India's power sector in ten graphs

The World Bank last week released one of the most well researched reports on India's power sector that I have come across. Here are ten graphics from the richly illustrated report.

1. The graphic below clearly spotlights the Achilles heel of the sector - distribution. Its losses have been mounting alarmingly.

2. The distribution side debt grew the fastest, at a CAGR of 23% in real terms in the 2003-11 period. It also grew from 9% of total electricity sector debt in 2003 to 36% in 2011. Transmission and generation debts grew at a CAGR of 10% and 9% respectively.

3. The cost-revenue gap has almost doubled in 2003-11. In the same period, the average cost rose 7% annually (70% in real terms totally) whereas the average revenues rose 6% (66% in real terms).

4. The main driver of cost has been power purchase costs, which have risen from 56% in 2003 to 74% in 2011. The rise in fuel costs due to imported coal and inefficient power procurement planning (which forces utilities into short-term power purchases) have been behind the rise in power purchase cost.

5. The decomposition of utility losses reveals interesting insights. The losses are decomposed into three buckets - distribution losses beyond an international benchmark of 10%, under-collection of bills, below cost-recovery pricing. In 2003, utilities were charging an average tariff well over cost-recovery and the losses were driven by distribution losses. In 2011, states were in aggregate charging an average billed tariff below cost-recovery. Distribution losses had come down whereas under-pricing losses shot up.

6. Distribution losses dominate in MP, Haryana, Bihar, Jharkhand, Assam, and Tripura. Under-pricing losses dominate for TN, Rajasthan, AP, HP, Punjab, Mizoram. For UP, Karnataka, Maharashtra, and Uttarakhand collection losses matter too.

7. Fortunately, tariffs have been increasing in recent years. In 2012-13, 26 states issued orders raising tariffs. On average states increased tariffs once in two years between 2007-08 and 2012-13.

8. Across the world industrial electricity tariffs are the lowest. However, in most Indian states, industrial tariffs are much higher than both commercial and residential prices.

9. No discussion in Indian power sector is complete without agriculture. While consumption been stable at about 25% since 1991, it formed only 7% of revenues realized in 2011.

10. Apart from agriculture, the other major target of subsidy are domestic consumers, who consume almost a quarter of the electricity sold. A staggering 87% of all electricity consumed by domestic users are subsidized, clearly indicating a very high level of leakage. And this subsidy is large - the tariff subsidy for the 87% is on average Rs 1.5 per kWhr. The cross-subsidy from the remaining 13% is only Rs 0.62 per kWhr. In 2010, 87% of the subsidies were delivered to households above the poverty line. Households below the poverty line either do not have access to supply or consume disproportionately less.