Power sector: meeting current and future challenges

The Indian economy has grown at around eight per cent for the past three years. It exhibited strong growth during the first three quarters of 2006/07, and is expected to show similar trends for the next quarter of 2006/07. The manufacturing sector is showing double-digit growth. As emphasized in the mid-term review of the Tenth Five-year Plan, the energy sector would play a crucial role in ensuring sustained growth of the economy in future. To keep the Indian economy growing, all infrastructure sectors, including power, have to be upgraded.

As per government estimates, investment requirements of the power sector for the Eleventh Five-year Plan would be around $100 billion for creation of a fresh capacity of 68,000 MW and expansion and upgradation of transmission and distribution networks. This not only calls for mobilization of finances from within and outside the country but also requires institutional strengthening of the sector. Improving the commercial viability of the sector, particularly the distribution segment, should ideally be given a high priority, as private players in the generation business have traditionally been averse to taking risks of nonpayment. However, the recent experience of ultra-mega power projects shows that private developers are not averse to risks in the changed scenario, and are willing to develop big projects at much more competitive prices than their public sector counterparts. Emphasis should also be given to improvement in supply side and end-use efficiencies through reduction of system losses, renovation and modernization of existing inefficient plants, and implementation of DSM measures for efficiency. At the same time, it is also essential to speed up the pace of efficiency improvement efforts in the states, which have not made any significant progress in this direction. Therefore, the electricity sector needs a multi-pronged approach to modernization to meet current and future challenges.

Editorial