India's power sector to face Rs1.62 lakh crore by 2017 annual loss sans reforms: WB
25 June 2014
India's power sector faces annual losses of $27 billion (over Rs1.62 lakh crore) by 2017 unless sweeping reforms are implemented to tackle inefficient subsidies, theft of power (written off as transmission & distribution losses) and political meddling in utility companies, the World Bank said on Tuesday.
The World Bank estimates that 15,000 hospitals and 123,000 schools could have been developed in 2011 alone if the states had not been required to pump money into utilities to keep them going.
Prime Minister Narendra Modi has pledged to bring electricity to the 300 million Indians who still lack power and improve the reliability of supplies, one of the biggest complaints of companies doing business in the country.
Gujarat, the state he governed for a long time before becoming PM, boasts the best power availability among all states.
But again this summer, blackouts continue to occur regularly in large swathes of northern and eastern India, with a rise in temperatures triggering a jump in demand that suppliers and an antiquated transmission system failed to meet.
Power demand in tropical India peaks in the summer, unlike in temperate countries where the situation is reversed, with energy demand peaking in winter.
Launching its report on the sector, the World Bank said that despite the gains made in the past decade, when 280 million Indians gained access to electricity, India would struggle to make further progress unless it freed its utilities from state control.
The largely state-owned power producers should be able to raise tariffs in line with costs, receive more compensation for the subsidies they provide to rural users, and improve their accountability to regulators and consumers, the World Bank said.
"Two decades after the initiation of reforms, an inefficient, loss-making distribution segment and inadequate and unreliable power supply are major constraints to India's aspirations for growth," said Onno Ruhl, World Bank country director for India.
"Revitalising the power sector by improving the performance of distribution utilities, and ensuring that players in the sector are subjected to financial discipline is the need of the hour," he added.