COVID-19: Opportunity for Energy Sector reforms

  • IASbaba
  • April 30, 2020
  • 0
UPSC Articles
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Topic: General Studies 2 & 3:

  • Government policies and interventions for development in various sectors 
  • Indian Economy and challenges with regard to resource mobilization

COVID-19: Opportunity for Energy Sector reforms

Context: The 9-minute event on April 5th was one PM asked to switch-off lights and light lamps to show respect to COVID-19 warriors. It was interesting for the extent of public participation and expert management of National Electricity grid

Pre-Covid, India’s power sector has been facing a mounting financial crisis which has made it more prominent in recent times caused by an expected slowdown.

Challenges in Energy Sector

  • The trend of low power demand, now furthered in the post-Covid economy
  • Idle, old, and inefficient coal plants.
    • Plant load factors of Coal plants for the 2019-20 period are at 56%, down from 78% a decade ago.
  • High Industrial Power tariffs –one of the highest in world
  • Heavily subsidised agricultural power tariffs leading to Cross-Subsidisation – High industrial power tariffs to lower the cost of agricultural power
  • Financial health of the DISCOMs (Power Distribution Companies who purchase power from generators & distribute it consumers). 
    • They now owe over Rs 8.8 billion to generators. 
  • Challenges with Renewable Energy (RE)
    • Difficulties of integrating it with National grid given its peak productions & falls.
    • Uncertainty with RE: Weather patterns change and forecasting is never 100% accurate. 
    • Electricity management of RE will be difficult given its fluctuating nature

Way Ahead

  • A market-based, automatic mechanism for integration of infirm renewable power into the grid is non-negotiable.
  • Use of Li-ion battery storage to manage power spikes associated with the 175GW of RE planned by 2022
  • Restructuring of Coal Plants: Some of these old units could be restructured and shut down, based on their generation costs, remaining plant life & modernisation
  • Improving Efficiency: Retrofit power units with flue gas desulphurisation (FGD) to improve the environmental efficiency of old power plants
  • Lower industrial power tariffs to meet the competition. Industrial power in Vietnam is, for example, 40% cheaper than in India
  • Adoption of DBT framework for providing subsidy to agricultural power consumers
  • Utilize the Crisis: Now is an opportunity to bring in fresh Covid-influenced industrial investment from Korea and Japan, which are diversifying away from China.
  • New Legislative Framework: Enactment of proposed Electricity Amendment Bill,2020 and adoption by States with suitable modifications


The proposed Electricity Amendment Bill, 2020, is an ambitious step in the right direction—with bold moves to 

  • Institute cost-reflective tariffs, 
  • Remove subsidies, and 
  • Strengthen the sanctity of contracts through greater enforcement 
  • Provision of payment security to generators

Connecting the dots:

  • UDAY Scheme
  • Paris Climate Goals and India’s commitment towards it

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