Power sector in India
The utility electricity sector in India has one National Grid with an installed capacity of 350.162 GW. India is the world’s third largest producer and third largest consumer of electricity. The per capita energy consumption is low compared to many countries despite cheaper electricity tariff in India.
The Power Generation Distribution is as below:
| Sector | MW | % of Total |
| State Sector | 84,637 | 24.2% |
| Central Sector | 104,039 | 29.7% |
| Private Sector | 161,487 | 46.1% |
| Total | 3,50,162 |
India has surplus power generation capacity but lacks adequate infrastructure for supplying electricity to all needy people. Electricity being a subject in the concurrent list in the seventh Schedule of the Constitution of India, both the central government and India’s state governments are involved in establishing policy and laws for its electricity sector. In order to address the lack of adequate electricity supply to all the people in the country by March 2019, the Government of India (GoI) launched a scheme called “Power for All”.This scheme will ensure continuous and uninterrupted electricity supply to all households, industries and commercial establishments by creating and improving necessary infrastructure. It is a joint collaboration of the GoI with states to share funding and create overall economic growth.
Electricity Act 2003 (Electricity Amendment Act, 2007)
Electricity Act 2003 has been enacted and came into force from 15.06.2003. The objective is to introduce competition, protect consumer’s interests and provide power for all. The Act provides for National Electricity Policy, Rural Electrification, Open access in transmission, phased open access in distribution, mandatory SERCs, license free generation and distribution, power trading, mandatory metering and stringent penalties for theft of electricity. It is a comprehensive legislation replacing Electricity Act 1910, Electricity Supply Act 1948 and Electricity Regulatory Commission Act 1998. The aim is to push the sector onto a trajectory of sound commercial growth and to enable the States and the Centre to move in harmony and coordination.
Post introduction of the Electricity Act, lot of private power producers have set up power projects and started supplying power to the DISCOMs under a Power Purchase Afreement (PPA).
Renewable Energy in India
Renewable energy in India comes under the purview of the Ministry of New and Renewable Energy (MNRE). India was the first country in the world to set up a ministry of non-conventional energy sources, in the early 1980s.
India is running one of the largest and most ambitious renewable capacity expansion programs in the world. A blueprint draft published by the Central Electricity Authority projects that 57% of the total electricity capacity will be from renewable sources by 2027. In the 2027 forecasts, India aims to have a renewable energy installed capacity of 275 GW, in addition to 72 GW of hydro-energy, 15 GW of nuclear energy and nearly 100 GW from “other zero emission” sources.
These targets would place India among the world leaders in renewable energy use and place India at the centre of its “Sunshine Countries” International Solar Alliance project promoting the growth and development of solar power internationally to over 120 countries. India set a target of achieving 40% of its total electricity generation from non-fossil fuel sources by 2030.
The DISCOM debacle
The companies that are not generating electricity themsleves, rather purchasing it from someone else and just supplying to the final consumers, are called Distribution Companies or DISCOMs for short. The DISCOMs buy power from power producers under a PPA arrangement.
The financial position of the DISCOM sector has been a concern for over a decade now. The inability of the State-owned distribution utilities to remain financially and commercially viable is putting at risk the significant investments being pumped into the electricity sector by private and public players.
As per data available in the public domain investment in a dozen power plants of the private sector to the extent of Rs. 3 lakh crore of is at risk of turning into NPA as states buying power have not been making payment for over months.
More than 80 per cent of the outstanding is accounted for by India’s most industrialised states such as Maharashtra and Tamil Nadu who are biggest consumers of electricity.
According
to PRAAPTI portal while the top-10 states take an average of 562 days for
effecting payments, the states of Uttar Pradesh and Maharashtra
take 544 and 580 days respectively to clear its dues .Such
delay has a cascading effect over Working Capital weakening the ability
of project developers to service debt in a timely manner which in turn risks
project being termed non-performing assets (NPAs) under the Reserve Bank
of India’s (RBI) new classification rules.
A recent World Bank study reviewing the power sector’s performance
points to challenges such as outstanding payments of generating companies
pending with discoms.
This scenario has severely dented the reputation of DISCOMs in India and is loosing Investor confidence.
In an attempt to alleviate the above malady the GOI introduced the Ujwal Discom Assurance Yojana
(UDAY) to save the DISCOMS which according to it was the weakest link in the
electricity value chain and indirectly penalizing the Power Generation Company
to generate 100 gigawatts (GW) of power levying a penalty on
gratuitous load-shedding, not allowing losses of more than 15% as a pass
through in tariff and limiting cross-subsidies etc.
The Scheme Objectives of UDAY are:
- Financial Turnaround
- Operational improvement
- Reduction of cost of generation of power
- Development of Renewable Energy
- Energy efficiency & conservation
Conclusion
With all states now signing MoUs with the Centre for the UDAY scheme, we hope to see the DISCOMs back in sound Financial health and contribute effectively to meet the energy needs of the country.
With strict monitoring mechanisms under UDAY scheme, strict enforcement of Renewable Energy Obligations, clearance of dues and timely payment under the PPA arrangements, the Independent Power Producers would be more than willing to invest more into the Energy sector.
References:
The Electricity Act 2003
MNRE
CEA
https://powermin.nic.in/en/content/power-sector-glance-all-india
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