India’s electricity industry is in a financial and political tangle. Power producers sit on thousands of megawatts of underutilized plant, while consumers face frequent power cuts, both planned and unplanned.
Financially troubled generators struggle to escape insolvency proceedings. The state-owned banks that have mostly financed power utilities fear that debts of troubled utilities totaling 1.74 trillion rupees will soon go bad.
Aggressive bidding for supply contracts and slower-than-expected demand growth is the root cause. The problems are compounded by difficulties in securing coal and other fuels, high transmission losses, electricity theft and cash-starved distribution companies.
But India`s 36 state and union territory governments are contributing mightily to this financial and economic mess. They persist with populist cross-subsidies — reducing charges for farmers and households at the cost of nonagricultural businesses, especially energy-intensive manufacturing sectors such as steel. Read More
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