CIAO DATE: 10/04

Thirteen Years of Power Sector Reform in India: Are We Still Groping in the Dark?

Kandula Subramaniam

CASI Working Paper
May 2004

Center for the Advanced Study of India

 

Abstract

In 1991, before the New Power Policy was announced opening the Indian power supply industry to private investment, the country was experiencing power shortages. Sanghvi (1991) estimated that in countries like India, electricity shortages led to a loss of 1.5 to 2 percent of gross domestic product (GDP). Ten years later, India still experiences shortages of power in the form of load-shedding. Even grid breakdowns have become a regular feature. In 2001 alone, there were two major grid collapses, bringing several Indian states to a grinding halt for more than one day.

Prime Minister Atal Behari Vajpayee stated in March 2001:

Power is what powers a nation's economic progress… almost all parts of the country are facing power shortages—and the scarcity is acute in many places. Without adequate, affordable, and reliable power, neither agriculture nor industry and services can grow to their full potential. And without accelerated economic growth, we cannot make a faster and more visible dent in poverty and unemployment.

Has India lost its way in reforms? In 1991 when the power policy was announced, India provided a multi-billion dollar market, attracting investors; by 2001, companies either had exited or were in the process of liquidating their investments.

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