The power sector is one of India’s significant and most essential energy sectors, with high demand and consumption. The history of power sector reforms dates back to the 1980s, when India suffered massive loss. The state electricity boards (SEBs) nearly crossed Rs 3000 crore loss without subsidy and suffered an enormous financial burden. The state electricity boards of India are crucial for the regulation of electricity and management of the power sector. The SEBs are responsible for generating, transmitting, and distributing electricity across their states. The financial condition of the SEBs stabilised only after several power sector reforms in India. 

State Electricity Boards and History of Power Sector Reforms 

  • The constitution of India formulated the Electricity Supply Act of 1948, which further established the Central Electricity Authority and the State Electricity Boards (SEBs).
  • The SEBs provided autonomous power and were responsible for regulating and managing electricity generation, transmission, and distribution across various states. The role of the CEA was to advise on the power policies and laws.
  • The irregularities and loss led to the initiation of power sector reforms in India. The reforms started in 1991 after key concerns were identified. 
  • The history of power sector reforms started in 1991 with restructuring the Indian power sector. The regulatory reforms were initiated through the Electricity Regulatory Commissions Act 1998. In 1991, the Indian power sector saw a significant change allowing private investment in the power generation sector. 

The poor regulation and state of affairs led the central government to make several policy changes and power sector reforms in India. Most of the SEBs in India were working under a financial crunch and suffered massive losses. The history of power sector reforms starts from unsatisfactory operational efficiencies, high transmission and distribution losses, and higher costs. 

Reforms in the Power Sector of India 

The history of power sector reforms started in 1991 due to the inability of the SEBs to endure the financial losses and manage the overall power sector. The introduction of the Independent Power Producers (IPP) was the first reform that was done due to the following reasons:

  • Close the gap between high demand and low supply of electricity 
  • Poor financial and technical performance  by the state electricity boards
  • Lack of funds and resources to mobilise and use funds by the government for developing infrastructure for power production 
  • Poor collection of bills due to inaccurate calculation and misappropriation of the reports. 

The role of the government in providing electricity in India across various terrains and generating surplus electricity was possible due to all the reforms. The third-party investment was the initial step in the history of power sector reforms leading to the amendment of the legislation. The India Electricity Act of 1910 and the Electricity Supply Act of 1948 were amended to include private investment in power generation. 

Role of government in providing electricity in India

The government made many changes in the policies, and hence the reformations helped the SEBs manage the generation, distribution, and transmission of the electricity. The history of Power Sector Reforms as effective from 1991 brought significant changes through private participation in the power sector:

  • The private sectors were permitted to set up thermal projects, hydroelectric or solar projects as infrastructure for large scale generation of electricity. 
  • The private sectors were even allowed to supply and distribute energy across many areas. 
  • The allowance of 100% FDI is one of India’s major power sector reforms. 

The National Development Council steered the reform process in 1993. It took care of many aspects like the power sector must be accountable to the consumers, the state power sector restoration for generating autonomy, and SEBs provided with the power to manage the technical, managerial, and financial aspects of electricity generation. In the history of power sector reforms, Orissa was the first state to enact the power sector reform Act in 1996. It did so by separating the SEBs of Orissa into separate entities for the generation, transmission, and distribution of electricity. 

Role of the SEBs in the power sector 

The SEBs are the state governed monopoly entity responsible for generating, transmitting and distributing power within a particular state. The Indian Electricity Act of 1910 provides power and undertaking to the state electricity boards (SEBs) so that the state government board is responsible for handling electricity for a particular state. The role of the government in providing electricity in India is through central and SEBs that manage the power sector. The central entity or PSU, like Power Grid Corporation, distributes electricity across India. However, SEBs only handle the power sector and demand for the respective state.

Conclusion

Electricity generation, transmission, and distribution are three major segments of India’s power sector. The financial distress, increased demand and low supply, and lack of appropriate performance by the SEBs led to many issues and created a financial burden on the state boards. Hence, the history of power sector reforms started to resolve the gap between demand and supply and set up infrastructure for electricity generation. One of the major reforms in the power sector in 1991 and post is the inclusion of the private players. The 100% FDI and allowed privatisation helped set up hydroelectric, solar etc., plants for power generation, its transmission and distribution.