Budget 2019 wishlist: Here are the key challenges for power sector

Key challenges

• The revenue shortfall that is, the gap between average cost and average revenue per unit supplied is starting to widen again, causing utilities to delay on payments to suppliers.
• The AT&C losses, although reducing over the years, have remained unchanged in FY19. The current levels are still higher than the policy target, which may cause regulators to disallow them
• Distribution utilities are facing growing competition from decentralised energy resources and must invest in new technologies to improve operational efficiency to be competitive.
• Regulatory uncertainty and stranded assets continue to be a drag to new investment and need an early resolution.

Key developments

• The drive to provide universal electricity access has vastly expanded the consumer base of power utilities. Over 22 million households have become electricity consumers in 2018-19.
• The peak demand grew by a substantial 8% in 2018-19, and unmet peak demand dropped to less than half of previous year's levels.  
• The per capita consumption of electricity has grown steadily every year, and is 60% higher now than a decade back.   
• Coal production from domestic sources led to improved supplies to power plants, helping meet demand growth and keeping merchant prices low.

Kameswara Rao, Partner - Energy & Utilities, PwC India

PwC point of view

“The year has seen a strong improvement in the demand and supply conditions of the power sector. This offers a window of opportunity to the government and utilities to undertake core reforms to improve efficiency and competitiveness, and turnaround the sector.”

Sunil Jain, chief executive officer, Hero Future Energies

Industry voice

“The renewable energy industry faces two prime challenges in terms of land availability and evacuation infrastructure for which the government needs to make funds available for development of solar parks and green corridors in the form of budgetary allocations not subsidies which can be recovered as these are self-sustainable projects. Long term visibility on GST rates for the industry will go a long way in reducing the uncertainty for the sector.”