INDIA

Power Sector Reforms

Suresh P. Prabhu
Minister of Power
8-5-2002
The views expressed in this paper are the views of the author and do not necessarily reflect the views
or policies of the Asian Development Bank. The Asian Development Bank does not guarantee the
accuracy of the data presented.
 Indian Power Sector
• Power in Concurrent List.
• Both Central and State can legislate - Central law prevails in
the event of conflicting provisions.
• Power Sector in States - vertically integrated State Electricity
Boards.
• Central Public Sector Undertakings - Own 25% of the capacity
 GROWTH OF THE INDIAN
POWER SECTOR
•Generating capacity has grown manifold from 1712 MW in 1950
to more than 1,04,000 MW today.
•The growth in the transmission lines has been from 2708 ckm in
1950 to more than 200,000 ckm today.
•About 80% of 5,80,000 villages have been electrified. Balance to
be electrified by 2007.
•60% household have access to Electricity. Balance to be
completed by 2012.
 Strengths of the Indian Power
Sector
•Well established and vast Transmission and Distribution
network.
•Private investment possible in Generation, Transmission and
Distribution.
•Highly qualified Engineering and Technical personnel.
•Availability of highly trained I.T., managerial and financial
personnel.
•Regulatory mechanism for tariff setting established.
•Independent judiciary with well established legal system.
 Major problems facing power sector

• Deteriorating financial health.

– Gap between unit cost of supply and revenue 92 paise
in 2000-01.
– SEB annual losses (without subsidy) up from Rs 45
billion in 1992-93 to Rs 205 billion in 2000-01.
• Persisting shortages
– Peak shortage –13%
– Energy shortage –7%
– Poor quality of supply- low voltage, grid instability
 Reforms - so far
• Automatic approval for foreign equity : no upper limit.
• Relaxation of 40% cap for debt exposure to FIs.
• Power to approve schemes decentralised.
• Requirement of Techno-economic Clearance decentralised.
• Hydro Policy to augment addition of hydro capacity
• Revised norms with specific delegations to State Government
in environment clearance to power projects.
 Reforms - so far
… contd.

• CERC established and functional

• 9 States have passed reform law.
• 7 States have unbundled State Electricity Boards.
• 21 States have constituted State Electricity Regulatory
Commissions.
• 12 State Electricity Regulatory Commissions have issued
tariff orders.
 Privatisation of distribution

• Private distribution stable and successful in Mumbai,

Kolkata, Ahmedabad and Surat.
• Distribution privatisation undertaken in Orissa in 1999.
– Problems due to under assessment of T&D losses in the absence of
metering and fall in industrial demand.
• Privatisation planned in Delhi, AP, Karnataka and
Rajasthan.
• Need to generate investors’interest. More players needed.
 Strategy

• Power sector reforms – focus on distribution. Chief Ministers’

Conference resolution of 3rd March, 2001
– Commercially viable distribution necessary for sustainable investment in
generation and transmission.
– Full metering of all consumers.
– Energy audit at 11 KV feeders.
– Effective MIS.
– Identification and elimination of theft.
– Viability through
• Privatisation
• Handing over local distribution to Panchayats, Users’Association, Franchisee.
• Local profit centers with full accountability.
 Electricity Bill, 2001

Ø Electricity Bill 2001 introduced in Parliament in August 2001

Ø Main features of the Bill are the following
•Generation free from licensing except for hydro units
•Requirement of techno economic approval done away with
•Captive generation free from controls
•Open access to transmission lines
•Setting up of SERC mandatory
•Open access in distribution to be allowed by SERC in phases
•Retail tariff to be determined by regulatory commission
•Trading distinct activity permitted with licensing
•Central Government to prepare National Electricity and Tariff policy
 Distribution –Six level intervention strategy
• National level
– Policy formulation, technical guidelines and standards, APDRP assistance.
• State level
– Tariff fixation, corporatisation, subsidies and budgetary support.
• SEB level
– Restructuring, increased accountability, development of MIS, T&D loss
reduction.
• Distribution circle level
– Reducing outages, improving reliability.
• Feeder level
– 11 KV feeders as business units
• Consumer level
Mandatory metering. Discipline of disconnection for non-payment. Stringent
penalties for theft.
 Partnership with States MOUs on Reforms

• MOUs on reforms signed with 21 States

– MOUs milestones
• 11 kv metering
• Consumer metering
• Energy audit, effective MIS and control of theft.
• Tariff determination by SERCs
• Timely payment of subsidies

• Early signs of turn around visible. Cash losses reduced –Maharashtra

from Rs 27 billion to Rs 7 billion, Haryana Rs 6.3 billion to Rs.1
billion, Rajasthan Rs.17 billion to Rs 12 billion, AP Rs 15 billion to 5
billion.
Accelerated Power Development and Reform
Programme (APDRP)
• Rs 35 billion provision this year. 50% grant and 50% Central
loan. FIs to provide additional Rs 35 billion.
• 63 Distribution Circles already taken up for development as
models of excellence.
– Full metering, energy audit and MIS, control of theft.
– Increase in transformation capacity.
– Increase in HT/LT ratio. Systems analysis and
reconfiguration.
– Reduction of technical losses.
• All distribution circles to be covered in 10th Plan. MOAs to be
signed with tight milestones.
 Capacity addition

• 100,000 MW capacity addition requirement by 2012.

• National grid to take electricity to all regions.
• Full development of hydro-generation in the Himalayas.
Pit-head thermal generation in coal belt.
• Investment to the tune of 120 to 160 billion US$ required.
 Capacity addition
..contd.

• Ninth Plan – capacity addition only 21,000 MW against

target of 40,000 MW.

• Tenth Plan – 47,000 MW planned. Effective monitoring

mechanism in position. Better performance expected.

• Energy conservation, technical loss reduction in transmission

and distribution and better performance through renovation
and modernisation of older plants to reduce need for capacity
addition by ten to twenty thousand MW over next ten years.

• Energy Conservation Act passed. Bureau of Energy

Efficiency being created.
 Public awareness and all party consensus

• CMs conference resolution called for “urgent need to

depoliticise power sector reforms and speed up their
implementation.”
• Power theft estimated to cost over Rs 20,000 crore a year.
Failure of governance.
• All party declaration on power circulated.
• Political will for reforms to come through public
awareness and public opinion. 2200 road shows held.
Thank you