Power industry

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.



The critical role played by the power industry in the economic progress of a country has to be emphasized. A self sufficient power industry is vital for a nation to achieve economic stability.


Before independence The British controlled the Indian power industry firmly before Independence. The then legal and policy framework was conducive to private ownership, with not much regulation with regard to operational safety.

Post Independence: Immediately after Independence, the country was faced with capacity restraint. India adopted a socialist structure for economic growth and all the major industries were controlled by public sector enterprises. By 1970's India had nationalized most of its energy assets, due to its commitment to social goals. By the late 1980's the Indian economy felt the strain of the socialist agenda followed since independence. Faced with a serious deterioration in public finance and balance of payment crisis, the Union government as part of its policy of economic liberalization allowed greater investment by private sector in the power industry.


Constitutional Position Power as a matter of legislative and executive competence, falls in the Concurrent List (List III of the Seventh Schedule to the Constitution of India).Both the Parliament and state legislatures have the rights to pass laws on the matter and any law passed by the Parliament overrides the existing state laws unless

* The existing law is conserved or saved from such a repeal or

* A law passed by the state legislature receives acknowledgment from the President of India.

Post Liberalization: Understanding the critical part played by the power industry, the Union government passed several laws and restructured the Power Industry to gear it up to meet the challenges posed to the Indian economy post Liberalization.

Electricity Bill 2001

Learning from the experience gained through various reform initiatives, the Indian government passed the Electricity Bill 2001.The Bill seeks to

* Consolidate and rationalize existing laws.

* To address the issues of developing industry including regulation, power trading, non discriminatory open access, choice of dispensing with vertically integrated state enterprises and encouraging private enterprise.

Energy Conservation Act 2001

The Act was enacted by the Indian government to facilitate stringent steps to ensure the efficient use of energy and its conservation. A Bureau of Energy Efficiency was set up to monitor and regulate the Power Industry according to the provisions of the act.

Non Renewable Energy

Fossil fuels

The Industrial Revolution in Europe in the 19th century forced human's to seek alternative sources of fuel to cater to the increasing demand. Focus was shifted to fossil fuels as an alternate source of energy.

Fossil fuels were formed millions of years ago. They are nothing but fossilized organic remains that after millions of years has been converted into oil, gas and coal. Because this process takes a long time, they are known as non renewable.


It is the most easily available fossil fuel in the world. It is mostly carbon and is used as a combustion fuel, especially after the Industrial Revolution. Coal can further be divided into lignite, bituminous and anthracite. Lignite and Bituminous have lesser percentage of carbon and therefore burn faster. They are not environmentally friendly, Whereas Anthracite has about 98% carbon and therefore burns slowly and is more environmentally friendly. Coal can be found in both underground mines and open mines.

Though Petroleum gained prominence through the 20th century, coal still continues to be the most used raw material for power generation.

Oil and Gas

Oil and Gas is mostly found in underground rocks. Millions of years ago when plants and animals died, they got buried in layers of mud and sand. The earth's crust changed its shape and put immense pressure and heat on the dead plants and animals. Over a period of time, the energy in those plants and animals changed into hydrocarbon liquids and gases. They then turned into chemicals called hydrocarbons .Most of the hydrocarbons is found under the sea bed. Oil has a disastrous effect on the environment and many scientists believe the main reason for global warming

Natural gas is usually found near a source of oil. It is a mixture of light hydrocarbons. It is lighter than air and is odorless. It is therefore mixed with a chemical that gives it a strong odour and thereby easy to detect in case of a leak. It is the cleanest burning fossil fuel.

Renewable Energy

Because of the environmentally disastrous effect of non renewable energy, an alternate source of energy which would not pollute the environment and which can also be renewed was tapped. They are known as renewable energy. The various types of renewable energy are

Solar Energy

It is the most easily available renewable resource. After the oil shock in 1970's many countries conducted research work to tap solar energy. It is believed in the next few years millions of consumers across the world would switch to solar energy. In India the Indian Renewable Energy Development Agency and the Ministry of Non Conventional Energy Sources are devising strategies to encourage the usage of solar energy.

Solar energy can be used for cooking, heating, drying, distillation, electricity, cooling, refrigeration, cold storage etc.

Hydel Energy

Energy available in fast flowing water can be used to generate electricity. Waves occur due to the interface of the wind with surface of sea and represent a transfer of energy. This energy can be tapped for commercial purpose.

Hydro Power

It is the one of the best, cheapest and cleanest source of power, though large dams could have environmental and social repercussions. In view of these problems associated with larger dams, experts have advocated the construction of smaller dams. New environmental laws to safeguard the planet from the effects of global warming have made smaller hydropower projects more viable.

Wind Energy

It is the kinetic energy used for many centuries in water sports like sailing and for irrigation. It converts kinetic energy into more usable forms of power. Wind turbines help to convert the energy in the wind into mechanical energy which can be used for generating power. Since the late 1980's the viability of wind energy has gained in prominence across the globe. In India the states of Tamil Nadu and Gujarat lead in the field of wind energy.


It is sourced from the carbonaceous waste of animals and is also the by products from timber industry, agricultural crops, raw material from forest, household waste and wood. It can be used to generate power with the same power plant that are burning fossil fuels and is very much environmentally friendly.

It is being used in the western countries for applications such as combined heat and power generation. In India 90% of the rural households and 15% of the urban households use bio mass fuel.

Nuclear Energy

Nuclear energy can be created in nuclear reactors under strict human control. The nuclear power can be generated by the fission of uranium, plutonium or thorium or the fusion of hydrogen into helium. Nowadays mostly Uranium is used for generating nuclear power. With a view to increase India's dependence on nuclear energy to offset the energy crisis in the country, the Indian government entered into an agreement with the government of USA called the 123 agreement. This agreement aims to assuage greater cooperation between the two countries in the field of nuclear technology.

Future Trends

* According to experts the private sector would play a greater role in power generation and foreign investments would increase considerable in his sector.

* The government of India's Hydrocarbon vision 2025 gives in detail the guidelines for the policies in India for the next 25 years to attract investment in exploration, production, refining and distribution of petroleum products.


The power industry in India was in the private sector at the time of independence and the total commissioned capacity of the power generation in the country was about 1350M.W. There was no power industry in the rural India.

In 1948, the very next year of the independence, the Electricity Supply Act 1948 came into existence with the aim and object to bring the power industry in the public sector. The question of speedy development of the economy was before the nation and without expansion of the a power industry, no economy can expect to develop.

The agrarian sector of our economy was employing more that 75% of the people and without development of the agrarian sector, India cannot develop.

The agrarian sector must develop. But without electricity no intensive forming is possible, so no development. Therefore the power industry was brought into the public sector under the Electricity Supply Act 1948.The state Electricity Boards were constituted in all the bigger states of the country and generating plants, transmission network with Grid substation and Transmission lines were erected. The system of rural electrification for power distribution was developed with the construction of distribution substations and its supply lines. The villages were electrified and for it, the Rural Electrification Corporation was formed to finance the work of rural electrification.

During the last 60 years, the power sector of the country developed tremendously.

Our Commissioned capacity of power generation increased from 1350MW in 1947 to 136000 MW now. It is about 100 times increase in our commissioned capacity of power generation. indian power transmission system expanded widely with the erection of grid substations, super grid substations and allied transmission lines throughout the country. For the development of proper power distribution system, Supply Areas, Circles, Divisions, subdivisions and sections were created in all the state electricity boards of the different states of the country.


In terms of social structure, the power Industrial Revolution witnessed the triumph of a middle class of industrialists and businessmen over a landed class of nobility and gentry.

Ordinary working people found increased opportunities for employment in the new mills and factories, but these were often under strict working conditions with long hours of labour dominated by a pace set by machines. However, harsh working conditions were prevalent long before the Industrial Revolution took place. Pre-industrial society was very static and often cruel—child labour, dirty living conditions, and long working hours were just as prevalent before the Industrial Revolution.

As per the statistics available, about more than half a million villages have been electrified, more than 14 Million of the irrigational motor pumpsets were energized. This development in the power industry in the public sector brought the country more than self reliant in the production of food grains.

The world capitalist system has always been passing through crisis, one after another. Earlier also the world capitalist system has faced the crisis of depressions. But by adopting the different method of shifting its burden to the toiling masses and the working class, it has survived.

This time also the world capitalist system faced a great crisis of market. Because of the scientific and technological development, the production of consumers goods increased tremendously, but the market of the western world was compelled to shrink because of the increased unemployment there, owing to the sophisticated new technology.

The abundance in production and decline in its market, resulted in sharp decline in the profits. So the capitalist world invaded the third world countries economically and financially for the expansion of their markets, and sale of their product to save them from the bankruptcy. Our India is one of those countries which adopted the market economy at the pressure of the world capitalist power. The philosophy of the self reliant and making the nation, a country of mixed economy by constituting the public sector enterprises, etc was forgotten, and just a reverse policy to that of the "self reliance ", was accepted in the middle of 1991. It is just 'U' turn of the economic policy. Our power policy also changed in just the rear direction leading to dismantling of about 13 State Electric Boards, privatization of the power distribution in the state of Orissa and Delhi.

In the dismantled state electricity, boards attempt is on to privatize the power distribution and revenue collection by franchises. The works of the power sector are being done by outsourcing.

The new economic policy at the pressure of the imperialist power and dictated by the World Bank and the International Monetary Fund, was adopted in 1991. The power sector became the first victim in 1996 when the Orissa state Electricity Board and the Haryana state Electricity Board were dismantled by passing new state Acts in 1996. Subsequently others state electricity boards were also dismantled by their own state Acts. Up till now about 13 state electricity boards have been dismantled. In addition to Orissa and Haryana, they are Andhra Pradesh, Karnatka, Gujrat, Uttar Pradesh, Uttranchal, Rajasthan, Madhya Pradesh, Delhi, Assam and Maharastra. West Bengal.

The State Electric Boards which are still existing are Bihar, Jharkhand, Meghalaya, Chhatisgarh, Tamilnadu, Kerala, Himanchal Pradesh & Punjab.

Among the dismantled State Electricity Board all except Assam and Maharstra have been dismantled by enacting state Act, for dismantling.

A central Electricity Act was enacted in 2003. This Act 2003 is the clear manifestation of what the Government of India intends to do in the power sector. Although the terminology being used by them for this dismantling, liberalization and privatization of the power boards, its reforms. But when we analyze different provisions of the Act. 2003, it is just severe i.e. deforms.

During last 16 years when the Government started its attack on the public sector power boards, it went on propagating that there is lower plant load factor, huge transmission and distribution losses, meager revenue collection and irregular and interrupted supply of power in these boards. So they require reforms in all spheres of its working. They also blamed for corruptions and inefficiency in these power boards and claimed that by dismantling the boards and adopting the policy of liberalization, privatization etc, the thing will improve.

But about 15 years have elapsed after the adoption of the new power policy and 11 years have elapsed for the start of the dismantling of Orissa and Haryana State Ele. Boards, there is no positive indication in any sphere of its working. The power distribution work also was privatized both in Orissa and Delhi but there is no possibility of any reforms claimed earlier by the Government.

The Government of India had given the job to study the impact of reforms in different states where electricity Boards have been dismantled, to the Indian Institute of Public Administration. But there is statistically no positive result any where. The "up" marking in the usual fluctuation in PLF, Revenue Collection, T.D. losses etc. have been fabricated as the positive signs of the so called reforms but for the "downs", there is no satisfactory explanation at all.

The National coordination committee of Elec. Emp. & Engineers examined the report and found it total farce, so rejected in its meeting on 13th March 2007.

The electricity Act 2003 has provided for a "stand alone system" for the entire rural India. The rural India will be detached from the grid system and will be asked to generate power of their own for its requirement preferably from the non- conventional source of energy i.e. solar panels, wind mills, sea tides etc with the help of their gram panchayat, co-operatives, franchises etc.

This is not possible for the present as the present consumption of power for the entire rural India exceeds 56% of its total generation. About 140 lakh irrigation motor pumps are being run by electricity. This huge requirement of the rural India can not be fulfilled by the "stand alone system" of the Act.

This system has been provided for the rural India with the thinking that for the present, there cannot be any possibility to supply power in the villages by private companies. Hence ask the village people to be selfreliant in power generation for their requirement. And this power saved from the rural India will be supplied to the urban India for its commercial and high tension use by the private licensees.

The market value of the present power generating plants and its transmission system, exceeds Rs. 9 lakhs crores. And as per this Act the entire rural India is being debarred from their share in the power generation and transmission network.

The other most important points in the Act 2003 is that the subsidized power supply to any sector is prohibited in the new Act. Rather the new tariff policy is to be decided by the Government and the guide lines given by the Act. 2003 is clear that hence forth there would not be any subsidized supply of power to any sector. If for some sector and for some period the subsidized supply of power is necessary then the Government will have to deposit to the licenses an amount equal to the subsidies given by them. At present there are subsidies in the agriculture sector as well as in the domestic sector.

Neither the Government of India in general nor the state Governments in particular is ready to bear the load of the subsidies to be given to the farming sector as well as the domestic sector. The Act. 2003 has also provided that there would be metered supply both in the farming as well as in the domestic sector of the economy. On the basis of the provisions of this Act the State Electricity Regulatory commission has been constituted in all the states to regulate the tariff as per the Act. 2003.

The tariff will be decided on the basis of the cost of power generation and the wheeling charge i.e. cost of transmission of electricity and then there will be the guaranteed profit of a minimum 16% now. Thus, this will lead to a steep rise in the tariff. Then as per Act 2003 there will only be metered supply of power every where. It may be domestic consumption or supply in the agricultural connection, irrigational motor pumps etc.

Thus, the steep rise in the power tariff is not bearable by the common people and farmers. If this tariff is strictly implemented then the motor pumps numbering more than 14 millions in our country will get disconnected as the farmers would not have money to pay the bills. The Govrnment of India and also the state governments are concealing all these facts from the farmers and common people.

The electricity employees of the country united had been fighting against this power policy since the very inception of the New Economic Policy in 1991. But that could not do much as yet. The Government of India is adamant to implement its power policy and the Electric Act 2003, enacted there under.

So far the electricity employees are concerned; it has been attempted in the Act. 2003 to console them on their service conditions etc. but when the employers are changed, one, after another, first in corporatization after dismantling, and again its privatization, in one after another enterprises, the assurance of stability of service conditions is a mere bluff. When the old employers go how the new employers will be compelled to pay the pension and other terminal benefits, is difficult to understand.

But the interest of the common people, the farmers and toiling masses are of great concern and for this the struggle on this issue must be widened among the farmers, common people and the toiling masses. At present they are not aware of the implication of the new power policy and the Act. 2003• enacted under that policy. The organized trade unions particularly of the power sector have this responsibility to make them aware of it by issuing posters, hand bills, holding meetings, seminar on the issue.

Unless the area of the struggle is widened and the farmers and toiling masses join the struggle, the government of India cannot be pushed lack to withdraw the present anti people, antination power policy and the electricity Act. 2003.

So the National Coordination Committee of Electricity Employees and Engineers have decided to hold an all India massive convention in New Delhi on October 10th, 2007. In that convention the employees and people of all the states of India are going to participate and decide the next course of struggle against the power policy of the Government of India.

TECHNOLOGICAL IMPACT on power industry

· Indo US nuclear deal:

India would be eligible to buy U.S. dual-use nuclear technology, including materials and equipment that could be used to enrich uranium or reprocess plutonium, potentially creating the material for nuclear bombs. It would also receive imported fuel for its nuclear reactors.

Social goals and partial deregulation of the electric utility industry.

by Rodney Stevension

Electric power is an essential and vital element of the nation's infrastructure. The electric power industry is also extensively regulated. Federal policy is moving toward partial deregulation of the generation/wholesale power portion of the industry.(1) The purpose of this paper is to consider the impact that the federal government's policies of partial deregulation will have on the attainment of beneficial social objectives.

Reducing Regulation

As with other regulated industries, such as transportation, telecommunications, natural gas, and banking, federal policy toward the electric utility industry has been to reduce regulatory oversight through partial (though substantive) deregulation.(2) The Federal Energy Regulatory Commission (FERC) has played a major role in the movement toward regulation by market forces. FERC's open market vision for the electric industry is that greater reliance on market forces achieved through increasing levels of deregulation will stimulate the development of a workably competitive industry.

In the 1980s and early 1990s, the FERC moved away from its cost of service standard for pricing and toward reliance on market-based rates. The FERC allowed utilities to substitute negotiated rates for short-term sales. The FERC approved transmission pricing that allowed utilities to gamer economic gains arising from their wholesale customers' efforts to secure lower cost supplies from other utilities.(3) And FERC allowed utilities to charge buyers market-based prices for the sale of wholesale power if the utility could demonstrate an "absence of market control" over a buyer - even when the market itself is not workably competitive.(4)

The Energy Policy Act of 1992 has furthered the process of partial deregulation. The Act expands the definition of generating entities that can be exempted from traditional pricing and operation regulatory controls and makes it easier for utilities to establish and expand "exempt wholesale generation" corporate affiliates.

Social Goals and Industry Characteristics

There are a variety of social goals that are important for the ordering and operation of the electric power industry. Social objectives include efficient supply and utilization of electricity, consumer protection, equitable responsibility for maintaining the electric power infrastructure, reduction of adverse environmental and social externalities, community cohesion, and promotion of socially beneficial technological progress and pathways. These objectives require institutional processes and control mechanisms that are congruent with the characteristics of electric production and utilization-and support the promotion or protection of socially enhancing values for consumers and producers alike.

The characteristics of the electric power industry pose significant challenges for achieving these social objectives. The technology of electric power is not conducive for sustaining completely open and competitive electric markets. Electric power technology exhibits significant cost-subadditivities.(5) Utilities experience extensive economies of scale in transmission, though to a. lesser degree in generation. Economies of utilization tend to favor a single distribution service provider in a given service area.

Electric power technology is also associated with a variety of externalities. Electric power poses significant environmental problems at all stages of operation, stresses that include greenhouse gasses, sulfur and nitrogen oxides, air toxins, ionizing radiation, thermal pollution, electromagnetic fields, aesthetic effects, and others. In addition, negative reliability externalities exist in the delivery of electric power. Electric power technology service cannot be maintained when demand exceeds available supply. Because of the interconnected nature of electric utility systems, and because electricity follows the path of least resistance, increased usage by one consumer increases the probability of outages for others.

Transaction cost differences exist between supply-side and demand-side resource options.(6) Because of the centralized nature of electricity supply and decentralized nature of electricity utilization, the transaction costs of supply acquisition are less than the transaction costs of improvements of energy use efficiency. In addition, significant information asymmetries exist. Utilities have better information about present and future supply options and aggregate use requirements than customers or non-utility providers.

Electric Utilities and Competition

Competition can be an effective control mechanism for achieving various social goals. Increased competition can foster greater efficiency in the construction and operation of generating facilities and reduce outage costs by providing greater supply diversity and flexibility in meeting customer needs.

The existence of comprehensive regulation and monopoly service areas has not been inconsistent with competition. Electric utilities compete with each other in the sale of wholesale and retail power. Competition at wholesale involves sales from one electric utility company to another and depends on the access to transmission services. Competition in the sale of retail power occurs for customers along the boundaries of utility service areas, customers who have multiple location options (industrial customers), customers


Global Solar Power Industry

The harnessing of solar energy is not new in fact, development of solar energy dates back more than 100 years, to the middle of the industrial revolution. Solar energy is pollution-free, an important benefit when the cost of removing pollutants from the environment is considered. For example, a typical SWH system will, over its lifetime, displace 10.5 tons of CO2 if replacing a natural gas system, or 71.5 tons if replacing an electric system.

The solar thermal industry is capable of becoming a dynamic, innovative annual business within 20 years, unlocking a new global era of economic, technological and environmental progress. The benefits of solar power are compelling: environmental protection, economic growth, job creation, diversity of fuel supply and rapid deployment, as well as the global potential for technology transfer and innovation. The underlying advantage of solar energy is that the fuel is free, abundant and inexhaustible. The total amount of energy irradiated from the sun to the earth's surface is enough to provide for annual global energy consumption 10,000 times over.

Legal impacts

Constitutional Position Power as a matter of legislative and executive competence, falls in the Concurrent List (List III of the Seventh Schedule to the Constitution of India).Both the Parliament and state legislatures have the rights to pass laws on the matter and any law passed by the Parliament overrides the existing state laws unless

* The existing law is conserved or saved from such a repeal or

* A law passed by the state legislature receives acknowledgment from the President of India.

Post Liberalization: Understanding the critical part played by the power industry, the Union government passed several laws and restructured the Power Industry to gear it up to meet the challenges posed to the Indian economy post Liberalization.

Electricity Bill 2001

Learning from the experience gained through various reform initiatives, the Indian government passed the Electricity Bill 2001.The Bill seeks to

* Consolidate and rationalize existing laws.

* To address the issues of developing industry including regulation, power trading, non discriminatory open access, choice of dispensing with vertically integrated state enterprises and encouraging private enterprise.

Energy Conservation Act 2001

The Act was enacted by the Indian government to facilitate stringent steps to ensure the efficient use of energy and its conservation. A Bureau of Energy Efficiency was set up to monitor and regulate the Power Industry according to the provisions of the act.

Environmental Impacts

When fossil fuels are burned to generate electricity, a variety of airborne gases and particulates are formed. If these gases and particulates are not captured by some pollution control equipment, they are released into the atmosphere. Among the gases emitted during the burning of fossil fuels are sulfur dioxide (SO2), nitrogen oxides (NOx), and carbon dioxide (CO2). In 2007, conventional power plants and combined-heat-and-power plants emitted approximately 2,517 million metric tons of CO2, 9.0 million metric tons of SO2, and 3.7 million metric tons of NOx. Compared to 2006, CO2 emissions increased by 56.8 million metric tons, while SO2 and NOx decreased by 0.5 and 0.2 million metric tons, respectively. The 2007 CO2 figures are 16.4 percent higher than those from 1996, while the SO2 emissions are 30.4 percent lower, and the NOx emissions are 43.6 percent lower than in 1996.