Publication: Beyond Crisis : The Financial Performance of India's Power Sector
Loading...
Published
2015
ISSN
Date
2014-11-12
Author(s)
Khurana, Mani
Editor(s)
Abstract
At the end of 2011, the Indian power sector found itself in financial crisis, just a decade after the 2001 bailout of state electricity boards (SEBs) by the central government. Bankrupt state power distribution utilities in several states were unable to pay their bills or repay their debts. Despite the passage of the landmark 2003 Electricity Act and implementation of a broad set of reforms over the past decade, the sector today is looking at another rescue from the center, four times larger than before. This financial rescue scheme amounts to about Rs 1.9 trillion ($42 billion) and was instigated by the nonperforming assets of the banks and other financial institutions. The Electricity Act was envisaged to create independent companies functioning on commercial principles, but they are still far away from that goal. This report presents a diagnostic of the financial and operational performance of segments in the power sector value chain between adoption of the Electricity Act, 2003, and 2011, including analysis of the factors that contributed to the recent crisis. The report focuses on efficiency and productivity, whether performance has improved over time, and which states have emerged as performance leaders. Analysis of this kind is not new or unique, but this report aims to integrate historical performance, the current situation, future projections of the impact of worsening sector finances, and the actions that need to be taken to check the downturn. The report draws primarily from utility data collected by the Power Finance Corporation in successive years on utilities operational and financial performance. The Power Finance Corporation data were collated into a single database with the addition of various operational parameters at the plant level and the utility level from the Central Electricity Authority.
Link to Data Set
Citation
“Khurana, Mani; Banerjee, Sudeshna Ghosh. 2015. Beyond Crisis : The Financial Performance of India's Power Sector. World Bank Study;. © http://hdl.handle.net/10986/20527 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Honduras(World Bank, Washington, DC, 2010-05)This report was prepared in response to a request by the government of Honduras for assistance in the preparation of a power sector strategy for the country. Specifically, the government asked for help in identifying the main issues in the power sector, and in addressing them through formulation of a clearly defined, achievable strategy. Left unresolved, these issues risk derailing the country's macroeconomic framework, potentially damaging the competitiveness of the country and its prospects for poverty reduction. The main issues to be analyzed in the study were identified at a workshop held on September 19, 2006, in Tegucigalpa, jointly with the Secretaria de Recursos Naturales y Ambiente (SERNA) and the Comision Presidencial de Modernizacion del Estado (CPME), and with the participation of representatives from the Empresa Nacional de Energia Electrica (ENEE), civil society, the private sector, Congress, public sector agencies, donors, utilities, and ministries. It was decided that the study would be divided into two components: (a) the first would identify and evaluate options on institutional reforms, particularly ENEE's restructuring and management, and securing electricity supply; and (b) the second would formulate a power sector strategy. Two reports will be prepared, with the second report to be finalized according to the timing of the government's decision. This first report analyzes the institutional and policy issues; financial and fiscal concerns; social aspects, such as tariffs and subsidies, and access to electricity; and investment requirements including the development of renewable resources. The report is divided into two parts. Part A presents a diagnostic of the electricity sector, including ENEE's financial performance, fiscal impacts, and reliability of supply, institutional and legal framework, pricing policy, and electricity coverage. Part B evaluates the options available to improve sector efficiency, ensure financial sustainability, promote the diversification of energy sources, and increase electrification coverage.Publication Regulatory Study to Encourage Energy Efficiency through Investment in Rehabilitation of Coal-fired Generation Plant in India(Washington, DC, 2008-10)The Indian power sector suffers from considerable supply shortages. The Government of India (GoI) is addressing this problem both through a major new build program (including certain fiscal incentives for construction of larger and more efficient plant) and through rehabilitation (renovation and modernization or (R&M) as it is known in India) of existing coal fired plant. Around two-thirds of India's existing 65,000 MW of coal fired plant capacity is owned by State Government utilities, but much of this is reported to be in a poor condition, with low load factors and station heat rates of up to a 4,000 kcal/kWh. Current R&M activity is not keeping pace with the requirements. R&M implementation has lagged significantly behind the requirements over the 10th plan period (2002-07), and during the current 11th plan period nearly 13,000 MW of R&M is targeted. Specifically: section two sets out the context of the study; section three summarizes the constraints and barriers to energy efficient R&M in India, which are set out in further detail in annex four; section four provides a framework for the main options identified, given present state of the Indian power market and describes the key lessons from our review of international best practice, which are described in annex five; section five identifies the various options considered for this study; section six analyses the various options identified in terms of their effectiveness in addressing the barriers and constraints identified in section three; and section seven sets out our conclusions and recommendations for a regulatory framework that can more effectively support energy efficient R&M in India.Publication Private Participation in the Indian Power Sector : Lessons from Two Decades of Experience(Washington, DC: World Bank, 2014-10-02)This book reviews the major developments in and the lessons learned from the 21-year (1991-2012) experience with private sector participation (PSP) in the power sector in India. It discusses the political economy context of the policy changes, looks at reform initiatives that were implemented for the generation sector, describes transmission and distribution segments at different points in the evolution of the sector, and concludes with a summary of lessons learned and a suggested way forward. The evolution of private participation in the Indian power sector can be divided into different phases. Phase one was launched with the opening of the generation sector to private investment in 1991. Phase two soon followed - early experiments with state-level unbundling and other reform initiatives, including regulatory reform, culminating in divestiture, and privatization in Orissa and Delhi respectively. Phase three, the passage of the electricity act of 2003 by the central government, followed by a large increase in private entry into generation and forays into transmission and experiments with distribution franchise models in urban and rural areas during the 11th five-year plan (2007-12) period. In phase four, at the start of the 12th five-year plan (2012-17), the sector is seeing a sharp reduction in bid euphoria and greater risk aversion on the part of bidders, who are concerned about access to basic inputs such as fuel and land. In this context, the report is structured as follows: chapter one gives introduction; chapter two presents private sector participation in thermal generation; chapter three presents private sector participation in transmission; chapter four deals with private sector participation in distribution; chapter five deals with private sector participation in the Indian solar energy sector; chapter six deals with financing of the power sector; chapter seven presents emerging issues and proposed approaches for the Indian power sector; and chapter eight give updates.Publication Development of Local Supply Chain : The Missing Link for Concentrated Solar Power Projects in India(Washington, DC, 2013-02-01)Amid the success of Solar Photovoltaic (PV) projects in India, Concentrated Solar Power (CSP) technology also provides a compelling case for support by the government as among solar technologies; CSP is the only techno-economically viable option at present that provides a storage option for dispatchable and dependable solar energy. Furthermore, the conversion of solar to steam is a relatively high-efficiency process versus the conversion efficiency of PV. This process can effectively supplement fossil fuels and renewable fuel, such as biomass, and thus contribute to the overall energy security of the country. The specific objective of the study is to assess the potential of India's industries to set up a manufacturing base to produce CSP technology components and equipment. The study assesses competitive positioning and the potential of Indian companies in the manufacturing of important CSP components. Various analysis models were prepared for the analysis, and the details have been explained in the elaborated version of the report. The report also proposes an action plan to help develop this potential and evaluate the resulting economic benefits. This report includes the following activities: i) assessment of the competitive position of local industries to support the development of CSP technologies in India; ii) evaluation of short, medium, and long-term economic benefits of creation of a local manufacturing base; and iii) action plan to stimulate local manufacturing of CSP technology components and equipment. This document is a summary of the larger report. The data analysis and messages presented in the report are based on very limited information presently available in the Indian market. Therefore, it is recommended that the trends and ideas to be given more attention than the data itself.Publication Lebanon : Electricity Sector Public Expenditure Review(Washington, DC, 2008-01)The Lebanese electricity sector is at the heart of a deep crisis. The sector is unable to supply the reliable electricity needed by homes, offices and industry. It is a massive drain on government finances, crowding out more valuable expenditures on education, infrastructure, social protection, and health, and putting macroeconomic stability at risk. The sector accumulates huge debt with little to show for it, and those who are least able to provide for themselves suffer the consequences most. The state of the electricity sector symbolizes to the public Lebanon's profound challenges of governance, inclusion and accountability. This report includes detailed calculations on these estimated high costs to the public. This additional spending and revenue loss has an obvious negative impact on these consumer categories, but also makes implementation of other macro-critical, non electricity sector reforms, difficult; as consumers have difficulty absorbing increased overall spending (for example tax increases). As such, this report presents an analysis of possible demand and supply scenarios for the future, and lays out options for the Government to consider in improving service and reducing the overall costs. Each option is presented with a savings potential, and time-line for implementation. Ultimately, however, the Government will have to consider how to sequence the reforms, in particular, the invariable tension between waiting with the much needed tariff level and structure adjustments for an observable improvement in service delivery versus starting the adjustments immediately and working on service improvements in parallel.
Users also downloaded
Showing related downloaded files
Publication MIGA Annual Report 2013 : Insuring Investments, Ensuring Opportunities(Washington, DC: World Bank Group, 2013-10-11)In fiscal year 2013, Multilateral Investment Guarantee Agency (MIGA) issued 2.8 billion dollars in investment guarantees for projects in our developing member countries. At 1.5 billion dollars, representing more than half of new business, the bulk of MIGA's guarantees issued support investments in Sub-Saharan Africa. Sixty-nine percent of new business volume this year was in complex projects in infrastructure and extractive industries, a strategic priority for the Agency. This year, 82 percent of MIGA's new volume fell into one or more of strategic priority areas: investments in the world's poorest countries, "South-South" investments, investments in conflict-affected countries, and investments in complex projects. MIGA also established the conflict-affected and fragile economies facility to further deepen support to this priority area.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication The Firm-Level Impact of the Covid–19 Pandemic(World Bank, Washington, DC, 2020-09-02)The World Bank commissioned a firm-level survey to provide quantitative evidence of the impact of the Coronavirus (COVID-19) pandemic. Two rounds of data have now been collected for the months of March and May using a nationally representative World Bank survey providing information on the impact of the Coronavirus (COVID-19) pandemic. The survey includes five hundred firms spanning a wide range of industries and firm sizes, as well as the formal and informal sector. This note provides a snapshot of how the firms’ outcomes and response to the pandemic have changed between the months of March and May 2020.Publication Impact of Migration on Economic and Social Development : A Review of Evidence and Emerging Issues(2011-02-01)This paper provides a review of the literature on the development impact of migration and remittances on origin countries and on destination countries in the South. International migration is an ever-growing phenomenon that has important development implications for both sending and receiving countries. For a sending country, migration and the resulting remittances lead to increased incomes and poverty reduction, and improved health and educational outcomes, and promote economic development. Yet these gains might come at substantial social costs to the migrants and their families. Since many developing countries are also large recipients of international migrants, they face challenges of integration of immigrants, job competition between migrant and native workers, and fiscal costs associated with provision of social services to the migrants. This paper also summarizes incipient discussions on the impacts of migration on climate change, democratic values, demographics, national identity, and security. In conclusion, the paper highlights a few policy recommendations calling for better integration of migration in development policies in the South and the North, improving data collection on migration and remittance flows, leveraging remittances for improving access to finance of recipient households and countries, improving recruitment mechanisms, and facilitating international labor mobility through safe and legal channels.Publication The Role of Social Ties in Factor Allocation(Published by Oxford University Press on behalf of the World Bank, 2019-10)We investigate whether social structure helps or hinders factor allocation using unusually rich data from the Gambia. Evidence indicates that land available for cultivation is allocated unequally across households; and that factor transfers are more common between neighbors, co-ethnics, and kinship-related households. Does this lead to the conclusion that land inequality is due to flows of land between households being impeded by social divisions? To answer this question, a novel methodology that approaches exhaustive data on dyadic flows from an aggregate point of view is introduced. Land transfers lead to a more equal distribution of land and to more comparable factor ratios across households in general. But equalizing transfers of land are not more likely within ethnic or kinship groups. In conclusion, ethnic and kinship divisions do not hinder land and labor transfers in a way that contributes to aggregate factor inequality. Labor transfers do not equilibrate factor ratios across households. But it cannot be ruled out that they serve a beneficial role, for example, to deal with unanticipated health shocks.