Indian Power Sector Scenario: An Analysis Pre- and Post-Liberalization

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1.Power sector at a glance

Electricity has been universally recognized as one of the most important inputs for economic growth and human development. There is a strong two-way relationship between economic development and energy consumption. On one hand, growth of an economy, with its global competitiveness, depends on the availability of cost-effective and environmentally benign energy sources, and on the other hand, the level of economic development has been observed to be reliant on the energy demand.

The electricity sector in India supplies the world's 5th largest energy consumer, accounting for 4.0% of global energy consumption. The Energy policy of India is predominantly controlled by the Government of India's , Ministry of Power, Ministry of Coal and Ministry of New Renewable Energy and administered locally by Public Sector Undertakings as well as some private players entry after power sector liberalization. Electricity consumed in India is generated by thermal power plants , hydroelectric power plants , nuclear power plants. Renewable Energy Sources with a share of 65 %, 22 %, 3% , 10 % respectively.

Rapid economic growth due to other industrial sectors like metal, cement, textiles, fertilizers, paper mills has created a growing need for dependable and reliable supplies of electricity, gas and petroleum products. Due to the fast-paced growth of India's economy, the country's energy demand has grown an average of 3.6% per annum over the past 30 years. In August 2011, the installed power generation capacity of India stood at 181,558 MW ( refer table -1 / trend -1 in annexure) and per capita energy consumption stood at 704 kWh in 2008-09.( refer table-3) The country's annual energy production increased from about 190 billion kWh in 1986 to more than 837 billion kWh in 2010. The Indian government has set a modest target to add approximately 78,000 MW of installed generation capacity by 2012 which it is likely to miss. The total demand for electricity in India is expected to cross 950,000 MW by 2030.This topic broadly explains about the power sector journey from 1947 to 2010 in different phases with its impact on macroeconomic fundamentals.

2.Preliberalisation era scenario ( Old policy impact on the sector) Pre-Independence Era ( upto 1947) :
The first instance of commercial generation of electricity in India dates back to 1879 in Kolkata (then Calcutta). In 1897, the colonial government of Bengal granted an exclusive 21-year license to the Calcutta Electricity Supply Corporation to supply electricity to Calcutta. Private companies set up power supply systems in major urban areas under franchises, which allowed them a reasonable rate ofturn. The demand for electricity during this phase was driven by demand from industries, commercial enterprises (including tramways) and also domestic use. Most of the earlier private companies in the power sector cease to exist today as they were amalgamated into state-owned enterprises; however, a few of them continue to exist as private players. The Electricity Act 1910 was the first act (one of the earliest regulation) in the power industry, which was introduced before independence. The Act provided the basic framework for supply of electricity in India. Post-Independence Era (1947-1990): At the time of independence, electricity generation and supply was concentrated in the hands of private electricity suppliers, and largely in urban areas. Electricity supply was a must across the country to promote overall growth and development; hence, the Electricity (Supply) Act 1948, which was based on the UK Electricity Supply Act 1926, was introduced. Under this Act the Central Electricity Authority (CEA) was established at the central level and the State Electricity Boards (SEBs) at...
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