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Business Environment and Law-Infrastructure Of The Economy

Energy- Infrastructure Of The Economy

   Posted On :  04.05.2018 05:35 am

Energy is the most important determinant of a country’s economic growth. In fact, per capita consumption of energy is taken as an indicator of a country’s prosperity.

Energy
 
 
Energy is the most important determinant of a country’s economic growth. In fact, per capita consumption of energy is taken as an indicator of a country’s prosperity. Energy is created through several sources. The sources are conventional and non-conventional. The first shall include commercial and non- commercial sources of energy.

Commercial energy is so-called as it commands a price and the user are expected to pay it for its use. Non-commercial energy commands no price and the user can take it as a free goods gifted by nature. Non – conventional energy is a recent discovery and its use is confined to limited pockets in our country.
 
Confining to the commercial energy, it may be stated that coal is the main source, accounting for 67 % of the total energy consumed in the country. The government has initiated several steps to improve the supply of coal. Private sector participation is allowed in coal mining. Imports of cooking coal under the open general license (OGL) are being allowed and the import tariff has been slashed from 85% to 35 %.
 
Power has been a bugbear of our economy. Lack of sufficient power supply has checked the growth of industries all over the country. The government has announced a package of incentives to attract private investments. The package includes the reduction of import duties on power equipment to 20%; a five-year tax holiday for new power projects; a guaranteed 16% rate of return on paid up and subscribed capital; and the provision of counter guarantee by the central government.
 
As part of the ongoing economic reforms, the government has allowed imports and distribution of certain petroleum products like domestic lpg and kerosene by the private sector at market prices to promote new investments and to improve operational efficiency. The ongc has already disinvested 2% of its equity and proposes to offload 18 % more in domestic and foreign markets.
 
Private and foreign companies are now allowed to invest in oil exploration and production in joint-venture with ONGC or OIL, (ONGC has already tied up with reliance and enron) and also in refining of petroleum products. The domestic market in lubricants has been opened up to foreign collaborations.


Strengths



  •  Elaborate organizational framework for the growth of electricity has been provided by the electricity (supply) act, 1948

  •  Power and responsibilities has nearly been divided between central and states. Former confines itself to planning, co-ordination and regulation. Latter looks after generation and distribution.

  •  Vast network of generation, transmission and distribution facilities are spanning the length and breadth of the country.

  •  Joint venture among states in power generation

  •  Numerous amendments to permit private participation in power generation.

Weaknesses



  •  Very low plant load factors

  •  Declining share of hydro-power

  •  Too much subsidy burden on state electricity boards

  •  Incompetent and corrupt electricity boards

  •  Frequent and heavy load-shedding

  •  Capital intensive but starved of funds

  •  Heavy losses during transmission and distribution


Remedies



  •  Formulate unambiguous guidelines for private sector investment and ensure speedy clearance

  •  Expedite formulation of guidelines for private participation in transmission and distribution

  •  Create autonomous regulatory authorities at the central and state levels.

  •  Corporatise sebs with separate generation, transmission, and distribution segments.

  •  Set cost-based pricing for each consumer group, building in per-determined tariff increases
 



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