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Challenge

Quality of life and economic growth depend on access to electricity, which brightens homes, powers household appliances, and enables children to study after sunset, thereby expanding their educational opportunities, job prospects, and other possibilities. Electricity enables farmers and businesses to operate equipment and create employment opportunities; it provides cold storage for vaccines and medications to maintain public health; and it powers essential services, including digital services, transportation, and critical infrastructure.

India¡¯s energy demand is expected to rise significantly due to higher incomes, mechanized agriculture, industrialization, and urbanization. Simultaneously, the Indian government's short-term 2030 targets under the Nationally Determined Contributions (NDCs) include a 45 percent reduction in carbon intensity from 2005 to 2030; achieving 50 percent of power capacity from non-fossil fuels; and a 135 percent increase in installed renewable energy (RE) generation capacity from 214 gigawatts (GW) to 500 GW.

Key improvements needed by DISCOMs include: (1) strengthening infrastructure to modernize aging grids and enhance network resilience, (2) establishing financial sustainability through better tariff structures and reduced losses, (3) developing robust data systems for informed decision-making, (4) creating innovative strategies to enhance efficiency in power supply to agriculture, (5) strengthening corporate governance, (6) developing consumer-centric service improvements, and (7) integrating renewable energy into distribution networks. Addressing these challenges requires the adoption of modern digital technologies to bolster grid security and ensure reliable and efficient electricity delivery to consumers.

Approach

Since power distribution falls under the jurisdiction of each state in India, the World Bank has collaborated not only with the national government of India but also with states and regions to enhance DISCOMs' efficiency, reliability, and financial sustainability. This collaboration promotes renewable energy integration, strengthens infrastructure, and advances green hydrogen initiatives to foster a cleaner and more resilient power sector. DISCOMs procure all forms of energy, including RE, and generate revenue from distribution; however, most face substantial financial stress. Given that power distribution is within the states¡¯ domain and states pursue different paths of reform, tailored solutions that address state-specific challenges, needs, and maturity levels are essential for driving sustainable improvements in the distribution of electricity across India.

Since 2014, the World Bank has concentrated on assisting state governments and utilities in modernizing state-level grids in Andhra Pradesh, Rajasthan, Jharkhand, West Bengal, and six states in the Northeastern region. The aim is to ensure a reliable, high-quality power supply, enhance the operational and financial health of utilities, support the adoption of new technologies, and bolster institutional capacity. ľ¹ÏÓ°Ôº is integrating investment financing, policy development, and technical assistance to create innovative business models that attract private sector participation.

Results: Year Launched ¨C Year Closed

Since 2016, the World Bank has supported India in enhancing the financial and operational health of its electricity distribution system to ensure a sustainable future with a reliable power supply, jobs, and revitalized lives across all of the country¡¯s regions.  Three notable projects for which the World Bank has provided loans include the , the , and the .

With $470 million in World Bank lending, the North Eastern Region Power System Project has benefited over 45 million citizens, transforming lives, stimulating local economies, and creating new income opportunities by overcoming challenges posed by rugged terrain and limited institutional capacity in Assam, Manipur, Mizoram, Meghalaya, Tripura, and Nagaland. The project has energized small businesses, agricultural activities, and entrepreneurial ventures, creating jobs in construction, maintenance, service provision, and entrepreneurship, thereby supplying a vital income source to an economically underdeveloped region. It has enhanced worker skills, improved the capacity of local contractors and ensuring they possess the skills and resources needed to contribute effectively to infrastructure development. The project has increased electricity access to economically disadvantaged regions and communities by 51 percent from 2015 to 2024, upgrading 31 transmission and 102 distribution substations while adding 32 transmission and 83 distribution substations, along with 1,077 kilometers (km) of transmission lines, 1,256 km of distribution lines, and 5,560,550 kilovolt-amps of transformation capacity.

With $251 million in World Bank lending, the has improved consumer services for nearly 5 million users through cutting-edge metering, billing, and collection systems, thereby enhancing customer satisfaction. To enhance electricity distribution across the state, over 2,000 km of transmission lines and 25 132/33 kilovolt grid substations are being built through this project.

With $135 million in World Bank lending, the has improved the electricity distribution infrastructure for a population of approximately 90 million across 14 districts in the state of West Bengal. The project has utilized smart meters and advanced digital systems such as SCADA and ERP, providing greater efficiency, reliablity, and reduced energy consumption for over 60,000 consumers as of September 2024. The project aims to extend these benefits for more than 400,000 residential consumers by November 2026.

World Bank Group Contribution

The North Eastern Region Power System Improvement Project incurred a total cost of $952.20 million, with financing of $470 million from the International Bank for Reconstruction and Development (IBRD). The Jharkhand Power System Improvement Project amounted to $465.2 million, receiving IBRD financing of $310 million, which was later revised down to $251.05 million following a partial fund cancellation. The West Bengal Electricity Distribution Grid Modernization Project had a total cost of $385.7 million, which included $135 million in IBRD financing, along with an equivalent co-financing amount from the Asian Infrastructure Investment Bank (AIIB).

Partnerships

Grid modernization is a complex process that involves assessing various technologies, business models, and the current maturity level of utilities, as well as recommending customized solutions. To enhance the design and effectiveness of these projects, the World Bank collaborated with partners such as Australian Aid (AusAID), the Foreign, Commonwealth and Development Office (FCDO) of the United Kingdom, the Public-Private Infrastructure Advisory Facility (PPIAF), and the Energy Sector Management Assistance Program (ESMAP) to provide substantial technical assistance during project preparation and implementation. Grant funds from these organizations were mobilized to maximize the benefits of investments made in these projects. Additionally, the World Bank partnered with the Asian Infrastructure Investment Bank (AIIB) to co-finance the West Bengal Electricity Distribution Grid Modernization Project to achieve the development objective.

Looking Ahead

India has made significant advances in the power sector, achieving universal household electrification while experiencing fewer grid interruptions and maintaining affordable tariffs. As the fourth-largest renewable energy (RE) market globally, India has made impressive progress, with RE representing 75 percent of annual capacity additions. In 2024, India added more renewable energy capacity than ever before, with 24.5 GW of solar and 3.4 GW of wind capacity. This brings the total renewable energy capacity across India to 209.44 GW as of December 2024. However, India¡¯s net generation of coal and lignite rose by 5 percent in 2024, resulting in a record high for electricity generated from coal, even as significant increases in renewable energy reduced coal¡¯s share of total installed capacity from 58 percent in 2018 to 47 percent in 2024.

Challenges persist in integrating renewable energy into the grid. Expanding the transmission network is essential, and India¡¯s Central Electricity Authority (CEA) has released a Transmission Master Plan that requires a $30 billion investment to enhance the intra-state electricity transmission network by 2030. DISCOMs face ongoing challenges, including cost recovery-based tariff-setting, delayed subsidy reimbursements, targeted subsidy delivery, and inefficient billing and collection. Unless the financial health of DISCOMs is improved, their off-taker risk will continue to hinder the energy transition and restrict the sector¡¯s ability to attract private investment.

In the future, the World Bank will focus its support on:

• Financing the expansion of transmission and distribution networks by utilizing innovative business models to attract private sector investment
• Leveraging digital technologies to optimize network utilization, enhance renewable energy integration, and improve the financial health and operational efficiency of the distribution sector
• Offering technical assistance for workforce training, building capacity, and addressing policy and regulatory obstacles
• Supporting state-level initiatives such as resource adequacy planning, and security and emissions-constrained economic dispatch

These efforts will be pivotal in ensuring a sustainable, resilient, and inclusive energy transition for India.