India is the third-largest producer and consumer of electricity globally after China and the United States. In FY 2024-25, the country generated 1824 TWh of power, of which 25% came from non-fossil sources.[3] India has achieved near-universal household electrification, though the quality and reliability of supply remain uneven across regions[4].
Electricity in India is generated by both public and private sector utilities, transmitted through a unified national grid, and distributed primarily by state-owned distribution companies. The sector has undergone significant reforms since the Electricity Act of 2003, which introduced competition, open access, and independent regulation. Despite rapid growth in generation and transmission capacity, the distribution segment continues to face financial stress due to high technical and commercial losses, tariff constraints, and subsidy burdens.
India has also emerged as a global leader in renewable energy deployment, with renewables accounting for 89% of capacity additions in FY 2024-25.[5] The country has set ambitious targets to achieve 500 GW of non-fossil fuel capacity by 2030[6] as part of its transition toward a low-carbon energy system.
History
Electricity was first introduced in India in 1879 with the demonstration of electric light in Kolkata[7], followed by the country's first hydroelectric power station at Darjeeling in 1897[8]. During the colonial period, electricity supply was largely developed by private companies serving urban centers and industries.
After independence in 1947, electricity development became a state-led activity. The Electricity (Supply) Act, 1948 established State Electricity Boards (SEBs), which took responsibility for generation, transmission, and distribution within each state. The sector expanded rapidly through successive Five-Year Plans, with coal and large hydroelectric projects forming the backbone of India's power system.
By the early 1990s, financial stress in SEBs and rising demand led to policy reforms. The 1991 economic liberalization permitted independent power producers (IPPs), and the Electricity Regulatory Commissions Act,1998 created independent regulators. These steps culminated in the Electricity Act, 2003, which consolidated prior legislation, mandated the unbundling of state utilities. Generation and distribution was de-licensed to encourage competition, and open access was introduced in transmission.
Since the 2010s, India's power sector has seen major structural changes. The regional grids were fully synchronized in December 2013 to form a single national grid[9]. Large-scale electrification programmes such as the DDUGJY and Saubhagya scheme extended electricity access to nearly all households[10]. In parallel, India has pursued rapid renewable energy deployment, positioning itself among the world's largest markets for solar and wind power.
India is the third-largest producer of electricity in the world. The nation's utilities produced 1824.2 TWh of power in FY 2024-25 with about 25% generated from non-fossil sources[3]. Generation was de-licensed in the Electricity Act of 2003, since then private participation has increased from 10% of overall share in FY 2003 to 37% in FY 2023.[11]
Generation Mix (FY 2024-25)
Generation and capacity installed in India by source (utilities)
India has huge coal reserves and as such it has been the backbone of India's electricity generation, providing base-load power. The government has indicated that coal will remain significant in the near future, and will likely peak between 2030-35[25].
Utilization of gas plants has been limited by constrained domestic supply and high prices of imported LNG[26]. Oil-fired generation plays a negligible role, used mainly for peaking or emergency power.
India operates a fleet of pressurized heavy-water reactors (PHWRs) managed by the NPCIL. The government has set a target to install 100 GW of nuclear capacity by 2047 and has initiated steps to reach 22.5 GW by 2031-32. It is also aiming to develop at least five indigenously designed and operational small modular reactors (SMRs) by 2033[27].
Renewable energy generation has doubled from 181.7 TWh in FY 2011-12[15] to 365.7 TWh in FY 2022-23[21]. However its overall share in total generation has been around 20% for the time span. This share is likely to reach 40% by 2030[28], due to the government's target of installing 500 GW of non-fossil capacity by then[6].
Large Hydro has historically contributed to the bulk of the renewable generation in the country, though solar – with its aggressive growth – has almost caught up with it as of FY 2024-25[23]. Wind energy has seen a relatively calm but steady growth.
Bio Energy has maintained a somewhat static generation of about 16 TWh in the past decade. However, it might increase as the government has mandated 5% biomass co-firing in Thermal Power Plants from FY 2024-25. This obligation shall increase to 7% from FY 2025-26[29].
Due to high import costs of battery systems, India is currently relying on pumped-storage hydroelectricity. India has identified a potential PSH of 214.6 GW[32] and is planning to install at least 50 GW by FY 2030-31.[33] In 2020, power tariff from Solar PV clubbed with PSH have fallen below the coal plant tariffs in offering base load and peak load power supply.[34][35]
The government is supporting development of BESS through Viability Gap Funding. The scheme was announced in Sep 2023 and envisages development of 4 GWh of BESS projects by 2030-31.[36] Due to declining battery prices, the target was later increased to 13.2 GWh.[37]
There has been renewed interest in solar thermal because of its energy storage properties. As of 2025, India has an installed capacity of just 329.5 MW of solar thermal, out of which only 101 MW was operational.[38]
After electricity is generated at power plants, it is stepped up to high voltages (765 kV, 400 kV, 230 / 220 kV) for transmission over long distances with minimal loss. And then stepped down to lower voltages, closer to demand areas for power distribution to end consumers.
The national grid - which was synchronized in 2013 - consists of Inter-State (ISTS) and Intra-state Transmission System (Intra-STS) of 220 kV and above. ISTS is largely managed by Central Transmission Utility (wholly owned by PowerGrid), with private participation through Tariff Based Competitive Bidding route, with a few exceptions[39]. Intra-STS is managed by State Transmission Utility of each state. Projects are developed by State Government through competitive bidding process for projects costing above a threshold limit which are decided by the SERC s.[39]
In order to increase transmission capabilities in a cost effective way, the government often converts existing lines and substations to higher voltages.[40] Further, transmission planning has been aligned with renewable energy targets and is planned to evacuate around 613 GW of renewable capacity by 2032, including large zones in Rajasthan, Gujarat, and Andhra Pradesh.[41]
Transformation capacity of substations (GVA) incl HVDC
1104.5
1881.8
2345.1
Electricity distribution remains the most financially stressed part of the sector. Most distribution companies (DISCOMs) are state-owned, with private licensees operating in few areas such as Delhi and Odisha.[42] The distribution segment is characterized by
high aggregate technical and commercial (AT&C) losses (excess of 30% in early 2000s;[43] 22.6% in FY 2013-14[44])
a gap between average cost of supply (ACS) and average revenue realized (ARR).
Technical losses stem from transformation losses, line losses, poor Power Factor due to insufficient reactive compensation. Commercial losses are caused by theft, inaccurate / faulty meters, billing inefficiencies (error in billing process), and collection inefficiencies.
Govt has launched several initiatives (IPDS, UDAY, RDSS, etc) to improve the financial health and operational efficiency of DISCOMs. While there have been improvements, chronic issues like high losses, unsustainable tariffs, subsidy dependence, and regional disparities continue to affect the overall performance of the sector.
India consumed a total electrical energy of 1622 TWh in FY 2023-24, with an estimated figure of 1694 TWh for FY 2024-25.[48]
Per capita consumption reached 1395 kWh for FY 2023-24, with an estimated figure of 1538 TWh for FY 2024-25 (as of Jan 2025).[48][49] This figure is relatively low compared to the global average of 3486 kWh for 2022.[47] The nation achieved 100% household electrification as reported by its states as on March 31, 2021. Electricity connection was provided to all willing un-electrified households in rural areas and all willing poor un-electrified households in urban areas.[50]
Consumption by Sector (FY 2022-23)
Between FY 2013-14 and FY 2024-25 (till Jan 2025), power availability has increased from 12.5 hrs to 22.6 hrs in rural areas and from 22.1 hours to 23.4 hrs in urban.[51][52]
Note: Energy requirement (accounting for losses) would be 1907.8 TWh.[53] Further, these estimates were made in 2020 and were based on "Optimistic" scenario where the government achieves its targets for various planned initiatives having potential to impact power demand of the country such as National Hydrogen Mission.
Consumption by Sector (2011-22)
Residential
Residential sector primarily includes use of household appliances such as air conditioners, refrigerators, fans, and other appliances. Rapid urbanization and rural electrification efforts have driven consumption. With rising global temperatures, residential demand will likely be driven by cooling needs. Steps taken by government to shape consumption includes Standards & Labeling (to help consumers identify energy-efficient products), UJALA (LED bulbs), and Go Electric Campaign (to promote electric mobility and electric cooking).
Industrial
Industrial sector encompasses manufacturing (automobiles, textiles, steel, cement), chemicals, mining, and construction. Energy-intensive industries like steel, aluminum, and cement contribute significantly to the demand. As India seeks to become a major manufacturing hub through Make in India and National Green Hydrogen Mission, the demand will likely increase in the future. Perform, Achieve and Trade scheme is the major government step to improve energy efficiency in the sector.
Commercial
The commercial sector includes areas like offices, retail establishments, malls, hotels, and restaurants. With increasing urbanization and the growth of the services sector, demand for electricity in this sector is steadily rising. Adoption of energy-efficient technologies and sustainable building practices is helping manage consumption growth.
Agriculture
Irrigation pumps are the main source of consumption in this sector. In many states, electricity for agriculture is either subsidized or provided for free, which has led to inefficiencies and high consumption levels.[54] The government has been working to reduce energy wastage in this sector by promoting solar-powered irrigation systems (PM-KUSUM) and more energy-efficient pumps (part of AgDSM), which are expected to help curb future demand.
Others
This includes municipal sector which encompasses public lighting, water works and sewage. MuDSM was launched to reduce energy consumption.
Government's efforts on improving energy efficiency across the sectors, resulted in a net energy savings of 210 TWh between FY 2011-12 and 2020-21. For FY 2020-21, 56% of overall yearly savings came from industrial sector, and 40% from residential.[55]
Foreign electricity trade
India's National Grid is synchronously interconnected to Bhutan, and asynchronously linked with Bangladesh, Myanmar and Nepal.[56] An undersea interconnector to Sri Lanka (India–Sri Lanka HVDC Interconnection) have been proposed.[57] Singapore and UAE are interested to import electricity from India by establishing undersea cable link to reduce carbon emissions as imported electricity would not contribute to carbon emissions upon its use whether it is generated from renewable resources or not in the exporting country.[58]
India has been exporting electricity to Bangladesh, Myanmar and Nepal and importing excess electricity from Bhutan.[59][60] Since 2016–17, India has been a net exporter of electricity with 9,232 Gwh exports and 7,597 Gwh imports, mainly from Bhutan, in 2021–22.[61][62][63] In 2018, Bangladesh proposed importing 10,000 MW power from India.[64]
Net exports (-) and Net imports (+). The above exports to Bangladesh are excluding the exports from the 1600 MW Godda Thermal Power Station which is located in India but not connected to Indian electric grid.
To encourage the carbon neutral solar power generation, plans are made to transform the Indian national grid into a transnational grid expanding up to Vietnam towards east and Saudi Arabia towards west spanning nearly 7,000km wide.[67][68] Being at the central location of the widened grid, India will be able to import the excess solar power available outside its territory at cheaper prices to meet the morning and evening peak load power demands without much costly energy storage.[69]
Governance and regulatory framework
Electricity is a concurrent subject matter in the Constitution of India. As such, central and state governments can both legislate on the Indian power sector. The sector is primarily governed under the Electricity Act, 2003 and the Energy Conservation Act, 2001, which together lay out the regulatory and policy foundations for generation, transmission, distribution, and energy efficiency.
Central level
Ministry of Power is the nodal ministry which oversees the development of the electricity sector in India. It is responsible for planning, policy formulation, processing of projects for investment decisions, monitoring project implementation, training and manpower development, and the administration and enactment of legislation related to thermal and hydro power, as well as the transmission and distribution network. It is also responsible for the administration of India's Electricity Act (2003), the Energy Conservation Act (2001).[70]
Central Electricity Authority (CEA) is the technical advisory body to the Ministry, which is also responsible for data collection and dissemination, through its National Electricity Plan for a 5 year period.[71]
Ministry of New and Renewable Energy (MNRE) is the nodal ministry for the development and promotion of renewable energy technologies. MNRE facilitates research, design, development, manufacture, and deployment, setting technical standards, and aligning domestic renewable energy costs with global benchmarks.[72]
Central Electricity Regulatory Commission (CERC) is an autonomous statutory body responsible for regulating the electricity sector at the national level. It regulates the tariff of generating companies owned or controlled by the Central Government and regulates, issues licenses and determine tariff for inter-State transmission.[73]
State level
State Electricity Regulatory Commissions (SERCs) function as independent regulators at the state level, determining tariffs, issuing licenses, promoting competition, and ensuring consumer protection. They operate under the guidance of the Electricity Act, 2003, and coordinate with CERC for interstate issues.
Funding of power infrastructure
Borrowings by state owned discoms & commercial losses of discoms
India's Ministry of Power administers the Rural Electrification Corporation Limited and the Power Finance Corporation Limited. These central-government-owned public sector enterprises provide loans and guarantees for public and private electricity sector infrastructure projects in India. Excessive plant construction loans at 75% of overestimated costs on overrated plant capacities have led to stranded assets of US$40 to 60 billion.[74][75] The central and state-owned power generators escaped this crisis as they had entered PPAs with state-owned monopolistic discoms on a cost-plus basis at higher than prevailing market power tariffs, without undergoing competitive bidding process. Many direct and indirect subsidies are given to various sectors.[76]
Power Market
In the electricity market in India, power can be traded between generators, distributors and large consumers through bilateral contracts or power exchanges. Bilateral contracts are negotiated between two parties and are often for long term, providing stable prices. Power exchanges allow electricity to be traded through collective transactions, where buy and sell bids are anonymously submitted and aggregated. The market is cleared based on supply-demand equilibrium, with the intersection of the demand and supply curves determining the Market Clearing Price (MCP) and Market Clearing Volume (MCV). Power exchanges helps supplement long term arrangements, while allowing discovery of efficient prices.
India has 3 power exchanges: IEX, PXIL, HPX which offer products like Day-Ahead Market, Real-Time Market, Term-Ahead Market, etc. These exchanges are regulated by CERC and also allow trading of Renewable Energy Certificates. In FY 2024-25, out of 1692 TWh supplied, 143.7 TWh (about 8.5%) was transacted via Power Exchanges, with the balance being supplied under long-term or bilateral arrangements.[77] 8.5% is relatively small compared to countries with liberalized markets where exchanges handle a much larger share.
Multiple power exchanges create fragmentation and lead to disparate price discovery. CERC has ordered market coupling to create a single clearing price, simplifying procurement, improving cost predictability, and reducing administrative burdens for DISCOMs and industries while improving price discovery and system efficiency. The coupling would be implemented for Day-Ahead Market by Jan 2026 after a shadow pilot project was conducted which could lead to a savings of ₹1.4 crore per day.[78]
CERC would also couple other segments like Real-time Market and Term-Ahead Market after pilot runs and consultations.
Challenges
India's electricity sector faces many challenges, categorized across generation, transmission, distribution and consumption.
Generation
Dependency on coal: Despite growth in renewables, coal remains dominant in generation, leading to air pollution and carbon emissions fueling climate change. Air pollutants scatter and absorb solar radiation which reduces the amount of light reaching solar PV. Whereas, increased temperatures reduces solar PV efficiency.[79]
Transmission and distribution
Hightechnical losses: Despite improvements under various government schemes, T&D loss stands at 19.2% for FY 2023-24.[80]
High commercial losses: Poor billing efficiency (86.9% for FY 2023-24[81]), poor collection efficiency (96.5% for FY 2203-24[82]) and power theft leads to delays, cash flow problems, and loss of revenue for DISCOMs.
Subsidies & political interference: Free/under-priced electricity for certain sectors (like agriculture) burdens state finances.[83] Due to vote-bank politics, electricity prices for farmers are kept artificially low, which often leads to wasteful consumption.
Consumption
Quality of supply: While India has achieved 100% household electrification, most households, especially in rural areas, find the electricity supply intermittent and unreliable.[84]
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