India’s power sector is experiencing many obstacles in all the fundamental areas of its functioning – generation, transmission, and distribution. The quality and amount of power that is being generated have their own set of challenges and inadequacies. On the other hand, there are technical glitches and losses during the transmission of power. Above all, the electricity distribution companies in India are experiencing a financial crisis. The rising cost of power procurement is the critical reason causing financial stress on the companies. Experts say that the current approach towards the power sector reforms is not streamlined, and it is what causes the problem.
The over-ambitious demand projections, excess procurement of renewable sources, and thermal power plants’ energy charges are causing the supply-demand mismatch. This post will discuss the challenges the government-owned power distribution companies face and what lies ahead for India’s power sector.
Demand for Electricity Estimated to Triple by 2040
One cannot deny that the Indian power sector has made extraordinary electricity distribution advancements over the last decade. But, it still faces challenges in meeting the growing demand for reliable power supply. While the country has made enormous strides in expanding household access to electricity, it still faces difficulties reducing power shortages. According to the World Bank, India achieved 100% village electrification in 2018. Still, with the growing population, an economy expected to grow at 7% every year, and rapid urbanization have caused the demand for electricity to tripe by the end of 2040.
In the midst of all this, India’s power distribution sector also face challenges like in-efficient state-government owned power plants, under-priced electricity, under-investment in transmission, groundwater depletion from cheap electricity, and high losses of distribution utilities.
Let’s put light on these challenges.
#1 Poor Performance of State Electricity Boards
The heart of the problems is the financial inefficiency of the State Electricity Boards. The financial position of electricity boards in the majority of Indian states have deteriorated rapidly. In the wake of inadequate revenues, electricity boards have defaulted in payments to central PSUs, including Coal India Limited, National Hydroelectric Power Corporation, Power Grid Corporation, and National Thermal Power Corporation. The current Indian states’ failure to make the required investments to meet the growing electricity demand is putting a high strain on the nation’s power sector.
#2 High Transmission and Distribution Losses
Another factor causing a variety of problems in the power sector is the high transmission and distribution losses. It includes sparsely distributed loads over large regions, improper billing and theft, inadequate investments in the distribution system, and energy sold at low voltage.
#3 Non-Remunerative Tariff Structure
Tariffs provide only 78% of the total cost of supply. This non-remunerative tariff structure has brought the State Electricity Boards to near financial ruin, combined with their ingrained organizational inadequacies. Factors like theft of power, lack of metering, inefficient collection of money, and other fundamental issues in the power sector have caused remuneration. Adding to the problem is how collections are carried out in a disorganized and shoddy manner.
#4 Power Subsidies
Wealthy and influential people can take part in false paper-based segmentation of assets, hide income, and use the local political funding to ensure that targeted power subsidies are unlikely to reach their intended beneficiaries.
#5 Gap between user chargers and cost of supply
The most fundamental problem faced by the State Electricity Boards in India is the void between the cost of supply and user charges. The gap between average tariff and cost of supply has worsened over the years despite reform efforts.
What is the Way Forward?
To overcome the power sector’s challenges, India needs to embrace renewable sources of energy like solar energy. Solar electric power is an ambitious project that can make India a solar superpower. Solar power deployment is essential to cut the cost of processing non-renewable energy sources used to produce electricity. It can help embrace the country’s energy needs without causing the trouble that the power sector is currently facing.
Also Read: What Is Off-Grid Solar And How Does It Work?
