Efficiency gap in India's power sector costs 4% of GDP: World Bank Report
The World Bank recently released a report titled ‘In the Dark: How Much Do Power Sector Distortions Cost South Asia’. As per the report, Efficiency gap in India’s power sector costs the Indian economy 4% every year, which equivalents to $86 billion in 2016FY.
Key Points of the Report:
- The rural household’s income in India can be increased by $9.4 billion and business losses worth USD 22.7 billion can be eliminated with 24 hours access to power supply.
- There was a shortage of 14% in India in meeting coal demand in 2016FY.
- The average output per labour shift at Coal India’s underground mines was less than one ton in 2016FY, which is very less in contrast to 25 tonnes in the United States. Also, out of total 1o underground mines only one underground coal mine in India is mechanised.
- As per the World Bank Report, Electricity subsidies provided by the government and inefficient power generation, transmission, and distribution of the power play a major role in power shortages.
- In 2016, around 20% of electricity generated was lost during transmission and distribution. This rate is the highest loss rate in the world.
- Industrial electricity tariffs become less affordable and competitive due to power subsidies from to households and farmers.
- India provides subsidies on electricity for agriculture which has made India the world’s largest user of groundwater. The consumption of groundwater has increased by 700% from 1950 to 2014.
Recommendations in the report:
- The report recommends reforms in the electricity sector to restore market pricing and improve efficiency. This will complement traditional investments to increase power supply and expand access to reliable electricity.
- Reliable access to electricity will have a positive impact on Gender Equality by increasing women’s employment and girls’ study time. It will lead to lower use of kerosene lamps which would improve health and the environment.
- Coal allocation and delivery need to be more efficient and competition in coal and electricity supply needs to be encouraged. Energy prices should be rationalised to reflect the actual cost of supply.
- Incentives should be given for the promotion of more efficient power generation and delivery.
- Social assistance should be provided to help people deal with higher energy prices.
India has made great progress in expanding access to power in recent years. However, many people still lack access to electricity and power shortages harm the economy and consumer well-being. India was at the 80th spot among 137 economies in the reliability of electricity supply as per the 2018 Global Competitiveness Report.
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