Annexure-V- Cover Page for Academic Tasks

Course Code: ECO113 Course Title: BUSINESS ECONOMICS

Course Instructor: Ms. Tanvi Shah

Academic Task No.: 2 Academic Task Title: Case Study

Date of Allotment: 22 Feb.2020 Date of submission: 23 Mar.2020

Student’s Roll no: 67,68,69,70 Student’s Reg. no: 11915941,11915716,11909317,11905409

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specified at the time of assigning the task by the instructor)

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I declare that this Assignment is my individual work. I have not copied it from any other student‟s work or from any other
source except where due acknowledgement is made explicitly in the text, nor has any part been written for me by any other
person.

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 Economics Assignment 2

Case Study: Power for All: Myth or Reality

Submitted By:

Serial Number Name Roll Number Unique Id

1 Prableen Kaur 67 11915941
2 Ayush Sharma 68 11915716
3 Amisha Singh 69 11905409
4 Suparna Kar 70 11909317

Index:

Serial Number Topic Page Number

1 Introduction 2
2 Case study in detail 3
3 Problems Identified 3,4
4 Current scenario 4
5 Answers to Questions
6 Conclusion
7 Peer Rating

Introduction:

In this case study we had studied that the power sector in India has undergone rapid changes
since last few years. In this government has start new mission to provide power to all country i.e.
all cities and villages. So there will be no more issues faced by people due to this problem as to
provide this facility to all this act is added to five year plan by government. This promise is made
by government in 2012. Government is using different strategies to achieve this mission namely,
power generation, transmission, distribution, regulation, conservation and communication. The
state of Uttar Pradesh is largest in India and having population more than 160 million according
to census 2002. It has satellite town like Noida, Ghaziabad, and Greater Noida that are emerging
as new industrial hubs. The power situation in the state of Uttar Pradesh is that of deficit, the
government of India through electricity act 2003 is implementing a “Power of All” plan, under
which 1,00,000MW of new installed generating capacity is added by the year 2012. In spite of
this another thing which we had studied in this case is demand and supply of power in UP.
Beside this the financial capacity of state power utility to purchase power is discussed. Another
fact which is studied is demand of infrastructure for economic growth.
Case study explanation: 3

The rapid changes has been noticed in terms of power sector by government since last few years
and also the Government has made promised “Power to all” by 2012. In the beginning, it is
accounted 1700MW in 1950-51 and by 2004-05 the figure increased to 1, 18,400MW. The less
rise is noticed in thermal power generation in 1970-91 whereas greater rise in hydroelectric
power production in 2000-01. The government is promoting clean source of energy i.e.
hydroelectric power. Moreover the consumption of electricity on the basis of consumer segments
is shown and the figure is in percentage. However, a decreasing trend of electricity consumption
is done by industry sector and increasing trend is shown by irrigation which has positive effect
on agriculture. In regard to this, no changes were noticed in commercial and traction sector. The
state of UP is termed as largest in India with population of 166 million and it is one of the largest
software exporting state in country and lead to BPO. The state has multicultural population with
diversity of customers, markets, and buyers. It has satellite towns which merge together as new
industrial hubs because of which there is increase in demand for infrastructure facilities like
transport, health, education, road etc. The power situation is deficit i.e. demand is more than its
supply as the capacity of production is 400MW whereas demand is of 6500MW. Through the
electricity act 2003 the supply gap at national level is recognized because of which government
has implement “power for all” plan under which 1,00,000MW generating power is added by
2012. Another thing which is studied is the cost which is increased to rs 400 crore due to
unviability of cheap hydel power. The capacity to supply to its customer is decreased due to
financial crisis and result to poor quality of supply. There is a vicious cycle of poor recovery,
leading to the inability of UPPCL to purchase power and attract investments.

Problems Identified:

As it is clearly revealed in the case that before the year 2012, the power situation in the state of
Uttar Pradesh was the deficit i.e., demand exceeds the supply and generation of power. The Uttar
Pradesh is the India’s largest state as well as growing industrial hub of India were many local &
multinational companies are operating the business. If UP were to be country, it could be the 7th
largest country in the world. So, the need of electricity in state like UP is growing day by day as
because of arrival of new as well as operation of existing industries. The UP had a power
generation capacity of 4000MW against the demand of 6500MW of power. Recognizing the
demand supply gap at the national level, the govt. of India through electricity act 2003 had
Implemented a ‘power for all’ plan under which 100000MW of new installed generating
capacity was to be added by the year 2012. Even with the present electrification levels, the
additional capacity requirement for supplying continuous power in the state was 1300MW. For
universal access the capacity requirement in the state was over than 14200MW, if UP were to be
attain the national per capita consumption. Compared to this requirement the availability in2009
was just 8650MW as per the estimates of year 2012, if all the projects fructify. Later, the
situation was further exacerbated due to the state reorganization in 2000. Prior to this U. P’s 4
hydel capacity was 1497 MW and thermal capacity was 3909MW. After the reorganization, UP
retained Only to 516MW at low cost hydel power while the balance hydel capacity had been
allocated to Uttaranchal. The cost due to the unavailability of the cheap hydel capacity which had
since gone to Uttaranchal was Rs.400Crore. There was a vicious cycle of poor recovery that
leads to inability of UPPCL to purchase power and attract investment leading to the poor quality
of supplying power even to the remunerative consumers which results that these consumers
move away from the grid.

Current scenario:

 The electricity sector in India had an installed capacity of 223.625 GW as of April 2013,
the world’s fifth largest.
 Captive power plants generate an additional 34.444 GW
 Per capita average annual consumption in India 96 kWh in rural areas and 288kwh in
urban areas.
 India, the world’s fourth largest energy consumer after united states, china and Russia
 Total generation capacity in India: 181,558MW
 State contribution: 83,314MW
 Private sector: 41,672MW
 Installed electricity capacity
*Coal-fired plants account for 57%
*hydro plants account for 19%
*Renewable energy for 12%
*Natural gas for about 9%
*others3%

Answers to questions
Ques1: what are the factors responsible for this excess demand for electricity?
Ans: In this case study, we have seen the consistency in growth and development in the
power sector. The power sector development resulted in the growth of production in the
power from 1700 MW in 1950-51 to 1,18,400 MW in 2004-05. There have been rise in
both thermal and hydroelectricity generation since 1950 to 2000. From the table of
pattern of electricity consumption given in the case, we see that demand for electricity
consumption given in the case, has gone high in the domestic and agricultural purposes.
As we all know that Uttar Pradesh is the largest state of India, it is the largest state to
export software in India and it has often brought laurels to our country. It had resulted in
a boom in India’s BPO since recent years. Also, Uttar Pradesh is surrounded by nearby
highly advanced cities and towns like Noida, Greater Noida, Ghaziabad and many more
emerging industrial hubs which require adequate and advanced infrastructural facilities
 5
like power, transport, health, education, road, shopping malls, multiplexes, etc. which
demand for a lot of electricity. Another way how Uttar Pradesh’s electricity was being
used was Uttaranchal had been allocated Uttar Pradesh’s electricity. So, from a time
when Uttar Pradesh used to produce 1497 MW electricity using hydroelectric power,
now, it could keep only 590 MW of its hydel electricity with itself and power worth 400
crores was being allocated to Uttaranchal.

Ques2: The demand supply gap is reformed by the government intervention. Explain this
phenomenon by a demand supply model?
Ans: The law of demand states that” other factors affecting demand remaining same, if
the price of product rises, its demand falls and vice versa.” On the other hand, the law of
supply states that “other factors affecting supply remaining constant, if the price of a
commodity rises, then its supply also rises and vice versa”. So, earlier when there were
limited resources to produce electricity, then the price was electricity was high and only
the rich-class people could afford it while the rest of the public remained in darkness as
per the law of demand. Whereas, when the government will install the 1,00,000 MW
power generation capacity would get installed then the price of electricity would come
down since electricity wont be scarce anymore and more people would be able to afford
it, which will be according to law of supply. Now, if electricity would be available in
excess and if its price would be low, then the supply of electricity should be less. So, to
avoid this situation government uses the technique of price ceiling and price flooring.
According to price flooring, the sellers cannot charge prices beyond a certain level so that
sellers do not exploit buyers. Price ceiling is used to stop sellers from suffering heavy
losses due to excess quantities of commodity to be supplied. When we combine both
forces of market forces of demand and supply, we obtain an equilibrium price.
Equilibrium price is the price at which buyers and sellers, both are comfortable. Also,
because in this case, since resources to produce electricity at the current moment are less,
then the government will exercise price ceiling and flooring.
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Ques3: What do you think will happen to the price of electricity?

Ans: Since the demand for the electricity in this state is more but supply at early stage was not
satisfactory, the government was not able to provide avenues to generate electricity. Due to this
price of electricity rises in the state. Soon after the government started the power for all in the
year 2012 due to which the state gets some new projects and was able to satisfy the need to
somehow. However, we cannot say that prices for electricity in UP are less but because of new
initiatives, the government was able to keep the prices of electricity at its bay. Moreover, the
demand is further rising in the state, if some new projects were not developed it is obvious that
prices may further rise.

Conclusion

To conclude, in this case study we had study about the power sector in India which increased
rapidly in past few years and Government had pronised to provide this facility to
everyone.Beside this pattern of electricity consumption is studied in detail from economic survey
of 2004-05. To have a vivid picture of this task the electricity bill 2003, ministry of power,
government of India has also studied by us.

Government of India is moving towards using the non-conventional sources of energy.

Government has launched programmes namely:

 Village electrification
 Wind energy
 Solar energy
 Energy conservation

Strict laws for trapping electric wires

The demand and supply also studied in this demand is more than price due to which its price
increase as the law of demand states with demand increase if price is less. This is exception to
this law as the demand is increasing although the price is high this is due to necessity of people.

Peer Rating

Serial number