PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Global Reach
The Ministry of Power reports a 10% overall deficit between electricity capacity and consumption,
rising to as much as 15% during peak periods. If India is to meet its 2005 National Electricity
Policy goal of universal electricity access by 2012, the installed base will need to grow to 400,000
megawatts. The government forecasts that coal, oil, and gas will generate 75% of this power,
though new consideration is being given to alternative hydroelectric, nuclear, and renewable fuels.
McKinsey estimates the total investment cost at about $225 billion, with the public sector portion
to include 102,000 megawatts of generation capacity, 60,000 kilometers (37,300 miles) of
extra high voltage transmission lines, and an increase in interregional power transfer capacity
from 9,500 to 37,000 megawatts. Government attempts to encourage private development of
generating capacity have met with only limited success: investors have been concerned regarding
the financial health of the state electricity boards, which are the exclusive buyers of power.
A 2008 Parliamentary report found that the government’s efforts to address these issues are
falling short. In the five years leading up to March 2007, India added only 21,080 megawatts of
generation capacity, half the official target. Peak load deficits are expected to continue through
2012, and even after that infrastructure bottlenecks are likely to produce coal and gas supply
interruptions and power outages.
Unscheduled outages, voltage fluctuations, and peak-period utility shutdowns when customers
exceed contracted limits—called load shedding—have indirect cost impacts involving: overdesigned
motors; voltage stabilizers connected to expensive equipment; backup diesel generators;
chargeable battery “inverters” that store utility power; replacement of burnt out transformers,
cables, motors, compressors and pumps; and idled production lines and employees. They also
deter potential investors in new industrial capacity.
Studies by the Planning Commission, the Brookings Institution, McKinsey, the Center for
Strategic and International Studies, International Resources Group, and others all offer broadly
similar prescriptions for addressing India’s power generation difficulties in the shorter term:
• Encourage increased foreign investment in both generation and transmission infrastructure.
• Complete 2003 reforms that centralize transmission grid, plant construction, and power trading,
so that utilities compete on price and service over a single, rationalized infrastructure.
• Negotiate agreements with Nepal to develop 42,000 megawatts of accessible surplus
hydro power and connect to a regional electricity grid serving Bangladesh, Bhutan, India,
and Nepal.
• Improve billing and collection processes, operating efficiencies, and protections against
electricity theft.
• End pricing structures under which industrial, commercial and large household users
subsidize unmetered and discount pricing for farmers and the poor.
• End caps on retail energy prices that subsidize farmers and consumers at the expense of
state utilities.
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