India has an installed power generation capacity of 310 GW as of December 2016. With this, India has become world's 3rd largest producer and 4th largest consumer of electricity. However, during 2014-15, per capita electricity generation in India was 1,010 kWh with consumption rate at 746 kWh per capita. It shows that India has surplus power generation. But, ironically, more than a third of the country's population still lives without power.

Reasons for this paradox:

• Poor financial health of state distribution companies (Discoms): Therefore, they are not buying power. Because of this, plants are running at only 60% of their capacity. This is the biggest reason for supply-demand mismatch.
• Reasons for this state of affairs: Irrational tariffs i.e. tariffs are lower than production cost; populist measures by states, like waver of electricity bills; free
• powers to some sections; non-payment of subsidy by states to Discoms; high AT&C losses etc.
• Underutilized renewable energy: It is because of technical difficulties in power from renewable plants (solar) on conventional grids and high tariffs..
• Irrational Tariffs: There is huge disparity in power tariffs across states, resulting in subdued demand in some states. Further, there are multiple commercial tariffs for different industries making it complex for Discoms to recover the price, while on the other hand, big consumers go for captive power generation.

So it is misleading to say that India has excess power. Statistics show the extent to which power supply falls short of demand by only those connected to the grid. With about 1/3rd of total households still not having electricity connection, the numbers underestimate the extent. Also, it does not capture the quality of power supplied. There are no metrics to estimate the potential power requirement according to
standards of living.

UDAY scheme: A way out?

• Debt restructuring of Discoms: It mandates states to take over 75% Discoms debt outstanding as of September 2015.
• Reduction of AT&C losses to 15% by 2018-19 from more than 30% now.
• Rationalize tariffs to reduce the gap between average cost of supply and average revenue realized by 2018-19.
• States shall take over future losses of Discoms in a phased manner and enforce financial discipline.

In this way, UDAY scheme seeks to improve the financial health of Discoms thereby enabling them to buy surplus power to meet the demand.

Further reforms:

• Implement Open Access (OA) Policy: This policy, contained in Electricity Act 2003, provides for unified national power market. Under this policy, large consumers can directly buy power from power plants, rather than through Discoms. This would bypass the disabilities of Discoms, while filling the gap between demand-supply. Indian Railways is going for this policy.
• Effective implementation of schemes: Such as Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for providing round the clock power to the rural areas; and Power for All to ensure adequate power to all by 2019.