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WEDNESDAY, SEPTEMBER 17, 2008
PESTEL Analysis of Power sector
Political/Government policies Analysis:
In India, the subject of electricity is covered under the Concurrent List in the Constitution of India, implying that both the central government and state governments have the power to make legislation for the sector. As a result, all major issues affecting the power sector require concurrent action by the central government and state governments. The allocation on power development during the first four Five Year Plans (FYP) was very low i.e. 10-15 percent of the total outlay. The low allocation of budget in power sector hampered the rural & urban electrification, and power generation capacity. With rapid industrialization and extensive demand for power both in rural and urban areas, the country has been reeling under severe power shortage and the country’s production effort has been severely curtailed by load shedding almost in all parts of country.
As it is a subject of concurrent list so each state has developed its own electricity policy and pricing based on its own interest rather than thinking of country as a whole. The different pricing regimes and distribution policies of state governments further aggravated the power situation. The low collection of revenue makes condition burst & slow down the growth Of SEBs and subsequently effect on the power syste. Another reason for the power system’s non-viability is the skewed retail tariffs, whereby agricultural consumers receive virtually free power (with flat-rate pricing averaging under 0.50 Rs/kWh) and even domestic consumers receive modest subsidies. Together, these are about half the consumption. The remaining paying customers (primarily commercial and industrial) cross-subsidize these sectors through very high tariffs.
Subsidies provided by the government were a large amount. As the state government paid these subsidies irregularly, So SEBs did not plan any long term project implementation i.e. capacity expansion, network extension, regular maintenance and system improvement. This also affects the T&D losses of SEBs. Severe financial losses have led to the almost total inability of these utilities to self-finance improvements. Utilities also borrowed heavily and aggravated their losses. In the past, these losses used to be made good by government treasuries, but till 90’s, most treasuries were ‘‘empty’’. The lack of internally generated funds and the inability of treasuries to provide funds have resulted in severe shortages of capital for expanding generating capacity and infrastructure development.
But after 1990, The Government has realized the importance of power in the economic development of the country. The Union Ministry of Power has developed appropriate strategies and a blueprint to address the problems in a time-bound manner. These strategies and the blueprints were flexible and to be adjusted to accommodate positive inputs and developments. Beginning with the opening up of power generation for private investment and later through regulatory reforms, the process has entered a new phase with the recent enactment of the Electricity Act 2003.
The recently established Central Electricity Regulatory Commission is empowered to regulate the central power utilities in accordance with the Electricity Regulatory Commission Act, 1998. The central power utilities include the National Thermal Power Corporation (NTPC),...