Fixing the Power Sector

The reforms debated for India's power sector - discom privatisation, tariff reform, competition and grid upgrades - and a recap of the module.

Many experts agree the power sector needs deeper reform, especially in distribution.

Reform ideas

Privatising discoms or bringing in private franchisees, as in Delhi and Odisha.
Rational tariffs closer to cost, with direct subsidies to the poor.
Choice of supplier: letting consumers pick among companies, as proposed in draft amendments.
Independent regulators that set tariffs regularly.
Grid investment for renewables.

Delhi’s experience

Delhi privatised distribution in 2002. AT&C losses fell sharply over the following years, often cited as a success, though tariffs and profits remained debated.

Political challenges

Farmers and households resist tariff increases.
Free power is a popular election promise.
Unions oppose privatisation.

Module recap

Power flows from generation to transmission to distribution.
Coal supplies most generation; renewables are booming.
Discoms lose money due to cheap tariffs, theft and unpaid subsidies.
Tariffs use slabs and cross-subsidies.
Free farm power drains groundwater.
Smart meters, exchanges, rooftop solar and storage are modernising the system.
Power cuts are costly, but reliability has improved.

The reform choice

A state government must choose: raise farm tariffs and face protests, or keep free power and fund discom losses from the budget. Most choose the latter, but the costs add up.

Thinking the power problem is about generation

Generation has grown a lot; distribution finances are the biggest weakness.

Key takeaways

Distribution is the key area needing reform.
Ideas include privatisation, rational tariffs and supplier choice.
Delhi's privatisation cut losses significantly.
Political resistance makes reform difficult.