Power Sector Reforms in India

Abstract

Power sector reforms in India were initiated in the face of mounting commercial losses due to poor fiscal health of State Utilities, endemic capacity and energy shortages and increasing subsidy burden on the states. Investment in the sector was falling far short of demand in power supply. The Government of India, in 1991 embarked upon an ambitious program for reforming the sector with the prime objective of transforming the electricity industry into an efficient enterprise. This paper analyses the pre-reform era and identifies the key concerns which led to the initiation of the reform process. The paper delineates the major policy and regulatory initiatives that have been undertaken since 1991 including the provisions of the new enactment which has come into force in the form of the Electricity Act, 2003 and seek a paradigm shift. Several key elements of the reform program have been implemented by the various states, with varying degree of success, during the period 1991-2005. This paper reviews the performance of the Indian power sector in the last one and half decade since the reforms had been initiated, while undergoing restructuring. The study also examines how far the reform process during this period has been effective in realizing its set objectives and benefited the development of the power sector and the nation at large. The paper briefly discusses the issue involved in introduction of competition in the power sector primarily through development of a market for bulk power.