Power sector opportunities - the strategic implications of size

Abstract

The power sector is one of the most important sectors that determine the growth on a country’s economy. The power sector encompasses the various types of power plants, the manufacturers of these equipments and the transmission and distribution agencies. The end consumer is usually a household or an industrial unit. India started producing electric power based on hydroelectric technology in 1880s. The commercialization and distribution of electricity started in 1889 in Calcutta. The first Act with legal provisions and regulations for the development of the sector was passed in 1910. Post independence all power related activities were taken up as government matters. The Electricity (Supply) act of 1948 gave birth to state electricity boards which were responsible for generation, transmission and distribution in their respective states. Most of the private players were bought out by state electricity boards. The Power sector was placed in the concurrent list which meant that decisions regarding the same were taken by both the state and the centre. The Centre took care of the generation part while transmission and distribution was the responsibility of the state. The Central Electricity Authority is currently the body responsible for power planning at the national level. During the 1974-79 period (5th plan), the Government of India decided to undertake large investments to meet the growing demand for power in the country. Consequently, the National thermal Power Corporation (NTPC) and National Hydroelectric Power Corporation (NHPC) were set up in 1975. In 1976 the North-Eastern Electric Power Corporation (NEEPCO) was set up to implement the regional power projects in the North-East. 1986 saw the formation of the Power Finance Corporation (PFC), a Financial Institution (FI) dedicated to Power Sector financing. The National Power Transmission Corporation (NPTC) was set up in 1989, which was later renamed as the POWER GRID in 1992. With the aim of developing a commercial market for power trading in the country, the Power trading corporation (PTC) was set up in 1999. From 1947 to 2005 the installed generation capacity in the country has increased from a mere 1,362MW to about 120,000MW. India has become sixth largest producer and consumer of electricity in the world equaling the capacities of UK and France combined. Only USA, China, Japan and Russia rank ahead of India the power generated in India is mostly thermal power (about 75%). However, the per capita consumption of electricity is only 606 Kwh (2004-05) which is very low compared to the world average of 2600 MW. The power sector has witnessed a flurry of activity after the new Electricity Act was passed in 2003 and the vision of power for all by 2012 was set by the government. The government plans to eliminate the shortage in the power sector, build a national power grid, cut down the AT&C losses, rationalize tariffs and enable full-fledged open access.