India - Economic issues in the power sector

A WORLD BANK COUNTRY STUDY PUB-2335 INDIA Economic Issues in the Power Sector November 1979  The World Bank issues country economic studies in two series. This report is a working document and is, as such, part of an informal series based wholly on materials originally prepared for restricted use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practitioners throughout the world. A second, more formal series entitled World Bank Country Economic Reports is published for the Bank by The Johns Hopkins University Press, Baltimore and London. Titles of these and all other Bank publications may be found in the Catalog of Publications, which is available free of charge from World Bank, Publications Unit, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. This report is a free publication. A small charge may be made if airmail postage is required. The views and interpretations in this report are the authors' and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Copyright ( 1979 The International Bank for Reconstruction and Development/The World Bank The World Bank enjoys copyright under Protocol 2 of the Universal Copyright Conven- tion. Nevertheless, permission for reproduction of any part of this report is hereby granted provided that full citation is made.  INDIA Economic Issues in the Power Sector This report is based on the findings of a mission to India consisting of the mission leader: C. Taylor, economist and C. White, consultant engineer and M. Gellerson, consultant economist in September/October 1978 and a follow-up visit by C. Taylor in February 1979. Ms. J. Voigt and N. Poduval at headquarters and Y. Satyanarayana in the New Delhi Office provided research assistance. V. Prakash, who is supervising the World Bank research project "Patterns of Industrial Development" kindly made his data tapes available to the mission. South Asia Regional Office The World Bank Washington, D.C., U.S.A.   Preface This review has grown out of the World Bank's increasing involve- ment in the power sector in India. As the Bank's operations grew in number and size it was felt that an overall strategy of assistance was needed and that the initial step required was to increase the Bank's knowledge of the operations and procedures within the power sector. Therefore, a review of issues at the national level was undertaken, with the main mission visiting India in September and October 1978 and a follow-up mission in February 1979. The present report contains the findings of those missions. The range of subjects that could be covered at the national level is very large and the complexity of the Indian power sector means that much detailed work would be required for a definitive, comprehensive sector review. This was felt to be beyond the scope of two brief missions. This review has, therefore, concentrated on two major areas which are principally economic in character. These are (i) demand for electricity and (ii) investment in the power sector. It must be emphasized that the power sector is a sophisticated and complex part of India's basic infrastructure: the many Central organiza- tions and the 18 State Electricity Boards between them employ over 600,000 regular staff. Thus, even on the subjects reviewed -- demand and investment -- the examination has been cursory and more work on them is highly desirable. In addition there are other major areas in which future work could be profit- ably taken up, including investment implementation, thermal plant operation and overall system management. The Government of India is well aware that there are many problems with the operation and development of the power sector. To define these problems and to prescribe methods of dealing with them, a cpmmittee was recently established under the chairmanship of one of the members of the Planning Commission. The committee's terms of reference call for an exam- ination of "all aspects of the functioning of State Electricity Boards and Central Organizations engaged in electricity generation, transmission and distribution and make recommendations for improving them". This committee should have far-reaching impact when it reports its conclusions early in 1980. The main text of this review is organized in two major sections: Section I, entitled "Consumption", and Section II, entitled "Investment Planning and Resource Allocation". Before these two major sections, there is a summary followed by a background discussion of the relationship of the power sector with the economy at large and the institutional and legal frame- work of the sector, which should be particularly useful to readers who are not familiar with the power sector in India. At the very end of the report the main conclusions are drawn together in a separate section. The annexes to the main report are mostly statistical but also include two notes on terminology for the lay reader, graphs and an organization chart for the sector. Michael H. Wiehen Acting Vice President South Asia Region   TABLE OF CONTENTS Page No. Map SUI{ARY ........... ................................ i - iii BACKGROUND: 1. Electricity and the Economy ...... 1 2. The Institutional Framework ...... 3 I * CONSUMPTION . ............... . .................. 10 1. Past Patterns of Demand ........ .. ........ 10 2. The Incidence and Impact of Shortages .... 12 3. The Efficiency of Power Use ............. . 18 4. Tariffs ...... ........... ................. 23 5. Demand Forecasts .......... .. ............. 27 II. INVESTMENT PLANNING AND RESOURCE ALLOCATION .... ... 35 1. Resources Devoted to Power Sector Development ............................ 35 2. The Investment Planning Process .......... 40 3. Present Investment Plans .... ............. 43 CONCLUSIONS ....................................... 51 ANNEXES . .......................................... 56 GRAPHS ........... ............................... 172 ORGANIZATIONAL CHART ............................. 175   IBRD 10483R4 70 I r-~-S \ eo 30 MARCH 19,0 DEMOCRATIC REPUBLIC OF AFGHANISTAN Z, L/ t I ND A JAMMU J-d KAS5HMl I? Srinogar - . 9 S Sotoe and Union Terrilory Cop.tols / .. 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