Economics · Governance · International Affairs · Law · Public Policy

India’s Energy Policy

Energy is needed for economic growth, for improving the quality of life and for increasing opportunities for development. Ensuring life line supply of clean energy to all is essential for nurturing inclusive growth, meeting the millennium development goals and raising India’s human development index that compares poorly with several countries that are currently below India’s level of development. The Power and Energy Division comprises of four units, Power, Coal, Petroleum and Energy Policy. Together these units review the energy situation in the country within the context of the global energy balance and rising environmental concerns. The division looks at India’s energy options in an integrated manner and proposes policies that would make the energy sector efficient and would ensure energy security.

India’s electricity mix comprises 69% coal, 14% hydro, 10% natural gas, 4% oil, 2% nuclear, and 1% renewables (solar, wind, biofuels, waste, etc). While the amount of off-grid power in India is debatable, depending on one’s estimates, it can skew India’s electricity growth projections dramatically. India’s power deficit in 2010 at peak load was more than 10%.

The energy consumption in India is the fourth biggest after China, USA and Russia. India is largely dependent on fossil fuel imports to meet its energy demands. Due to rapid economic expansion, India has one of the world’s fastest growing energy markets and is expected to be the second-largest contributor to the increase in global energy demand. The total electricity generated in India during the financial year 2014-15 is 1043 billion kWh which excludes electricity generated by Renewable energy sources and the captive power stations feeding into the utility power grid. All India per capita consumption of Electricity is nearly 957 kWh during the financial year 2013-14.

The energy policy of India is characterized by trades between four major drivers:

  • Rapidly growing economy, with a need for dependable and reliable supply of electricity, gas, and petroleum products;

  • Increasing household incomes, with a need for affordable and adequate supply of electricity, and clean cooking fuels;

  • Limited domestic reserves of fossil fuels, and the need to import a vast fraction of the gas, crude oil, and petroleum product requirements, and recently the need to import coal as well; and

  • Indoor, urban and regional environmental impacts, necessitating the need for the adoption of cleaner fuels and cleaner technologies.

In recent years, these challenges have led to a major set of continuing reforms, restructuring and a focus on energy conservation.

Energy conservation has emerged as a major policy objective, and the Energy Conservation Act 2001, was passed by the Indian Parliament in September 2001, 35.5% of the population still live without access electricity. This Act requires large energy consumers to adhere to energy consumption norms; new buildings to follow the Energy Conservation Building Code; and appliances to meet energy performance standards and to display energy consumption labels. The Act also created the Bureau of Energy Efficiency to implement the provisions of the Act. In the year 2015, Prime Minister Mr. Narendra Modi launched a scheme called Prakash Path urging people to use LED lamps in place of other lamps to drastically cut down lighting power requirement.

Rapid growth of the economy places a heavy demand on electric power. Reforms in the power sector, for making it efficient and more competitive, have been under way for several years and while there has been some progress, shortage of power and lack of access continues to be a major constraint on economic growth. Power shortages are an indication of insufficient generating capacity and inadequate transmission and distribution networks. To a great extent this is the outcome of poor financial health of the State Electricity Utilities having high levels of Aggregate Technical and Commercial losses


If India does not embark on serious energy and electricity sector reform, it runs the risk of a sociopolitical explosion. Given both its tremendous economic growth fueled by energy and the equally large poverty rate, addressing these issues is perilous. Manufacturing, industrial production, finance, and commerce cannot function without energy. Similarly, energy access can provide a lifeline and an opportunity for economic development.

India’s energy and electricity shortages have already rattled private sector investors. They still invest because India’s opportunities are so expansive, but if energy sector reform does not occur and energy provision does not become more reliable, investment may dry up.

Moreover, any stagnation in India’s growth rate due to energy insecurity can have very damaging effects on the country’s stability.



About the Author

Girish BhatiaGirish Bhatia is a second year B.B.A. LL.B. student at Raffles University. His areas of interest include the constitutional law and corporate law and he is keen on joining the Indian Army after he completes his graduation. He is working as an active member at Muskaan, an NGO. He has participated in various competitions. He is currently interning with the Model Governance Foundation.

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