Power
India is world's third largest producer and fourth largest consumer of electricity in the world.

Power Sector in India

Latest update: September, 2018

  • With electricity production of 1,201.543 BU in India in FY18, the country witnessed growth of around 55.72 per cent over the previous fiscal year.
  • Over FY10–FY18, electricity production in India grew at a CAGR of 5.69 per cent.
  • In March 2017, the Power Ministry has launched an application named - GARV-II, to provide real time data related to rural electrification regarding all un-electrified villages in India. A total of 17,164 villages out of 18,452 un-electrified villages in India have been electrified up to March 2018 as part of the target to electrify all villages by May 1, 2018.
Growth

Notes: FY - Indian Financial Year (April-March), BU – Billion Unit
Source: BP Statistical Review, Ministry of Power, Aranca Research;

  • India has large reserves of coal. By the end of March 2018, total installed coal capacity in India stood at 197,171.50 MW.
  • India’s proven natural gas capacity measures about 24,897.46 MW as on March 2018.
  • With a large swathe of rivers and water bodies, India has enormous potential for hydropower. As of March 2018, India has 45.29 GW of hydro power generating capacity.
  • Wind energy is the largest renewable energy source in India; projects like the Jawaharlal Nehru National Solar Mission (aims to generate 20,000 MW of solar power by 2022) are creating a positive environment among investors keen to exploit India’s potential. There are plans to set up four solar power plants of 1GW each. As of March 2018, India has 69.02 GW of renewable energy capacity.
Growth

Notes: MW - Megawatt, GW - Gigawatt
Source: Ministry of Coal, NHPC, CEA, BP Statistical Review 2015, Corporate Catalyst India, Indian Power Sector, Ministry of Power, Aranca Research

Last Updated: September, 2018

Introduction

Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.

India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.

In May 2018, India ranked 4th in the Asia Pacific region out of 25 nations on an index that measures their overall power.

Market Size

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

Total installed capacity of power stations in India stood at 344.69 Gigawatt (GW) between as of August 2018.

Investment Scenario

Between April 2000 and June 2018, the industry attracted US$ 14.18 billion in Foreign Direct Investment (FDI), accounting for 3.64 per cent of total FDI inflows in India.

Some major investments and developments in the Indian power sector are as follows:

  • In August 2018, Kohlberg Kravis Roberts & Co (KKR) acquired Ramky Enviro Engineers Limited for worth US$ 530 million.
  • In April 2018 ReNew Power made the largest M&A deal by acquiring Ostro Energy for US$ 1,668.21 million.

Government Initiatives

The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:

  • As of September 2018, a draft amendment to Electricity Act, 2003 has been introduced. It discusses separation of content & carriage, direct benefit transfer of subsidy, 24*7 Power supply is an obligation, penalisation on violation of PPA, setting up Smart Meter and Prepaid Meters along with regulations related to the same.
  • Ujwal Discoms Assurance Yojana (UDAY) was launched by the Government of India to encourage operational and financial turnaround of State-owned Power Distribution Companies (DISCOMS), with an aim to reduce Aggregate Technical & Commercial (AT&C) losses to 15 per cent by FY19.
  • As of August 2018, the Ministry of New and Renewable Energy set solar power tariff caps at Rs 2.50 (US$ 0.04) and Rs 2.68 (US$ 0.04) unit for developers using domestic and imported solar cells and modules, respectively.
  • The Government of India approved National Policy on Biofuels – 2018, the expected benefits of this policy are health benefits, cleaner environment, employment generation, reduced import dependency, boost to infrastructural investment in rural areas and additional income to farmers.

The Road Ahead

The Government of India has released its roadmap to achieve 175 GW capacity in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power. The Union Government of India is preparing a 'rent a roof' policy for supporting its target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.

Coal-based power generation capacity in India, which currently stands at 196.10*GW is expected to reach 330-441 GW by 2040##.

The 2026 forecast for India's non-hydro renewable energy capacity has been increased to 155 GW from 130 GW on the back of more than expected solar installation rates and successful wind energy auctions#.

India could become the world's first country to use LEDs for all lighting needs by 2019, thereby saving Rs 40,000 crore (US$ 6.23 billion) on an annual basis.

All the states and union territories of India are on board to fulfil the Government of India's vision of ensuring 24x7 affordable and quality power for all by March 2019, as per the Ministry of Power and New & Renewable Energy, Government of India.

The Government of India is taking a number of steps and initiatives like 10-year tax exemption for solar energy projects, etc., in order to achieve India's ambitious renewable energy targets of adding 175 GW of renewable energy, including addition of 100 GW of solar power, by the year 2022. The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW.

Exchange Rate Used: INR 1 = US$ 0.0149 as on Q1 FY19

References: Media Reports, Press Releases, Press Information Bureau (PIB), PE Roundup – August’18 report by EY

Note: # - BMI Research, ## - according to Mr Gopal Singh, CMD, Coal India Limited, ^ - includes utilities, * - as of August 2018, ^ - as of June 2018

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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