How to shock-proof India’s power sector

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How to shock-proof India’s power sector

  • In October last year, India witnessed significant power shortages stemming from the low inventory of coal at the power plants.
  • After seven months, we are back to square one as reports of coal-shortage induced power outages across states continue to pour in.
  • On the one hand, there is a rush towards buying expensive coal and power on the exchanges.

Impact of Russo-Ukrainian Conflict

  • Russia-Ukraine conflict has sent coal prices touching historical highs.
  • The cost of imported coal in India is expected to be 35%higher in the fiscal year 2022-23 compared to the past year.
  • Subsequently, power producers paid a premium of up to 300% in March to secure coal supplies in the domestic spot market.

Increased Energy Demands

  • Even as coal stocks available with state thermal power plants fell, India also witnessed a sudden rise in energy demand in March — the hottest in its recorded history.
  • This pushed peak power demand to 199 GW in the middle of March.

Measures by Government against this:

  • Giving directions to ensure maximum production of coal at captive mines,
  • Rationing of coal to non-power sectors
  • A price cap of Rs 12 per unit on electricity traded on exchanges.
  • But it is more required to enhance the sector’s resilience to such disruptions from exogenous factors.

Steps to be taken

  • Creating an enabling ecosystem
    • To ensure power plants work efficiently.
    • India has about 200 GW of coal-based generation capacity which accounts for nearly 70% of the total electricity generated in the country.
    • CEEW assessment - a disproportionate share of generation comes from older inefficient plants
      • Newer and efficient ones remain idle for want of favourable coal supply contracts or power purchase agreements.
  • Enabling discoms to undertake smart assessment and management of demand
    • India has advanced tools for medium- and short-term demand forecasting.
    • However, few discoms have embraced these to inform their procurement decisions.
    • More than 90% of power is procured through long-term contracts, so, discoms have little incentive to dynamically assess and manage demand.
    • Introducing time-of-day pricing and promoting efficient consumption behaviour would help shave peak demand and avoid panic buying in the market.
  • Empowering electricity regulators to help bring down discom losses.

Despite two decades of sectoral reforms, the aggregate losses of discoms stand at 21 % (2019-20).


  • Given the country’s development aspirations, India’s power demand is set to rise substantially and become more variable.
  • Increasing climatic and geopolitical uncertainties underscore the need to become more efficient in the way we generate, distribute and consume energy.
  • We need to act now for the long-term resilience of India’s power sector.

Exam track

Prelims Takeaway

  • CEEW
  • Russian energy exports from India

Mains Track

Q. Discuss the problems faced by the power sector in India. Suggest some measures to tackle these problems.