Cross-Functional

World Bank Study on India's Power Sector

A World Bank Study on India's Power sector highlights the achievements made over the last 20 years along with identifying key problems that continue to impact India's ability to provide energy access to all its citizens.

The reports highlights achievements on many fronts: a tripling of conventional generation capacity with active private participation, renewables increasing from zero to 12 percent of the energy mix, the development of a state-of-the-art grid linking the entire country, the transformation of market structure, and the extension of service to more than 250 million users.

Overall, however, the report believes that the potential of the sector remains unrealized. The lack of reliable power is a leading concern for the industry and a potential constraint to growth. Annual per capita consumption is low by global standards and 300 million people lack electricity while the peak deficit is more than 10 percent. Sector finances are weak, with distribution utilities being the main contributors to sector financial losses. Utilities in several states have taken on significant commercial debt to finance their operation, which has led to concerns about poor power sector performance spilling over into the financial sector and broader economy. State electricity boards and distribution utilities also continue to require government support to stay in business, including transfers. This imposes a high opportunity cost on the economy by preempting other development spending.

A key message of the report is that the distribution segment, still largely government owned and run, will require the sustained attention of the authorities if sector performance is to improve. A complete copy of the report could be found here https://openknowledge.worldbank.org/bitstream/handle/10986/18726/889060PUB0978100Box385252B00PUBLIC0.pdf?sequence=1

Shakti Foundation & KPMG's Evaluation/Recommendation for Improvement of/for the Clean Energy Fund

The National Clean Energy Fund (NCEF) is a flagship initiative that aims to provide an impetus for the development of clean energy in India. Introduced in the 2010-2011 budget by the Finance Minister, the stated objective of NCEF was ‘funding research and innovative projects in clean energy technologies’. Although the non-lapsable corpus is expanding steadily through consistently collected levies of INR 50 per tonne of coal (revised to INR 100 per tonne from July 2014), it has faced major challenges in its performance as highlighted in the assessments by research institutes such as National Institute of Public Finance and Policy and the Centre for Budget and Governance Accountability.

The NCEF’s present structure and framework for operation needs to be sharpened and strengthened to improve its effectiveness and performance. Through this study, KPMG have recommended several amendments to the existing guidelines in order to improve the performance of the Fund, including:

Revisions to the existing ‘guidelines for appraisal and approval of projects/schemes eligible for financing under the National Clean Energy Fund’ (F. No. 16(5)/PF-II/2010)

Formulation of a separate process document which provides an overview of the suggested governance structure of the Fund and the basic underlying operational policies and processes

Revised application form with added information requests and detailed guidance

Formulation of a separate proposal appraisal form, listing the basic and detailed appraisal criteria along with assigned weightages

Formulation of a separate document establishing the monitoring and evaluation (M&E) procedures and processes for the fund as well as approved projects