Government and Policy Overview

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Despite the growing potential for private investment in energy and electrification in India, the Indian government remains a key player in the energy sector. This section will outline the major government agencies, programs and initiatives that deal with the provision of energy. Although grid expansion is a major focus of the Indian Government, specific attention will be given to renewable energy and rural electrification projects and policies.


Generally, the responsibility of providing energy is shared between the central government and state governments, with the state governments dealing primarily with taxation. State governments are responsible for implementing national policies as well as creating legislation specific to their individual state’s conditions meaning that the institutional and policy framework within each state varies widely. As will be discussed in the Investment and Trade section, this has resulted in a very challenging policy framework and makes market entry and/or expansion difficult.
There are five federal ministries that deal with energy planning and implementation:

  • Ministry of Power
  • Ministry of Coal
  • Ministry of New and Renewable Energy
  • Ministry of Petroleum and Natural Gas
  • Department of Atomic Energy

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In terms of renewable energy and rural electrification, the two most important ministries are the Ministry of Power (MOP) and the Ministry of New and Renewable Energy (MNRE). The MOP is responsible for the generation and distribution of electricity and oversees six public energy enterprises. These enterprises largely deal with the expansion and management of the grid. Nonetheless, the MOP has a variety of rural electrification programs. The MNRE deals with the research, development, implementation, and promotion of renewable energy technologies. Unlike the MOP, the MNRE does not control any state owned enterprises, but rather works closely with other agencies and private providers of renewable technologies.Beyond the five energy ministries, there are several important ministries that are central to the proliferation of renewable technologies and rural electrification. The Ministry of Environment and Forests approves clean energy projects and regulates where projects such as coal exploration can be sited. The Ministry of Rural Development deals with improving rural livelihoods and managing resources. The ministry is heavily involved in determining the impact of energy projects on rural communities. Finally, the Ministry of Finance, which will be discussed in the finance section, allocates funding and monetary incentives for energy projects.


Programs and Policies

Since the early 1950s, the Indian Government has instituted a multitude of plans and projects aimed at addressing energy concerns. The result has been a complex policy environment in India, which makes achieving specific goals difficult at times. In the past decade or so, these projects have become more focused on rural areas and clean energy. In terms of renewable energy and rural electrification, a few of the most important programs are highlighted below:

The Electricity Act [2003]

This purpose of this act was to create an energy policy framework that was more liberal and open. The act reduces barriers for entry for new enterprises that may only specialize in one step of the value chain by breaking up state electricity providers into generation, transmission, and distribution utilities. The act also deregulated generation by allowing all providers to supply energy to the grid without obtaining a license. In terms of rural electrification, the act also de-licensed transmission in rural areas. Finally, the act requires meters for suppliers and has systems to reduce electricity theft.

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) [2005]

The RGGVY merged all previous energy schemes under one plan. Directed by the Ministry of Power, the RGGVY is funded largely by the government and the Rural Electrification Corporation. The goal of the RGGVY is to electrify all villages through grid expansion. For households living below the poverty line, electricity is provided at no cost. Reports suggest that this program has successfully reached 96% of reachable villages, although the quality and consistency of the electricity is often not very good.

Decentralized Distributed Generation Program

An extension of RGGVY and under the direction of the MOP, the Decentralized Distributed Generation Program covers remote villages where grid access is not practical or too expensive. Focusing on all un-electrified villages with over 100 people, this program promotes standalone distributed energy systems.

Remote Village Electrification Program

Under the direction of the MNRE, this program has similar aims to that of the Decentralized Distributed Generation Program but focuses exclusively on renewable energy sources such as biomass, small-hydro, and solar.

Off-Grid Power/Energy Program

Also an initiative under the MNRE, this program aims to fund research and development of renewable distributed energy systems intended to be used in isolated communities. The program aims to improve systems through testing of products and improving the manufacturing process.

Jawaharlal Nehru National Solar Mission (JNNSM)

The JNNSM is a program under the direction of the MNRE, which aims to promote the expansion of the solar energy sector in India. The program offers financial support and customs exemptions to new solar projects in both urban and rural areas. One of the key provisions of the JNNSM is to ensure India becomes a major manufacturer in solar products.

There are a variety of issues associated with these government instituted programs that have been counterproductive to spreading distributed energy systems. The fact that many of these programs are designed at the federal level means that they are often generalized and lack an understanding of the realities on the ground. There are also a variety of issues regarding the level of research and development at the government level. Finally, as mentioned before, the lack of coordination between federal and state level agencies leads to an inefficient use of resources. In some cases, two ministries could be working on similar research that could be combined such that they learn from one another and prevent using limited funds twice for the same project.

Nevertheless, the policy framework has improved dramatically since the late 1990’s and it can only be expected to become more effective and beneficial for distributed energy providers in the future.

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