Electricity is considered key driver for targeted 8 to 10% economic growth of India. As per CENSUS – 2001, 45% of Indian households do not have access to electricity.
56% of rural households do not have access to electricity. Task - would require massive addition to:

•	Generation capacity.
•	Transmission system
•	Distribution network.

The National Common Minimum Programme of the new Government commits to pay special attention to augmenting and modernizing rural infrastructure. Household Electrification has to be completed in 5 years.  Accordingly, the programmes of the Government of India revolve around the following:-

•	Access to electricity – To be available for all households in the next 5 years.
•	Availability of power on demand to be fully met by 2012.
•	Energy shortage and peaking shortage to be overcome by providing adequate spinning reserves.
•	Reliability and quality of power to be supplied in efficient manner.
•	Per capita consumption of electricity to rise to over 1000 KWH in next 10 years (from present level of 580 KWH).
•	Electricity Sector to achieve financial turn around and commercial viability.

Consumers interests to be accorded top priority. 

Electricity Act-2003 passed by Indian Parliament and notified in June 2003, is a historic legislation initiative:
Objective: Competition, Protection of Consumers interests & Power for all Areas:

•	Creates liberal framework for power developments.
•	Creates competitive environment.
•	Facilitates private investment.
•	Delicences generation.
•	Rural Areas: Stand-alone generation and distribution delicenced.
•	Multiple licensing in Distribution.
•	Stringent provisions for controlling theft of electricity.
•	Obliges States to restructure Electricity Boards.
•	Mandates creation of Regulatory Commissions.
•	Tariff to be determined by Regulatory Commission.
•	Open access in Transmission from outset.
•	Open access in Distribution to be allowed by State Electricity Regularity Commissions (SERCs) in phases.
•	Obliges States to restructure Electricity Boards.
•	Gradual phasing out of cross subsidies.
•	Trading a distinct licensed activity to promote development of electricity market.

Electricity Act – 2003 provides for National Electricity Plan
The plan would be for short-term framework of 5 years while also projecting a 15-year perspective. 
Electricity plan to be formulated by Central Electricity Authority would, inter alia, include the following:-
Short-term and long-term demand forecast for various consumer segments and different regions;
Suggested areas/locations for capacity additions keeping in view optimal mix of fuels, the economics of generation and transmission, losses in the system, load centre requirements, grid stability, security of supply, quality of power including voltage profile etc. and environmental considerations including rehabilitation and resettlement; Integration of such possible locations with transmission system and development of national grid including type of transmission systems and requirement of redundancies; and Different technologies available and assessing their suitability for deployment for efficient generation, transmission and distribution.
Action plans of the Ministry of Power cover the following:-

•	Rural Electrification
•	Generation
•	Transmission
•	Distribution
•	Technology Development and Research and Development(R&D)
•	Energy Conservation
•	Environmental Issues
•	Cogeneration & Renewable and Non-Conventional Energy Sources

Rural Electrification
Reliable rural electrification has the highest priority.  Rural electricity supply infrastructure would involve:-

Rural Electrification Distribution Backbone (REDB) with at least one 33/11 kv (or 66/11 kv) substation in every Block and more if required as per load, networked and connected appropriately to state transmission system.

Emanating from REDB would be supply feeders and one distribution transformer at least in every village.

Household Electrification from distribution transformer to connect every household on demand.

Wherever above is not feasible (cost effective and optimal solution to provide grid connectivity,) decentralized distributed generation facilities together with local distribution network would be provided so that every household gets access to electricity

Development of infrastructure would also cater for requirement of agriculture & other economic activities including irrigation pump sets, small and medium industries, khadi and village industries, cold chain and social services like health and education

The role of Rural Electrification Corporation of India, a Govt. of India Enterprise, has been suitably enlarged to ensure speedy implementation of rural electrification projects.  It is relevant to mention that distribution of electricity including rural electrification is under the jurisdiction of the Provincial Governments.

State Governments are considering various options for necessary institutional framework to be put in place not only to ensure creation of rural electrification infrastructure but also to operate and maintain supply system for securing reliable power supply to consumers. Responsibility of operation & maintenance and collection of bills could be done by utilities or by Panchayats, local authorities, NGOs and other franchisees.  The Electricity Act-2003 has provided for multiple options.

Capacity Addition Programmes
During the period 2002-12, the target is to add 100,000 MW additional capacity.

The Government of India has taken up several reform measures to create a favourable environment for addition of new generating capacity in the country. The Electricity Act 2003 has provided a highly liberal framework for generation. There is no requirement of licensing for generation. The requirement of techno-economic clearance of Central Electricity Authority (CEA) for thermal generation project is no longer there. For hydroelectric generation also, the limit of capital expenditure, above which concurrence of CEA is required, is likely to be raised suitably. Captive generation has been freed from all controls.
 
In order to fully meet both energy and peak demand by 2012, there is a need to create adequate reserve capacity margin. In addition to enhancing the overall availability of installed capacity to 85%, attempt will be made to create reasonable spinning reserve at national level, to ensure grid security and quality and reliability of power supply.

Hydro Generation
Hydroelectric potential in India is of the order of 1,50,000 MW.  Hydroelectricity is a clean and renewable source of energy.  Maximum emphasis would be laid on the full development of the feasible hydro potential in the country. 50,000 MW hydro initiatives already launched is being vigorously pursued.   This involves 162 projects to be developed during 2007-17.

Hydel projects call for comparatively larger capital investment. Therefore, debt financing of longer tenure would need to be made available for hydro projects.  Central Government is providing equity funds to Central Public Sector Undertakings (CPSUs) for hydro-projects. 

State Governments have been advised to review procedures for land acquisition, and other approvals/clearances for speedy implementation of projects.

Thermal Generation
India is endowed with huge coal reserves – more than 200 Billion tonnes. Even with full development of the feasible hydro potential in the country, coal would necessarily continue to remain the major fuel for meeting future electricity demand.

Imported coal based thermal power stations, particularly at coastal locations, would be encouraged based on their economic viability and with use of low ash content coal, which would help in reducing the problem of fly ash emissions.

Significant Lignite resources in the country are located in Tamil Nadu, Gujarat and Rajasthan and these would be increasingly utilized for power generation.  Lignite mining technology is being improved to reduce costs.

Use of gas as a fuel for power generation would depend upon its availability at reasonable prices. Natural gas is being used in Gas Turbine /Combined Cycle Gas Turbine (GT/CCGT) stations, which currently accounts for about 10 % of total capacity. Power sector consumes about 40% of the total gas in the country. New power generation capacity could come up based on indigenous gas findings, which can emerge as a major source of power generation if prices are reasonable. Gas reserves discoveries made so for indicate that more than 25,000 MW of capacity could be developed.  A national gas grid covering various parts of the country could facilitate development of such capacities.

Imported LNG based power plants are also a potential source of electricity and the pace of their development would depend on their commercial viability. The existing power plants using liquid fuels should shift to use of Natural Gas/LNG at the earliest to reduce the cost of generation.
Liquid fuels, which are costly, can be used in generating stations for emergency purposes and for other specific needs. Such plants can also meet the requirement of decentralized distributed generation for remote locations.

For thermal power, economics of generation and supply of electricity should be the basis for choice of fuel from among the options available. It would be economical for new generating stations to be located either near the fuel sources e.g. pithead locations or load centres.

Nuclear Power
Nuclear power is considered a reliable source of energy to meet base load demand. Nuclear power plants are being set up at locations away from coalmines. Share of nuclear power, which is about 2.2% in the overall capacity profile, will be increased significantly. Economics of generation will be, among others, important considerations.  Public sector investments are being stepped up. Department of Atomic Energy is also examining the option of private sector partnership to see that not only targets are achieved but exceeded.

Renovation and Modernization   (R&M)
Optimum utilization of existing capacities is essential. One of the major achievements of the power sector has been a significant increase in availability and plant load factor of thermal power stations specially over the last few years. The overall national average Plant Load Factor has improved from 55% to 73% in last 20 years.

Renovation and modernization, with financial support of Government of India, for achieving higher efficiency levels is being pursued vigorously and all existing generation capacity is targeted to be brought to acceptable level of performance.

For projects operating below acceptable levels, R&M is to be undertaken as per well-defined plans featuring necessary cost-benefit analysis.  If economic operation does not appear feasible through R&M, and there may be no alternative to closure of such plants the same could be considered as the last resort.

In cases of plants with poor O&M record and persisting operational problems, alternative strategies including change of management is some cases has been considered so as to improve the efficiency to acceptable levels of these power stations. Such an approach is being further explored.

Captive Generation
The Electricity Act, 2003 is very liberal with respect to setting up of captive power plant.  This is not only for securing reliable, quality and cost effective power for the industry but also to facilitate creation of employment opportunities through speedy and efficient growth of industry.

Captive power plants to be set up in group as allowed in the Act is primarily aimed at enabling such small and medium industries as may not be in a position to set up plant of optimal size in a cost effective manner.  An efficient expansion of small and medium industries across the country would lead to creation of enormous employment opportunities.

The existing large installed capacity of captive generation, which is of the order of 25,000 MW, offers a sizeable potential capacity, which could be well harnessed for meeting requirements.  Long term arrangements for supply of energy particularly during peak hours could also be useful in the mutual interest of the utilities and the captive generating stations. The captive generators are being encouraged to supply their surplus power to the grid.

Transmission
At present India has over 100,000 ckt km of Extra High Voltage (220KV,400 KV & above) of Transmission System.  Adequate and timely investments and also efficient and coordinated action to develop a strong and integrated power system for the country are being facilitated.

Keeping in view the additional capacities planned in generation and also for development of power market, there is need for adequately augmenting transmission capacity. While planning new generation capacities, requirement of associated transmission capacity are worked out simultaneously in order to avoid mismatch between generation capacity and transmission facilities.

The Central Government is contributing significantly in the continued development of the National Grid for providing adequate infrastructure for inter-state transmission of power and to ensure that under-utilised generation capacity is facilitated to generate electricity for its transmission from surplus regions to deficit regions of the 100,000 ckt km of EHV Transmission lines the Central Governments undertaking Power Grid owns and maintains about 50,000 ckt km.  Toward creation of National Grid involving inter-regional transmission of electricity, Power Grid has already created a capacity of 8,500 MW, which will rise to 23000 MW by 2007 and to over 30,000 MW by 2012.

The Central Transmission Utility (CTU) viz Power Grid and State Transmission Utility (STU) have the key responsibility of network planning and development based on the National Electricity Plan.  The CTU is responsible for the national and regional transmission system planning and development.  The STU is responsible for planning and development of the intra-state transmission system. The CTU has to coordinate with the STUs for an integrated development of the system so that constraints and congestions are avoided.

Open access in transmission would usher in competition amongst the generating companies leading, in turn, to availability of cheaper power. Therefore, a facilitative framework, as provided in the Act, considered necessary for encouraging open access. The Act mandates non-discriminatory open access in transmission from the very beginning.

Introduction of open access and development of power market and also for secure and reliable operation of the grid would require adequate margins in transmission system. The transmission capacity has to be planned and built to cater to both the redundancy levels and margins keeping in view international standards and practices.

A well-planned and strong transmission system will ensure not only optimal utilization of transmission capacities but also of generation facilities and would ultimately deliver cheaper power.  

Distribution
Distribution is the most important element of the electricity supply chain. Considering the deficiency in the distribution sector including in the rural electrification, the real challenge in power sector in India lies in how efficiently the distribution sector could be managed.  In most parts of the country, Distribution infrastructure suffers from inadequate transformation capacities, lack of redundancies, high technical losses, poor consumer services, absence of I.T. to address the issues of reliability and consumer concerns.  The Government of India has launched two major schemes to address the problems of Distribution:  Accelerated Power Development & Reforms Programme (APDRP) for towns and Accelerated Rural Electrification Programme (AREP) for rural areas.

The Act provides for a robust regulatory framework for distribution licensees to safeguard consumer interests. It also creates a competitive framework for the distribution business, offering options to consumers, through the concepts of open access and multiple licensees in the same area of supply.
For achieving effi
ciency gains proper restructuring of distribution utilities is essential. A number of states have embarked upon such an approach, many of them have already restructured.  Adequate transition financing support appears to be necessary for these utilities. For ensuring financial viability and sustainability, State Governments are considering to restructure the liabilities of the State Electricity Boards to ensure that the successor companies are not burdened with past liabilities.
 
Reasonable incentives and suitable transitional model with predetermined improvements in efficiency parameters in distribution business would be necessary for facilitating funding and attracting investments in distribution. Performance based regulation through Multi-Year Tariff (MYT) framework, which has been provided in the Act, is an important incentive to minimize risks for utilities and consumers, promote efficiency and rapid reduction of system losses. It would also bring greater predictability to consumer tariffs by restricting tariff adjustments to known indicators.  Private sector participation in distribution needs to be encouraged for achieving the requisite reduction in Transmission and Distribution losses and improving the quality of service to the consumers.

It is important for open access in distribution that the distribution network is adequate. The State Regulatory Commissions are encouraging upgradation and augmentation of the network by the Distribution Licensees.

The Act provides for competition in distribution through the concept of multiple licensees in the same area of supply through their independent distribution systems. State Governments have full flexibility in carving out distribution zones while restructuring the utilities.

Energy Conservation
There is a significant potential of the order of over 20% savings through energy efficiency and demand side management measures. In order to minimize the overall requirement, energy conservation and demand side management (DSM) is being accorded high priority. The Energy Conservation Act has been enacted and the Bureau of Energy Efficiency has been set up.

The potential number of installations where demand side management and energy conservation measures are to be carried out is very large. Bureau of Energy Efficiency (BEE) has initiated action in this regard. BEE would also make available the estimated conservation and DSM potential, its staged implementation along with cost estimates for consideration in the planning process for National Electricity Plan.

Periodic energy audits have been made compulsory for power intensive industries under the Energy Conservation Act. Other industries are also being encouraged to adopt energy audits and energy conservation measures. Energy conservation measures may be adopted in all Government buildings for which saving potential has been estimated to be about 30% energy.

In the field of energy conservation initial approach would be voluntary and self-regulating with emphasis on labelling of appliances. Gradually as awareness increases, a more regulatory approach of setting standards and consumption norms would be followed.

In the agriculture sector, the pump sets of high quality and the water delivery system engineered for high efficiency would be promoted.  In the industrial sector, energy efficient technologies should be used and energy audits carried out to indicate scope for energy conservation measures.  Motors and drive system are the major source of high consumption in Agricultural and Industrial Sector. Energy efficient lighting technologies should also be adopted in industries, commercial and domestic establishments.  These are being encouraged.

In order to reduce the requirements for capacity additions, the difference between electrical power demand during peak periods and off-peak periods would have to be reduced.  Suitable load management techniques are being adopted for this purpose.  Differential tariff structure for peak and off peak supply and metering arrangements (Time of Day metering) should be conducive to load management objectives. Many Regulatory Commissions have already started actions on these lines.
For effective implementation of energy conservation measures, role of Energy Service Companies would be enlarged. Steps would be taken to encourage and incentitise emergence of such companies.

A national campaign for bringing about awareness about energy conservation has been planned to achieve efficient consumption of electricity.

Cogeneration and renewable and non-conventional energy sources
Renewable and non-conventional sources of energy being the most environment friendly there is an urgent need to promote generation of electricity based on such sources of energy.   Ministry of Power has planned for tapping the huge hydroelectric potentials in the country.  For this purpose, efforts need to be made to reduce the capital cost of projects based on non-conventional and renewable sources of energy.  Cost of energy can be reduced by promoting competition within such projects. At the same time, adequate promotional measures would also have to be taken for development of technologies and a sustained growth of these sources.  Ministry of Non-Convention Energy Sources have plans to promote large capacities through these sources.

The Electricity Act 2003 provides that co-generation and generation of electricity from renewable sources would be promoted by the SERCs by providing suitable measures for connectivity with grid and sale of electricity to any person and also by specifying, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. 

It is well established that industries in which both process heat and electricity are needed are well suited for cogeneration of electricity. A significant potential for cogeneration exists in the country, particularly in the sugar industry. A few Regulatory Commissions have already come out with their formulations to promote arrangements between the co-generator and the concerned distribution licensee for purchase of power from such plants. Cogeneration system is being encouraged in a few states in the overall interest of energy efficiency and also grid stability.

Financing for power sector expansion programmes
As mentioned, the target is to complete household electrification by 2009 and power for all on demand by 2012, it is estimated that to expand the industry by adding 100,000 MW of generating capacity with commensurate expansion of transmission, sub-transmission, distribution and rural electrification, the investments required would be of the order of Rs.900,000 crore ($ 200 billion).  While the Public Sector investments both at the Central Government level and at the level of State Governments are being stepped up, the task is so gigantic that Private Sector investment will be essential.  As per Govt. of India policy, Private Sector investments are allowed in all the segments of the industry, generation, transmission and distribution.  As a matter of fact 100% FDI is also allowed in power sector.  The Electricity Act – 2003 has provided a very conducive framework for investments both by Public Sector and Private Sector Organizations.