Despite making remarkable progress in electricity distribution over the years, India still faces challenges in meeting its growing demand for power and reliable supply still remains low in the country, the World Bank said in a report.

India has made enormous progress in expanding household access to electricity and reducing power shortages over the last few years. In 2018 India achieved 100 per cent village electrification, the World Bank Regional Report -- ‘In the Dark: How Much Do Power Sector Distortions Cost South Asia’ -- here on Wednesday.

“Notwithstanding this remarkable progress, India still faces an enormous need to meet the growing demand for electricity.”

With a growing population, rapid urbanisation and an economy that is expected to grow at an average of 7 per cent every year, demand for electricity in India will almost triple between 2018 and 2040, the World Bank said, citing projections from the International Energy Agency.

Even as air pollution from fossil fuel-based power generation poses another daunting challenge, coal is India’s dominant source of energy, the report added.

“Despite ambitious programmes to promote renewable energy development, India still uses coal to generate 75 per cent of its electricity. Meanwhile, industries produce their own ‘captive’ power, much of it from coal and small diesel generators,” it said.

The report also recognised that shortly after Independence in 1947, India began adopting legislative measures to develop the core electricity sector followed by reforms in later years, but despite all these the state power utilities have struggled to improve their performance.

The inefficient state government-owned power plants, under-investment in transmission, under-priced electricity, high losses of distribution utilities, groundwater depletion from cheap electricity are the key challenges to India’s power generation sector.

“The World Bank study reviewing the sector’s performance finds that, despite progress in implementing the law, many challenges remain. They include inefficient generation, high losses in transmission and distribution, widespread subsidies and most notably, sharp deterioration in the finances of state utilities,” the report said.

With the total installed generation capacity more than doubling over the past decade from 154.7 gigawats (GW) in 2006-07 to 345.5 GW in 2017-18, India is now the world’s third largest producer of electricity, after China and the US.

Significant capacity additions and lower-than-expected demand growth have helped reduce power shortages significantly, the report said.

The Central Electricity Authority predicts that India is likely to become a power surplus country in fiscal 2019, it said.

On the renewable energy generation front, India has become one of the leading countries in the world recently, with the cumulative installed capacity from these sources reaching 70 GW in 2018, higher by about 50 per cent from four years ago.

The increase in solar and wind energy since 2014 has been particularly large. India now ranks fourth in the world in wind power-based capacity after China, the US and Germany and sixth in solar-based capacity.

“Through various initiatives and incentive programmes, the Government of India plans to add 227 GW of renewable energy capacity by the end of 2022,” said the World Bank report.

According to the 2018 Global Competitiveness Report, India ranks at 80th position among 137 economies in the reliability of its electricity supply, the report added.