Vital Stats

Overview of issues in the power sector in India

In the recent past, several initiatives have been taken to address the challenges in the power sector. These include structural
changes in the regulatory framework as proposed by the Electricity (Amendment) Bill, 2014, and more recently, the UDAY
scheme to address financial issues being faced by companies distributing electricity. In this context, we present an overview of
the status of the electricity sector and the challenges it continues to face.

Power deficit decreasing; North Eastern region saw up to 12% peak hour deficit last year
Power deficit

20%

20%

0%

Peak deficit

Northern
Region

2015-16*

Energy deficit

2014-15

0%
2013-14

5%
2012-13

5%

2011-12

10%

2010-11

10%

2009-10

15%

2008-09

15%

Region-wise power deficit (2014-15)

Western Southern
Region
Region
Energy deficit

Eastern
Region

Peak deficit

North
Eastern
Region

* Provisional data

The power deficit situation in the country has improved in the past few years. From 2008 to 2014, energy deficit (shortfall
in energy supply during a day) has reduced from 11.0% to 3.6% and peak deficit (shortfall in supply during highest
consumption period in a day) has reduced from 11.9% to 4.7%.

Some of the issues leading to the power deficit situation in the country include (i) shortage of fuel, (ii) high AT&C losses,
(iii) a differential tariff structure, and (iv) delays in tariff revisions. High AT&C losses and losses arising due to issues
with tariff affect the ability of distribution companies (discoms) to buy power to supply to the consumers.

Generation capacity increasing, but utilisation of generation capacity is still low

Demand, production and import of coal (in
million tonnes)

Installed generation capacity (in MW)

3,00,000

1,000

2,50,000

800

2,00,000

600

1,50,000

400

1,00,000

Coal

Hydro

Gas

Nuclear

Others

2012-13

11th Plan

10th Plan

9th Plan

8th Plan

0
7th Plan

0
6th Plan

200
5th Plan

50,000

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Demand

Production

Import

Historically, inadequate generation capacity was the key contributor to power deficit. However, generation capacity has
improved in the last few years due to high participation by the private sector.

Over the years, the capacity to generate electricity has increased, however the actual generation of electricity has not been
commensurate with this increased capacity. Key reasons for the low utilisation of generation capacity are: (i) shortage of
fuel, especially coal, and (ii) unviable Power Purchase Agreements.

The coal sector has failed to match production with the growth in coal-based generation capacity. This has created a gap
between the demand and supply of coal. As a result, Indias coal imports have risen from 59 to 168 million tonnes from
2008-09 to 2013-14 (185%). Shortage of coal affects the generation of power, leading to power deficits. However, with
the reallocation of coal blocks in 2014 it remains to be seen to what extent the supply of coal has been addressed.

Prachee Mishra
prachee@prsindia.org

December 02, 2015

PRS Legislative Research Institute for PolicyResearch Studies
3rd Floor, Gandharva Mahavidyalaya 212, Deen Dayal Upadhyaya Marg NewDelhi110002
Tel:(011)2323 4801-02, 4343 4035-36
www.prsindia.org

Vital Stats: Overview of issues in the power sector in India

PRS Legislative Research

Decline in AT&C losses has been slower than the target

AT&C losses

Aggregate Technical and Commercial (AT&C) loss is the

percentage of power procured by the discom for which it
did not receive any payment. The national average for
AT&C losses for 2012-13 was about 25%. In countries
such as UK and US, AT&C losses are about 6-7%.

Technical loss is the energy lost as heat when electricity

is carried over wires. Poor equipment increases this loss.
Commercial losses are caused by theft and pilferage of
power, and lack of metering and poor billing and
collection systems.

The Accelerated Power Development Program was

launched in 2002-03 with the main objective of reducing
AT&C losses. However, reduction in AT&C losses
(1.1% per annum) has been slower than the target (3% for
utilities with losses above 30%; 1.5% for others).

50%
40%
30%
20%
10%
2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

0%

Differential tariff, delays in tariff revisions lead to financial losses

Gap between average cost of supply and tariff
In Rs/kWh
8.0

In Rs/kWh
8.0

6.0

6.0

4.0

4.0

2.0

2.0

Consumer category-wise electricity tariff

0.0

0.0
2009-10
2010-11
2011-12
Average cost of supply

2009-10
2010-11
2011-12
2012-13
Agriculture
Domestic
Commercial

2012-13
2013-14
Average tariff

2013-14
Industrial

In 2013-14, the average cost of supplying power was Rs 5.9/kWh whereas the average tariff was Rs 4.8/kWh. In the same
year, across consumer categories, the average tariff was highest for commercial (Rs 7.6/kWh) and industrial (Rs 6.3/kWh)
consumers. Average tariff was the lowest for agricultural consumers at 1.8 Rs/kWh (due to direct subsidies received from
the state government and cross-subsidisation by commercial and industrial consumers).

Supplying electricity at tariff lower than the cost to supply, along with delay in tariff revisions has led to discoms facing
huge financial losses.

Borrowings by state owned discoms has been increasing

Commercial losses of discoms (in Rs crore)

2013-14

With subsidy

2012-13

2013-14

2011-12

Without subsidy

2012-13

2010-11

2011-12

2009-10

2010-11

2008-09

2009-10

Borrowings by state discoms (in Rs crore)

6,00,000
5,00,000
4,00,000
3,00,000
2,00,000
1,00,000
0
2007-08

1,00,000
80,000
60,000
40,000
20,000
-

The accumulated losses of state-owned discoms (without subsidies) rose from Rs 11,699 crore in 2004-05 to Rs 71,271
crore in 2013-14. These losses have resulted in state discoms relying more on short-term loans to fund their operations.
Borrowings by state discoms rose from Rs 1,58,003 crore in 2007-08 to Rs 5,45,922 crore in 2013-14 (CAGR 23%).

Consequently, the interest cost on these loans worsens the poor finances of state discoms. Poor finances of the discoms
affect their ability to buy power, thus leading to power deficits.

Data Sources: Ministry of Power; Ministry of Statistics and Programme Implementation; Central Electricity Authority; Lok Sabha Questions; Power
Finance Corporation; PRS.
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