As the Indian electricity sector is embarking on increasing the generation and transmission capacities, key challenges lie ahead which also resulted the historical underperformance. Under Performance: India has historically failed to meet its power sector targets by a significant margin and with tremendous opportunities ahead, the power sector continues to be affected by the shortfall both on generation as well as transmission side. For example, for the current installed capacity of around 152 GW, the inter-regional transmission capacity is only about 20 GW (13 percent of the installed capacity). The various proposals in generation and transmission are currently under different implementation stages. However, the power sector in India has been plagued with a set of problems for meeting the planned targets. Although measures have been defined by the policymakers and stakeholders in a sense of complacency that the issues will indeed be resolved and India will plug the supply deficit of power to resolve the same but looking at the past record, it can be estimated that the resolution measures may not be implemented. The biggest indicator of a poor track record is the inability to meet targets on the power generation capacity additions. Variance with the target has been as high as 50 percent in the past.

Some of the specific challenges have been elaborated in the following paragraphs:

1. Fuel Availability: While additional gas supply from KG Basin has eased shortage to a limited extend, supply constraints for domestic coal remain and are expected to continue going forward. Consequently, public and private sector entities have embarked upon imported coal as a means to bridge the deficit. This has led to some Indian entities to take upon the task of purchasing, developing and operating coal mines in international geographies. While this is expected to secure coal supplies it has again thrown upon further challenges. For example, the main international market for coal supply to India – Indonesia, poses significant political and legal risks in the form of changing regulatory framework towards foreign companies. Similarly, coal evacuation from mines in South Africa is constrained by their limited railway capacity and the capacity at ports is controlled by a group of existing users making it difficult for a new entrant to ensure reliable evacuation9. In this case it is essential to manage the risk of supply disruption by different options like – diversification of supply, due diligence on suppliers, unambiguous contracting and strict monitoring among others.

2. Problems of Coal Blocks: The failure to achieve the planned target from the captive coal blocks presents itself as a major challenge to the electricity sector, as only 24 blocks have become operational out of the total 210. Experts believe that the non-operational status of majority of these blocks is attributed to land acquisition (RULES AND REGULATIONSR) issues, permit delays and infrastructure problems. In addition, the developers who have been given the charge of captive blocks are not putting diligent efforts to expedite the mining operations due to their lack of experience in coalmine development. Coal is the mainstay of the power production in India and is expected to remain so in the future.