of free power, the subsidy burden on State governments will substantially increase.
  • Low adoption of solar power: Roof-top solar and energy efficiency are good environment-friendly options for homes but providing free power to well-off households will discourage them from taking these up.

Way forward

  • Free or low-tariff power is at best a short-term relief, which should be provided to those who desperately need it.
  • Give fixed rebate: A fixed rebate of up to ₹200/month for residential consumers can be provided in the electricity bill.
  • As the rebate is delinked from consumption, distribution companies won’t have an incentive to inflate consumption.
  • Rebate for adopting energy-efficient appliances: There can be additional rebates for adopting energy-efficient appliances like refrigerators, combined with State-level bulk procurement programmes to reduce the cost.
  • Addressing mutual mistrust: The atmosphere of mutual mistrust between small consumers and distribution companies has to change.
  • There should be quick resolution of arrears and one-time offers for settlements.


There is a need to question the wisdom of broad-brush promises such as free power, which cannot be sustained in the long run.

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Policy Wise: India’s Power Sector

Reforms-based and Results-linked, Revamped Distribution Sector Scheme: Ensuring sustainable turnaround in financial health of discoms


From UPSC perspective, the following things are important :

Prelims level : UDAY scheme

Mains level : Paper 3- Scheme for discoms


In its budget 2021-22, the Union government had announced the launch of a “reforms-based and results-linked” scheme for the distribution sector.

Precarious financial condition of discoms

  • Their overall debt burden, despite the implementation of the UDAY scheme, is estimated to increase to around Rs 6 lakh crore in the ongoing financial year.
  • Moreover, their annual cash losses are estimated to be about Rs 45,000-50,000 crore (excluding UDAY grants and regulatory income).
  • Due to highly subsidised nature of power tariffs towards agriculture and certain sections of residential consumers, the overall subsidy dependence is likely to be roughly Rs 1.30 lakh crore this year at the all-India level.

Revamped Distribution Sector Scheme

  • In its budget 2021-22, the Union government had announced the launch of a “reforms-based and results-linked” scheme for the distribution sector.
  • Subsequently, the Revamped Distribution Sector Scheme was notified in July with an overall outlay of Rs 3.03 lakh crore. 
  • Under the scheme, AT&C losses are sought to be brought down to 12-15 per cent by 2025-26, from 21-22 per cent currently.
  • Operational efficiencies of discoms are to be improved through smart metering and upgradation of the distribution infrastructure, including the segregation of agriculture feeders and strengthening the system.
  • The scheme has two parts — Part A with an outlay of Rs 3.02 lakh crore, pertains to the upgradation of the distribution infrastructure and metering related works.
  • Part B, with an outlay of Rs 1,430 crore, is for training and capacity building, besides other enabling and support activities.
  • Discoms and their state governments will have to sign a tripartite agreement with the central government in order to avail benefits under the scheme.
  • Only those discoms that meet all the pre-qualifying criteria will be eligible for the release of funds.
  • A loss-making discom will not be eligible unless it draws up plans to reduce its losses, approved by the state government and filed with the central government.
  • As far as the agricultural sector is concerned, the use of solar power projects to supply electricity to these consumers through the agriculture feeder route is likely to result in savings.
  • This is because of a combination of high tariff competitiveness offered by solar power, lower technical losses due to proximity to load centres, and the ability to meet demand during the day when sunlight is available.
  • In addition, the delicencing initiative proposed by the central government can effect significant changes in the distribution segment, facilitating competition and placing emphasis on the quality and reliability of power supply and consumer services.

Issue of tariff determination

  • A continuing area of concern affecting discom finances is the significant delay in the process of tariff determination in many states.
  • As of now, only 19 out of 28 states have issued tariff orders for 2021-22, indicating sluggish progress.
  • Further, there is upward pressure on the cost of power supply for distribution utilities, considering the dominant share (around 70 per cent) of coal in the fuel mix for energy generation, the strengthening of imported coal prices and the possibility of domestic coal price revisions by Coal India.
  • As a consequence, a cost-reflective tariff determination process, coupled with the timely pass-through of power purchase costs, remains critical for the utilities.

Consider the question “Examine the factor that explains the continuing financial woes of state-owned discoms despite implementing several schemes. How Revamped Distribution Sector Scheme seeks to address the issue?”


On the whole, while the focus on improving the operational efficiency, and ensuring the financial sustainability of discoms is indeed welcome, timely implementation of the reforms is critical to achieving the milestones.


Policy Wise: India’s Power Sector

[pib] SAUBHAGYA Scheme completes 4 years


From UPSC perspective, the following things are important :

Prelims level : PM-SAUBHAGYA Scheme

Mains level : Rural and Urban Electrification

The Pradhan Mantri Sahaj Bijli Har Ghar Yojana – SAUBHAGYA Scheme has successfully completed four years of its implementation.

Progress till date

  • 82 crore households have been electrified since the launch of SAUBHAGYA till 31st March, 2021.

About SAUBHAGYA Scheme

  • The Saubhagya is a scheme to ensure electrification of all willing households in the country in rural as well as urban areas.
  • It was launched in September 2017.
  • The Rural Electrification Corporation Limited (REC) is the nodal agency for the operationalization of the scheme throughout the country.


  • To provide energy access to all by last mile connectivity and electricity connections to all remaining un-electrified households in rural as well as urban areas
  • To achieve universal household electrification in the country

Beneficiaries of the project

  • The beneficiaries for free electricity connections would be identified using Socio-Economic and Caste Census (SECC) 2011 data.
  • However, un-electrified households not covered under the SECC data would also be provided electricity connections under the scheme on payment of Rs. 500 which shall be recovered by DISCOMs in 10 installments through electricity bill.
  • The solar power packs of 200 to 300 Wp with battery bank for un-electrified households located in remote and inaccessible areas, comprises Five LED lights, One DC fan, One DC power plug.
  • It also includes Repair and Maintenance (R&M) for 5 years.

Implementation process

  • For the easy and accelerated implementation of the Scheme, modern technology shall be used for household surveys by using Mobile App.
  • Beneficiaries shall be identified and their application for electricity connection along with applicant photograph and identity proof shall be registered on spot.
  • The Gram Panchayat/Public institutions in the rural areas may be authorised to collect application forms along with complete documentation, distribute bills and collect revenue in consultation with the Panchayat Raj Institutions and Urban Local Bodies.

Expected outcomes of the scheme

The expected outcome of the Scheme is as follows:

  • Environmental upgradation by substitution of Kerosene for lighting purposes
  • Improvement education services
  • Better health services
  • Enhanced connectivity through radio, television, mobiles, etc.
  • Increased economic activities and jobs
  • Improved quality of life especially for women

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Policy Wise: India’s Power Sector

Retiring Old Coal Power Plants


From UPSC perspective, the following things are important :

Prelims level : CERC

Mains level : Paper 3- Issues with aging out old power plants based on age


As part of the Union Budget address for 2020-21, the Finance Minister, Nirmala Sitharaman, said that the shutting down of old coal power plants, which are major contributors to emissions, will aid the achievement of India’s Nationally Determined Contributions.

Advantages of shutting down old coal power plants

  • The availability of under-utilized newer and presumably more efficient coal-based capacity means that shutting down older inefficient plants would lead to improved efficiencies, reduced coal usage, and hence, cost savings.
  • It would be uneconomical for old plants to install pollution control equipment required to meet the emission standards announced by the Environment Ministry, and hence it would be better to retire them.

Why the decision needs finer scrutiny?

  • Some old plants are cost-effective: There are also several old plants, which generate at lower costs, such as plants at Rihand, Singrauli, and Vidhyanchal (Madhya Pradesh).
  • Locational advantage: This may be due to locational advantage rather than efficiency, as older plants are likely to be located closer to the coal source, reducing coal transport costs.
  • Not cost-effective: Savings in generation cost from shutting down plants older than 25 years would be less than ₹5,000 crore annually, which is just 2% of the total power generation cost.
  • Not effective in reducing coal consumption: Savings in coal consumption by replacing generation from plants older than 25 years with newer coal plants are also likely to be only in the 1%-2% range.
  • Economical even after installing pollution control equipment: There are some old plants that may continue to be economically viable even if they install pollution control equipment as their current fixed costs are very low.

Important roles played by old thermal power plants

  • A significant part of power supply: Plants older than 25 years makeup around 20% of the total installed thermal capacity in the country and play a significant role in the country’s power supply.
  • Supporting renewable: To support the growing intermittent renewable generation in the sector, there is an increasing need for capacity that can provide flexibility, balancing, and ancillary services.
  • Old thermal capacity, with lower fixed costs, is a prime candidate to play this role until other technologies (such as storage) can replace them at scale.
  • Political economy risk: There is also a political economy risk, as aggressive early retirement of coal-based capacity, without detailed analyses, could result in real or perceived electricity shortage in some States, leading to calls for investments in coal-based base-load capacity by State-owned entities.

Way forward

  • Nuanced analysis needed: Instead of using age as the only criteria, a more disaggregated and nuanced analysis needs to be used.
  • Constraint related to renewable and increasing demand: We also need to take into account aspects such as intermittency of renewables, growing demand, and the need to meet emission norms, to make retirement-related decisions.


It may be prudent to let old capacity fade away in due course while focusing on such detailed analysis and weeding out the needless capacity in the pipeline, to derive long-term economic and environmental benefits.

Policy Wise: India’s Power Sector

Issues faced by Discoms in India


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues of Discoms

The article highlights the need for frequent financial aids to the discoms by the Centre and discusses the factors responsible for this.

Frequent rescue packages for discoms

  • Recently, there was a sharp decline in the dues owed by power distribution companies, discoms, to power generating companies.
  • Discoms have paid off their dues in part by drawing down a liquidity facility arranged by the Centre last year.
  • This rescue package was arranged to prevent the entire power sector chain from suffering because of the discoms’ inability to meet their obligations. 
  • In the initial years after the introduction of UDAY some states did, in fact, witness an improvement in their financial and operational indicators.
  • But it wasn’t sustained, There has been a sharp deterioration in several parameters.

Low performance of Discoms

1) On the basis of AT&C losses

  • A key metric to measure the performance of discoms is AT&C losses.
  • The UDAY scheme had envisaged bringing down these losses to 15 per cent by 2019.
  • However, as per data on the UDAY dashboard, the AT&C losses currently stand at 21.7 per cent at the all-India level.
  • In the case of the low-income north and central-eastern states — Uttar Pradesh, Bihar, Jharkhand and Chhattisgarh — the losses are considerably higher.

2) On the basis of cost and revenue per unit

  • On another metric — the gap between discoms’ costs and revenues — the difference, supposed to have been eliminated by now, stands at Rs 0.49 per unit in the absence of regular and commensurate tariff hikes.
  • For the high-income southern states of Tamil Nadu, Andhra Pradesh, and Telangana, this gap between costs and revenues is significantly higher.

What are the factors responsible for inefficiencies?

1) Electrification push without cost restructuring

  • The government’s push for ensuring electrification of all have contributed to greater inefficiency.
  •  To support higher levels of electrification, cost structures need to be reworked, and the distribution network would need to be augmented — in the absence of all this, losses are bound to rise.

2) Economic fallout of the pandemic

  • With demand from industrial and commercial users falling, revenue from this stream, which is used to cross-subsidise other consumers, has declined, exacerbating the stress on discom finances.
  • A turnaround in the economy will provide some relief, but will not form the basis of a sustained improvement in finances.

3) Lack of consumer data and metering

  •  Even six years after UDAY was launched, various levels in the distribution chain — the feeder, the distribution transformer (DT) and the consumer — have not been fully metered.
  • As a result, it is difficult to ascertain the level in the chain where losses are occurring.
  • Other than discoms in metros like Delhi and Mumbai, there is also limited data on which consumer is attached to which DT.
  • This lack of data makes it difficult to isolate and identify loss-making areas and take corrective action.

4) No tariff hike

  • The continuing absence of political consensus at the state level to raise tariffs or to bring down AT&C losses signal a lack of resolve to tackle the issues plaguing the sector.

Way forward

  • One of the solution centres around a national power distribution company.
  • Another option is to deduct discom dues, owed to both public and private power generating companies, from state balances with the RBI forcing states to take the necessary steps to fix discom finances.
  • The Centre has linked additional state borrowings to the completion of distribution reforms to incentivise states to act.

Consider the question “Despite several efforts by the Centre to improve the efficiency, discoms continue to perform dismally requiring frequent financial aids. What are the factors responsible for this? Suggest the way forward.” 


Short of radical measures — privatisation remains a chimera — it is difficult to see how a sustainable turnaround in the financial and operational position of discoms can be engineered. As the amounts involved rise, minor tinkering isn’t likely to produce the desired results.

Back2Basics: AT&C losses

  • Distribution loss consists of two parts:
  • a. Technical loss
  • b. Commercial loss.
  • It is also called AT&C loss.
  • AT&C loss is nothing but the sum total of technical and commercial losses and shortage due to non-realization of billed amount.
  • AT&C Loss = (Energy input – Energy billed) * 100 / Energy input.

Policy Wise: India’s Power Sector

True empowerment of the electricity consumer


From UPSC perspective, the following things are important :

Prelims level : SERC

Mains level : Paper 3- The Electricity (Rights of Consumers) Rules, 2020

The article examines the various provisions of the Electricity (Rights of Consumers) Rules, 2020 and analyses whether or not these Rules will empower the consumers. 

Empowering electricity consumers

  • The Electricity (Rights of Consumers) Rules, 2020 was promulgated in December to deal with the problems faced by the consumers.
  • The enactment of consumer-centric rules does spark public debate that brings the rights of consumers to the fore.
  • the Rules lay an emphasis on national minimum standards for the performance parameters of DISCOMs. without urban-rural distinction.
  • They also reiterate the need for automatically compensating consumers.

Let’s analyse the changes introduced by the new Rule and issues with them

Supply quality issue

  • Many States have not been able to provide quality supply, especially to rural and small electricity consumers.
  • Provisions similar to made in the new Rule already exist in the Standards of Performance (SoP) regulations of various State Electricity Regulatory Commissions (SERCs).
  • It is not because of a lack of rules or regulations that quality supply is not provided; rather, it is on account of a lack of accountability systems to enforce them.
  • Unfortunately, neither these rules nor past efforts address these accountability concerns.
  • Guarantee of round the clock supply is a provision that the Rules emphasise, which might be missing in State regulations.
  • It is difficult to enforce since the availability of power supply is inadequately monitored even at 11 kV feeders, let alone at the consumer location.
  • This highlights not only the need for implementation of existing provisions in letter and spirit but also amending them with strong accountability provisions.

Weakening of existing provision

  • The Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
  • For example, the Rules say that faulty meters should be tested within 30 days of receipt of a complaint.
  • Compared to this, regulations t in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
  • A similar observation can be drawn from the suggested composition of the Consumer Grievance Redressal Forum. 
  •  The Rules say that the forum — constituted to remedy complaints against DISCOMs should be headed by a senior officer of the company.
  • This is a regressive provision that would reduce the number of cases that are decided in favour of consumers.

Lack of clarity on net-metering

  • The Rules guarantee net metering for a solar rooftop unit less than 10 kW.
  • However, there is no clarity if those above 10 kW can also avail net metering.
  • This could lead to a change in regulations in many States based on their own interpretations.
  •  The possible litigation that follows would be detrimental to investments in rooftop solar units, and would discourage medium and large consumers to opt for an environment-friendly, cost-effective option.

Way forward

  • SERCs should assess the SoP reports of DISCOMs and revise their regulations more frequently.
  • SERCs should organise public processes to help consumers raise their concerns.
  • DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online.
  • The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
  • Central agencies have taken proactive efforts to ensure regular tariff revision.
  • They could also support independent surveys and nudge State agencies to enforce existing SoP regulations.
  • The central government could disburse funds for financial assistance programmes based on audited SoP reports.

Consider the question”What are the problems faced by the electricity consumers in India? Will the Electricity (Rights of Consumers) Rules, 2020 help consumers to deal with the existing issues?”


The governments, DISCOMs and regulators need to work jointly and demonstrate the commitment and the will power to implement existing regulations. It is not yet late to recognise this and initiate concerted efforts to truly empower consumers.

Policy Wise: India’s Power Sector

[pib] Six successful years of UJALA Scheme


From UPSC perspective, the following things are important :

Prelims level : PM UJALA scheme

Mains level : Not Much

The Unnat Jyoti by Affordable LEDs for All (UJALA) Scheme and Street Lighting National Programme (SLNP) marks their sixth anniversary today.

Do not get confused with PM-UJJWALA Scheme.

UJALA Scheme

  • Unnat Jyoti by Affordable LEDs for All (UJALA) was launched by our PM on 1 May 2015, replacing the “Bachat Lamp Yojana”.
  • The project is spearheaded by the Energy Efficiency Services Limited.
  • In non-subsidized LED lamp distribution projects, this program is considered the world’s largest.
  • In May 2017, the Government of India announced that they were expanding the LED distribution project to the United Kingdom.
  • Both the programmes are being implemented by Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Ministry of Power, Government of India since their inception.

A roaring success

  • Under UJALA, EESL has distributed over 36.69 crores LED bulbs across India.
  • This has resulted in estimated energy savings of 47.65 billion kWh per year with an avoided peak demand of 9,540 MW and an estimated GHG emission reduction of 38.59 million tonnes CO2 per year.
  • Additionally, over 72 lakh LED tube lights and over 23 lakh energy efficient fans have also been distributed at an affordable price under this programme.

Policy Wise: India’s Power Sector

How should India navigate future energy transition?


From UPSC perspective, the following things are important :

Prelims level : International Energy Agency

Mains level : Paper 3- India's transition to renewable and challenges it faces

The article is based on the book by Daniel Yergin, titled ” The New Map: Energy, Climate and the Clash of Nations”. The book throws some questions to countries dependent on oil and suggests the framework for their transition to renewable.

Six broad themes underlying the energy transition

  • The first is the US shale revolution, which transformed the US from a major importer of oil and gas to a significant exporter.
  • The second is the leveraging by Russia of its gas exports to compel former members of the Soviet Union to stay within its sphere of influence and to embrace China into an energy partnership.
  • The third is China’s assertion of its rights over the South China Seas — a critical maritime route for its energy imports and the Belt and Road initiative;
  • The fourth is sectarian strife (Sunni/Shia) in the Middle East which, compounded by volatile and falling oil prices, has brought the region to the edge;
  • The fifth is the Paris climate summit and its impact on public sentiment, investment decisions, corporate governance and regulatory norms.
  • Sixth is the consequential impact of the manifold and impressive advancement of clean energy technologies.

Questions for India

  • The ongoing transition in the energy world raises several questions for India.
  • How might they impact its objective to provide reliable, affordable, clean and universal access to energy?
  • Who will bear the costs of the transition — in particular, the costs of retrofitting industrial infrastructure and upgrading the power grids.
  • How can it prevent the “perfect storm” of high unemployment due to laid-off coal workers and stranded assets thermal power plants, slowed economic growth and environmental degradation?
  • How realistic is a green transition for an economy almost totally dependent on fossil fuels?

Three policy initiatives for the government

1) Securing favourable terms with oil suppliers

  • The government leverage its buyer strength to secure “most favoured” terms of trade for crude supplies.
  • In this regard, they bring out one development that plays to India’s advantage — the onset of “peak oil demand” (that is, demand will plateau before supply depletes).
  • However, there is no consensus on the timing of peak demand.

2) Develop own systems for photovoltaics (PVs) and batteries

  • India must develop its own world-scale, competitive, manufacturing systems for photovoltaics (PVs) and battery storage.
  • Otherwise, India will not be able to provide affordable solar units unless it accepts the further deepening of dependence on Chinese imports.
  • Currently, China manufactures 75 per cent of the world’s lithium batteries; 70 per cent of solar cells; 95 per cent of solar wafers and it controls 60 per cent of the production of poly silica.
  • China is also looking to secure a chokehold over several strategic minerals (cobalt, nickel).

3) Prepare a clean energy technology strategy

  • Technology is the answer to the energy transition.
  • That is what will bring the system to the tipping point of radical change.
  • China has placed clean energy R&D at the forefront of its “Plan 2025”.
  • The India strategy should identify relevant “breakthrough technologies”, establish the funding mechanisms and create the ecosystem for partnerships (domestic and international).


As an economy which is energy import-dependent, fossil-fuel-based India must balance between the rising demand for energy and an unhealthily strong linkage between this demand and environmental pollution.

Policy Wise: India’s Power Sector

Power sector reforms: UK lessons for India


From UPSC perspective, the following things are important :

Prelims level : CERC

Mains level : Paper 3- India's power sector and issues

Reforms in power sector in the UK were extensive and offers some important lessons for India. This article elaborates on the issue of reforms the challenges in introducing such reforms in India.

Background of the power sector reforms in UK

  • After living with vertically integrated utilities till 1989, they unbundled.
  • Unbundling created markets both at generation and retail end.
  • Today, they are back to a situation where 70% of the power generated is sold outside the wholesale market.
  • The Electricity Act, 1989, which paved the way for the appointment of a regulator and thereafter, leading to unbundling, both vertical and horizontal.
  • Twelve distribution utilities were set up (called RECs) along with three-generation companies and also a national wires company (called NGC).
  • All of them were privatised barring Nuclear Electricity.
  • Retail competition was introduced in 1990 and was extended to all consumers in 1998.
  • A wholesale market was set up for generators.
  • The next major step was to fragment the generators because the regulator felt that they were colluding.
  • NETA in 2001 was primarily a tie-up between gencos and their consumers with long-term power purchase agreements.
  • The Energy Act, 2012, was enacted, which envisaged further changes.

Issues with Power sector reform in India

  • The Electricity Act, 2003 is a very cautious and timid exercise compared to what has been done in the UK.
  • Through the Act, we have merely unbundled and ring-fenced our utilities so that there is transparency in the accounts; this itself took us several years.
  • There has been no attempt to create a wholesale market or a full-fledged retail market where the consumer chooses the supplier.
  • Large consumers, having loads in excess of 1 MW, however, have the option of open-access where they can opt to receive supply from some other entity, instead of his incumbent utility.
  • The road to open access though has been bumpy, and discoms have opposed it tooth and nail.
  • Besides what was possible in the UK may not be possible in India.
  • The UK did not have a regime of cross-subsidies where the commercial and industrial sectors subsidise agriculture and low-end domestic consumers and also did not have high commercial loss levels.
  • Moreover, in the UK, all consumers were metered, unlike India.
  • There is yet another factor: ‘Power’ falls in the Concurrent List.
  • The Centre and states rarely see eye-to-eye on several issues concerning the sector, especially on matters relating to distribution.
  • Consequently, any major change does not get accepted.

Issues in introducing reform in India

  • The CERC floated a discussion paper in December 2018 about the creation of a wholesale market in India.
  • This amounts to retrofitting, and retrofitting in an existing architecture has its limitations.
  • But the issue is whether India should attempt creating a wholesale market or for that matter a full-fledged retail market in India, especially after the experience of the UK.
  • The UK is almost back to the era of vertically integrated utilities, and consumers barely switch their retailer.

Way forward

  • We need to privatise our distribution sector by creating joint ventures with the government.
  • the government will have to undertake initial hand-holding till such time commercial losses are wiped out.
  • This is the model which was followed in the case of Delhi and has proven successful.
  • Commercial losses have come down from 50% to single-digit figures within a span of 10 to 12 years.
  • Once we reach that stage, we can think of creating a full-fledged retail market where a consumer can choose her supplier.

Consider the question “Despite several reforms in the power sector, India still lacks full-fledged retail. What are the challenges in the creation of such a market. Suggest the ways to deal with the challenges.”


The Indian consumer is only interested in good quality power supply at a reasonable price. We only need to take policy measures so that the incumbent utilities can provide this, since, this will be the least costly path.



Policy Wise: India’s Power Sector

[pib] Electricity Access & Utility Benchmarking Report


From UPSC perspective, the following things are important :

Prelims level : Highlights of the report

Mains level : Household electricity supply in India

NITI Aayog, Ministry of Power, Rockefeller Foundation, and Smart Power India have together launched the ‘Electricity Access in India and Benchmarking Distribution Utilities’ report.

About the report

  • It is based on a primary survey conducted across 10 states––representing about 65% of the total rural population of India.
  • Aimed at capturing insights from the demand (electricity customers) as well as supply-side (electricity distribution utilities), the report seeks to:
  1. Evaluate the status of electricity access in India across these states and distribution utilities along all dimensions that constitute meaningful access
  2. Benchmark utilities’ capacity to provide electricity access and identify the drivers of sustainable access
  3. Develop recommendations for enhancing sustainable electricity access

Key findings of the report:

  • As much as 92% of customers reported the overall availability of electricity infrastructure within 50 metres of their premises; however, not all have connections, the primary reason being the distance of households from the nearest pole.
  • Overall, 87% of customers have access to grid-based electricity. The remaining 13% either use non-grid sources or don’t use any electricity at all.
  • The hours of supply have improved significantly across the customer categories to nearly 17 hours per day.
  • Nearly 85% of customers reported to have a metered electricity connection.
  • Access to electricity is observed in 83% of household customers.
  • Considering the overall satisfaction level, a total of 66% of those surveyed were satisfied––74% of customers in urban areas and 60% in rural areas.

Recommendations made

The key recommendations provided in the report are in the areas of policy and regulation, process improvement, infrastructure and capacity-building of utilities. Other recommendations included:

  • prioritizing the release of new connections for non-household customers
  • transfer of subsidies or other benefits directly into a customer’s account
  • enhanced technology-driven customer service; ensuring 100% metering of customers
  • segregation of feeder lines

Policy Wise: India’s Power Sector

How to improve the financial picture of the DisComs


From UPSC perspective, the following things are important :

Prelims level : Schemes for DisComs

Mains level : Paper 3- Financial issues faced by the DisComs

The article analyses the factors responsible for financial difficulties faced by the DisComs and suggests the ways to deal with the issues.

Important role of the DisComs

  • Distribution Companies (DisComs) are the utilities that typically buy power from generators and retail these to consumers.
  • For all of India’s global leadership for growth of renewable energy, or ambitions of smart energy, the buck stops with the DisComs.
  • The days of scarcity of power are over.
  • The physical supply situation has mostly improved.
  • But the financial picture has not brightened much.

Analysing the data on liabilities of the DisComs

  •  ₹90,000 crore (later upgraded to  ₹1,25,000 crore) was earmarked for DisComs in ₹20-lakh crore package announced in the wake of Covid-19’s economic shock.
  • The Power Finance Corporation (PFC)’s Report on Utility Workings for 2018-19 showed dues to generators were ₹2,27,000 crore, and this is well before COVID-19.
  • It also showed similar Other Current Liabilities.
  • DisComs have delayed their payments upstream (not just to generators but others as well) — in essence, treating payables like an informal loan.

But why do DisComs not pay on time?

  • Ideally, DisComs should not incur losses as they enjoy a regulated rate of return.
  • While AT&C losses can explain part of any gap. Major reasons are as discussed below:

1) Regulatory issue and cash-flow gap due to it

  • The first problem starts at the regulatory level where even if DisComs performed as targeted, across India, they would face a considerable cash flow gap.
  • This cash flow gap was ₹60,000-plus crore in FY18-19 compared to their then annual cost structure of ₹7.23-lakh crore.

2) Payabeles issue: Due from consumers, state and regulatory gap

  •  These dues are of three types.
  • First, regulators themselves have failed to fix cost-reflective tariffs thus creating Regulatory Assets,which are to be recovered through future tariff hikes.
  • Second, about a seventh of DisCom cost structures is meant to be covered through explicit subsidies by State governments.
  • Third, consumers owed DisComs over ₹1.8 lakh crore in FY 2018-19, booked as trade receivables.
  • State governments are the biggest defaulters, responsible for an estimated a third of trade receivables, besides not paying subsidies in full or on time.

3) Challenge of renewable energy

  • The rise of renewable energy means that premium customers will leave the system partly first by reducing their daytime usage.
  • And as battery technologies mature, their dependence on DisComs may wane entirely.
  • Even without batteries, regulations permitting, they may want to find third party suppliers under competitive models.

Impact of Covid pandemic

  • COVID-19 has completely shattered incoming cash flows to utilities.
  •  The revenue implications were far worse since the lockdown disproportionately impacted revenues from so-termed paying customers, commercial and industrial segments.
  • Reduced demand for electricity did not save as much because a large fraction of DisCom cost structures are locked in through Power Purchase Agreements (PPAs) that obligate capital cost payments, leaving only fuel savings with lower offtake.

Way forward

  • We will probably need a much larger liquidity infusion than has been announced thus far, but it also must go hand-in-hand with credible plans to pay down growing debt.
  • We need a complete overhaul of the regulation of electricity companies and their deliverables.
  • We need to apply common sense metrics of lifeline electricity supply instead of the political doleout of free electricity even for those who may not deserve such support.
  • For the rest, regulators must allow cost-covering tariffs.

Consider the question “Examine the factor responsible for making the DisComs financial unviable? Sugget the pathways to deal with the issues faced by the DisComs”


The financial problems of DisComs have been brewing for many yearsHowever, if business as usual was not even good enough before COVID-19, it will not be workable for the current national needs of quality, affordable, and sustainable power.

Policy Wise: India’s Power Sector

Power sector reforms


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Affordability of electricity

This article analyses the issue of affordability of electricity in the country and the factors making it expensive.

How recent changes increased subsidy burden

  •  Recent policy measures like the the “Saubhagya” scheme have remarkably improved the first 3 ‘A’s, i.e., awareness, accessibility and availability.
  •  It has also increased the cost of supply due to an increase in LT distribution network length necessitating more conductors, meters, transformers, etc.
  • Most of the newly-added consumers are from rural areas of low-income states like UP and Bihar.
  • They belong to subsidised consumer categories, viz. agriculture, rural-domestic, etc.
  • Thus, the subsidy burden of respective state governments has increased.

Affordability of subsidy by States

  • The state’s capacity to service power subsidy of its BPL consumers is dependent on its per capita income which varies from state to state.
  •  The central government provides no subsidy for this purpose.
  • Therefore, making electricity affordable for consumers becomes a priority for the power sector.
  •  Limiting focus only to reduction of the cross-subsidy burden of industries may not be fruitful.

Policy steps to make electricity affordable

1) Expedite overdue distribution reforms

  • While generation and transmission sectors have been unbundled, unbundling (segregation of carrier and content business) of distribution has been started yet.
  • Privatisation of, and governance reforms in, state-owned distribution companies are likely to unlock huge value and provide efficiency gains through loss reduction for making power affordable.

2) Capping of stranded capacity charges

  • As of now, we have surplus installed capacity of around 370 GW against a peak demand of 183 GW.
  • So, any fresh capacity addition should be limited to projected load demand growth and replacement of retiring power plants.
  • This will reduce the stranded capacity charges the discoms are currently paying to gencos under their long-term power purchase agreements without taking any power from them under availability-based tariff regime.

3) Scrap cost-plus regime

  • Now, when the country has sufficient installed capacity, it makes no sense to provide a risk-free 15.5% tax-free (or 22% after-tax) return on equity to the power companies.
  • No new project (except hydro and nuclear) should be allowed on cost-plus route or MoU route under section 62 of the Electricity Act.

4) Restructure normative debt-equity financing to 80:20

  • At present, the regulatory norm used for tariff computation of projects is 70:30 debt: equity.
  • Debt servicing is limited only to the term of the loan, i.e., up to 12 years, but Return of Equity is allowed in perpetuity even after the plant has fully depreciated.
  • This needs to be limited to the useful life of the unit.

5) No double-whammy for consumers:

  • National Clean Energy Fund was created as a non-lapsable fund in 2010 for promoting clean technology, and since then around Rs 1 lakh crore has been collected from coal cess.
  • However, most of it has been diverted and used for other purposes like funding to states for their GST losses, etc.
  • Asking gencos to install Fuel Gas Desulfurization and pass on the cost to the consumer amounts to a double whammy for the consumers who first paid the coal-cess and now will have to bear the FGD cost also.
  • We should stop using cess as a tax and NCEF should be used to fund the clean energy initiative and FGD installation etc.

Consider the question “What are the factors responsible for making the electricity costly in India. Suggest the pathways to make it affordable to all.”


Making electricity affordable following these steps would be instrumental in the progress of the nation.

Source: https://www.financialexpress.com/opinion/powering-reforms-bringing-power-psus-under-competitive-bidding-will-help-in-tariff-reduction/2057940/


Electricty generation,transmission and Distribution

Saubhagya scheme

Policy Wise: India’s Power Sector

“Healthy and Energy Efficient Buildings” Initiative


From UPSC perspective, the following things are important :

Prelims level : EESL, MAITREE

Mains level : Energy saving and its significance in carbon emissions reduction

The Energy Efficiency Services Limited (EESL) has launched the “Healthy and Energy Efficient Buildings” initiative that will pioneer ways to make workplaces healthier and greener.

Possible prelims question:

Q. The MAITREE programme recently seen in news is related to: Trade/Energy Efficiency/Climate Change/ Strategic Relations

About the Initiative

  • The initiative has been launched by EESL in partnership with the U.S. Agency for International Development’s (USAID) MAITREE program.
  • As part of this initiative, EESL has taken the leadership by being the first to implement this framework in its own offices.
  • This initiative addresses the challenges of retrofitting existing buildings and air conditioning systems so that they are both healthy and energy-efficient.
  • It will pave the way for other buildings to take appropriate steps to be healthy and energy-efficient.

What is the MAITREE program,?

  • The Market Integration and Transformation Program for Energy Efficiency (MAITREE) is a part of the US-India bilateral Partnership between the Ministry of Power and USAID.
  • It is aimed at accelerating the adoption of cost-effective energy efficiency as a standard practice within buildings and specifically focuses on cooling.

Significance of the initiative

  • Poor air quality has been a concern in India for quite some time and has become more important in light of the COVID pandemic.
  • As people return to their offices and public spaces, maintaining good indoor air quality is essential for occupant comfort, well-being, productivity and the overall public health.
  • Most buildings in India are not equipped to establish and maintain healthy indoor air quality and need to be upgraded.
  • The EESL office pilot will address this problem by developing specifications for future use in other buildings throughout the country.
  • It will aid in evaluating the effectiveness and cost benefits of various technologies and their short and long-term impacts on air quality, comfort, and energy use.

 Back2Basics: EESL

  • Energy Efficiency Services Limited (EESL), under the administration of Ministry of Power, is working towards mainstreaming energy efficiency.
  • It is implementing the world’s largest energy efficiency portfolio in the country.
  • EESL aims to create market access for efficient and future-ready transformative solutions that create a win-win situation for every stakeholder.
  • About USAID: USAID is the world’s premier international development agency and a catalytic actor driving development results.

Policy Wise: India’s Power Sector

Proposed amendments could harm DISCOMs


From UPSC perspective, the following things are important :

Prelims level : Electricity Act 2003.

Mains level : Paper 3- Problems of DISCOMs.

Despite several policy measures, DISCOMs continue to suffer from various issues. This article focuses on the comprehensive proposal to amend the Electricity Act 2003. But here’s a catch, we will be discussing some issues with proposed amendment. Let’s dive into our DISCOMs analysis.

Two-part tariff policy

  • At the core of DISCOM woes is the two-part tariff policy.
  • Two-part tariff policy was mandated by the Ministry of Power in the 1990s at the behest of the World Bank.
  • As more private developers came forward to invest in generation, DISCOMs were required to sign long-term power purchase agreements (PPA).
  • Under PPA, DISCOMs were committed to pay-  1) a fixed cost to the power generator, irrespective of whether the State draws the power or not, 2) a variable charge for fuel when it does.

How Over-optimistic projection led to losses?

  • The PPAs signed by DISCOMs were based on over-optimistic projection of power demand estimated by the Central Electricity Authority (CEA).
  •  The 18th Electric Power Survey (EPS) overestimated peak electricity demand for 2019-2020 by 70 GW.
  • The 19th EPS published in 2017, by 25 GW, both pre-Covid 19.
  • Thus, DISCOMs were locked into long-term contracts, ended up servicing perpetual fixed costs for power not drawn.
  • Due to the CEA’s overestimates, the all-India plant load factor of coal power plants is at an abysmal 56% even before COVID-19.
  • This means that coal power plants are generating electricity only 56% of what maximum these power plants are able to generate.

Renewable energy factor

  • Renewable impacted the power sector in the following 3 ways-
  • 1) From 2010, solar and wind power plants were declared as “must-run”.
  • This required DISCOMs to absorb all renewable power as long as there was sun or wind, in excess of mandatory renewable purchase obligations.
  • This means backing down thermal generation to accommodate all available green power.
  • This resulted in further idle fixed costs payable on account of two-part tariff PPAs.
  • 2)  Power demand peaks after sunset.
  • In the absence of viable storage, every megawatt of renewable power requires twice as much spinning reserves to keep lights on after sunset.
  • DISCOMs, especially in the southern region, have had to integrate large volumes of infirm power, mostly from solar and wind energy plants.
  • These renewable energy plants enjoy must-run status irrespective of their high tariffs.
  • The tariff is  ₹5/kwh in Karnataka and ₹6/kwh in Tamil Nadu for solar power.
  • All this even as the demand growth envisaged in the 18th EPS failed to materialise.
  • 3) In 2015 the Centre announced an ambitious target of 175 gigawatts of renewable power by 2022.
  • This followed with a slew of concessions to renewable energy developers, and aggravating the burden of DISCOMs.
  • Incidentally, China benefited by as much as $13 billion in the last five years from India’s solar panel imports.

So, what are the proposals in the Electricity Act-2020?

1. Sub-franchisees and  issues with it

  • The amendment proposes sub-franchisees, presumably private, in an attempt to usher in markets through the back door.
  • Issue:  Private sub-franchisees are likely to cherry-pick the more profitable segments of the DISCOM’s jurisdiction.
  • The Electricity Bill 2020 containing the proposed amendments is silent on whether a private sub-franchisee would be required to buy the expensive power from the DISCOM or procure cheaper power directly from power exchanges.
  • If it is the first, the gains from the move are doubtful since the room for efficiency improvements is rather restricted in the already profitable regions attractive to sub-franchisees.
  • If it is the second, DISCOMs will then be saddled with costly power purchase from locked-in PPAs and fewer profitable areas from which to recover it.

2. Concession to renewable

  • The amendment proposes even greater concessions to renewable power developers.
  • This would have a cascading impact on idling fixed charges, impacting the viability of DISCOMs even more.

3. Elimination of cross-subsidies

  • The most controversial amendment proposed, seeks to eliminate in one stroke, the cross-subsidies in retail power tariff.
  • This means each consumer category would be charged what it costs to service that category.
  • Rural consumers requiring long lines and numerous step-down transformers and the attendant higher line losses will pay the steepest tariffs.
  • The proposed amendments envisage that State governments will directly subsidise whichever category they want to, through direct benefit transfers.
  • Cross-subsidy is a fact of life in even private industries, soap, newspapers, or even utilities such as telecom.
  • But eliminating them in one stroke is bound to be ruinous to State finances.
  • There are also myriad problems with Direct Benefit Transfer.
  • This proposal is practically infeasible; if forcibly implemented, it will lead to chaos.

4. Selection of the State regulator

  • State regulators will henceforth be appointed by a central selection committee.
  • The composition of which inspires little confidence in its objectivity.
  • This could result in jeopardising not only regulatory autonomy and independence but also the concurrent status of the electricity sector.

5. Electricity Contract Enforcement Authority

  • Its members and chairman will also be selected by the same selection committee referred to above.
  • The power to adjudicate upon disputes relating to contracts will be taken away from State Electricity Regulatory Commissions and vested in this new authority.
  • This is being done ostensibly to protect and foster the sanctity of contracts.
  • This is also to ensure that States saddled with high-priced PPAs and idling fixed costs, yet forced to keep increasing the share of renewables in their basket, have no room for manoeuvre.

Consider the question “Despite various policy interventions, DISCOMs continue to suffer from financial woes. Analyse the reasons for their woes. Examine the proposals in the Electricity Act (Amendment) Bill 2020.”


Beyond a doubt, the Electricity sector requires change but we must try to bring holistic and participatory approach to find solutions.

Back2Basics: Electricity Act 2003

  • The act covers major issues involving generation, distribution, transmission and trading in power.
  • Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998.
  • The Electricity Act 2003 consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country.
  • The act attempted to address certain issues that have slowed down the reform process in the country and consequently had generated new hopes for the electricity industry.


Policy Wise: India’s Power Sector

[pib] Data on Energy Savings


From UPSC perspective, the following things are important :

Prelims level : Various schemes mentioned in the newscard

Mains level : Energy saving and its significance in carbon emissions reduction

The Union Ministry of Power has released a Report on “Impact of energy efficiency measures for the year 2018-19”.

Things to note:

1) UJALA Scheme

2) PAT Scheme

3) Standards & Labeling Programme

Possible mains question:

Q. Discuss the role of Bureau of Energy Efficiency (BEE) in “institutionalizing” energy efficiency services in India.

About the report

  • This report was prepared by an Expert agency PWC Ltd, who was engaged by the Bureau of Energy Efficiency (BEE).
  • The objective of this study is to evaluate the performance and impact of all the key energy efficiency programmes in India, in terms of total energy saved and the related reduction in CO2 emissions.

Data on energy savings

  • With our energy efficiency initiatives, we have already reduced the energy intensity of our economy by 20% compared to 2005 levels. This includes both the Supply Side and Demand Side sectors of the economy.
  • The implementation of various energy efficiency schemes has led to total electricity savings to the tune of 113.16 Billion Units in 2018-19, which is 9.39% of the net electricity consumption.
  • Energy savings (electrical + thermal), achieved in the energy-consuming sectors is to the tune of 16.54 Mtoe, which is 2.84% of the net total energy consumption in 2018-19.
  • Overall this has translated into savings worth INR 89,122 crores against last year’s savings of INR 53,627 crore.
  • These efforts have also contributed to reducing 151.74 Million Tonnes of CO2 emissions, whereas last year this number was 108 MTCO2.

(Note: Mtoe= million Tonne of Oil Equivalent)

What led to this significant savings?

  • The study has identified the following major programmes, viz. Perform, Achieve and Trade Scheme, Standards &Labelling Programme, UJALA Programme, Municipal Demand Side Management Programme, etc.
  • There is huge capacity still for bringing efficiencies especially in MSME sector and a Housing sector that has now been taken up.

About the Bureau of Energy Efficiency (BEE)

  • The Bureau of Energy Efficiency is an agency under the Ministry of Power created in March 2002 under the provisions of the nation’s 2001 Energy Conservation Act.
  • Its function is to develop programs which will increase the conservation and efficient use of energy in India.
  • The mission of BEE is to “institutionalize” energy efficiency services, enable delivery mechanisms in the country and provide leadership to energy efficiency in all sectors of the country.


1) PAT Scheme

  • Perform Achieve and Trade (PAT) scheme is a flagship programme of the Bureau of Energy Efficiency under the National Mission for Enhanced Energy Efficiency (NMEEE).
  • NMEEE is one of the eight national missions under the National Action Plan on Climate Change (NAPCC) launched in the year 2008.
  • The scheme aims to reduce specific energy consumption in energy-intensive industries through certification of excess energy saving which can be traded.
  • It refers to the calculation of Specific Energy Consumption (SEC) in the baseline year and projected SEC in the target year covering different forms of net energy going into the boundary of the designated consumers’ plant and the products leaving it over a particular cycle.
  • Those eight Energy Intensive Sectors included are Chlor-alkali, Pulp & Paper, Textile, Aluminum, and Thermal Power plants, Fertilizer, Iron & Steel and Cement.

2) Standards & Labeling Programme

  • It is one of the major thrust areas of BEE.
  • A key objective of this scheme is to provide the consumer with an informed choice about the energy-saving and thereby the cost-saving potential of the relevant marketed product.
  • The scheme targets display of energy performance labels on high energy end-use equipment & appliances and lay down minimum energy performance standards.

3) UJALA Scheme

  • Launched in 2015, the Unnat Jyoti by Affordable LEDs for All (UJALA), in a short span of time, has emerged as the world’s largest domestic lighting programme.
  • The main objective is to promote efficient lighting, enhance awareness on using efficient equipment which reduces electricity bills and helps preserve the environment.
  • The Electricity Distribution Company and Energy Efficiency Services Limited (EESL) a public sector body of the Ministry of Power is implementing the programme.

Policy Wise: India’s Power Sector

Global Energy Review 2020, Report


From UPSC perspective, the following things are important :

Prelims level : Global Energy Review, 2020

Mains level : India's emergency demand

Covid-19 is having a ripple effect on the global energy space. Consistent lockdowns have reduced energy demand by almost 30 per cent in India.

Covid-19 shock global energy demand

  • The IEA’s Global Energy Review studies the impacts of the Covid-19 crisis on global energy demand and CO emissions.
  • The projections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world.
  • It projects a 6 per cent fall in energy demand in 2020 — seven times the decline after the 2008 global financial crisis.
  • Electricity demand is set to decline by 5 per cent in 2020, the largest drop since the Great Depression in the 1930s.

Global Energy Demands

  • The countries in full lockdown are experiencing an average decline of 25% in energy demand per week, while in those with a partial lockdown, the fall in energy demand is about 18% per week.
  • Global energy demand declined by 3.8% in the first quarter of 2020 compared to the first quarter of 2019.
  • Further, it is expected that the impact of Covid‑19 on energy demand in 2020 would be more than seven times larger than the impact of the 2008 financial crisis on global energy demand.

Considering the above scenario the global demand of various energy sources can be analysed as given below

   Coal Demand:

  • It has been declined by 8% compared with the first quarter of 2019.
  • The reasons for such decline include, China – a coal-based economy – was the country hardest hit by Covid‑19 in the first quarter and cheap gas and continued growth in renewables elsewhere challenged coal.

Oil Demand:

    • It has declined by 5% in the first quarter, majorly due to curtailment in mobility and aviation, which account for nearly 60% of global oil demand.
    • The report also estimates that the global demand for oil could further drop by 9% on average in 2020, which will return oil consumption to 2012 levels.
  •  Gas Demand:
    • The impact of the pandemic on gas demand has been moderate, at around 2%, as gas-based economies were not strongly affected in the first quarter of 2020.
  •  Renewables Energy Resources Demand:

    • It is the only source that has registered a growth in demand, driven by larger installed capacity.
    • Further, the demand for renewables is expected to rise by 1% by 2020 because of low operating costs and preferential access for many power systems.
  •  Electricity Demand:

    • It has been declined by 20% during periods of full lockdown in several countries.
    • However, the residential demand is outweighed by reductions in commercial and industrial operations.

Indian scenario

  • The declines in electricity and transport demand in India have been among the deepest globally, but the contractions over the full year are likely to be smaller than the global average.
  • The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus.
  • At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including nuclear, hydropower, wind and solar PV.

Data on renewables

  • After overtaking for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40 per cent of global electricity generation — 6 percentage points ahead of coal.
  • Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.

Back2Basics: International Energy Agency (IEA)

  • The IEA is an autonomous organisation which works to ensure reliable, affordable and clean energy, headquartered in Paris, France.
  • It was established in the wake of 1973 (set up in 1974) oil crisis after the OPEC cartel had shocked the world with a steep increase in oil prices.
  • India became an associate member of the International Energy Agency in 2017.

Policy Wise: India’s Power Sector

Explained: 9 minutes light-out and its impact on grids


From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : 9 minutes light-out and its impact on grids

In his address to the nation, our PM has urged people across to turn off the lights in their homes for 9 minutes on April 5, starting at 9 pm. In response to this appeal, grid managers across states have flagged some risks.

Why is the 9-minute exercise a problem?

  • India is one of the largest synchronous interconnected grids in the world, with an installed capacity of about 370 GW (3,70,000 MW), and a normal baseload power demand of roughly 150 GW.
  • The big worry is that just before 9 pm there may be unprecedented load reduction, followed by a sudden increase in load post at 9.09 pm.
  • The concern is that grid frequency should not swing beyond permissible limits and that all generators across the country must give frequency response as per the Grid Code.
  • During this 9-minute lights out exercise, up to 10,000-15,000 MW of power demand could to drop suddenly and then come on stream a few minutes later.

How does grid function normally?

  • Power System Operation Corporation Ltd (POSOCO), the national electricity grid operator, projects daily demand for power and regulates supply from power generators based on these projections.
  • Frequency reflects the load generation balance in the grid at a particular instant and is one of the most important parameters for assessment of the security of the country’s power system.
  • The nominal frequency is 50 hertz and POSOCO endeavours to maintain frequency within a permissible band (49.9- 50.5 hertz), primarily by balancing the demand-supply equation.

Impacts of light-out

  • The frequency needs to be maintained within this range as all the electrical equipment and appliances at our homes are designed to perform safely and efficiently in a certain power supply band.
  • An increase in frequency results in an increase in the voltage and a decrease in frequency results in a decrease in voltage.
  • Exigency does occur during an outage at a power plant or the tripping of a transmission line or a sudden change in electrical demand.
  • The grid operator needs to ensure that there is an automatic corrective response manually by curtailing demand or ramping generation from another source within a really short period of time.
  • Handling imbalances are the most crucial function of the grid operator.

What are the key areas of concern?

While the possibility of the grid tripping on account of this is highly unlikely, operators expect a “jerk”. While the system is generally planned for an outage of the single largest unit outage, there are two riders:

1) Lockdown has severed domestic consumption

  • One, the grid load is primarily on account of the domestic load now, especially since the lockdown implemented.
  • The normal baseload power demand of roughly 150 gigawatts has already dropped by 20 per cent since the lockdown announcement as most of the industry and commercial establishments are not operational.
  • With hotels and factories, malls, railway stations, airports closed, the domestic load is the predominant load.
  • So the lighting load as a percentage of total loads is much higher now and the impact of a sudden drop in lighting load could be more accentuated than during regular times.

2) Fear of complete power-offs

  • The second concern is if housing clusters and societies switch off mains, or if overzealous discoms switch off street lighting or even feeders to show compliance.
  • During this part of the year, domestic load peaks at about 9 pm.
  • This load could then be impacted much more than what’s being anticipated in the normal course, a concern that grid operators are flagging.

Why is this demand of significance in such a big grid?

  • The domestic load is about 30-32 per cent of total load during normal times.
  • Of India’s total electricity demand load pattern, industrial and agricultural consumption accounts for 40 per cent and 20 per cent load, while commercial electricity consumption accounts for 8 per cent of demand.
  • So, theoretically, if only lighting load goes off, it should not have a major impact on grid frequency during normal times.

Policy Wise: India’s Power Sector

[pib] State Energy Efficiency Index 2019


From UPSC perspective, the following things are important :

Prelims level : State Energy Efficiency Index

Mains level : Various initiatives for promotion of energy efficiency of power sector

The Ministry of Power and New & Renewable Energy has released the ‘State Energy Efficiency Index 2019’.

State Energy Efficiency Index

  • The first such Index, the “State Energy Efficiency Preparedness Index 2018”, was launched on August 1, 2018.
  • The index tracks the progress of Energy Efficiency (EE) initiatives in 36 states and union territories based on 97 significant indicators.
  • It is developed by Bureau of Energy Efficiency (BEE) in association with Alliance for an Energy Efficient Economy (AEEE).
  • It categorizes states as ‘Front Runner’, ‘Achiever’, ‘Contender’ and ‘Aspirant’ based on their efforts and achievements towards energy efficiency implementation.
  • It incorporates qualitative, quantitative and outcome-based indicators to assess energy efficiency initiatives, programs and outcomes in five distinct sectors – buildings, industry, municipalities, transport, agriculture, and DISCOMs.

Performance evaluation

  • For rational comparison, States/UTs are grouped into four groups based on aggregated Total Primary Energy Supply (TPES) required to meet the state’s actual energy demand (electricity, coal, oil, gas, etc.) across sectors.
  • TPES grouping shall help states compare performance and share best practices within their peer group.
  • Under four categories based on TPES, Haryana, Kerala, Karnataka, Maharashtra, Himachal Pradesh, Uttarakhand, Puducherry and Chandigarh have been evaluated as progressive states/UTs in the index.
  • The top performing states Haryana, Kerala and Karnataka – are in the ‘Achiever’ category.
  • Manipur, Jammu & Kashmir, Jharkhand and Rajasthan performed the worst in each of their groups.

Utilities of the index

  • It will help states contribute towards national goals on energy security and climate action by helping drive EE policies and program implementation.
  • It will help tracking progress in managing the states’ and India’s energy footprint and institutionalising the data capture and monitoring of EE activities by states.

Policy Wise: India’s Power Sector

[pib] UJALA & Street Lighting National Programme


From UPSC perspective, the following things are important :

Prelims level : UJALA and Street Lighting National Programme

Mains level : Success of these scheme

The Unnat Jyoti by Affordable LEDs for All (UJALA) and LED Street Lighting National Programme (SLNP) has completed five years of successful implementation.


  • SLNP is the world’s largest streetlight replacement programme and UJALA is the world’s largest domestic lighting project.
  • Both have been spearheaded and implemented by Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Ministry of Power.

Major accomplishments


  • UJALA project brought the market transformation in energy efficiency sector.
  • Prices of LED bulbs being distributed under UJALA programme have fallen to one-tenth of their rates in 2015 from INR. 310 to INR 38 in 2018.
  • The switch from inefficient incandescent bulbs to LEDs is helping families reduce their electricity bills while also enabling them to access better brightness in homes.
  • Through the UJALA over 36.13 crore LED bulbs have been distributed across India.
  • This has resulted in estimated energy savings of 46.92 billion kWh per year, avoided peak demand of 9,394 MW, and an estimated GHG emission reduction of 38 million t CO2 annually.


  • Under the SLNP programme, over 1.03 crore smart LED streetlights have been installed till date, enabling an estimated energy savings of 6.97 billion kWh per year with an avoided peak demand of 1,161 MW and an estimated GHG emission reduction of 4.80 million tonnes CO2 annually.
  • LED streetlights have been installed in various states across the country, helping generate approximately 13,000 jobs to support Make in India initiative.
  • This has enabled citizens to increase productivity at night and made roads safer for pedestrians and motorists due to enhanced brightness and reduced dark spots.
  • As these lights are automated, they switch on and off at sunrise and sunset thereby reducing wastage.
  • In the last five years, the LED streetlights installed have illuminated 3,00,000 km of roads in India, enabling public safety and energy efficient lighting.

Policy Wise: India’s Power Sector

One Nation, One Grid


From UPSC perspective, the following things are important :

Prelims level : National Grid

Mains level : One Nation, One Grid

One Nation, One Grid

  • In a move to improve India’s connectivity infrastructure, the government in its second term plans to build a model of ‘One Nation, One Grid’ to ensure availability of power to states at ‘affordable’ rates.
  • FM in his budget speech made available a blueprint for developing gas grids, water grids, i-ways, and regional airports.
  • The government is also examining the performance of its Ujjwal DISCOM Assurance Yojana (UDAY), aimed at financial and operational turnaround of power distribution companies.

Power grids in India

  • The Indian Power system for planning and operational purposes is divided into five regional grids.
  • The integration of regional grids, and thereby establishment of National Grid, was conceptualized in early nineties.
  • The initial inter-regional links were planned for exchange of operational surpluses amongst the regions.
  • However, later on when the planning philosophy had graduated from Regional self-sufficiency to National basis, the Inter-regional links were planned associated with the generation projects that had beneficiaries across the regional boundaries.

Evolution of National Grid

  • Grid management on regional basis started in sixties.
  • Initially, State grids were inter-connected to form regional grid and India was demarcated into 5 regions namely Northern, Eastern, Western, North Eastern and Southern region.
  • In October 1991 North Eastern and Eastern grids were connected.
  • In March 2003 WR and ER-NER were interconnected .
  • August 2006 North and East grids were interconnected thereby 4 regional grids Northern, Eastern, Western and North Eastern grids are synchronously connected forming central grid operating at one frequency.
  • On 31st December 2013, Southern Region was connected to Central Grid in Synchronous mode with the commissioning of 765kV Raichur-Solapur Transmission line thereby achieving ‘ONE NATION’-‘ONE GRID’-‘ONE FREQUENCY’.

About National Grid

  • The National Grid is the high-voltage electricity network in mainland India, connecting power stations and major substations and ensuring that electricity generated anywhere in mainland India can be used to satisfy demand elsewhere.
  • The National Grid is owned, operated, and maintained by state-owned Power Grid Corporation of India.
  • It is one of the largest operational synchronous grids in the world with 334.40 GW of installed power generation capacity as on 31 January 2018.

 Benefits of centralized power grid

  • Synchronization of all regional grids will help in optimal utilization of scarce natural resources by transfer of Power from Resource centric regions to Load centric regions.
  • Further, this shall pave way for establishment of vibrant Electricity market facilitating trading of power across regions.
  • One Nation One Grid shall synchronously connect all the regional grids and there will be one national frequency.

Policy Wise: India’s Power Sector

[op-ed snap]How to achieve 24×7 power for all


From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Structural issues in the power sector


The household electrification scheme, Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya, has been implemented at an unprecedented pace. More than 45,000 households were electrified every day over the last 18 months.

Reasons behind the success of Saubhagya

  • The efforts under Saubhagya have come upon decades of hard work preceding it.
    1. The enactment of the Electricity Act, in 2003
    2. The introduction of the Rajiv Gandhi Grameen Vidyutikaran Yojana, in 2005
  • Over the last year, several engineers and managing directors in electricity distribution companies (discoms), their contractors, State- and Central-level bureaucrats, and possibly energy ministers have been working at fever pitch.
  • Discom engineers have evolved in their attitude from one of scepticism to that of determination.
  • CASE STUDY-Their efforts to meet targets even included crossing streams in Bihar on foot with electricity poles, and reaching far-flung areas in Manipur, through Myanmar, to electrify remote habitations with solar home systems.

Challenges Remaining

  • The erection of electricity poles and an extension of wires do not necessarily mean uninterrupted power flow to households.
  • By tracking more than 9,000 rural households, since 2015, across six major States (Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal), the Access to Clean Cooking Energy and Electricity Survey of States (ACCESS) report by the Council on Energy, Environment and Water (CEEW) has highlighted the gap between a connection and reliable power supply. 
  • No 24*7 power supply-While the median hours of supply increased from 12 hours in 2015 to 16 hours a day in 2018, it is still far from the goal of 24×7.
  • Low voltage Issues-Similarly, while instances of low voltage and voltage surges have reduced in the last three years, about a quarter of rural households still report low voltage issues for at least five days in a month.

Vital Step Forward

  • In order to achieve 24×7 power for all, there is need to focus on three frontiers.

1.Monitoring of Supply

  • First, India needs real-time monitoring of supply at the end-user level.
  • While the government is bringing all feeders in the country online, we currently have no provision to monitor supply as experienced by households.
  • Only such granular monitoring can help track the evolving reality of electricity supply on the ground and guide discoms to act in areas with sub-optimal performance.
  • Eventually, smart meters (that the government plans to roll out) should help enable such monitoring.
  • However, in the interim, we could rely on interactive voice response systems (IVRS) and SMS-based reporting by end-users.

2. Quality and maintenance services

  • Second, discoms need to focus on improving the quality of supply as well as maintenance services.
  • Adequate demand estimation and respective power procurement will go a long way in reducing load shedding.
  • Moreover, about half the rural population across the six States reported at least two days of 24-hour-long unpredictable blackouts in a month.
  • Such incidents are indicative of poor maintenance, as opposed to intentional load-shedding.
  • Discoms need to identify novel cost-effective approaches to maintain infrastructure in these far-flung areas.
  • Some States have already taken a lead in this.
  • EXAMPLES-Odisha has outsourced infrastructure maintenance in some of its rural areas to franchisees, while Maharashtra has introduced village-level coordinators to address local-level challenges.

3.Customer Service

  • Finally, the improvement in supply should be complemented with a significant improvement in customer service,
  • which includes billing, metering and collection. Around 27% of the electrified rural households in the six States were not paying anything for their electricity.
  • Despite the subsidies, constant loss of revenue would make it unviable for discoms to continue servicing these households in the long run.
  • Low consumer density along with difficult accessibility mean that conventional approaches involving meter readers and payment collection centres will be unviable for many rural areas.
  • We need radically innovative approaches such as the proposed prepaid smart meters and last-mile rural franchisees to improve customer service and revenue collection.

Way Forward

  • Electricity is the driver for India’s development.
  • As we focus on granular monitoring, high-quality supply, better customer service and greater revenue realisation at the household level,we also need to prioritise electricity access for livelihoods and community services such as education and health care.
  • Only such a comprehensive effort will ensure that rural India reaps the socio-economic benefits of electricity.



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