World Energy Outlook 2007

(because of the captive restriction) when prices are attractive, investors in the
coal sector are likely to remain cautious. The political and social dimensions
of reform in the coal sector are more complex than in many other sectors
because of the concentration of coal mining and related activities in a small
number of states.
The government continues to pursue reform of electricity markets, in order
to address chronic problems of under-investment and poor quality of
service. With the enactment of the Electricity Act of 2003, India initiated a
much-needed overhaul of its power sector. The act consolidates the laws
relating to generation, transmission, distribution, trading and use of
electricity. It promotes competition and protects the interests of consumers.
It also lays out plans to rationalise electricity tariffs. The act, however, does
not specify any concrete time frame for elimination of subsidies, which
remain very large. Provisions in the act will end investors' obligation to sell
to a single buyer.
The act brings some clarity to the roles of different organisations and
provides for better management of the regulatory commissions. It also allows
for open access to transmission and distribution systems to encourage the
development of competitive power markets, and permits private investment
in generation and transmission. The act requires the central government to
consult with the Central Electricity Authority and state governments in
formulating a national electricity and tariff policy. Accordingly, a new
National Electricity Policy was announced in 2005 and a National Tariff
Policy in 2006. These policies aim to provide everyone with access to reliable
electricity supply and to make the power sector commercially viable through
cost-reflective tariffs. Progress in implementation of the Electricity Act has
varied from state to state. Some states have made progress in separating
transmission from generation and developing open access regulations, but
more significant progress, especially in grid expansion, will require that all
states implement reforms.
In 2006, after comprehensive public consultation, the Indian
government approved an Integrated Energy Policy, which lays out
recommendations for the main energy challenges facing the country
(Table 15.3). Some of the recommendations lack sufficient precision
but, since the Integrated Energy Policy was approved, many working
groups and committees have been set up to plan the necessary action and
evaluate progress. The Expert Committee that drafted the Integrated
Energy Policy has acknowledged that greater precision will be needed
regarding specific policy measures; but the definition of many of the
objectives themselves first needs to be made more precise if they are to
be successfully communicated and implemented by appropriately welldirected
policies.
15
Chapter 15 - Overview of the Energy Sector 455