Reforms in the Indian Power Sector

The developments in the Indian power sector from the very beginning to the present have been analyzed and discussed in this article. It has also highlighted the reforms that laid the foundations for India’s power sector – and addresses the key points of each reform. Also, it highlights some of the challenges and the current efforts to overcome those…

The power industry has always been a key driver for industrial development, infrastructure growth and social welfare. The journey of electricity in India began with the transfer of electricity-based technologies from England to India during the colonial period, from the first flickering of the light bulb in Calcutta in 1879 to the first commercial hydroelectric power station in 1897. The motivation behind this was to leverage the resources and not to transfer the knowledge. The electricity was generated and distributed primarily by private companies in the urban areas before independence.

During the colonial period (1910-1947)

The first law that came into the picture was the Electricity Act of 1887, to control power generation and supply. This act was amended as the Indian Electricity Act 1903 (IEA 1903). Year after year different changes were made in the IEA to resolve the power demand and to make it easier for private companies to participate. During this time, electricity was not very prominent; companies gave advertisements through newspapers and ballot papers to promote energy usage. The Indian Electricity Act 1910 was a fundamental foundation for India’s electricity supply industry. It provides the opportunity for private companies to generate and supply state government-issued electricity. This move encourages utilities to generate more electricity. The benefit achieved after this act was increased in the supply of electricity to 58 times from 363MW in 1910 to 21,082MW in 1915. Damodar Valley Company (DVC) and Calcutta Electric Supply Company Ltd. (CESC) were the main corporations.

Post-independence era (1948 – present)

The progression of the power industry started with the Electricity Supply Act 1948, which established State Electricity Boards (SEBs). Such SEBs became the autonomous body responsible for expanding the country-electrification that was limited to a few cities. Central Electricity Authority (CEA) was established under this act to administer SEBs at the national level. The nation faced an energy crisis in the 1970s by indiscriminate progress. The government was searching for renewable alternatives, and in 1981 the Commission for Additional Energy Sources (CASE) was established. In renewable energy, only wind energy was first used as a cheaper alternative to diesel pump sets in India in the 1950s primarily for agriculture and irrigation purposes.

Strengthening of reforms

In 1964 our nation was split into five electricity regions to make the planning process smoother. These regional grids were implemented to meet common demands and efficient grid operations, namely Southern, Northern, North-Eastern, Western and Eastern. SEBs were unable to meet the people’s demands in their respective states, to cope up with this situation in 1976 a central organization was formed for generation and transmissions like National Thermal Power Corporation (NTPC), National Hydro-electric Power Corporation (NHPC) and National Power Corporation (NPC). In the next few years, the condition of the SEBs became grim as the debt rose to 41,000 crores. This issue had predominantly risen because of high transmission losses and political interference over SEBs in granting of subsidies to the farmers. The privatization wasn’t even considered to be good at that time, somehow the government decided in 1991 to open up the paths for private companies in the power sector. These were permitted to generate and supply electricity in confined areas. With the involvement of private companies in the sector, the responsibility of SEBs was increased, thereby requiring a regulatory body for proper governance. The Electricity Regulatory Commission Act 1998 (ERC Act 1998) was formed to monitor and keep the government away from tariff determination. The Central Electricity Regulatory Commission (CERC) at the national level and the State Electricity Regulatory Commission (SERC) at the state level were set up to rationalize the electric tariff. The consequence of these laws can be seen from the growth of electricity generation, which boosted from about 5.1 billion units to 420 billion (82-fold increase) and the per capita consumption of electricity also increased from 15 units in 1950 to about 338 units in 1997-98, which was about 23 times higher.

There were also many maladies in the Indian power sector, Electricity Act 2003 was introduced to eradicate these maladies. This was the most essential act in Indian history that properly integrated all previously established acts. The various objectives of this act are enumerated below:

  • To promote competition in the market.
  • Strengthening the laws relating to power generation, transmission and distribution.
  • Guaranteeing transparency in the subsidy programs.
  • Strict rules for the minimization of theft and misuse.
  • Mandatory metering in all houses.
  • Ensuring that electricity reaches all areas.
  • To protect the rights of the consumer.
  • Fostering efficient and environmentally sustainable policies.
  • To take action for the development of the power industry.

This act was amended several times between 2004 to 2014. The 2005 reforms centered specifically on energy protection, with the offenses relating to power stealing, energy poles and meter manipulation as recognized offenses. The distribution sector did not remain untouched by the restructuring of the power sector.

Reforms in distribution sector

SEBs maintained a monopoly in the electricity distribution sector after the Electricity Supply Act 1948. Thereafter, more emphasis on government was on increasing the installed capacity whereas less focus was given on the expansion of the distribution sector. It can be demonstrated by the CEA Report 2002, the installed capacity’s Compound Annual Growth Rate (CAGR) increased to 4.1 per cent during the 1995-2001 period, while the CAGR growth in transmission and distribution lines was estimated at just 2.8 per cent over the same duration. The burden on distribution lines was increased that resulted in low voltage problems and frequent tripping was common. The transmission and distribution losses were estimated by utilities about 40 to 50 per cent. The main reason for these higher losses was the lack of strict electricity distribution policies. Theft of electricity, bypassing meters, unmetered connections and improper tariff policies had brought SEBs in debt. SEBs had been financially devastated that led to the state-wide inability of transmission line expansion. Various reforms that played an important role in the restructuring of the distribution sector are described below:

  • Accelerated Power Development Programme (APDP) – APDP scheme was initiated in 2000 with the main emphasis on providing financial assistance to SEBs to further renovate and upgrade the distribution and transmission network. In all districts, 100 per cent metering was introduced to reduce electricity theft and ensure transparency. Under this act, the privatization of the distribution sector was done by dividing the state in  different zones.
  • Electricity Act 2003 – Electricity Act 2003 came into being with the expansion of the transmission network – and lays the foundation for the transformation and privatization of the distribution sector. This act changed the whole structure of the power sector in India. Various features of this act in the power distribution sector include allowing private utilities to participate in the distribution of power, making meters mandatory and allowing construction of special transmission lines. Private participation had increased competition in the distribution market that provided benefits to the consumer in price reduction.
  • Integrated Power Development Scheme (IPDS) – It was launched in 2014 to strengthen the transmission and distribution system of urban areas through implementing Information Technology (IT). This policy was primarily based on the urban areas distribution sector through the metering of customers and feeders. IPDS was a major step towards the upliftment of distributed renewable energy resources. This was also made mandatory to provide customers with a load of more than 1 MW by law free access to energy, thereby enabling them to enter into bilateral procurement agreements. At present, more than one supplier may be working in a market, giving consumers the power to choose the seller. Through this step, the idea of smart grid and smart meter was gathering traction.
  • Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) – This scheme was approved in 2014 for metering and electrification purposes in the rural areas. It was for the enhancement of the distribution network in rural areas. Under this scheme, 98.7  per cent of villages were electrified till March 2015 and further rural electrification was done under Saubhagya scheme. Till 19-05-2020, 99.99 per cent of villages have been electrified. Only a few villages of Chhattisgarh are left to be electrified as per Saubhagya dashboard.

Transition in the power sector

Central Government launched various schemes for the electrification of every household, one of them is Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) on 4th April 2005 for attaining the National Common Minimum Programme (NCMP) goal of providing access to electricity to all households in the country in five years. In this step, the rapid growth of solar energy is only made possible with the Jawaharlal Nehru National Solar Mission (JNNSM), which was launched to encourage environment-friendly development while tackling India’s energy security issue. It will also mark India’s main contribution to the global initiative to confront the problems of climate change. The Mission’s immediate goal was to focus on creating an encouraging environment for the country’s penetration of solar energy at both centralized and decentralized level. With the motive of transparency and competition in trading of power in 2008, the Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) have been established. PXIL and IEX facilitate transparent trading of electricity, a larger market spectrum, and allows the participation of other players in the market. IEX’s services include Term Ahead Market (TAM), Day-Ahead Market (DAM), and much more. Availability-based tariff is one of the main mechanisms to estimate the DAM successfully. Fig. 1 shows the transformation of the Indian power sector.

Fig. 1. Transformation of the Indian power sector…
Fig. 2. Percentage time-frequency between 49 Hz to 50.5 Hz…

The next and foremost important revolution in the Indian Power Sector was the implementation of “Availability Based Tariff (ABT)” in the tariff structure. The frequency of the grid increases when generation is more than demand and if the generation is less than demand the frequency falls. The past problems associated with the grid are low frequency at peak load periods, high frequency during off-peak hours, and frequent tripping of generators. ABT has proved to be the best equipment for handling all these problems. To maintain the grid frequency at its nominal value of 50 Hz, the ABT introduced the concept of Unscheduled Interchange (UI) charges. In this tariff framework, the generating station is entitled to obtain the incentive payment for the additional amount of generation according to the frequency guided rate whenever the actual energy supplied is greater than the pre-committed scheduled amount and will pay fine in a vice-versa situation. The ABT was implemented in all the five regions of India by 1 November 2003 and also its enactment had displayed a notable improvement in grid discipline. The permissible frequency band is reduced from the introductory range of 49 – 50.5 Hz in 2002-03 to 49.7 – 50.2 Hz in 2012. After ABT was introduced, the frequency profile of all regions was improved greatly and Fig 2 shows the frequency comparison of all regions within one year of pre-ABT and post ABT period.

Power supply position in India

The aforementioned reforms undoubtedly opened up all the avenues for the growth of the power industry. Yet the situation was different, the gap between demanded and supplied energy rose from 8.1% in 1997-98 to 11.1% in 2008-09. The two key factors that hampered the development were power generation capacity and failure to reduce distribution losses. In order to address this problem, the generation capacity was increased from 723.8 BU in 2008-09 to 1376.09 BU in 2018-19 within a decade. It brings the deficit to 0.6% in 2018-19 as shown in Fig. 3. In certain regions, the electricity was in surplus condition therefore, the other states were provided with unused electricity.

According to the CEA report, installed capacity was raised to 369,428MW till 29.02.2020, from which thermal energy had its contribution of 62.8%, renewable energy had 23.5%, hydro energy had 12.4% and remaining was from nuclear energy. The growth in the renewable sector is appreciable from 2015 onwards, the rise last year was 24%. The Indian market was flooded with china’s cheap solar module and the government subsidy help boost renewable energy generation which marks the 23.5% share of total generation.

Fig. 3. Power supply position in India…

Intelligent Electronic Devices (IEDs)

The outdated electrical transmission and distribution network has several drawbacks like high transmission losses, electricity theft, inaccurate demand response forecasting and those are unreliable in the integration of distributed resources. Hence, technological advancement with the implementation of Smart Grid technology, Electrical Storage System, Smart meters and Blockchain can maintain grid stability with today’s demand.

Smart grid

In India, renewable energy has registered tremendous growth in few years mainly in solar and wind energy. So, the grid needs to become smarter to maintain grid stability from such intermittent sources of energy. Today’s distribution grid has become old, inefficient and unreliable for operating with Distributed Energy Resources (DERs). In order to avoid blackouts, brownouts and inefficiencies of the power system, the implementation of the smart grid is the best option. The grid, which is equipped with the sensors, actuators and smart meters and allows multi-way communication between consumers, prosumers–and the system can be called a smart grid. It allows two-way communication between consumer and utility by the flow of power from the utility to consumer and the flow of information from the consumer. Data from the sensors that are mounted in the distribution grid can be used to balance the demand and supply. Real-time data of generation, transmission and distribution from IED can help utilities and consumers to utilize power efficiently.

Smart grid has a potential to takeover generation, transmission and distribution from centralized to the decentralized way with the incorporation of DERs and electrical storage system. Implementation of the smart grid can be expensive but it has a wide variety of advantages for both customers and utilities. Consumers have the ability to adjust their loads at peak hours to reduce their bills and prosumers may also gain profit by selling the electricity at peak hours. People can buy and sell electricity from their own choice and despite being dependent on single utility. One-third of the power generated is to get wasted in transmission and distribution losses. With Peer to Peer (P2P) energy trading, everyone can get power at an economical price that has low losses in transmission and distribution. The smart grid provides a platform for P2P energy trading, the prosumer who generates energy from renewable energy resources such as solar and wind can sell their surplus energy to their neighbour. For buying and selling power an application regulates the smart meter, which monitors the usage of electrical energy and transmits information to the user. Security of the grid from the cyber-attacks is also one of the main concerns that arise with the implementation of the smart grid. The threat of cyber-attack is prolonged because the data collected from the sensors is stored in a centralized server of power utilities, which can be easily targeted by the attackers. The researcher finds out the way to secure the grid from cyber-attack by implementing blockchain. Blockchain technology is used in P2P energy trading to make the trade more secure and ensure credibility. It’s the same technology behind bitcoin.

Fig. 4. Transformation in the power system…

In India, the UPPCL and BSES Rajdhani power limited have introduced blockchain technology to its rooftop solar power segment to implement large-scale P2P energy trading trials across the existing solar infrastructure in a selected group of solar consumers in the UP and Dwarka region in New Delhi respectively. The Indian Government had initiated a National Smart Grid Project (NSGM) to deploy smart grids in India. NSGM is functional under the Ministry of Power from January 2016. It was designed to be completed in two stages, the first phase (2014-2017) to investigate the different possibilities and plan the infrastructure for implementation – and various smart grid schemes had to be deployed in selected cities during the second phase (2017-2020). Eleven Smart grid pilot projects, such as IIT Kanpur Smart City Pilot, CESC Mysore etc., have already been completed and five have been active projects.

Smart metering infrastructure

With the increase in rooftop PV implementation and grid-integrated solar deployment, net metering is of vital importance. In the case of net energy metering, various studies have shown how a consumer is been now acting as a prosumer i.e., they can switch roles between consumers and a seller as per the condition of the prevailing time. Hence, prosumers are now able to use the energy generated by their own sources DG set, PV etc., and the surplus would be exported to the utility grid whereby the consumer receives an incentive for the exported electricity. It faces certain variations in terms of pricing as the consumer buys electricity from the grid and charges for it at the retail rate, while all electricity generated from a distributed generation is sold to the grid at a predetermined rate (which may vary from the retail rate). In India, multiple steps have been taken ahead to advance the smart grids including Puducherry Smart Grid Pilot Project and Battery Energy Storage System, Chamundeshwari Electricity Supply Corporation Ltd. (CESC), Mysore etc.

Electrical Storage System (ESS)

It provides flexibility in the integration of intermittent wind and solar energy sources. ESS can play a game-changer role in balancing load and generation. Nowadays, Energy Storage Systems (ESSs) have created their imperative space in renewable energy integration. With the substantial growth of renewable energy in India, energy storage can help to reduce the intermittency of renewable energy. It incorporates a method by which electrical energy is converted into a type that can be stored in off-peak hours i.e., when surplus is generated and can be converted back to electrical form to utilize it in peak hours. Indeed, many systems are available for energy storage, which we will discuss in this section of the article. According to ESSs are classified as follows:

Based on the form of energy stored

The ESSs are widely classified based on the form of energy that is used for storing:

  • Mechanical Energy Storage – A good example of this kind of energy storage is a ‘Pumped Hydro Energy Storage (PHES).’ In this type, Gravitational Potential is stored by lifting the water at high altitude (charging) at off-peak hours and released in a way so that gravitational potential energy is converted into mechanical energy, which in turn is converted into electrical energy. E.g., Tehri Pumped Storage Hydroelectric Power Plant in India.
  • Electrochemical Energy Storage – In this facility,, the electrical energy is stored by converting it into the electrochemical form of energy; an example is Battery Storage Systems (BSSs). Battery storage system technology is the most extensively used energy storage system for the application of the power grid. Various types of batteries include sodium sulphur battery, lead-acid battery, lithium-ion battery etc.
  • Electrical Energy Storage – A Double Layer Capacitors (DLC) or Supercapacitors, it follows the same concept of traditional capacitors behind storing electric energy except DLCs have thinner dielectrics and large surface area to accumulate a large amount of charge. Giga Capacitor Hyderabad Test Project (IL) in Hyderabad India, is a super-capacitor based facility with a rated power of 15,000kW.
  • Thermal Energy Storage (TES) – These TES systems are used to store the electricity or the waste heat in the form of thermal energy, which further can be harnessed to get electrical energy.









ESS can provide the stored energy at peak hours and reduce the fluctuation in the grid. The most prominent ESS in India is the Pumped Storage Hydro (PSH) system. The first PSH plant in India “Nagaarjun Sagar – Andhra Pradesh” was commissioned in 1985. Several advancements had taken place to reach the first grid-scale battery-based energy storage system of 10MW that was established in New Delhi at this level in 2019.




Aniket Raj
is from the Department of Electrical Engineering, M.M.M. University of Technology, Gorakhpur, U.P., India




Prabhakar Tiwari
is from the Department of Electrical Engineering, M.M.M. University of Technology, Gorakhpur, U.P., India




S.N. Singh
is from the Department of Electrical Engineering, Indian Institute of Technology, Kanpur, U.P., India

Utkarsh Gupta is from the Department of Electrical Engineering, M.M.M. University of Technology, Gorakhpur, U.P., India

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