Power
Sector- Reforms and Growth Perspectives in India
India ranks low in per capita consumption of electricity (kwh) even compared to Brazil, China; leave alone, developed countries. Despite this consumption level, the supply of electric power does not match with rising demand. In order to increase the availability of power and reduce the gap between demand and supply, as also to encourage the private sector power producers to augment electricity
generation, the government in recent years has been taking several initiatives as part of power sector reforms.To overcome different problems faced by the power sector the government has drawn up an ambitious programme for
improving the efficiency of capital utilization in the country. This is a long overdue initiative,
considering it is commonsensical that it is easier to add wattage by improving
capacity utilization than by
adding to new capacity. New generation capacity of 100,000 MW (which would roughly double the existing generation of capacity) and substantial investments in transmission and
distribution are envisaged. Private sector is increasingly being looked at for adding additional capacity and for improving distribution and transmission networks.India has introduced Regional Power Trading System with a view to help various regions with in the country in reducing power deficit by transferring power from and to other regions. The same concept can be extended to other counties in the region like Bangladesh, Bhutan and Nepal.Considering the complexity of the power sector reform challenges, greater emphasis should be put on the formulation of true privatization strategies, which are much broader than transaction plans. These strategies must deal explicitly with the risk exposure during the transition period, up to the time that the financial and technical performance of the privatized distribution businesses become commercially viable, and in particular, their cash flows become strongly positive.
(The authors are respectively, Chief Economist and President of ING Vysya Bank Limited. The views are personal.)
More summaries about the Power Sector- Reforms and Growth Perspectives