Power Sector in India: Evolution, Growth, and Current Scenario

1. Initial Days and Developments till Independence

The power sector in India has undergone a significant transformation from its nascent stages to its current state. The inception of electricity in India dates back to the late 19th century. The first demonstration of electric light in India was conducted by P.W. Fleury & Co. in Calcutta (now Kolkata) in 1879. Following this, the first electric street light was installed in Bangalore in 1905.

The early development of the power sector was primarily driven by private enterprises. The first power station, a hydroelectric plant, was established in Darjeeling in 1897, followed by the Sivasamudram Hydroelectric Power Plant in Karnataka in 1902. By the time India gained independence in 1947, the installed power generation capacity was a mere 1,362 MW, predominantly consisting of hydroelectric and thermal power stations.

2. Evolution and Growth till 1970s

Post-independence, the Indian government recognized the importance of electricity for economic development and initiated several measures to expand the power sector. The Electricity (Supply) Act, 1948, led to the establishment of the Central Electricity Authority (CEA) and State Electricity Boards (SEBs), which were responsible for the generation, transmission, and distribution of electricity.

The focus during the 1950s and 1960s was on expanding the grid infrastructure and increasing the generation capacity. The government invested in building large hydroelectric projects like Bhakra Nangal, Hirakud, and Damodar Valley Corporation. The introduction of Five-Year Plans provided a structured approach to developing the power sector, with significant investments in both hydro and thermal power projects.

By the 1970s, the installed capacity had grown to around 16,000 MW. However, the sector faced challenges like inadequate investment, operational inefficiencies, and a lack of technical expertise, which hindered its growth.

3. Rapid Growth from 1970s till Now

The 1970s marked a period of rapid growth and diversification in the power sector. The discovery of large coal reserves in India led to a shift towards thermal power generation. The government established National Thermal Power Corporation (NTPC) in 1975 and National Hydroelectric Power Corporation (NHPC) in 1975 to spearhead the development of thermal and hydroelectric power projects, respectively.

The 1980s and 1990s saw further expansion with the introduction of new policies and reforms. The Electricity Supply Act was amended to encourage private sector participation. The establishment of Power Grid Corporation of India Limited (PGCIL) in 1989 facilitated the development of a national grid and improved the transmission network.

The liberalization of the Indian economy in the 1990s brought significant changes. The Electricity Act of 2003 was a landmark legislation that introduced comprehensive reforms, promoting competition, efficiency, and investment in the power sector. It unbundled the SEBs into separate entities for generation, transmission, and distribution, allowing private players to enter the market.

The last two decades have witnessed exponential growth in generation capacity, with a mix of thermal, hydro, nuclear, and renewable energy sources. The installed capacity as of March 2023 was over 400 GW, with renewable energy contributing around 25% to the mix.

4. Current Scenario – Power Generation, Transmission, and Distribution System

Power Generation

India’s power generation capacity is diverse, comprising thermal (coal, gas, and oil), hydro, nuclear, and renewable energy sources (solar, wind, biomass, and small hydro). Coal-based thermal power plants dominate, contributing around 55% of the total installed capacity. However, the share of renewable energy has been growing rapidly, driven by government policies and global climate commitments.

Despite the growth in installed capacity, India’s per capita power consumption remains low compared to global standards. As of 2022, it stood at around 1,200 kWh, significantly below the global average of approximately 3,200 kWh. This low per capita consumption highlights the need for further expansion and improvement in the power sector to meet the growing demand and support economic development.

Transmission System

The transmission system in India is managed by PGCIL, which operates the National Grid. The grid is divided into five regional grids – Northern, Eastern, Western, Southern, and North-Eastern – which are interconnected to ensure reliable power supply across the country. The development of high voltage transmission lines and sub-stations has improved the efficiency and reliability of power transmission.

Despite these advancements, the system suffers from high transmission and distribution (T&D) losses, averaging around 20%, which is significantly higher than the global average of around 8-10%. These losses are a major concern, as they impact the overall efficiency and financial viability of the power sector.

Distribution System

The distribution system remains the most critical and challenging segment of the power sector. It is primarily managed by state-run distribution companies (DISCOMs). Despite improvements, issues like high transmission and distribution losses, financial instability of DISCOMs, and inadequate infrastructure persist. Efforts like the Ujwal DISCOM Assurance Yojana (UDAY) have been introduced to address these challenges.

The financial health of DISCOMs continues to be a significant concern. Many DISCOMs are financially stressed due to high debt levels, subsidy burdens, and operational inefficiencies. This growing financial sickness hampers their ability to invest in infrastructure upgrades and maintain reliable service.

5. Power Market Now – Its Shape, Size, and Issues

The Indian power market has evolved significantly, with the introduction of power exchanges like the Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) enabling competitive pricing and trading of electricity. The market size is substantial, catering to over 1.3 billion people, with a peak demand of around 240 GW.

However, the sector faces several issues:

  • Financial Health of DISCOMs: Many DISCOMs are financially stressed due to high debt levels, subsidy burdens, and operational inefficiencies.
  • Transmission and Distribution Losses: High T&D losses, averaging around 20%, impact the efficiency and financial viability of the sector.
  • Regulatory Challenges: The regulatory framework needs to be more robust to address issues like tariff setting, cross-subsidization, and ensuring fair competition.
  • Infrastructure and Investment: There is a need for significant investment in modernizing the grid infrastructure and expanding renewable energy capacity.
  • Renewable Energy Integration: Integrating a high share of renewable energy into the grid presents challenges related to intermittency and grid stability.
  • Continuing Government Control and Regulatory Capture: The power sector still experiences significant government control and regulatory capture, which can stifle competition and innovation.
  • Shy Private Investments: Private investors remain cautious due to regulatory uncertainties, financial instability of DISCOMs, and risks associated with long-term investments in the sector.

Globally Accepted Efficiency Parameters

To evaluate the performance of various parts of the power system, several globally accepted efficiency parameters are used:

Generation Efficiency

  • Heat Rate: A measure of the efficiency of a thermal power plant, representing the amount of fuel energy required to generate one unit of electricity.
  • Plant Load Factor (PLF): The ratio of the actual output of a power plant to its maximum possible output over a period of time.
  • Capacity Utilization Factor (CUF): Used for renewable energy plants, representing the actual output as a percentage of the maximum possible output.

Transmission Efficiency

  • Transmission Losses: The percentage of power lost during transmission from power plants to distribution networks. Global best practices aim for transmission losses below 3%.
  • Grid Availability: The percentage of time the transmission system is available for use. High grid availability is crucial for reliable power supply.

Distribution Efficiency

  • Distribution Losses: The percentage of power lost during distribution to end consumers. Efficient systems target losses below 7%.
  • Collection Efficiency: The ratio of revenue collected to the total revenue billed. High collection efficiency is essential for the financial health of distribution companies.
  • System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI): Measures of the reliability of the distribution network, indicating the average duration and frequency of power interruptions experienced by consumers.

Pain Points for End Consumers

While the power sector has made significant strides, end consumers still face several pain points:

  • Continuing Power Shortages and Blackouts: Despite the increase in installed capacity, many regions still experience power shortages and blackouts, particularly during peak demand periods.
  • High Prices for End Consumers: Electricity tariffs in some regions are high, placing a financial burden on consumers. This is exacerbated by inefficiencies and losses in the system.
  • Frequent Disruptions: Consumers frequently experience power interruptions and voltage fluctuations, impacting their daily lives and businesses.
  • Non-Responsive DISCOMs: State’s Power Distribution Companies (DISCOMs) are often perceived as non-responsive to consumer grievances, leading to dissatisfaction.
  • Non-Responsive Municipal and Government Functionaries: Inadequate support and responsiveness from municipal and government authorities further exacerbate the challenges faced by consumers.

6. Power Markets in Major Countries and Issues There

United States

The U.S. power market is highly deregulated, with significant private sector participation. It operates through regional transmission organizations (RTOs) and independent system operators (ISOs). Key issues include aging infrastructure, regulatory uncertainty, and the integration of renewable energy sources.


China has a centrally planned power sector, with significant investments in renewable energy and grid expansion. The primary issues include overcapacity, environmental concerns, and the need for market reforms to improve efficiency and competition.

European Union

The EU power market is characterized by a high degree of liberalization and integration across member states. The focus is on transitioning to renewable energy and improving grid interconnectivity. Challenges include regulatory harmonization, balancing supply and demand, and managing the intermittency of renewables.

7. Development of Global Power Grid and How India Fits in It

The concept of a global power grid envisions connecting regional grids across continents to optimize the use of renewable energy and enhance energy security. The International Solar Alliance (ISA), initiated by India, aims to promote solar energy and facilitate cross-border energy trade.

India’s strategic location and ambitious renewable energy targets position it as a key player in the development of a global power grid. Cross-border electricity trade with neighbouring countries like Nepal, Bhutan, Bangladesh, and Myanmar is already underway, and further integration with Southeast Asia and beyond is being explored.

8. Impact of Global Warming on Power Sector and Changes Required to Tackle the Same

Global warming poses significant challenges to the power sector, including:

  • Increased Demand: Higher temperatures lead to increased demand for cooling, straining the power supply.
  • Impact on Hydropower: Changes in precipitation patterns and glacier melt affect hydroelectric power generation.
  • Thermal Efficiency: Higher temperatures reduce the efficiency of thermal power plants.

To tackle these challenges, the power sector needs to:

  • Transition to Renewable Energy: Accelerate the adoption of solar, wind, and other renewable sources to reduce carbon emissions.
  • Improve Energy Efficiency: Implement energy efficiency measures across generation, transmission, and distribution systems.
  • Climate Resilient Infrastructure: Develop infrastructure that can withstand the impacts of climate change, such as extreme weather events.
  • Policy and Regulation: Strengthen policies and regulations to promote sustainability and resilience in the power sector.

9. Future Outlook

The future of the power sector in India looks promising, with several key trends and developments shaping its trajectory:

  • Renewable Energy Growth: Continued expansion of renewable energy capacity, targeting 450 GW by 2030, driven by supportive policies and technological advancements.
  • Smart Grid Development: Investment in smart grid technologies to improve efficiency, reliability, and integration of renewable energy sources.
  • Electric Mobility: Growth in electric vehicles (EVs) will increase electricity demand, necessitating the development of EV charging infrastructure.
  • Energy Storage: Advancements in energy storage technologies, such as batteries and pumped hydro storage, will play a crucial role in managing the intermittency of renewable energy.
  • Decentralized Generation: Increased adoption of decentralized generation solutions, such as rooftop solar and microgrids, will enhance energy access and reliability.
  • Policy Reforms: Ongoing policy and regulatory reforms to address challenges in the distribution sector, promote competition, and attract investment.

In conclusion, the power sector in India has come a long way from its initial stages to become a dynamic and evolving industry. Despite the challenges, the sector is poised for significant growth, driven by renewable energy, technological advancements, and policy support. The focus on sustainability, resilience, and efficiency will be critical in shaping the future of India’s power sector and its role in the global energy landscape.






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