The constraints on achieving the milestones set for 2022-23 can be divided into two broad categories – overall energy sector and sub-sector specific.
1. Overall energy Subsidies and taxes:
- A variety of subsidies and taxes distort the energy market and promote the use of inefficient over efficient fuels.
- They also make Indian exports and domestic production uncompetitive as energy taxes are not under GST and hence, no input credit is given. This is a serious lacuna.
- Old inefficient plants continue to operate whereas more efficient plants are underutilized.
- As the gap between the average cost of supply (ACS) and average revenue realized (ARR) persists due to high aggregate technical and commercial (AT&C) losses, distribution companies (DISCOMS) use load shedding to minimize losses.
- Although legally independent, Regulatory Commissions are unable to fully regulate DISCOMS and fix rational tariffs.
- Unmetered power supply to agriculture provides no incentive to farmers to use electricity efficiently.
- There is a lot of hidden demand because of unreliable supply and load shedding.
- State power utilities are not able to invest in system improvements due to their poor financial health.
- High industrial/commercial tariff and the cross-subsidy regime have affected the competitiveness of the industrial and commercial sectors.
3. Oil & gas
- Non-discriminatory access for private and public sector companies to the gas pipeline network does not exist.
- Lack of market-driven gas prices for old fields disincentivises further production.
- The gas pipeline infrastructure is also inadequate.
- Land for coal mining is becoming a major issue.
- There is a tendency to expand opencast mining and discourage underground operation even for better quality coal reserves. This aggravates the land availability problem.
- There is no competitive coal market.
5. Renewable energy
- High energy costs result in reneging on old power purchase agreements (PPAs) and erode their sanctity. This leads to uncertainty regarding power offtake and consequently endangers further investments.
- Flexibility in generation and balance requirements for the integration of renewable energy are emerging as major issues.
- There are supply chain issues in biomass power generation.
6. Energy efficiency
- Limited technical capabilities, high initial capital expenditure, limited market and policy issues have adversely affected efforts to achieve energy efficiency High transaction costs (which involves appointing suitable consultants and vendors for execution) relative to project size, especially in the micro, small-scale and medium enterprises (MSME) sector, makes energy efficiency investments unattractive for investors.
- The non-availability of sufficient credit facilities and difficulties in obtaining required finances for energy saving projects are strong deterrents to investments in energy efficiency in India.