Electricity sector in India

Electricity was first introduced in India in 1879 with the demonstration of electric light in Kolkata, followed by the country's first hydroelectric power station at Darjeeling in 1897. During the colonial period, electricity supply was largely developed by private companies serving urban centers and industries. After independence in 1947, the Electricity (Supply) Act of 1948 established the Central Electricity Authority (CEA) for planning at central level and State Electricity Boards (SEBs) at state level. SEBs oversaw generation, transmission, and distribution within each state. The sector expanded rapidly through successive Five-Year Plans, with coal and large hydroelectric projects forming the backbone of India's power system. However, not every state was rich in coal or hydro resources. This lead them to depend on diesel generators. In 1960s, regional grid was conceptualized to supplement power from neighboring states. By the 1970s, REC was established to finance rural electrification. Generation was not able to keep up with growing demand. This, along with the oil price shocks lead central government to nationalize coal mines and establish CIL, NTPC and NHPC. In the 1980s, rural electrification accelerated. However, due to votebank politics by state governments, tariffs were kept low which strained their finances. In order to further develop the sector, PFC was established for financing needs. By the 1990s, the idea of a national grid was conceptualized and lead to establishment of PGCIL. The 1991 economic liberalization led to policy reforms. It allowed private participation in generation (via licenses) and the Electricity Regulatory Commissions Act,1998 created independent regulators at central (CERC) and state level (SERC). In the 2000s, the Electricity Act, 2003 was enacted which consolidated prior legislation, mandated the unbundling of state utilities. Generation and distribution was de-licensed to encourage competition, and open access was introduced in transmission. In the 2010s, all regional grids were fully synchronized to form a single national grid. Large-scale electrification programmes such as DDUGJY and Saubhagya extended electricity access to nearly all households. India also pursued renewable energy deployment through National Solar Mission, positioning itself as a global leader for renewables. ==Generation==

India is the third-largest producer of electricity in the world. The nation's utilities produced 1824.2 TWh of power in FY 2024-25 with about 25% generated from non-fossil sources. Generation was de-licensed in the Electricity Act of 2003, since then private participation has increased from 10% of overall share in FY 2003 to 37% in FY 2023. Notes: $ Including Pumped storage electricity generation: ^ including electricity generation from Battery Energy Storage Systems. • Coal includes lignite • Other = Biomass, Bagasse, and Waste to Energy Historical datasets can be retrieved from Utilization of gas plants has been limited by constrained domestic supply and high prices of imported LNG. Oil-fired generation plays a negligible role, used mainly for peaking or emergency power. Nuclear power India operates a fleet of pressurized heavy-water reactors (PHWRs) managed by the NPCIL. The government has set a target to install 100 GW of nuclear capacity by 2047 and has initiated steps to reach 22.5 GW by 2031-32. It is also aiming to develop at least five indigenously designed and operational small modular reactors (SMRs) by 2033. Renewable energy Renewable energy generation has doubled from 181.7 TWh in FY 2011-12 due to the government's target of installing 500 GW of non-fossil capacity by then. == Installed capacity==

As of 2025, India has the world's 3rd largest renewable energy installed capacity, the world's 3rd highest solar energy capacity, 4th highest wind energy capacity and 5th highest hydroelectric power capacity. Due to availability and other factors, India's power generation remains significantly skewed in favor of fossil fuel and nuclear sources roughly 70% of total power generated in 2025 despite having installed renewable capacity being more than 50% of total installed capacity. == Storage ==

Energy storage systems (ESS) help in maintaining grid stability from intermittent and variable renewable energy sources and enabling round-the-clock supply of low-carbon electricity. Due to high import costs of battery systems, India is currently relying on pumped-storage hydroelectricity. India has identified a potential PSH of 214.6 GW and is planning to install at least 50 GW by FY 2030-31. In 2020, power tariff from Solar PV clubbed with PSH have fallen below the coal plant tariffs in offering base load and peak load power supply. The government is supporting development of BESS through Viability Gap Funding. The scheme was announced in Sep 2023 and envisages development of 4 GWh of BESS projects by 2030-31. Due to declining battery prices, the target was later increased to 13.2 GWh. There has been renewed interest in solar thermal because of its energy storage properties. As of 2025, India has an installed capacity of just 329.5 MW of solar thermal, out of which only 101 MW was operational. Many storage technologies like Flywheel Energy Storage, Compressed Air Storage, Green Hydrogen, etc. are in nascent stages of development. ==Transmission and distribution==

After electricity is generated at power plants, it is stepped up to high voltages (765 kV, 400 kV, 230 / 220 kV) for transmission over long distances with minimal loss. And then stepped down to lower voltages, closer to demand areas for power distribution to end consumers. The national grid - which was synchronized in 2013 - consists of Inter-State (ISTS) and Intra-state Transmission System (Intra-STS) of 220 kV and above. ISTS is largely managed by Central Transmission Utility (wholly owned by PowerGrid), with private participation through Tariff Based Competitive Bidding route, with a few exceptions. Intra-STS is managed by State Transmission Utility of each state. Projects are developed by State Government through competitive bidding process for projects costing above a threshold limit which are decided by the SERCs. Further, transmission planning has been aligned with renewable energy targets and is planned to evacuate around 613 GW of renewable capacity by 2032, including large zones in Rajasthan, Gujarat, and Andhra Pradesh. The distribution segment is characterized by high aggregate technical and commercial (AT&C) losses (excess of 30% in early 2000s, 22.6% in FY 2013-14) and a gap between average cost of supply (ACS) and average revenue realized (ARR). Technical losses stem from transformation losses, line losses, poor Power Factor due to insufficient reactive compensation. Commercial losses are caused by theft, inaccurate / faulty meters, billing inefficiencies (error in billing process), and collection inefficiencies. Govt has launched several initiatives (IPDS, UDAY, RDSS, etc) to improve the financial health and operational efficiency of DISCOMs. While there have been improvements, chronic issues like high losses, unsustainable tariffs, subsidy dependence, and regional disparities continue to affect the overall performance of the sector. ==Consumption==

India consumed a total electrical energy of 1622 TWh in FY 2023-24, with an estimated figure of 1694 TWh for FY 2024-25. Per capita consumption reached 1395 kWh for FY 2023-24, with an estimated figure of 1538 TWh for FY 2024-25 (as of Jan 2025). Between FY 2013-14 and FY 2024-25 (till Jan 2025), power availability has increased from 12.5 hrs to 22.6 hrs in rural areas and from 22.1 hours to 23.4 hrs in urban. Note: Energy requirement (accounting for losses) would be 1907.8 TWh. The government has been working to reduce energy wastage in this sector by promoting solar-powered irrigation systems (PM-KUSUM) and more energy-efficient pumps (part of AgDSM), which are expected to help curb future demand. Others This includes municipal sector which encompasses public lighting, water works and sewage. MuDSM was launched to reduce energy consumption. Government's efforts on improving energy efficiency across the sectors, resulted in a net energy savings of 210 TWh between FY 2011-12 and 2020-21. For FY 2020-21, 56% of overall yearly savings came from industrial sector, and 40% from residential. ==Foreign electricity trade==

India's National Grid is synchronously interconnected to Bhutan, and asynchronously linked with Bangladesh, Myanmar and Nepal. An undersea interconnector to Sri Lanka (India–Sri Lanka HVDC Interconnection) have been proposed. Singapore and UAE are interested to import electricity from India by establishing undersea cable link to reduce carbon emissions as imported electricity would not contribute to carbon emissions upon its use whether it is generated from renewable resources or not in the exporting country. India has been exporting electricity to Bangladesh, Myanmar and Nepal and importing excess electricity from Bhutan. Since 2016–17, India has been a net exporter of electricity with 9,232 Gwh exports and 7,597 Gwh imports, mainly from Bhutan, in 2021–22. In 2018, Bangladesh proposed importing 10,000 MW power from India. Net exports (-) and Net imports (+). The above exports to Bangladesh are excluding the exports from the 1600 MW Godda Thermal Power Station which is located in India but not connected to Indian electric grid. To encourage the carbon neutral solar power generation, plans are made to transform the Indian national grid into a transnational grid expanding up to Vietnam towards east and Saudi Arabia towards west spanning nearly 7,000 km wide. Being at the central location of the widened grid, India will be able to import the excess solar power available outside its territory at cheaper prices to meet the morning and evening peak load power demands without much costly energy storage. == Governance and regulatory framework ==

Electricity is a concurrent subject matter in the Constitution of India. As such, central and state governments can both legislate on the Indian power sector. The sector is primarily governed under the Electricity Act, 2003 and the Energy Conservation Act, 2001, which together lay out the regulatory and policy foundations for generation, transmission, distribution, and energy efficiency. Central level Ministry of Power is the nodal ministry which oversees the development of the electricity sector in India. It is responsible for planning, policy formulation, processing of projects for investment decisions, monitoring project implementation, training and manpower development, and the administration and enactment of legislation related to thermal and hydro power, as well as the transmission and distribution network. It is also responsible for the administration of India's Electricity Act (2003), the Energy Conservation Act (2001). Central Electricity Authority (CEA) is the technical advisory body to the Ministry, which is also responsible for data collection and dissemination, through its National Electricity Plan for a 5 year period. Ministry of New and Renewable Energy (MNRE) is the nodal ministry for the development and promotion of renewable energy technologies. MNRE facilitates research, design, development, manufacture, and deployment, setting technical standards, and aligning domestic renewable energy costs with global benchmarks. Central Electricity Regulatory Commission (CERC) is an autonomous statutory body responsible for regulating the electricity sector at the national level. It regulates the tariff of generating companies owned or controlled by the Central Government and regulates, issues licenses and determine tariff for inter-State transmission. State level State Electricity Regulatory Commissions (SERCs) function as independent regulators at the state level, determining tariffs, issuing licenses, promoting competition, and ensuring consumer protection. They operate under the guidance of the Electricity Act, 2003, and coordinate with CERC for interstate issues. == Power Market ==

In the electricity market in India, power can be traded between generators, distributors and large consumers through bilateral contracts or power exchanges. Bilateral contracts are negotiated between two parties and are often for long term, providing stable prices. Power exchanges allow electricity to be traded through collective transactions, where buy and sell bids are anonymously submitted and aggregated. The market is cleared based on supply-demand equilibrium, with the intersection of the demand and supply curves determining the Market Clearing Price (MCP) and Market Clearing Volume (MCV). Power exchanges helps supplement long term arrangements, while allowing discovery of efficient prices. India has 3 power exchanges: IEX, PXIL, HPX which offer products like Day-Ahead Market, Real-Time Market, Term-Ahead Market, etc. These exchanges are regulated by CERC and also allow trading of Renewable Energy Certificates. In FY 2024-25, out of 1692 TWh supplied, 143.7 TWh (about 8.5%) was transacted via Power Exchanges, with the balance being supplied under long-term or bilateral arrangements. 8.5% is relatively small compared to countries with liberalized markets where exchanges handle a much larger share. Multiple power exchanges create fragmentation and lead to disparate price discovery. CERC has ordered market coupling to create a single clearing price, simplifying procurement, improving cost predictability, and reducing administrative burdens for DISCOMs and industries while improving price discovery and system efficiency. The coupling would be implemented for Day-Ahead Market by Jan 2026 after a shadow pilot project was conducted which could lead to a savings of ₹1.4 crore per day. CERC would also couple other segments like Real-time Market and Term-Ahead Market after pilot runs and consultations. == Environmental Concerns ==

The electricity sector in India has significant environmental implications, primarily due to the continued reliance on fossil fuels, especially coal. While renewable energy capacity is expanding rapidly, coal still dominates the generation mix, contributing to high levels of air and water pollution, land degradation, and greenhouse gas emissions. Air Pollution Prior to 2015, thermal power plants were only required to meet the norms for particulate matter (150 mg/ Nm3 for 210 MW and above; 350 mg/ Nm3 for less than 210 MW plant), with standards set for chimney height for proper emission dispersion (220m for less than 500 MW, 275m for above 500 MW). In December 2015, MoEFCC introduced following regulations for thermal power plants. The power plants were required to comply with these standards by Dec 2017. Due to techno-economic constraints, this timeline was later extended to 2022. Due to persistent challenges related to SO2 emission compliance, in Mar 2021, MoEFCC categorized thermal plants on the basis of location and specified timelines for each. In case of non-compliance after the stipulated deadlines, an Environmental Compensation of Rs. 0.2 / unit generated will be levied for up to 180 days, Rs 0.3 / unit for 180–365 days, and Rs 0.4 / unit for beyond 365 days. Greenhouse gas emissions File:India - CO2 emissions per kWh generated.svg|thumb|CO2 emissions per kwh (2013-23) with electricity sector emitting 928.1 MT CO2, Total emissions are estimated to reach 1114 MT CO2 in FY 2029-30, with an average emission factor of 0.477 kg CO2 / kWh. ==Challenges==

India's electricity sector faces many challenges, categorized across generation, transmission, distribution and consumption. Generation • Dependency on coal: Despite growth in renewables, coal remains dominant in generation, leading to air pollution and carbon emissions fueling climate change. Air pollutants scatter and absorb solar radiation which reduces the amount of light reaching solar PV. Whereas, increased temperatures reduces solar PV efficiency. Transmission and distribution • High technical losses: Despite improvements under various government schemes, T&D loss stands at 19.2% for FY 2023-24. • High commercial losses: Poor billing efficiency (86.9% for FY 2023-24), poor collection efficiency (96.5% for FY 2203-24) and power theft leads to delays, cash flow problems, and loss of revenue for DISCOMs. • Subsidies & political interference: Free/under-priced electricity for certain sectors (like agriculture) burdens state finances. Due to vote-bank politics, electricity prices for farmers are kept artificially low, which often leads to wasteful consumption. Consumption • Quality of supply: While India has achieved 100% household electrification, most households, especially in rural areas, find the electricity supply intermittent and unreliable. ==See also==