India has moved from being a country perennially short on power to one power surplus country which also exports power and this may be a major step towards reliable electricity supply and universal access. Despite this, the power sector in the country is facing several serious challenges as well.

In the urban areas, the average power cuts are to the tune of 25 hours in a month whereas in rural areas the supply rarely exceeds 12 hours in a day. The main reasons are financial constraints of power utilities which prohibits them from purchasing power as per demand and transmission constraints. Besides these power theft and non- payment of electricity bills by consumers also force power utilities to restrict power supply.

To much aghast with nearly four crore households comprising of 29% of total households in the country does not have any electricity connection. The total number of people without electricity in the country are about 30 crore. The government has launched “Saubhagya “scheme on 25 September, 2017 to electrify all rural and urban household with a target date of March 31, 2019.

The country has a generation capacity of 3, 34,399 MW while power demand is around 1, 58,000 MW. The generation capacity in the private sector is 44 % and in state and central sector it is 31% and 25 % respectively. The aggressive capacity generation by the private sector has led to a piquant situation where 23% capacity in private sector is stranded due to lack of power purchase agreements and 9% lying idle due to tariff problems.

Further state sector thermal units are forced to close down due to power purchase agreements with private generators with fixed charges clauses. The capacity of idle units vary up to 30% and state power utilities are paying about 1000 to 4000 crore every year to private generators as fixed charges even without utilizing a single unit. The plant load factor of thermal plants which used to be 80% has now come down to around 60%.

According to official data over 2.6 million households has been electrified since Saubhagya’s launch. As many as 16,341 or 89 percent of 18,452 un-electrified villages have been electrified, However, only eight percent of these villages have all the households electrified over four years to 2018.

Another problem to the aggressive capacity increase especially in the thermal sector is the stressed situation as far as the funding is concerned. Non-availability of regular fuel supply arrangements, lack of Power Purchase Agreements (PPA), an inability of the promoters to infuse equity and working capital and other regulatory and contractual issues were some of the reasons for rising stress in the power sector.

According to a standing committee report tabled in Parliament Rs 174, 468 lakh crore is the debt outstanding from 34 stressed power sector assets of private power producers.  A power surplus situation today has meant that much of the installed capacity of these plants remain idle – from nearly 80% of the capacity being used in 2006-07, the utilization had fallen to just 60% by 2016-17.

Power transmission is another critical area because often the place of power generation and the place of power consumption are located far apart. The coal-rich states or states with run of rivers can generate a lot of power, but they may not be rich enough to consume this power. The eastern and northern states have more generation capacity while the western and southern states cannot use this power because of transmission constraints.

The current challenges are far too strong as power utilities are seeking re-negotiation of old and expensive solar and wind power purchase agreements (PPAs) and delaying the signing of new PPAs. The power utilities which are already struggling with stranded thermal units will find it difficult to sign new PPAs.  The other problem is linked to system operation as large Giga Watt solar stations would require transmission that would be utilized only for a fraction of the time.

The reforms in power sector are a good idea as long as it is done with the consent of power sector engineers and workers. The Electricity (Amendment) bill may be strong policy initiatives to keep up the momentum but concerns of biggest stakeholders working in this sector must be addressed.