978-1-4244-5791-5/09/$25.00 © 2009 IEEE Abstract— The aim of this paper is to analyze the power crisis in India as a function of both supply and demand. Given the history of underachievement in meeting the supply-demand gap, we explore some short and long-term solutions both on supply and demand side. In the context of India, these solutions each have certain limitations with respect to feasibility and their usefulness in meeting the energy gap. Adding generation capacity alone will not solve the power crisis in India. Efforts need to be made on the demand side as well, even though demand-side solutions can not replace supply augmentation in satisfying India’s power hunger. So, what short and long-term options are available on the supply and demand sides? What are the limitations of these options? In this paper we explore these questions looking at the historical trend of power supply position in India and also drawing experience from other countries like Brazil. We then evaluate possible policy choices against the policy goals of Indian power sector. I. INTRODUCTION The eleventh five year planning has a program to provide power for all by 2012. To achieve that, in this five year period the power sector is projected to add around 78GW of capacity. However, history shows a trend of underachievement in supply augmentation. The distribution sector is also plagued with significant losses due to aggregate and technical losses (AT&C losses). A large part of this is due to unaccounted energy consisting of theft and unmetered consumption. To bring the power sector to a sustainable state, the policymakers undertook comprehensive reforms in the nineties. The vertically integrated state electricity boards were unbundled, independent regulators were set up and mechanisms for competitive market were outlined. However, with fast economic growth, the sector has been unable to bridge the gap between supply and demand of power. In this paper we explore this problem and the goals of Indian power sector. We then present a list of possible supply and demand side policy options and analyse these options qualitatively based on the policy goals. II. OVERVIEW OF POWER SECTOR REFORM IN INDIA Electricity in India started with private companies. Kolkata was the first city to be electrified in 1897 by the Calcutta Electricity Supply Corporation. The country inherited about 1300 MW at the time of independence in 1947. After 1 Sharad B. Karmacharya is a PhD candidate in Energy and Industry section at TU Delft, Contact details: 2628BX Delft, The Netherlands, phone: +3115278342 Email: s.b.karmacharya@tudelft.nl 2 Laurens J. de Vries is Assistant Professor in Energy and Industry Section, TU Delft Contact details: 2628 BX Delft, The Netherlands, phone: +31172781137 Email: l.j.devries@tudelft.nl independence the private power companies were nationalized and electricity was declared a concurrent subject of the Indian Constitution which means making both Central government and State governments as responsible parties. The electricity act of 1948 led to creation of State Electricity Boards (SEBs) who are responsible for the generation, transmission and distribution of electricity within the borders of their states. The Act also created a Central Electricity Authority (CEA), who has an advisory role and is responsible for coordinating and planning long-term power policies. However, most of the power policies within the states remained with the SEBs. In the late 60s, it was judged that states alone are not capable of adding generation in response to demand growth. This led to the creation of central government organizations participating in generation and transmission business like NTPC, NHPC and PGCIL 3 . Over time, the share of Central generation increased and now is almost 30% of total generation [1]. The answer to reducing the supply-demand gap of electricity was sought by addition of new generation capacity to meet the ever-increasing demand. Most of the new generation capacity was added by the state and Central governments while private investments have been very limited. In 1991, India faced a financial crisis and control over the fiscal budget from the Central government became tighter. During the course of the 1990s, most of the states were in dire fiscal crises, aggravated among other things by heavy subsidies to the power sector [4]. Power sector reform and independent regulation was proposed as a viable solution to state electricity board’s finances [3]. This led to a wave of reform initiatives in most states in India, starting with Orissa. As part of this, independent regulators were created, both State Electricity Regulatory Commissions (SERCs) and a Central Electricity Regulatory Commission (CERC) [4]. The Electricity Act of 2003 is the most recent legislation. It is a comprehensive law that encompasses all the previous laws on the power sector and creates some mechanisms to make the industry more competitive. Delicensing of generation business and open access are some of the market mechanisms introduced by EA2003 to attract captive generation in to the main grid [5]. 3 NTPC- National Thermal Power Corporation NHPC- National Hydro Power Corporation PGCIL- Power Grid Corporation of India Addressing the supply-demand gap in India’s electricity market: long and short-term policy options Sharad B. Karmacharya 1 and Laurens J. de Vries 2