Uttarakhand: The Golden Combination of Cheap Energy and a Large Industrial Base

By Jonathan Balls
Regulatory Assistance Project
5 June 2017

Uttarakhand currently enjoys an energy sector where power cuts are limited, electricity tariffs are some of the lowest in India, full electrification is close to being achieved, and the state’s public power distribution company (discom) has low levels of debt and does not require government subsidies. This position has been achieved because Uttarakhand has a large base of cheap hydro power capacity, and rapid growth in industry over the last 16 years has delivered large, paying customers to the state’s public discom. Despite this relatively strong position, over the last 16 years aggregate technical and commercial losses at the state’s discom, whilst falling rapidly as a percentage of overall sales, have remained high in the state’s “plains” districts and among all consumer groups other than large industry. There are persistent, unresolved problems with deficient meters and revenue realisation. Were it not for the golden combination of cheap hydro power and a large industrial base, Uttarakhand’s distribution sector would likely resemble that of its neighbour, Uttar Pradesh, where discoms are struggling financially. Looking forward, Uttarakhand’s ability to rely upon cheap power and industry looks fragile. In recent years, agreements to buy more expensive gas and renewables have been made, industry has increasingly been using open access regulations to buy electricity from providers other than the state’s discom, and incentives that brought industry to Uttarakhand are coming to an end.