India’s power sector in need of “sweeping reform”

Significant energy sector reforms will be necessary if India is to meet its goal of universal electricity access by 2019, the World Bank has said.   

Based on a review of the nation’s power sector performance spanning two decades, the Bank’s latest report, More Power to India: the Challenge of Electricity Distribution, found significant progress – but also much work left to do.  

Among India’s achievements since the 1990s, the report noted a threefold increase in conventional power generation capacity, accompanied by significant private sector investment; government-supported growth in renewable energy capacity from zero to 12 per cent of the nation’s energy mix; the development of a modern grid linking the entire country; 2003’s Electricity Act and its market structure reform; and distribution of electricity service to over 250 million users, or three quarters of India’s population.

However, the study said, the power sector’s overall potential remains unrealized, with 300 million citizens still lacking electricity, and with even those in electrified areas facing an unreliable supply.  

While the report applauded India’s progress in power generation and transmission, it took a critical view of the distribution segment, which has accrued growing debts and continuing losses that affect the entire value chain.

The study found a number of factors contributing to this poor performance: lax governance, a soft regulatory environment, tariffs that have not kept up with costs, power theft (with one fifth of supplied power not paid for), unfunded mandates and pervasive state government interference in electricity distribution companies.

Key recommendations of the report include full implementation of the Electricity Act mandates, especially tariffs, open access and performance standards; giving utilities and regulators autonomy while requiring accountability; and insulating utilities from state governments to prevent interference with internal operations.

“We have to reform governance of the sector to see transformative change,” said the study’s co-author Sudeshna Ghosh Banerjee, a senior economist at the World Bank Group. “Today, in addition to the state government, outside stakeholders, specifically the regulators and commercial financial institutions, have a key role to play in creating an operating environment that provides incentives for improved performance.”

The report comes at a time when India’s newly-elected government is focusing on power sector issues


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