India Takes Steps to Reform its Power Sector but Still Heavily Relies on Coal

India Takes Steps to Reform its Power Sector but Still Heavily Relies on Coal

India is the world’s third-largest producer and third-largest consumer of electricity. With more than 400 million people lifted above the poverty line over the last decade, there has been a consistent rise in demand for power consumption across the nation’s rural, urban and semi-urban areas, necessitating far-reaching changes in India’s power sector. 

The national electric grid in India over the years has come to have an installed capacity of 368.79 GW as of 31 December 2019. Renewable power plants, which also include large hydroelectric plants, constitute 34.86% of India’s total installed capacity. During the fiscal year, 2018-19, the gross electricity generated by all utilities in India was 1,372 TWh and the total electricity generation (utilities and non-utilities) in the country was pegged at 1,547 TWh. 

The gross electricity consumption in 2018-19 in India was 1,181 kWh per capita. In the fiscal year 2015-16, electric energy consumption in agriculture was recorded as being the highest (17.89%) worldwide, with the country being a predominantly agrarian economy, contributing approximately 3% of its gross national product (GDP). The per capita electricity consumption, however, is still low compared to most other countries despite India having a low electricity tariff.

India, due to its power sector reforms undertaken since 2015 under the new political dispensation, currently has a surplus power generation capacity but lacks an adequate distribution infrastructure. To address this, the Government of India launched a program called “Power for All” in 2016. The program provided the necessary infrastructure to ensure uninterrupted electricity supply to all households, industries, and commercial establishments with funding made available through a collaboration between the federal government and its constituent states.

India’s electricity sector is dominated by fossil fuels, in particular coal, which during the 2018-19 fiscal year produced about three-quarters of the country’s electricity. The government, however, has consistently been making honest and transparent efforts to increase investment in renewable energy. The government’s National Electricity Plan of 2018 also states that the country does not need more non-renewable power plants in the utility sector until 2027, with the commissioning of 50,025 MW coal-based power plants under construction and an addition of 275,000 MW total renewable power capacity after the retirement of nearly 48,000 MW old coal-fired plants

The installed captive power generation capacity (above 1 MW capacity) associated with industry-owned plants is 58,000 MW as of 31 March 2019.  In the fiscal year 2018-19, 175,000 GWh was generated. Diesel power generation sets of 75,000 MW capacity (excluding sets of size above 1 MW and below 100 kVA) are also installed in the country. In addition; there are a large number of diesel generators of capacity less than 100 kVA to cater to emergency power needs during power outages in all sectors.

Captive Power Sector
Number Source Captive Power Capacity (MW) Share Electricity generated (GWh) Share
1 Coal 34,833 60.06% 141,137 80.64%
2 Hydroelectricity 48 0.08% 97 0.09%
3 Renewable energy source 1,881 3.24% 2,258 1.28%
4 Natural Gas 7,753 13.37% 23,785 13.58%
5 Oil 13,485 23.25% 7,723 4.41%
Total 58,000 100.00% 175,000 100.00%

Source: Ministry of Power, 2019

The fact that India still depends heavily on coal-powered electricity is due to the large availability of this asset and price advantage for a large number of people living at the bottom of the pyramid.  The good news in India is that the country is moving ahead towards mixed energy use by focussing on renewable energy and civil nuclear energy. 

India’s renewable energy sector has been growing vigorously for the last decade. As of 31 March 2018, India had a grid-connected installed electricity generation capacity of about 69.02 GW from non-conventional renewable sources including winds, solar, biomass, and hydro-power.

Installed capacity of non-conventional renewable power
Type Capacity
(in MW)
Wind 34,046.00
Solar 21,651.48
Small Hydro Power Projects 4,485.81
Biomass Power & Gasification and Bagasse Cogeneration 8,700.80
Waste to Power 138.30
Total non-conventional renewable Power – Grid Connected 69,022.39

Source: Ministry of Power, 2019

India’s focus besides its transition to clean energy has also been on adopting several policy measures that are aimed at producing more power due to growing demands and the opportunity to export the surplus power to neighboring nations. Some of the key measures adopted in this arena include subsidized distribution of 210 million LED bulbs across the country, saving about 2 billion USD with resultant reduction in carbon emissions; revision in e-mobility policy including building charging infrastructure storage; transition to Bharat Stage VI variant petrol and diesel (the cleanest fuel) for cars estimated to bring down the emissions by 20% immediately; and environmental taxes on carbon emissions. 

Under the Domestic Efficiency Lighting Programme, the government wants to replace all the 770 million incandescent bulbs sold in India with LED bulbs. This will result in the reduction of 20,000 MW load, energy savings of 105 billion KWh and Green House Gas (GHG) emissions savings of 80 million tonnes every year.

These measures combined together are estimated to bring over 30 billion USD to the national exchequer and also resulting in lowering up to 30-35% of carbon emissions, shining India’s case to strengthen its Paris Climate obligations to the gold standard, going forward. 

Activity Rating: *** Right Direction

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India is making good progress in transitioning to the use of renewable energy but continues to rely on coal and biofuel resources by far. The Indian Union Minister of Power is requested to consider taking irreversible and demonstrable measures to reduce the nation’s reliance on coal in collaboration with its private sector in further strengthening India’s commitment to Paris Climate Agreement, 2015.  


Mr. Raj Kumar Singh, Minister of State for Power, Independent Charge Government of India, Email:

This post was submitted by Climate Scorecard India Country Manager Pooran Chandra Pandey

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