India’s Power Sector: Progress and Reforms

UPSC Syllabus: Gs Paper 3- Infrastructure

Introduction

Electricity is essential for economic activity, daily life, and digital systems. India has moved from power shortages to a system with improved capacity, reliability, and access. This shift is due to sustained investments, better policies, and institutional reforms. The sector now reflects adequacy in supply, expansion in infrastructure, and stronger governance. It also supports economic growth while preparing for future energy needs and sustainability.

Growth and Infrastructure Expansion in India’s Power Sector

1. Rising Electricity Demand and Capacity Expansion: Electricity demand has increased across households, industry, and agriculture. In FY 2025–26, a record 52,537 MW capacity was added, including 39,657 MW renewable energy, marking the highest-ever annual addition.
2. Growth in Installed Capacity: India’s total installed capacity reached 520.51 GW by January 2026, showing over 11% growth. This ensures the system can meet rising consumption needs.
3. Strengthening Transmission Infrastructure: New substations, upgraded transformers, and high-capacity transmission corridors improved power flow. These steps reduced bottlenecks and improved grid stability.
4. Expansion of National Grid: The transmission network crossed 5 lakh circuit km, with 1,407 GVA transformation capacity. This strengthens integration of diverse energy sources across regions.

From Deficit to Reliable Power Supply

1. Reduction in Power Shortages: Peak demand of 242.49 GW was successfully met in FY 2025–26. Power shortages declined sharply from 4.2% in FY14 to 0.03% in 2025, showing strong supply adequacy.
2. Improved Rural and Urban Supply: Rural supply increased from 12.5 hours to 22.6 hours daily, while urban supply rose to 23.4 hours. This improved reliability across regions.
3. Increase in Electricity Consumption: Per capita consumption rose to 1,460 kWh in 2024–25, up by 52.6% from 2013–14. This reflects better access and economic activity.
4. Reduced Dependence on Traditional Fuels: Reliable electricity reduced reliance on diesel and traditional fuels. This lowered costs and improved environmental outcomes.

Universal Access and Distribution Strengthening

1. Last-Mile Connectivity Expansion: Schemes like DDUGJY, IPDS, and Saubhagya strengthened rural and urban distribution networks. These improved infrastructure and ensured electricity access.
2. Mass Electrification Achievements: About 18,374 villages were electrified and 2.86 crore households received connections. Total investment was around ₹1.85 lakh crore.
3. Modernisation of Distribution Systems: Urban systems adopted IT tools like smart metering, ERP, and real-time monitoring. These improved efficiency and service delivery.
4. Importance of Distribution Companies (DISCOMs): DISCOMs connect consumers with the power system. Their performance affects service quality and financial stability of the entire sector.

Distribution Sector Reforms and Financial Turnaround in India

1. Revamped Distribution Sector Scheme (RDSS): Launched with an outlay of ₹3.03 lakh crore, with ₹2.8 lakh crore approved. It aims to improve efficiency and financial sustainability.
2. Smart Metering and Consumer Empowerment: Around 5.62 crore smart meters have been installed. These provide real-time usage data and help consumers manage consumption.
3. Reduction in Financial Stress: Outstanding dues reduced from ₹1.4 lakh crore to ₹4,109 crore due to LPS Rules. This improved liquidity across the sector.
4. Improvement in DISCOM Finances: DISCOMs reported ₹2,701 crore profit in FY25, reversing large losses in FY14. This marks a major financial turnaround.
5. Decline in AT&C Losses: Losses reduced from 22.62% to 15.04%, showing better efficiency. Billing and collection systems improved significantly.
6. Narrowing ACS-ARR Gap: The gap reduced from ₹0.78/unit to ₹0.06/unit, showing better cost recovery. This supports long-term financial sustainability.

Policy Reforms and Clean Energy Transition in India’s Power Sector

1. National Electricity Plan (2023–2032): Targets 458 GW peak demand by 2032 with ₹9.15 lakh crore investment. Transmission network will expand to 6.48 lakh ckm and 2,345 GVA capacity.
2. Electricity (Amendment) Bill, 2026: Focuses on cost-reflective tariffs and reduced cross-subsidies. It allows industries to procure power directly and improves competitiveness.
3. Automatic Cost Adjustment Mechanisms: Monthly adjustments align costs with tariffs. This prevents financial losses for distribution utilities.
4. Green Energy Open Access Rules: Consumers above 100 kW load can access renewable energy with simplified approvals. This promotes clean energy use.
5. Growth in Renewable Energy Capacity: India ranks 4th globally in renewable capacity. Solar grew from 3 GW (2014) to 140 GW (2026), while wind reached 54.65 GW.
6. Record Renewable Energy Contribution: On 29 July 2025, renewables met 51.5% of electricity demand (203 GW). Solar, wind, and hydro played major roles.
7. Promotion of Rooftop Solar: Under PM Surya Ghar scheme, 31.04 lakh households installed rooftop solar. The target is 1 crore households by 2026–27.
8. Strengthening Transmission for Renewables: Investment limits of POWERGRID increased to support large projects. This helps in efficient evacuation of renewable energy.

Institutional Strengthening and Global Engagement

1. Role of Bharat Electricity Summit 2026: The summit provides a global platform for collaboration and innovation. It focuses on sustainability and energy transition.
2. Large-Scale Participation and Investment: Over 25,000 attendees, 500 exhibitors, and ₹50 lakh crore investment opportunities are expected. This reflects global interest in India’s power sector.
3. Platform for Technology and Partnerships: The summit includes discussions, exhibitions, and knowledge exchange. It supports innovation and global cooperation.

Conclusion

India’s power sector has moved from shortage to stability through sustained reforms, infrastructure expansion, and policy support. Reliable access, financial improvement, and renewable growth show structural progress. Continued focus on distribution efficiency, clean energy integration, and future demand planning is needed. The sector now plays a key role in supporting growth, inclusion, and long-term sustainability.

Question for practice:

Discuss how infrastructure expansion, distribution reforms, and policy measures have contributed to improving reliability, access, and sustainability in India’s power sector.

Source: PIB