India Lost $86 Bn Due to Power Distortions in 2016: World Bank

India lost $86.1 billion, equivalent to over 4 percent of its GDP, due to distortions in the power sector in 2016, according to a World Bank report.

The report titled ‘In the Dark: How much do power sector distortions cost South Asia?’ prepared by World Bank Senior Economist Fan Zhang and released on Dec. 19, also says that although India achieved 100 percent village electrification this year, 178 million Indians remain without electricity as per figures for 2017, news agency IANS reported.

The 2018 Global Competitiveness Report ranks India 80th among 137 countries in the reliability of electricity supply.

According to the report, “India achieved 100 percent village electrification in 2018. But at the household level, its rural access rate, at 81 percent in 2017, is still the third-lowest in South Asia.”

It estimates the downstream impact of power shortages on rural households and firms at 1.42 percent of the Gross Domestic Product (GDP) per year and the second largest economic cost for the country, IANS reported.

According to the report, the government should look to ensure steady power supply to households if its electrification program has to be successful.

Although the power deficit in the country has been substantially reduced over the last few years, the reliability of electricity is still low compared with global standards, the news agency reported citing the report.

Using nightly satellite images from India for 2013, the World Bank study found that areas adjacent to newly electrified villages subsequently experienced worse power outages, the news agency wrote.

According to the report, among the major distortions in the sector is the lack of commercial mining in coal, a near monopoly on which is enjoyed by state-run Coal India, and which fuels over 70 percent of the country’s power generation. It said the lack of competition has bred major inefficiency in India’s coal mining.

“The results show that the overall economic cost of distortions – ranging from 4 to 7 percent of GDP – is far greater than previously thought on the basis of analysis considering only the fiscal implications of distortion,” it added.