ASIAN MEGATRENDS by RAJIV BISWAS

Author:RAJIV BISWAS
Language: eng
Format: epub
ISBN: 9781137441904
Publisher: Palgrave Macmillan
Published: 2016-03-09T16:00:00+00:00

Figure 8.1 Indian power generating capacity compared to China (gigawatts, 2015)

Source: National statistics.

With India’s power generation capacity being around 20 per cent that of China for a population of similar size, India continues to have chronic power shortages. For commercial and industrial businesses, this creates the need for additional capital expenditure to purchase alternative backup power systems that are also more costly per kilowatt hour than grid electricity.

If Indian economic growth can return to rates of between 8 and 9 per cent per year over the next five years, the minimum annual addition to power generating capacity would need to be around 40 GW per year between 2017 and 2020. This would require the addition of 120 GW between 2017 and 2020, which would be equivalent to the entire power generation capacity addition aimed for during the 12th Five Year Plan between 2012–17, for which the government is aiming to add a total of 118 GW capacity over five years. The additional power generating capacity increase planned under the 12th Five Year Plan target has been considerably increased by the BJP government since it took office, compared to the original five-year target set by the previous UPA coalition government. If indeed the Indian government meets its objective of adding a total 118 GW capacity over the 12th Five Year Plan, this would be quite an impressive outcome, since the previous 11th Five Year Plan only added 55 GW to total capacity.

The Modi government has given a high priority to accelerating power infrastructure development, and has a diversified strategy to achieve these goals. While coal will continue to play a central role in new power infrastructure, the BJP energy policy strategy also includes use of gas, nuclear power and renewable energy as key components of the overall strategy. The most dramatic shift in energy policy under the new Modi government has been a big shift towards solar energy, with the BJP having announced goals to lift solar energy generating capacity from 3 GW in 2015 to 100 GW by 2020.

Furthermore, a large share of the total population of India does not even have access to electricity yet. An estimated 300 million Indians still do not have access to electricity, and the electricity distribution system has been facing financial problems for decades, with many power utilities and distributors having accumulated losses due to government controls on electricity tariffs. A recent study by the World Bank has estimated that accumulated losses of the electricity distribution sector amount to 3 per cent of Indian GDP, with further losses expected to continue in future years unless the government reforms electricity tariffs to allow electricity generators and utilities to improve their balance sheets (Pargal and Banerjee, 2014).

The financial problems of the electricity distribution companies are a key constraint delaying the rollout of electricity connections to the remaining 300 million Indians without electricity, since these are predominantly low income households that will also be low electricity consumers. With distributors already suffering financial losses, there is little incentive

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