13 May India’s Power Sector at a Crossroads: Growth Amidst Emerging Oversupply Risks
This article covers “Daily Current Affairs” and the Topic India’s Power Sector at a Crossroads: Growth Amidst Emerging Oversupply Risks
SYLLABUS MAPPING:
GS-3- Economics development and infrastructure – India’s Power Sector at a Crossroads: Growth Amidst Emerging Oversupply Risks
FOR PRELIMS
What is the role of renewable energy in India’s power sector?
FOR MAINS
What are the main challenges faced by India’s distribution companies (DISCOMs)?
Why in the News?
India’s power sector is currently facing a potential oversupply crisis, as highlighted by a recent Fitch Ratings report. The warning comes in the backdrop of continued sluggish electricity demand growth—around 4% in FY25—while power generation capacity continues to expand rapidly. This growth rate is nearly half of what was seen during FY22–FY24, where demand grew by about 8%. Despite achieving a record peak demand of 250 GW in FY25 and reducing national energy shortages to just 0.1%, the mismatch between capacity addition and actual consumption is raising concerns. Since FY2014, installed power generation capacity has increased by 83.8%, from 249 GW to 457 GW (as of November 2024), significantly improving power availability—rural areas now receive 21.9 hours of supply daily (up from 12.5 hours in 2014), while urban areas get 23.4 hours. However, global uncertainties such as India-Pakistan tensions, disruptions in international trade, and potential U.S. tariffs could impact GDP growth (projected at 6.4% in FY26), thereby affecting future power demand.
Power sector basket in India
| Energy Source | Installed Capacity (GW) | Share in Total Capacity (%) | Source |
|---|---|---|---|
| 1. Thermal Power | |||
| – Coal | ~206 | ~45.0% | Central Electricity Authority (CEA) |
| – Gas | ~25 | ~5.5% | CEA |
| – Diesel | ~0.5 | ~0.1% | CEA |
| Subtotal – Thermal | ~231.5 | ~50.6% | |
| 2. Renewable Energy | |||
| – Solar | ~76 | ~16.6% | Ministry of New and Renewable Energy (MNRE) |
| – Wind | ~46 | ~10.1% | MNRE |
| – Small Hydro (<25 MW) | ~5 | ~1.1% | MNRE |
| – Biomass & Waste-to-Energy | ~10 | ~2.2% | MNRE |
| Subtotal – Renewable | ~137 | ~30.0% | |
| 3. Large Hydro (>25 MW) | ~52 | ~11.3% | Central Electricity Authority (CEA) |
| 4. Nuclear Power | ~7 | ~1.5% | Nuclear Power Corporation of India Ltd. (NPCIL) |
| TOTAL INSTALLED CAPACITY | ~457 GW | 100% |
Govt. Initiatives to promote the power Sector
1. Revamped Distribution Sector Scheme (RDSS): Aims to improve the operational efficiency and financial sustainability of DISCOMs by reducing AT&C losses and enhancing infrastructure with smart metering and feeder separation.
2. Production Linked Incentive (PLI) Scheme for Solar Manufacturing: Promotes domestic manufacturing of high-efficiency solar PV modules with a target to reduce import dependence and boost renewable energy capacity.
3. Ujjwal DISCOM Assurance Yojana (UDAY): A financial restructuring plan to improve the financial health of power distribution companies and ensure affordable power supply.
4. National Electricity Plan (NEP): Provides a long-term roadmap for power generation and capacity addition, emphasising renewable integration and reduced dependence on coal.
5. One Nation One Grid – One Frequency: Ensures seamless power transmission across states through a unified national grid, enhancing energy accessibility and efficiency.
6. Green Energy Corridor Project: Focuses on the development of dedicated transmission networks for renewable energy to ensure grid stability and smooth power evacuation.
7. Saubhagya Scheme (Pradhan Mantri Sahaj Bijli Har Ghar Yojana): Achieved near-universal household electrification across the country by providing last-mile connectivity.
8. Hydrogen Mission & Pumped Hydro Development: Encourages green hydrogen production and storage-based hydro power to support grid balancing and clean energy transition.
Issues in India’s Power Sector
1. Demand-Supply Mismatch: Sluggish electricity demand (~4–5%) despite rising capacity is leading to oversupply concerns.
2. DISCOM Financial Stress: High AT&C losses, poor billing efficiency, and mounting dues undermine sector stability.
3. Coal Dependence: Heavy reliance on coal (~50% of generation) raises pollution and import dependency.
4. Transmission Bottlenecks: Outdated infrastructure hampers power evacuation and renewable integration.
5. Renewable Integration Issues: Intermittency, lack of storage, and land acquisition challenges delay clean energy expansion.
6. Regulatory Hurdles: Complex policies, tariff uncertainties, and slow approvals deter private investment.
7. Financing Constraints: Limited low-cost financing and high upfront costs affect project viability, especially for renewables.
8. Environmental Concerns: Emissions from thermal plants and social resistance to large projects pose sustainability challenges.
Way forward
1. Boost Renewable Integration: Invest in grid modernization, battery storage, and smart grids to handle variable renewable energy efficiently.
2. Strengthen DISCOMs: Ensure financial viability through reforms like smart metering, privatization of loss-making utilities, and timely subsidy disbursements.
3. Diversify Energy Mix: Reduce coal dependence by promoting solar, wind, hydro, nuclear, and green hydrogen.
4. Enhance Transmission Infrastructure: Expand and modernise interstate transmission networks to improve reliability and renewable power evacuation.
5. Promote Energy Efficiency: Scale up programs like PAT (Perform, Achieve, and Trade) and UJALA to reduce energy intensity.
6. Ease Regulatory Frameworks: Simplify clearance processes, ensure tariff stability, and promote open access to encourage private investment.
7. Support R&D and Innovation: Promote domestic development of energy storage, smart meters, and clean technologies through public-private partnerships.
8. Ensure Just Energy Transition: Create green jobs, reskill coal sector workers, and focus on equitable energy access across regions.
Conclusion
India’s power sector stands at a critical juncture—characterised by vast capacity, rising renewable ambition, and persistent structural challenges. While significant progress has been made in expanding generation and electrification, issues like demand-supply mismatch, financial distress of DISCOMs, and overdependence on coal threaten long-term sustainability. To address these, a balanced approach involving renewable integration, technological upgrades, financial reform, and equitable transition is essential. With consistent policy support, private sector participation, and innovative solutions, India can achieve a resilient, inclusive, and green energy future aligned with its developmental and climate goals.
Download Plutus IAS Current Affairs (Eng) 13th May 2025
Prelims Questions
Q. Which of the following initiatives is aimed at improving the operational efficiency and financial sustainability of DISCOMs in India?
1. Ujjwal DISCOM Assurance Yojana (UDAY)
2. National Electricity Plan (NEP)
3. Revamped Distribution Sector Scheme (RDSS)
4. Saubhagya Scheme
Select the correct answer using the code below:
a) 1, 2 and 3 only
b) 2, 3 and 4 only
c) 1, 3 and 4 only
d) 3 and 4 only
Answer: C
Mains Questions
Q. Discuss the key issues faced by India’s power sector, including demand-supply imbalances, financial stress of DISCOMs, and reliance on coal. Suggest a way forward to address these challenges. (250 words, 15 marks)
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