Indian Economic Review
According to the Economic Survey 2022-23, the Indian economy is expected to grow 6% to
6.8% in financial year 2023-24. India is also expected to become a $5 trillion economy in
this decade. Among the main development agendas of the Union Budget 2023-24, is that of
Green Growth which aligns with Indias climate goals as a pillar in the countrys Amrit
Kaal – the journey from 75 years of Independent India to the next 25 years. The Union
Budget has allocated nearly 35,000 crore to support the energy transition objectives of
the country. The main policy initiatives under the Green Growth agenda:
The G20 Presidency gives India a unique opportunity to strengthen its role in the world
economic order. With the theme of ‘Vasudhaiva Kutumbakam, India is steering an
ambitious, people-centric agenda to address global challenges, and facilitate sustainable
economic development.
As per the Centre for Economics and Business Research (CEBR), India will become the
third largest economy by 2035, up from the current fifth position. Expected GDP Growth
Quarter & Financial year 2024 |
Growth (%) |
| Q1 |
8 |
| Q2 |
6.5 |
| Q3 |
6 |
| Q4 |
5.7 |
| FY24 |
6.5 |
Source: RBI MPC Forecasts June 2023 |
|
Indias Power Sector
Indias power sector is transforming rapidly on all fronts in terms of generation,
energy mix, demand growth, and transmission and distribution capacity. As the worlds
third largest electricity consumer Indias power system is one of the most diversified in
the world with generation from a variety of conventional sources such as coal, lignite,
natural gas, oil, hydel and nuclear as well as non-conventional sources such as wind,
solar, biomass, bagasse etc. India now boasts of the third largest installed RE capacity
of 174 GW comprising 127 GW non-fossil fuel and 47 GW hydro as on 31st May 2023. India has
voluntarily set the target of achieving 500 GW of non-fossil based capacity by 2030, in
addition to meeting 50% of its energy requirements from RE sources. Owing to the
intermittent nature of renewable sources, the government and corporates are also pursuing
adoption of variety of storage solutions such as pumped storage, battery, hydrogen etc.
The demand growth of electricity bounced back post easing of pandemic-related
restrictions as electricity consumption grew 9.5% for FY23. The major drivers behind the
increased demand remain rising income levels, urbanisation, and government initiatives to
improve electrification in rural areas. Expansion of the manufacturing and service sectors
is expected to contribute to the growth of demand for power across the country. The
governments push towards increasing the use of electric vehicles (EVs) to reduce carbon
emissions, is also expected to have a positive impact on power demand in India. Few
schemes such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles
(FAME) have helped augment demand for electric vehicles in the country. India has been
taking steps to promote clean energy through the introduction of policies such as the
National Solar Mission and the Green Energy Corridor Project. The country has also pledged
to reduce the emissions intensity of its GDP by 45 percent by 2030 (with respect to 2005
levels) to limit global warming to 1.5 degrees Celsius.
India has submitted its Long-Term Low Emissions Growth Strategy indicating low carbon
transition pathways in key economic sectors. The country has embarked on several
far-reaching initiatives in renewable energy, e-mobility, ethanol blended fuels, and green
hydrogen as an alternate energy source. In continuation of the low carbon transition
pathway, the National Green Hydrogen Mission has assumed significance as its mission to
enable India become energy independent by 2047. India expects to develop Green Hydrogen
production capacity of at least 5 MMT (Million Metric Tonne) per annum by 2030. The
government has been successful in making strides in expanding the access of electricity to
all households in India through Saubhagya and other related schemes. The per capita
consumption of electricity has increased substantially from 819 kWh in financial year 2011
to 1,255 KWh in financial year 2022.
Electricity Value Chain
The electricity value chain includes all activities necessary for generation,
distribution and consumption of electrical energy. The value chain comprises five major
segments: fuel procurement, electricity generation, transmission, distribution and the
end-market or service location.
Electricity consumption is one of the most important indices that signals the
development level of a nation. It is the key ingredient for forecasting economic growth
and vital for a nations overall development. Providing reliable and quality power supply
in an efficient manner has evolved as a key requirement of economic growth.
There is consistent growth in Indias electricity demand due to an increase in customer
base, changes in lifestyle and consumption patterns which requires continual reinforcement
and creation of new electricity infrastructure in generation, transmission and
distribution sectors to meet consumer expectations. The Government of India envisions
providing reliable 24x7 supply of electricity at competitive prices to all consumers
through its ‘Power for All initiative.
Generation
India is now a country with a significant power surplus that has a peak demand of 221
GW vis-a-vis an installed capacity of 418 GW as on 31st May 2023, with thermal capacity
share at around 56%. In line with the governments commitment to the Paris Climate
Agreement to increase the share of green energy in the overall energy mix, renewable
capacity is slated to touch 500 GW over this decade. According to the Central Electricity
Authority (CEA) Indias total generation is 1,624 billion units of electricity in FY23,
out of which 74% was generated from thermal, 11% from hydro, 13% from renewables, and 3%
from nuclear. The overall generation in the country increased by nearly 9% over last year
with conventional power generation recording a growth of 8.2% and renewable power
generation clocking 19.1% growth. The Plant Load Factor of thermal power plants monitored
by the Central Electricity Authority stood at 64.2% in FY23, compared to 58.4% in
financial year 2022.
Transmission
All regional grids across the country are synchronously connected for smooth flow of
power resulting in ‘One Nation – One Grid – One Frequency.
At present, the interregional transmission capacity of the National Grid is 4,71,817ckm
of transmission line and 11,85,058 MVA of transformation capacity (as on Apr23). Besides,
the countrys inter-regional capacity increased by 212% to 1,12,250 MW since 2014. The
planning and approval process of Inter-State Transmission System (ISTS) has also been
simplified as dual consultation for ISTS planning at regional level has been removed and
power to approve ISTS system up to 500 crore has been delegated to the Central
Transmission Utility (CTU) and National Committee on Transmission. Further, CTU function
has been separated from POWERGRID and Central Transmission Utility of India Ltd started
function as CTU w.e.f. 1st April 2022.
Distribution
On the distribution side of the value chain, between 5th August 2022 and 21st September
2022, discoms paid overdue amounts totalling 26,546 crores. Green Open Access Rules
lowered the Open Access cap from 1 MW to 100 kW with no cap on captive consumers, thus
allowing small consumers to buy RE as well.
The Electricity (Right of Consumers) Rules 2020 were published by the Ministry of Power
with the belief that consumers have a right to dependable services and high-quality
electricity and that power systems exist to serve those interests.
A pilot project for a 1,000MWh Battery Energy Storage System (BESS) has been awarded
based on open bidding in accordance with the BESS bidding guidelines. Under the RDSS, 17.3
crore prepaid Smart meters, 49 lakh DT meters, and 1.7 lakh Feeder meters totalling 1.15
lakh crore have been approved so far across 23 States and 40 Discoms.
Up until 31st October 2022, 83,887 metric tonnes of biomass had been used as green fuel
for co-firing in power plants and 39 TPPs have started using biomass in co-firing with
coal.
An Indian technical team from OSOWOG (One Sun One World One Grid) is examining
requirements for connecting India and the Maldives via Lakshadweep. The projected
transmission system will give renewable energy developers visibility into potential
generation sites and the size of investment opportunities. Additionally, it will give
Transmission Service
Providers a view of the expansion opportunities in the transmission sector as well as
an investment opportunity worth roughly 2.44 lakh crore.
Factors Driving Growth in Electricity Consumption
Industrial Growth and Urbanisation
The government envisions a robust economy with manufacturing contribution growing
steadily over the next few years. With various policy, structural and financial year
reforms announced by the Government of India to expand supply in the medium-long term and
avoid long-term damage to productive capacities, industrial activity and exports have
rebounded, leading to greater demand for electricity. Indias industrial production for
the fiscal 2022-23 recorded a 5% rise. Manufacturing output for the year grew at 4.5% YoY
and mining grew at 5.8% YoY. Electricity output was a shining light with a growth of
nearly 9.0% higher than the near 8% rise last fiscal. India has made significant progress
in urbanisation. More than 400 million people are expected to live in Indian cities by the
year 2030. While cities cover a mere 3% of the countrys area, they contribute a
staggering 60% to Indias GDP. In India, urban expansion has contributed to a reduction in
poverty overall, with urban growth accounting for nearly 80% of the total decline in
poverty.
Demand and Supply
According to data available with CEA, all India peak demand reached 207 GW during FY23
registering a 5.6% YoY increase from 201 GW in financial year 2022. Also, all India energy
consumption reached 1,504 BU during FY23 registering 9.5% YoY increase from 1,374 BU
during financial year 2022.
The increased electricity demand was led by the Western Region which saw an increase of
11.0% YoY followed by the Northern, Southern, Eastern and NorthEastern regions with growth
of 10.8%, 5.7%, 10.5% and 3.5% respectively. Similar to the trend last fiscal, states such
as Chhattisgarh, Uttar Pradesh, Gujarat, and Rajasthan have shown growth in demand for
power. A comparison of energy met in the key states during FY23 versus financial year 2022
is as hereunder:
Demand Met
State/UT |
FY23 |
FY22 |
% Change |
| Maharashtra |
186 |
173 |
8% |
| Uttar Pradesh |
143 |
128 |
11% |
| Gujarat |
138 |
124 |
12% |
| Tamil Nadu |
115 |
110 |
4% |
| Rajasthan |
100 |
89 |
12% |
| Madhya Pradesh |
92 |
86 |
6% |
| Telangana |
78 |
71 |
10% |
| Karnataka |
76 |
72 |
4% |
| Andhra Pradesh |
72 |
68 |
5% |
| Others |
504 |
452 |
11% |
All India |
1504 |
1374 |
9% |
Short-term electricity market
According to the CERC, Indias short-term power market increased from 187 BU to 194 BU
in FY23, accounting for 13.7% of the energy met through short term transactions compared
with total generation (excluding RE) of 1,421 BU.
In the short-term market, bilateral transactions - both trader and direct - constituted
34% excluding volumes traded on the Exchange, followed by the power exchanges at 53%, and
Deviation Settlement Mechanism (DSM) transactions at 14%.
Outlook
Post disruptions related to COVID-19, a series of measures were taken by the government
to improve economic activity and convert pandemic-led disruption into an opportunity for
growth. These key measures primarily included the Atmanirbhar Bharat package and the
introduction of Production Linked Incentive (PLI) Scheme executed through various
Ministries. The Union Budget 2023-24 has allocated nearly 8,083 crores under the
Production Linked Incentive Scheme. It has also allocated 35,000 crore for priority
capital investments towards energy transition and net zero objectives, and energy
security. The Economic Survey 2023-24 is optimistic about overall macro-economic stability
of the Indian Economy and for her to remain the fastest growing major economy in the
world.
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