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History of Indian Energy Sector

ndia became independent in 1947, the country had a power generating capacity of 1,362 MW.Hydro power and coal based thermal power have been the main sources of generating electricity. Generation and distribution of electrical power was carried out primarily by private utility companies. Notable amongst them and still in existence is Calcutta Electric. Power was available only in a few urban centres; rural areas and villages did not have electricity. After 1947, all new power generation, transmission and distribution in the rural sector and the urban centres (which was not served by private utilities) came under the purview of State and Central government agencies. State Electricity Boards (SEBs) were formed in all the states.Nuclear power development is at slower pace, which was introduced, in late sixties. The concept of operating power systems on a regional basis crossing the political boundaries of states was introduced in the early sixties. In spite of the overall development that has taken place, the power supply industry has been under constant pressure to bridge the gap between supply and demand.

Development of power sector

Development of Power Sector is the key to the economic development. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods. Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. Over the years (since 1950) the installed capacity of Power Plants (Utilities) has increased to 89090 MW (31.3.98) from meagre 1713 MW in 1950, registering a 52d fold increase in 48 years. Similarly, the electricity generation increased from about 5.1 billion units to 420 Billion units – 82 fold increase. The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98, which is about 23 times. In the field of Rural Electrification and pump set energisation, country has made a tremendous progress. About 85% of the villages have been electrified except far-flung areas in North Eastern states, where it is difficult to extend the grid supply.

Structure of power sector after independence

Till December 1950 about 37% of the installed capacity in the Utilities was in the public sector and about 63% was in the private sector. The Industrial Policy Resolution of 1956 envisaged the generation, transmission and distribution of power almost exclusively in the public sector. As a result of this Resolution and facilitated by the Electricity (Supply) Act, 1948, the electricity industry developed rapidly in the State Sector. In the Constitution of India “Electricity” is a subject that falls within the concurrent jurisdiction of the Centre and the States. The Electricity (Supply) Act, 1948, provides an elaborate institutional frame work and financing norms of the performance of the electricity industry in the country. The Act envisaged creation of State Electricity Boards (SEBs) for planning and implementing the power development programmes in their respective States. The Act also provided for creation of central generation companies for setting up and operating generating facilities in the Central Sector. The Central Electricity Authority constituted under the Act is responsible for power planning at the national level. In addition the Electricity (Supply) Act also allowed from the beginning the private licensees to distribute and/or generate electricity in the specified areas designated by the concerned State Government/SEB.

During the post-independence period, the various States played a predominant role in the power development. Most of the States have established State Electricity Boards. In some of these States separate corporations have also been established to install and operate generation facilities. In the rest of the smaller States and UTs the power systems are managed and operated by the respective electricity departments. In a few States private licences are also operating in certain urban areas.

From, the Fifth Plan onwards i.e. 1974-79, the Government of India got itself involved in a big way in the generation and bulk transmission of power to supplement the efforts at the State level and took upon itself the responsibility of setting up large power projects to develop the coal and hydroelectric resources in the country as a supplementary effort in meeting the country’s power requirements. The National thermal Power Corporation (NTPC) and National Hydro-electric Power Corporation (NHPC) were set up for these purposes in 1975. North-Eastern Electric Power Corporation (NEEPCO) was set up in 1976 to implement the regional power projects in the North-East. Subsequently two more power generation corporations were set up in 1988 viz. Tehri Hydro Development Corporation (THDC) and Nathpa Jhakri Power Corporation (NJPC). To construct, operate and maintain the inter-State and interregional transmission systems the National Power Transmission Corporation (NPTC) was set up in 1989. The corporation was renamed as POWER GRIDin 1992.

Policy and regulatory framework

The policy of liberalisation the Government of India announced in 1991 and consequent amendments in Electricity (Supply) Act have opened new vistas to involve private efforts and investments in electricity industry. Considerable emphasis has been placed on attracting private investment and the major policy changes have been announced by the Government in this regard which are enumerated below:

  • The Electricity (Supply) Act, 1948 was amended in 1991 to provide for creation of private generating companies for setting up power generating facilities and selling the power in bulk to the grid or other persons.
  • Financial Environment for private sector units modified to allow liberal capital structuring and an attractive return on investment. Up to hundred percent (100%) foreign equity participation can be permitted for projects set up by foreign private investors in the Indian Electricity Sector.
  • Administrative & Legal environment modified to simplify the procedures for clearances of the projects.
  • Policy guidelines for private sector participation in the renovation & modernisation of power plants issued in 1995.
  • In 1995, the policy for Mega power projects of capacity 1000 MW or more and supplying power to more than one state introduced. The Mega projects to be set up in the regions having coal and hydel potential or in the coastal regions based on imported fuel. The Mega policy has since been refined and Power Trading Corporation (PTC) incorporated recently to promote and monitor the Mega Power Projects. PTC would purchase power from the Mega Private Projects and sell it to the identified SEBs.
  • In 1995 GOI came out with liquid fuel policy permitting liquid fuel based power plants to achieve the quick capacity addition so as to avert a severe power crisis. Liquid fuel linkages (Naphtha) were approved for about 12000 MW Power plant capacity. The non-traditional fuels like condensate and orimulsion have also been permitted for power generation.
  • GOI has promulgated Electricity Regulatory Commission Act, 1998 for setting up of Independent Regulatory bodies both at the Central level and at the State level viz. The Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commission (SERCs) at the Central and the State levels respectively. The main function of the CERC are to regulate the tariff of generating companies owned or controlled by the Central Government, to regulate the tariff of generating companies, other than those owned or controlled by the Central Government, if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State to regulate the inter-state transmission of energy including tariff of the transmission utilities, to regulate inter-state bulk sale of power and to aid & advise the Central Government in formulation of tariff policy. The CERC has been constituted on 24.7.1998.
  • The main functions of the SERC would be to determine the tariff for electricity wholesale bulk, grid or retail, to determine the tariff payable for use by the transmission facilities to regulate power purchase and procurement process of transmission utilities and distribution utilities, to promote competition, efficiency and economy in the activities of the electricity industries etc. Subsequently, as and when each State Government notifies, other regulatory functions would also be assigned to SERCs.
  • The Electricity Laws (Amendment) Act, 1998 passed with a view to make transmission as a separate activity for inviting greater participation in investment from public and private sectors. The participation by private sector in the area of transmission is proposed to be limited to construction and maintenance of transmission lines for operation under the supervision and control of Central Transmission Utility (CTU)/State Transmission Utility (STU). On selection of the private company, the CTU/STU would recommend to the CERC/SERC for issue of transmission licence to the private company.
  • The Electricity Laws (Amendment) Act, 1998 provides for creation of Central and State Transmission utilities. The function of the Central Transmission Utility shall be to undertake transmission of energy through inter-state transmission system and discharge all functions of planning and coordination relating to inter-state transmission system with State Transmission Utilities, Central Government, State Governments, generating companies etc. Power Grid Corporation of India Limited will be Central Transmission Utility.
  • The function of the State Transmission Utility shall be to undertake transmission of energy through intra-state transmission system and discharge all functions of planning and coordination relating to intra-state transmission system with Central Transmission Utility, State Governments, generating companies etc.

The share of hydel generation in the total generating capacity of the country has declined from 34 per cent at the end of the Sixth Plan to 29 per cent at the end of the Seventh Plan and further to 25.5 per cent at the end of Eighth Plan. The share is likely to decline even further unless suitable corrective measures are initiated immediately. Hydel power projects, with storage facilities, provide peak time support to the power system. Inadequate hydel support in some of the regions is adversely affecting the performance of the thermal power plants. In Western and Eastern regions, peaking power is being provided by thermal plants, some of which have to back down during off peak hours.

Installed capacity (Fuel wise)

Growth of installed power generation capacity given below according to year and percentage of installed capacity growth. Table included conventional and non- conventional resource according to fossil fuel being used.


Installed Capacity as on Thermal (in MW) Nuclear(in MW) Renewable (in MW) Total (in MW) % Growth (on yearly basis)
Coal Gas Diesel Sub-TotalThermal Hydel OtherRenewable Sub-TotalRenewable
31-Dec-1947 756 98 854 508 508 1,362
31-Dec-1950 1,004 149 1,153 560 560 1,713 8.59%
31-Mar-1956 1,597 228 1,825 1,061 1,061 2,886 13.04%
31-Mar-1961 2,436 300 2,736 1,917 1,917 4,653 12.25%
31-Mar-1966 4,417 137 352 4,903 4,124 4,124 9,027 18.80%
31-Mar-1974 8,652 165 241 9,058 640 6,966 6,966 16,664 10.58%
31-Mar-1979 14,875 168 164 15,207 640 10,833 10,833 26,680 12.02%
31-Mar-1985 26,311 542 177 27,030 1,095 14,460 14,460 42,585 9.94%
31-Mar-1990 41,236 2,343 165 43,764 1,565 18,307 18,307 63,636 9.89%
31-Mar-1997 54,154 6,562 294 61,010 2,225 21,658 902 22,560 85,795 4.94%
31-Mar-2002 62,131 11,163 1,135 74,429 2,720 26,269 1,628 27,897 105,046 4.49%
31-Mar-2007 71,121 13,692 1,202 86,015 3,900 34,654 7,760 42,414 132,329 5.19%
31-March-2012 112,022 18,381 1,200 131,603 4,780 38,990 24,503 63,493 199,877 9.00%
31-March-2014[27] 145,273 21,782 1,199 168,274 4,780 40,531 29,463 69,994 243,029 10.26%

In above figure growth of power sector shown which indicate periodical performance and fossil fuel being used in power generation. In year of 1947, when India got independence the generation capacity was only 1362 MW, in which coal based generation was high after that hydro took place because of absence of high technology and lack of infrastructure.

Problem with Indian Power sector

Indian power sector facing lot of problem in all sub-sectors like Generation, transmission and distribution. After unbundling of power sector all those three sector get boosted due to appropriate funds provision by government. From stating of generation to ending of distribution, lack of skilled labour, management, asset management and infrastructure are responsible to low growth in power sector.

Apart from technological and managerial in-efficiency few major issue given below some reason to sickness of power sector.

  • Government giveaways such as free electricity for farmers, partly to curry political favour, have depleted the cash reserves of state-run electricity-distribution system. This has financially crippled the distribution network, and its ability to pay for power to meet the demand. This situation has been worsened by government departments of India that do not pay their bills.
  • Shortages of fuel: despite abundant reserves of coal, India is facing a severe shortage of coal. The country isn’t producing enough to feed its power plants. Some plants do not have reserve coal supplies to last a day of operations. India’s monopoly coal producer, state-controlled Coal India, is constrained by primitive mining techniques and is rife with theft and corruption; Coal India has consistently missed production targets and growth targets. Poor coal transport infrastructure has worsened these problems. To expand its coal production capacity, Coal India needs to mine new deposits. However, most of India’s coal lies under protected forests or designated tribal lands. Any mining activity or land acquisition for infrastructure in these coal-rich areas of India, has been rife with political demonstrations, social activism and public interest litigations.
  • Poor pipeline connectivity and infrastructure to harness India’s abundant coal bed methane and shale gas potential.
  • The giant new offshore natural gas field has delivered less fuel than projected. India faces a shortage of natural gas.
  • Hydroelectric power projects in India’s mountainous north and north east regions have been slowed down by ecological, environmental and rehabilitation controversies, coupled with public interest litigations.
  • India’s nuclear power generation potential has been stymied by political activism since the Fukushima disaster in Japan.
  • Average transmission, distribution and consumer-level losses exceeding 30% which includes auxiliary power consumption of thermal power stations, fictitious electricity generation by wind generators & independent power producers (IPPs), etc.
  • Over 300million (300 million) people in India have no access to electricity. Of those who do, almost all find electricity supply intermittent and unreliable.
  • Lack of clean and reliable energy sources such as electricity is, in part, causing about 800million (800 million) people in India to continue using traditional biomass energy sources – namely fuel wood, agricultural waste and livestock dung – for cooking and other domestic needs. Traditional fuel combustion is the primary source of indoor air pollution in India, causes between 300,000 to 400,000 deaths per year and other chronic health issues.
  • India’s coal-fired, oil-fired and natural gas-fired thermal power plants are inefficient and offer significant potential for greenhouse gas (CO2) emission reduction through better technology. Compared to the average emissions from coal-fired, oil-fired and natural gas-fired thermal power plants in European Union (EU-27) countries, India’s thermal power plants emit 50% to 120% more CO2 per kWh produced.



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