Energy and utilities

Detail

1. What energy infrastructure and utilities are

• Energy infrastructure is the set of physical structures that supply energy (Class 7). Examples:
• windmills and wind farms;
• solar parks;

• oil and gas pipelines.

• Utilities are basic services delivered through networks. Examples are electricity lines and water pipelines.

• Solar panels on rooftops. Class 7 suggests putting solar panels on buildings. The power is made where it is used, so less has to come from coal plants, and emissions fall.
• The state's role (Class 10, Sectors of the Indian Economy).
• The government supplies electricity at rates that small industries can afford.
• The government pays part of the cost itself, which is a subsidy.
• This is why power is treated as a public service and not only as a business.

2. Legal and institutional frame

• Constitution: electricity is entry 38 of the Concurrent List (List III, Seventh Schedule).
• Both Parliament and state legislatures can make laws on it.

• Distribution (the last-mile supply to homes and firms) is run mostly by the states.

• Electricity Act 2003 is the main law. It did four things:

• Unbundling. Each old State Electricity Board (SEB) was split into separate companies for generation, transmission and distribution (discoms).
• Regulators. It set up the Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commissions (SERCs). These bodies fix tariffs and settle disputes.
• Open access. Big buyers can use the network to buy power from any supplier (see Section 7).
• Power trading. Power can be bought and sold as a product, and this later led to power exchanges.

3. Capacity: where India stands

• Installed capacity is the maximum power all plants could produce at one moment, measured in GW.

• 505 GW as on 31 October 2025. Non-fossil sources made up over 259 GW of this [5]. (NCERT scaffold: about 480–500 GW in 2025.)

• The non-fossil milestone:

• In June 2025, non-fossil sources reached 50% of installed capacity [4].
• This met India's NDC target five years early. An NDC (Nationally Determined Contribution) is a country's climate pledge under the Paris Agreement, and this target was set for 2030 [4].

• The share rose from 32% (2014) to 51% (October 2025) [2].

• Next goal: 500 GW of non-fossil capacity by 2030.

• Capacity is not the same as generation.
• Solar plants work only in daylight, and wind depends on the weather.
• So a 50% share of capacity gives a much smaller share of the units of power actually produced.
• Coal still produces most of India's electricity.

4. Energy security

• Energy security means three things:
• energy supply does not stop;
• prices stay affordable;

• the system can survive supply shocks such as wars, sanctions or price spikes.

• Crude-oil import dependence:

• India imports about 85% of the crude oil it needs.
• In 2022-23, imports were about 87% of crude consumption [7].

• (NCERT scaffold: 85–88%.)

• Strategic petroleum reserves (SPR) are government-owned emergency stocks of crude oil, kept in underground rock caverns.

• Phase I capacity: 5.33 MMT (million metric tonnes) at three sites:

  Site	Capacity
  Visakhapatnam (Andhra Pradesh)	1.33 MMT
  Mangaluru (Karnataka)	1.5 MMT
  Padur (Karnataka)	2.5 MMT
  - Stock held: 3.52 MMT of crude was stored in the caverns as of March 2025 [6].
  - Phase II (approved July 2021): 6.5 MMT more, built as commercial-cum-strategic reserves under PPP (public–private partnership) [6].
  - Chandikhol, Odisha: 4 MMT.
  - Padur, Karnataka: 2.5 MMT.
  - Total storage cover: India's crude and petroleum-product storage equals 74 days of use [7].
  - Standing Committee recommendation: the Standing Committee on Petroleum and Natural Gas (2025) asked India to reach 90 days of crude storage, which is the global standard [7].

• Other levers:

• Supplier diversification. India buys from many countries so that trouble in one region cannot cut off supply.
• National Green Hydrogen Mission (2023). Green hydrogen is hydrogen made from water using renewable power. It can replace imported gas and oil in fertiliser, refining and steel.
• Nuclear Energy Mission (Budget 2025-26):
  • target of 100 GW of nuclear capacity by 2047 [11];
  • ₹20,000 crore allocated to develop at least five indigenous Small Modular Reactors (SMRs) by 2033 [11];
  • SMRs are small nuclear reactors built from factory-made parts.

5. Plant load factor (PLF): how well plants are used

• Plant load factor (PLF) measures how much a plant actually produced, compared with the most it could have produced.
• Formula: PLF (%) = Actual generation ÷ (Installed capacity × Hours in the period) × 100
• Worked example:
• A 1,000 MW plant running all year can make at most 1,000 MW × 8,760 hours = 8,760 GWh.
• It actually makes 6,000 GWh.

• PLF = 6,000 ÷ 8,760 × 100 = 68.5%.

• The coal fleet runs at about 68–70% PLF (verify for the latest year).

• Why PLF matters:
• A low PLF means expensive plants are sitting idle.
• The discom still pays their fixed costs, so it has less money for other things.

6. Distribution losses, discom debt and reforms

• Aggregate technical and commercial (AT&C) losses are the share of power put into the distribution network that is never paid for. They have four causes:
• technical losses, such as heat lost in wires and transformers;
• theft;
• metering errors;

• unpaid bills.

• Formula: AT&C (%) = [1 − (Billing efficiency × Collection efficiency)] × 100

• Billing efficiency = units billed ÷ units input.

• Collection efficiency = money collected ÷ money billed.

• Worked example:

• Input is 100 units, and 85 units are billed, so billing efficiency is 0.85.
• 95% of bills are paid, so collection efficiency is 0.95.
• Units actually paid for = 100 × 0.85 × 0.95 = 80.75.

• AT&C = 19.25%.

• Trend: AT&C losses fell from 21.91% (FY21) to 16.16% (FY25, provisional) [2][3]. (NCERT scaffold: about 22% in FY21 to about 16% in FY24.)

• The ACS–ARR gap:
• It is the Average Cost of Supply minus the Average Revenue Realised for each unit sold.

• It fell from ₹0.69/kWh (FY21) to ₹0.11/kWh (FY25, provisional) [2][3].

• Why losses create debt:

• The discom buys power but is not paid for all of it.
• It then delays paying the generators.
• To cover the shortfall, it borrows.

• The state has to rescue it, which strains state finances.

• Reforms:

• UDAY (Ujwal DISCOM Assurance Yojana, 2015). State governments took over most of their discoms' debt. In return, discoms promised to cut their losses.
• Revamped Distribution Sector Scheme (RDSS, 2021):
  • aims to bring AT&C losses down to 12–15% by installing prepaid smart meters, where people pay before they use power, as with a mobile recharge;
  • sanctioned so far: 19.79 crore prepaid smart meters, 52.5 lakh distribution-transformer (DT) meters and 2.05 lakh feeder meters, costing ₹1,30,671 crore in all [2][3].
• Late Payment Surcharge Rules 2022. Discoms must clear their unpaid bills to generators in instalments. If they default, their access to power supply is cut back.

7. Market design

• Power purchase agreement (PPA)
• What it is: a long-term contract, often 25 years, between a generator and a buyer, usually a discom. It fixes the tariff and the supply terms.
• Risk 1: demand may change or cheaper solar power may arrive, but the discom must still pay for capacity it does not need.

• Risk 2: states may try to renegotiate the PPA. This scares away investors.

• Cross-subsidy

• What it is: some consumer groups, such as industry and commerce, pay more than cost. This lets others, such as farmers and poor households, pay less than cost.
• Tariff Policy rule: tariffs should stay within ±20% of the average cost of supply.
• Example: if the average cost is ₹7/unit, tariffs should lie between ₹5.60 and ₹8.40.

• Same logic as railways: rail freight charges subsidise passenger fares, and the result is the same. High-paying users try to leave, through open access or captive plants (a firm's own power plant for its own use).

• Open access (electricity)

• What it is: large consumers or generators can use the transmission and distribution network to buy or sell power with any supplier.
• Charges: they pay wheeling charges for using the wires and a cross-subsidy surcharge (CSS), which makes up for the cross-subsidy the discom loses when they leave.

• Green Energy Open Access Rules 2022: the minimum size for buying green power this way was cut to 100 kW.

• Time-of-day (ToD) tariff

• What it is: the price changes with the time of day.
  • It is higher at peak hours, usually in the evening.
  • It is lower during solar hours, in the daytime.
  • The aim is to move demand to the hours when solar power is plentiful.
• From April 2024: applies to commercial and industrial users of 10 kW or more.
• From April 2025: applies to most other consumers except agriculture (verify).

8. Renewables pricing

• Feed-in tariff (FiT)
• What it is: a guaranteed, long-term price for renewable power, often set above the market price.
• Where it was used: early wind and solar projects, including JNNSM (Jawaharlal Nehru National Solar Mission, 2010).

• Later replaced by reverse auctions: projects go to the bidder who offers the lowest tariff.

• Levelised cost of electricity (LCOE)

• Formula: LCOE = Lifetime discounted costs ÷ Lifetime discounted generation.
• What it means: the average cost of one unit over the plant's whole life. It is used to compare technologies, such as coal and solar.

• Example: discounted lifetime cost of ₹500 crore ÷ discounted output of 200 crore units = ₹2.50/kWh.

• Grid parity

• What it is: renewable power costs the same as, or less than, conventional grid power.
• Where India stands: solar auction tariffs of about ₹2.5/kWh are now cheaper than power from new coal plants.

• Catch: solar plus storage (batteries or pumped hydro), which is needed for evening supply, costs more.

• Renewable purchase obligation (RPO)

• What it is: discoms and large consumers must buy a minimum share of their power from renewable sources.
• New name: the Energy Conservation (Amendment) Act 2022 turned it into the renewable consumption obligation.

• How to meet it: buy renewable power directly, or buy renewable energy certificates (RECs).

  • 1 REC = 1 MWh of renewable power.
  • RECs are traded on power exchanges under the CERC framework of 2010.

• Net metering

• What it is: rooftop solar owners send extra power to the grid. That power is credited against what they draw from the grid, so they pay only for the net amount.
• PM Surya Ghar Muft Bijli Yojana (2024):
  • outlay of ₹75,021 crore;
  • target of 1 crore households, with up to 300 free units a month [10];
  • progress by 14 August 2025: 58.81 lakh applications received and 17.24 lakh households benefited [10].

9. Water utilities

• Jal Jeevan Mission (JJM) was launched on 15 August 2019. Its goal is a functional household tap connection for every rural home [8].
• At launch (2019): only 3.23 crore households (16.71%) had tap water [8].
• By 15 December 2025: 15.76 crore of 19.36 crore rural households had tap water (81.42%) [8].
• Extension: the Mission now runs to 2028, with total outlay raised to ₹67,000 crore (Budget 2025-26) [9].

The climate side of the renewable transition is covered in environment-sustainable-development.

Prelims Hooks

• Electricity is entry 38 of the Concurrent List. It is not in the State List.
• The Electricity Act 2003 unbundled the SEBs, created CERC and SERCs, and allowed open access and power trading.
• PLF = Actual generation ÷ (Installed capacity × hours) × 100. A 1,000 MW plant producing 6,000 GWh in a year has a PLF of 68.5%.
• AT&C (%) = [1 − (Billing efficiency × Collection efficiency)] × 100. The national figure fell from 21.91% (FY21) to 16.16% (FY25, provisional) [2].
• SPR Phase I = 5.33 MMT: Visakhapatnam 1.33 + Mangaluru 1.5 + Padur 2.5. Phase II adds Chandikhol (4 MMT) and Padur (2.5 MMT) under PPP [6]. Trap: Padur appears in both phases.
• Non-fossil sources reached 50% of installed capacity in June 2025, meeting the 2030 NDC target early. This is a share of capacity, not of generation [4].
• 1 REC = 1 MWh. RECs are traded on power exchanges under the CERC framework (2010).
• Green Energy Open Access Rules 2022 cut the threshold to 100 kW.
• Tariff Policy: tariffs should stay within ±20% of the average cost of supply.
• Nuclear Energy Mission (Budget 2025-26): ₹20,000 crore for at least 5 indigenous SMRs by 2033. The capacity target is 100 GW by 2047 [11].

Mains Points

• Discoms are the weak link in the power chain.
• High AT&C losses and a large ACS–ARR gap lead to unpaid dues to generators and repeated bailouts: UDAY (2015), then RDSS (2021).

• Losses have fallen to 16.16% (FY25) [2], but lasting repair needs tariffs that reflect cost, SERCs free from political pressure, and subsidies paid on time by states.

• Cross-subsidy creates a trade-off.

• Charging industry more keeps power cheap for farmers and poor households.
• But it raises industry's costs, which hurts Make in India.
• It also pushes industry to leave through open access, which shrinks the discom's revenue further, as with rail freight cross-subsidies.

• Suggested way out: Direct Benefit Transfer of power subsidies (paying the subsidy straight into consumers' bank accounts) together with smart meters.

• Energy security has two sides.

• Oil: about 85% import dependence and only 74 days of storage, against a 90-day global standard [7], leave India exposed to shocks such as those in West Asia.

• Power: the 50% non-fossil capacity share [4] cuts import risk but raises new needs: firm, round-the-clock supply through storage, nuclear and flexible coal, plus secure critical-mineral supply chains.

• Utilities are welfare infrastructure.

• JJM (81.42% coverage) [8] and PM Surya Ghar [10] tie infrastructure to health, women's time saved and household incomes.
• Link to GS-II (welfare schemes, cooperative federalism) and SDG 6 (clean water) and SDG 7 (clean energy).