Powering Progress: India’s Energy Transition and the Role of Distribution Reform

India stands at a pivotal moment in its energy evolution—balancing the demands of a growing economy and population with climate goals that require deep decarbonization of the power sector. As access to electricity underpins economic development, public health, education, and job creation, India’s energy strategy must align its aspirations for universal, affordable power with the realities of environmental sustainability and financial viability.

At the heart of this challenge lies India’s electricity distribution system, managed largely by financially stressed, state-owned Distribution Companies (DISCOMs). While the country has made impressive strides in expanding electrification and renewable energy capacity, reforming the distribution sector remains critical to ensure that power reliably reaches homes, businesses, and industries—particularly as India scales up its clean energy commitments under its Nationally Determined Contributions (NDCs).

Energy Demand, Emissions Goals, and the Renewable Revolution

India’s energy demand is projected to surge in the coming years due to urbanization, mechanized agriculture, industrialization, and rising incomes. In response, the government has pledged bold climate action, aiming by 2030 to:

• Reduce emissions intensity of GDP by 45% from 2005 levels.

• Achieve 50% power capacity from non-fossil sources.

• Increase installed renewable energy (RE) capacity from 214 GW to 500 GW, a 135% jump.

Progress is evident: In 2024, India added 24.5 GW of solar and 3.4 GW of wind capacity—its largest-ever single-year RE growth. The total RE capacity reached 209.44 GW by year-end. RE now accounts for 75% of annual capacity additions, and the share of coal in total installed capacity dropped from 58% (2018) to 47% (2024).

However, challenges remain. Coal and lignite generation rose by 5% in 2024, hitting a record high in absolute generation, despite RE growth. These developments spotlight the need for deep reforms in how power is transmitted and distributed to integrate variable RE while maintaining grid reliability.

DISCOMs: Backbone of the Power Sector Facing a Financial Crisis

India’s more than 50 state-run DISCOMs are at the center of the electricity supply chain. They procure power—including from renewable sources—and are responsible for billing and revenue collection. Yet, their poor financial performance threatens both supply reliability and clean energy adoption.

Key figures:

• Annual losses total INR 678 billion (~$8.1 billion).

• Cumulative debt exceeds $83.5 billion.

• Past reform efforts since the late 1990s have failed to resolve systemic issues.

DISCOMs face multiple pressures:

• Aging grid infrastructure vulnerable to outages.

• High technical and commercial losses.

• Inefficient tariff structures and delayed subsidies.

• New challenges from distributed renewables, electric vehicles, and prosumers.

Without structural reforms, these issues jeopardize India’s clean energy future.

The World Bank's Strategic Approach: National Vision, State-Level Action

Since power distribution is a state subject, reforms must be tailored to each region's needs and maturity level. Recognizing this, the World Bank collaborates both with the Government of India and individual state governments to deliver targeted investments, policy support, and technical assistance.

Focus Areas:

1. Infrastructure Modernization – Strengthening grids for reliability and resilience.

2. Financial Sustainability – Enhancing DISCOM cost recovery and tariff efficiency.

3. Digitalization – Deploying smart metering, ERP, and SCADA systems.

4. Consumer Services – Improving billing, grievance redressal, and communication.

5. Renewable Integration – Upgrading grids to handle RE intermittency.

6. Private Sector Participation – Creating models to attract private investment.

7. Governance and Capacity Building – Training personnel and improving accountability.

Transformative Projects and Impacts

The World Bank’s support since 2014 spans states like Jharkhand, Andhra Pradesh, Rajasthan, West Bengal, and the Northeastern Region. Notable initiatives include:

1. North Eastern Region Power System Project (2016–2024)

• IBRD financing: $470 million (total cost: $952 million)

• Impact: 45 million people across Assam, Manipur, Mizoram, Meghalaya, Tripura, and Nagaland gained reliable power.

• Infrastructure:

  • 31 upgraded + 32 new transmission substations

  • 102 upgraded + 83 new distribution substations

  • 1,077 km of new transmission lines

  • 1,256 km of distribution lines

  • 5.5 million kilovolt-amps added

• Socioeconomic outcomes: Boosted local businesses, agricultural productivity, contractor skill development, and job creation.

2. Jharkhand Power System Improvement Project

• IBRD financing: $251 million (original: $310 million)

• Impact: Enhanced service quality for nearly 5 million users.

• Infrastructure: 2,000+ km of transmission lines and 25 grid substations (132/33 kV) under construction.

• Digital upgrades: Improved metering and billing efficiency.

3. West Bengal Electricity Distribution Grid Modernization Project

• IBRD financing: $135 million, co-financed by AIIB

• Impact: Grid improvements across 14 districts (population ~90 million)

• Digital systems: Smart meters, SCADA, and ERP deployed

• Consumer benefits: Over 60,000 residential users already benefiting; target of 200,000 by 2026.

Key Partnerships for Enhanced Impact

To amplify results, the World Bank joined forces with:

• Australian Aid (AusAID)

• UK's Foreign, Commonwealth and Development Office (FCDO)

• Energy Sector Management Assistance Program (ESMAP)

• Public-Private Infrastructure Advisory Facility (PPIAF)

• Asian Infrastructure Investment Bank (AIIB)

These collaborations provided technical assistance and grant funding for project design, implementation, and capacity building.

Looking Ahead: A Grid for the Future

Despite its progress, India faces persistent challenges. Grid integration of RE is constrained by inadequate transmission infrastructure, requiring a $30 billion investment by 2030, per the Central Electricity Authority's Transmission Master Plan.

To meet these challenges, the World Bank will continue to support India through:

• Financing T&D network expansion via public-private models.

• Digital transformation to enhance reliability, RE uptake, and billing efficiency.

• Policy and regulatory reform assistance at the state level.

• Support for workforce training and institutional strengthening.

• Strategic planning for grid adequacy and emissions reduction.

Toward a Resilient and Equitable Energy Future

India’s power sector is undergoing a profound transformation. With the right mix of investment, policy reform, and innovation, the country can build a resilient, equitable, and sustainable electricity distribution system. Modernizing DISCOMs is not just a technical requirement—it is a cornerstone of India’s energy security, climate leadership, and inclusive development.