16 Jul, 2019
Role of central and state government in power sector in India
1 mins read | CEF Explains

Context

Electricity is a regulated sector and a concurrent subject in the Indian polity. This implies that both central and state governments play key roles, and can regulate and operate in the electricity market. Figure 1 summarises the role of key stakeholders with respect to policy-making, regulation and key market functions (generation, transmission, operation, etc.).

Figure 1: Indian power market structure

At the national level, policy-making is undertaken by Ministry of Power and Ministry of New & Renewable Energy with state level policies being driven by power or energy departments of the state and union-territories.

The Central Electricity Regulatory Commission (CERC) and the Regulatory Commissions of the state (SERCs) are largely responsible to design the broad contours of the power sector in the country. They frame regulations for power generators (government and private), transmission utilities and the distribution companies in their areas of jurisdiction.

Public companies mostly dominate the power sector across the value chain, except in the generation sector where private sector is very active. While central government backed generation companies may supply power to multiple states, generation companies owned by state governments supply power to the parent state only. Post generation, electricity is transmitted through government or private transmission utilities. The Power Grid Corporation of India Limited (PGCIL) is the Central Transmission Utility (CTU), responsible for majority of the inter-state transmission projects. Similarly, each state has a State Transmission Utility (STU) along with private transmission companies which are responsible for setting up intra-state transmission projects. Companies like Power System Operation Corporation (POSOCO) along with National, Regional and State Dispatch Centres (NLDC, RLDC, SLDC) work in tandem to ensure grid security and balance. Distribution companies (mostly state government owned with few private ones) conduct distribution and retail operations with customers.

In addition to the above stakeholders, an important role is played by trading companies and power exchanges to balance the demand and supply of power. A wholesale electricity market ecosystem has been created for easy interaction between generators and large consumers at both national and state level.

Relevance & Impact      

The Indian power sector is highly complex, given that both central and state government are responsible for its development. Any successful development of infrastructure (power project, transmission or distribution lines) requires buy-in from various stakeholders of central and state government. Many power generating and distribution companies are currently facing severe financial stress due to sector-wide challenges beyond their control. With legislations governing the power sector continuing to evolve (such as amendments to the Electricity Act 2003), the role of many stakeholders is expected to change, leading to simplification in the process of generation, transmission, distribution, and consumption of electricity.

Who should care

  • Foreign and domestic investors/developers in power sector
  • Power sector analysts

Disclaimer

CEF Analysis” is a product of the CEEW Centre for Energy Finance, explaining real-time market developments based on publicly available data and engagements with market participants. By their very nature, these pieces are not peer-reviewed. CEEW-CEF and CEEW assume no legal responsibility or financial liability for the omissions, errors, and inaccuracies in the analysis.
Filled under: Policy & Regulation , Power Markets
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