India: Challenges to Electricity Production

India's electricity-generation capacity has struggled to keep pace with the country's rising demand. Insufficient rate and tariff schemes, dilapidated infrastructure, theft and corruption have retarded development and prevented the government's energy expansion efforts. The world saw the result of India's energy deficiencies July 31, when a power outage left some 680 million residents without electricity for several days.

In an attempt to improve performance and attract foreign investment in the ailing sector, the Indian government on Sept. 14 announced a set of controversial reforms that would allow some foreign ownership of Indian power brokerages. Then on Sept. 25, New Delhi introduced a debt-restructuring program for state power distribution companies, which serve as intermediaries between those who buy and those who sell electricity.

In addition to institutional problems, India's coal industry also impedes the development of its power generation capabilities. While the recent reforms will help remove considerable financial pressure from state power services companies, New Delhi's ability to reach its short- to medium-term power generation goals will be challenged by two factors: a high level of state autonomy and the decrepitude of India's domestic coal sector.