The Indian economy is in the trajectory of upward growth. The importance of electricity as a prime driver for rapid economic growth and poverty alleviation is well acknowledged. One of the biggest concerns is the gap in the demand and supply of power. The demand for electricity has always been more than the supply. The current power infrastructure in India is not capable of providing sufficient and reliable power supply. There are many roadblocks in unleashing the full potential of India’s power sector. Power is scarce. Millions of countrymen have zero access to electricity. For many more, their electricity is unreliable, with blackouts forcing them to turn to expensive self-generation, suffer business losses, make do with inferior lighting from kerosene or spend hours in darkness. India is racing to accelerate growth for colossal achievement of 24 x 7 reliable and quality power for all its citizens which means much more than merely an act of infrastructure development. It encompasses to project average per day consumption of rural-urban households, commercial, industrial, agricultural or for any other category. The first rudiment is to make the initial connection and price affordable and also to ensure benchmark operational efficiency for reliable and quality power supply. For financial sustainability in the sector non-price incentives/disincentives are essentially required.

Government support

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)

In April 2005 Government of India (GoI) launched Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) providing budgetary support to distribution companies (DISCOMS) for electrification of unelectrified villages and for providing free electricity connections to BPL households and also extending Decentralised Distributed Generation (DDG) to grid connected areas to supplement the availability of power. 90% grant was provided by GoI and 10% loan by the Rural Electrification Corporation (REC) the nodal agency for the programme. The object of scheme was for attaining the National Common Minimum Programme (NCMP) goal of providing access to electricity to all households in the country in five years.

Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

On 3-12-2014 President of India conveyed for implementation of Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for the rural areas with the following components:

(i) Separation of agriculture and non-agriculture feeders facilitating judicious rostering of supply to agricultural and non-agricultural consumers in the rural areas.

(ii) Strengthening and augmentation of sub-transmission and distribution (ST&D) infrastructure in rural areas, including metering at distribution transformers, feeders and consumers end.

(iii) Rural electrification, as per approval of Cabinet Committee on Economic Affairs (CCEA) for comple-tion of the targets laid down under RGGVY for 12th and 13th Plans by subsuming RGGVY in DDUGJY and carrying forward the approved outlay for RGGVY to DDUGJY.

The Ministry of Power (MoP) has sanctioned projects worth INR 69,475 crores under this scheme.

Integrated Power Development Scheme (IPDS)

On 3-12-2014, floated flagship Integrated Power Development Scheme (IPDS) with the following components:

(i) strengthening of sub-transmission and distribution networks in the urban areas;

(ii) metering of distribution transformers/feeders/consumers in the urban areas;

(iii) IT enablement of distribution sector and strengthening of distribution network as per CCEA approval dated 21-6-2013 for completion of targets laid down under Restructured Accelerated Power Development and Reforms Programme (R-APDRP) for 12th and 13th Plans by carrying forward the approved outlay for R-APDRP to IPDS.

The scheme was approved by GoI on 20-11-2014 with a total outlay of Rs 32,612 crores including budgetary support of Rs 25,354 crores from GoI for components (i) and (ii) while for component (iii) approvals by CCEA in June 2013 in the form of R-APDRP for 12th and 13th Plans got subsumed in this scheme and approved scheme outlay of Rs 44,011 crores including a budgetary support of Rs 22,727 crores carried over to the new scheme of IPDS. MoP has sanctioned totalling INR 26,910 crores for providing quality and reliable 24 x 7 power supply in the urban areas under this scheme.

Global sourcing

World Bank, Asian Development Bank, Japan International Cooperation Agency and Kreditanstalt für Wiederaufbau Bank provide low cost loans to Power Grid Corporation of India Ltd. (PGCIL) for purchasing equipments for highly viable open case projects with an object to decrease input cost of power transmission utilities. GoI guarantees these loans.

Power System Development Fund (PSDF)

The GoI has constituted Power System Development Fund (PSDF) under Central Electricity Regulatory Commission (Power System Development Fund) Regulations, 2010 with budgetary support to aid government-owned transmission companies (TRANSCOs) for management of networks, maintaining grid stability, grid security, strategic transmission lines, etc. The regional power committees, generating companies, transmission licensees, distribution licensees, load dispatch centers, power exchange may as per their case furnish necessary details of the projects to the nodal agency the National Load Dispatch Center (NLDC) for implementation of schemes. PSDF Regulations, 2014 have also been notified by CERC on 9-6-2014.

North-Eastern Region Power System Improvement Project

On 28-11-2016, GoI, Power Grid and the six north-eastern States, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura and World Bank signed a US $470 million loan agreement to support these six States to augment their transmission and distribution (T&D) networks and strengthen the capacity of the State level power utilities/departments in extending last mile electricity connections to households. The total project cost is US $952.20 and closing date is 31-3-2023.

Power Transmission Scheme for Arunachal Pradesh and Sikkim

The intra-State T&D systems in the north-eastern States have remained very weak; the Central Electricity Authority (CEA) developed the Comprehensive Scheme for Strengthening of Transmission and Distribution Systems (CSST&DS) for the North-East Region (NER) in consultation with the PGCIL and State Governments concerned. On 15-9-2014 the CCEA approved the CSST&DS in Arunachal Pradesh and Sikkim at an estimated cost of Rs 4754.42 crores. The scheme is to be taken up under a new Central sector plan scheme of MoP to line up with various programmes of investments to achieve the objectives of the 24 x 7 power for all programme.

State Energy Conservation Fund (SECF)

Section 16 of the Energy Conservation Act, 2001 mandates the States to constitute a fund for the purpose of promotion of efficient use of energy and its conservation within the State. The fund is meant to be applied for meeting the expenses incurred for implementing the provisions of the Act. Bureau of Energy Efficiency (BEE) has been set up as the statutory body on 1-3-2002 at the Central level to facilitate the implementation of the energy conservation. Energy Conservation Act, 2001 provides regulatory mandate for standards and labelling of equipment and appliances, energy conservation building codes for commercial buildings, and energy consumption norms for energy intensive industries. In addition it enjoins the GoI and BEE to take steps to facilitate and promote energy efficiency. The Act also directs States to designate agencies for the promotion of energy efficiency in the State and implementation of the schemes. BEE periodically mandates regulatory standards, and formulates promotional schemes, which encourage the use of efficient lighting, heating, ventilation, air conditioning (HVAC), and electric motor based appliances in the residential and commercial establishments across the country. The main policy driver, the National Manufacturing Policy coupled with National Mission for Enhanced Energy Efficiency (NMEEE), has introduced the Perform, Achieve and Trade (PAT) scheme for energy savings. GoI during the 11th Plan approved an outlay of Rs 66 crores with a budget outlay of Rs 50 crores. Several States have constituted SECF are providing matching contribution.

Training, research and development

Electricity Act, 2003 provides that the CEA shall perform such functions and duties as the Central Government may prescribe or direct, inter alia, to promote measures for advancing the skill of persons engaged in the electricity industry and promote research in matters affecting the generation, transmission, distribution and training of electricity. A National Training Policy (NTP) for the power sector has been formulated. The policy emphasises the idea that money spent on training is an investment and not expenditure. Research and development (R&D) is a priority focus area in the power sector with a vision for providing affordable quality power to each strata of the society. NTPC Energy Technologies Research Alliance (NETRA) is envisioned as state-of-the-art centre for research, technology development and scientific services in the domain of electric power to enable seamless workflow right from concept to commissioning. An Excellence Enhancement Centre for the Indian Power Sector is being set up with German assistance. For all these activities budgetary support is being provided by GoI. INR 106.20 crores subsidy was conferred in Financial Year 2017 for the purpose.

National Electricity Fund (Interest Subsidy) Scheme

On 13-12-2011, the CCEA approved setting up of the National Electricity Fund (Interest Subsidy) Scheme aggregating to Rs 8466 crores, to provide interest subsidy on loans sanctioned for projects of electricity distribution sector for a spread period of 14 years. The object is to facilitate Central Government intervention, and catalyst for revamping and restructuring the State sector distribution scheme. The implementation of the scheme would result in reduction of AT&C losses, reduction of gap between average cost of supply and average revenue on subsidy received basis, improving return on equity and issue of notification of multiyear tariff along with investment in distribution sector. The scheme can extend up to 2026-2027 for the projects sanctioned during 2012 to 2014. The end recipients’ of subsidy are DISCOMS.

National Smart Grid Mission (NSGM)

A smart grid vision and roadmap for India was approved by MoP in August 2013 which also envisaged the launch of a National Smart Grid Mission (NSGM) having its own resources, authority, functional and financial autonomy to plan and monitor implementation of the policies and programmes prescribed in the roadmap. The total estimated cost for all the projects and NSGM activities is Rs 980 crores including a budgetary sup-port of Rs 338 crores to develop smart grids in smart cities, microgrids and consumer engagement.

Green energy corridor

The Asian Development Bank (ADB) is working with India to build new electricity transmission facilities, which will allow power to be transferred from fast growing renewable energy-rich areas to other parts of the country. The project is funding high voltage lines, a substation, and other infrastructure to increase connectivity between the western and southern region power grids. On 23-2-2017 the loan agreement is signed between PGCIL and ADB. On 22-5-2017, India conducted the groundbreaking ceremony for its first green energy corridor project with an ultra high voltage direct current (UHVDC) link over 1800 km with the aim to bring power to 80 million people. The system aims to connect Raigarh in Central India to Pugalur in the southern State of Tamil Nadu. This mega project is worth over Rs 4350 crores and is a great example of the Make in India initiative where design, engineering, manufacturing of major components and project execution is done locally.

Ujwal DISCOM Assurance Yojana (UDAY)

On 20-11-2015, a scheme for financial turnaround of DISCOMs has been approved by GoI known as Ujwal DISCOM Assurance Yojana (UDAY) with an object to improve the operational and financial efficiency by compulsory smart metering, upgradation of transformers, meters, etc. to reduce theft and improve transmission and billing process. Reducing cost of power through increased supply of cheaper domestic coal, coal linkage rationalisation and coal swaps from inefficient to efficient plants, faster completion of transmission lines and enforcing financial discipline on DISCOMs through alignment with State finances.

Direct tax incentives for the power sector in India

The Income Tax Act, 1961 provides special incentives for the industries engaged in generation, distribution and transmission of power in India. The Indian power sector is regulated and has been the greatest beneficiary of the various tax incentives. Direct taxes foregone to the power companies alone are estimated to be 700,000 million during the fiscal year 2006-2007 to 2014-2015. The power companies in India have enjoyed profit-linked tax holidays (Section 80-IA), accelerated depreciation (Section 32), easy accessibility of external commercial borrowings and a low withholding tax of 5 per cent on overseas borrowing.

Indirect tax concessions and exemptions

The power industry had enjoyed a multitude of tax concessions and exemptions. Through minimising indirect taxes, the industry has been able to keep the cost of electricity down, and thereby ensuring reach to all segments of Indian society. The 101st Constitution Amendment paves the path for the Government to recon-struct the present indirect tax law regime into a single tax structure through Central Goods and Services Tax Act, 2017 (GST). The GST law would attempt to subsume a variety of indirect taxation laws on goods and services that form part of a transaction chain commencing from the import, manufacture or production of goods and terminating at final consumption. Electricity, as a commodity, is excluded from the ambit of GST, even then the power industry will have to face severe complications, both on a procedural aspect effecting cost. In a significant widening of the tax base of the GST the Central and State Governments are discussing for bringing electricity under the ambit of the GST.


Year 2017 was an important year, when Government unveiled Rs 16,320 crores Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) on September 25, to provide energy access to all by last mile connectivity and electricity connections to all remaining unelectrified households in rural as well as urban areas by March 2019. However, the MoPs internal target to achieve universal electrification under this scheme is December 2018. GoI has announced that all States will be legally obliged to provide 24 x 7 power for all by March 2019 and shall remain committed to 100 per cent metering of electricity supply with 90 per cent prepaid meters and Direct Benefit Transfer (DBT) of subsidies for electricity consumers. For any load shedding, except in cases of technical issues or any natural calamity, there will be penalties. Further, States have agreed to reduce distribution losses to 15 per cent and cross-subsidies to no more than 20 per cent (the difference between highest and lowest tariff) by January 2019. For any losses above 15 per cent, the consumers will not be liable to pay. India’s power sector has indeed taken rapid strides and the process continues unabated for sustainable electricity for all.


*Harsha Rajwanshi, Assistant Professor of Law, Gujarat National Law University

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