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When Power Doesn’t Power: The Indian Energy Contradiction

India occupies a strikingly paradoxical position in the energy transition game. It is simultaneously among the world’s fastest-growing producers of energy and one of the most inefficient users of its own generation capacity. Over the past decade, India has expanded its renewable energy footprint at an impressive pace, diversified its thermal base and articulated ambitious climate goals in tandem with the Paris Agreement.


When Power Doesn’t Power: The Indian Energy Contradiction

Illustration by The Geostrata


Yet, these great feats co-exist with regrettable energy wastage, chronic inefficiencies in transmission and distribution, fragmented regulation and bureaucratic inertia that collectively blunt the impact of capacity expansion. As scholars like Jean Dreze and Amartya Sen have long observed, India’s main challenge is seldom one of absolute resource scarcity; rather, it’s mostly rooted in governance failures, weak coordination and flawed institutional design.


The energy sector is a real testament to this dilemma with particular clarity. Although capacity has exponentially grown, its utilisation remains uneven; investments are readily mobilised in most cases, but outcomes fall short, policy visions are announced routinely, but implementation is most often compromised. By 2024, India’s installed electricity capacity surpassed 430 GW, with renewable sources accounting for 40 over per cent of the total, according to the Ministry of Power and International Assessments by the International Energy Agency.


Despite this, coal-based thermal plants operate at plant load factors of only 60-65 per cent, renewable energy curtailments exist in several states and aggregate technical and commercial losses remain over 15 per cent nationally, exceeding 25 per cent in some regions. These figures are not merely symptoms of technical inefficiency, but rather they reflect deep institutional design failures and deeper structural flaws embedded within the larger system. Understanding and acknowledging these failures is essential if India is to harness its energy potential. 


STRUCTURAL ORIGINS OF ENERGY WASTAGE


Energy wastage in India is not confined to physical losses along the grid. Navros Dubash and Ramesh Bhat argue that the Indian power sector suffers less from a technological deficit than a governance deficit. This deficit most clearly manifests in three interlinked domains; first, transmission and distribution losses reflect political tolerance of non-payment, inadequate enforcement and the absence of operational discipline rather than mere infrastructural decay.


Second, generation capacity is poorly utilised because investment decisions have been decoupled from fuel security, payment discipline and flexible dispatch arrangements, resulting in quasi-stranded assets. Third, cross-subsidisations and politically constrained tariffs blur cost signals and weaken incentives for efficiency on both the supply and demand side. Together, these factors produce a self-reinforcing cycle in which electricity is produced but not adequately delivered, priced or consumed. 


Jean Dreze’s analysis of public service delivery points to the idea that political encouragement often incentivises the accommodation of inefficiencies, specifically in rural and agricultural constituencies.


This manifests as the lack of willingness to enforce billing discipline. Consequently, electricity is generated but not monetised. The contrast between states such as Gujarat and Uttar Pradesh highlights that effective practices are contingent on governance decisions. 

Furthermore, there also exists a gaping hole between generation capacity and system needs. Thithankar Roy’s critique of India's “partial reforms’ is instructive here. Liberalisation of generation following the Electricity Act of 2003 was not matched by reforms in fuel supply or regulatory enforcement. In the power sector, private investment in generation surged after the Electricity Act of 2003, but fuel linkages, land acquisition and environmental clearances remained mired in bureaucratic delays.


As a result, several plants became stranded assets, contributing neither to energy scarcity nor economic efficiency. Renewable energy, which is increasingly hailed as India’s success story, also faces massive wastage through curtailment. Studies by CEEW have shown that solar and wind power in states like Tamil Nadu, Rajasthan and Karnataka are frequently curtailed due to grid inflexibility, inadequate storage capacity and poor inter-state coordination.



Finally, policy-induced distortions also lead to massive wastage. Cross-subsidisation, where industrial and commercial consumers bear the cost of subsidised residential and agricultural tariffs, has distorted price signals and discouraged efficiency. As Pranab Bardhan argues in his work on political economy, such distortions continue to linger because they serve really short-term political incentives, even when it comes at the cost of long-term economic rationality. This means that energy politics in India can never be divorced from the larger umbrella of state capacity and electoral politics. 


POLITICAL ECONOMY OF ENERGY GOVERNANCE


Bureaucratic hurdles are not merely administrative, but also structural features of a fragmented governance system. The energy sector is governed by multiple ministries and agencies; power, coal, new and renewable energy, environment, state electricity regulatory commissions and public sector undertakings, often operating with overlapping mandates and very limited coordination. This institutional fragmentation has been extensively analysed by scholars, by Lant Pritchett, who characterises Indian governance as “frailing”, where the state is continuously present and ineffective. 


Federal division of power also happens to be a mounting challenge. While electricity is a concurrent subject under the Indian constitution, states exercise substantial control over distribution and tariff setting. This has resulted in uneven reform trajectories across states.


While Gujarat and Maharashtra have relatively efficient distribution systems, other states like Bihar and UP struggle with losses and financial insolvency of DISCOMS. NITI Aayog has highlighted that policies often fail because they never sufficiently account for state-level political realities. 

Environmental clearances, while absolutely indispensable, have become a site for delay. Madhav Gadgil and Ramachandra Guha have argued that India’s environmental governance often oscillates between excessive proceduralism and selective deregulation. Energy projects often face clearance processes which are lengthy, and they come without transparent timelines, leading to cost overruns and uncertainty. At the same time, the lack of post-clearance monitoring allows environmentally harmful practices to persist. 


Financial fragility of state-owned distribution companies like DISCOMs also matters. In spite of multiple bailout schemes like UDAY and RDSS, DISCOMs remain riddled by debt, delayed payments to generators and political interference in tariff division. Economist Mohntek Ahluwalia has noted that without insulating DISCOMs from populist pressures, no amount of generation capacity will translate into reliable energy delivery. Bureaucratic reluctance to enforce cost-effective tariffs and penalise inefficiency perpetuates a cycle of fiscal stress and operational wastage. 


Moreover, India’s regulatory culture prioritises compliance over outcomes. Regulatory commissions emphasise procedural adherence rather than performance benchmarks such as reliability and consumer satisfaction. 


PATHWAYS FOR EFFICIENCY  


India no longer needs more power plants primarily, but rather it requires better functioning institutions, smarter grids and accountable governance mechanisms. Sustainable resource management arises not from centralised control alone, but from polycentric, adaptive governance systems.


First, grid modernisation and energy storage as core infrastructure and not ancillary components need to be taken seriously. Advanced metering infrastructure, smart grids and battery storage can reduce technical losses and renewable curtailment.


The IEA emphasises that without storage and flexible grids, renewable heavy systems inevitably face wastage. Public investment and regulatory support for storage must be accelerated with clear policy signals to reduce investor uncertainty. 

Bureaucratic integrity should be achieved through institutional integrity rather than mere digitisation. Single window clearance systems often fail because underlying decision-making remains fractured in most cases. India requires empowered inter-ministerial bodies with binding authority and time-bound mandates for energy projects. Fukuyama says that state capacity depends not on the number of rules but on the coherence of institutions. Energy governance should be able to move in that direction. 


Reforming DISCOMs is also nonnegotiable. It starts with depoliticising tariff setting, enforcing accountability for losses and enabling competition in distribution. Furthermore, energy efficiency should be reframed as a central pillar of development rather than pushing it to the peripheries. Demand-side management, energy-efficient appliances, and industrial efficiency standards can significantly reduce wastage. Nicholas Stern argues that efficiency is the cheapest and fastest route to emissions reduction. India’s Perform, Achieve and Trade scheme (PAT) is a step in this direction. 


Finally, energy data should be made available overtly for the public to see. Details such as curtailment, losses and emissions should be publicly accessible. Accountability is not merely electoral but informational. By aligning infrastructure with institutions, incentives without outcomes and policy with practice, India can truly transform its energy sector from a site of inefficiency to a cornerstone of sustainable and inclusive development. 


BY NAKSHATRA H. M.

CENTRE FOR ENVIRONMENT AND CLIMATE ACTION

TEAM GEOSTRATA

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