Power Sector in India

The power sector in India is mainly governed by the Ministry of Power. There are three major pillars of power sector these are Generation, Transmission, and Distribution. As far as generation is concerned it is mainly divided into three sectors these are Central Sector, State Sector, and Private Sector. 

Central Sector or Public Sector Undertakings (PSUs), constitute 29.78% (62826.63MW) of total installed capacity i.e, 210951.72 MW (as on 31/12/2012) in India. Major PSUs involved in the generation of electricity include NHPC Ltd., NTPC Ltd.,, and Nuclear Power Corporation of India (NPCIL).

Besides PSUs, several state-level corporations are there which accounts for about 41.10% of overall generation , such as Jharkhand State Electricity Board (JSEB), Maharashtra State Electricity Board (MSEB), Kerala State Electricity Board (KSEB), in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL four distribution Companies and one controlling body GUVNL, and one generation company GSEC), are also involved in the generation and intra-state distribution of electricity.

Other than PSUs and state level corporations, private sector enterprises also play a major role in generation, transmission and distribution, about 29.11%(61409.24MW) of total installed capacity is generated by private sector. The PowerGrid Corporation of India is responsible for the inter-state transmission of electricity and the development of national grid.

History

• The Indian Power Industry before independence was controlled firmly by the British. Then legal and policy framework was conducive to private ownership, with not much regulation with regard to operational safety. 
• In line with the Industrial Policy Resolution of 1948, the government played a dominant role in initiating and regulating development in key sectors of the economy, which inter alia included the Indian Electricity Sector. It was embodied in the constitution, the principle that both the Central Government and the States should be able to legislate on power.
• Legislative authority was more formally divided in the Electricity Supply Act of 1948. The Act provided for the establishment of the Central Electricity Authority (CEA) and of State Electricity Boards (SEBs) which were to become the main agencies for supplying power throughout India.
• The SEBs were autonomous bodies responsible for the development and operation of generation, transmission and distribution in the “most economical and efficient way”.
• The CEA was to develop national plans and help formulate national power policy, to report the progress of the electricity supply industry, to provide technical assistance, to advise Central Government/ State Government/Boards/generating company, act as arbitrator between State or Board or licensees, to train personnel in the sector, to promote research and, in general, to facilitate efficient power supply. Its role, however, was essentially advisory rather than executive.
• The Industrial Policy Resolution of 1956 reserved the generation and distribution of electricity almost exclusively for the states, letting, existing private licensees, however, to continue. This led to the gradual domination of the electricity sector by government enterprises.
• Amendment in 1976 enabled generation companies to be set up by the central and state governments resulting in the establishment of National Thermal Power Corporation Ltd. (NTPC Ltd.), National Hydro Power Corporation Ltd. (NHPC), North Eastern Electric Power Corporation Ltd. (NEEPCO), Mysore (now Karnataka) Power Corporation and Water & Power Consultancy Services (a consulting firm), etc. The development of the sector took place essentially through various public sector utilities – some under the central government and the majority under the state governments – between them they accounted for more than 95% ownership.
• Until the 1980s, electricity services in most developing countries of the world, as also in many developed countries of Europe, were delivered by state-owned monopolies. It was considered that monopolies were best suited to deliver electricity services, as they enjoyed economies of scale and scope.
• In India until 1991, power sector in the states was managed by one large, vertically integrated entity that generated, transmitted and distributed power, under the respective State Ministries of Power.
• However, the absence of competition led to poor quality of services, sub optimal utilization of resources, and little consideration for consumer interests. The inability of state-owned enterprises to deliver services in an efficient and cost-effective manner led to reassessment of the policies relating to the provision of services, and there was a growing perception that corporatization of the sectors could improve efficiencies, quality of service and improve the bottom-line.
• Following UK & USA and developing countries like Argentina, Chile, Brazil, Philippines & Pakistan, the Indian government also commenced the restructuring of the Indian power sector, which commenced with the unbundling, corporatization and privatization of Orissa power utility.
• The Indian power sector has witnessed significant changes since early 1990s. Beginning with allowing private investment in power generation in 1991, initiating regulatory reforms through Electricity Regulatory Commissions Act, 1998, the Indian government has enacted the Electricity Act, 2003 which seeks a paradigm shift.
• The Electricity Act, 2003 mandates that Regulatory Commissions shall regulate tariff and issue of licenses and that State Electricity Boards (SEBs) will no longer exist in the existing form and will be restructured into separate generation, transmission and distribution entities. Regulatory function has been taken away from the purview of the government. The Electricity Act, 2003 mandates licensee-free thermal generation, non-discriminatory open access of the transmission system and gradual implementation of open access in the distribution system which will pave way for creation of power market in India