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India's power sector losses seen at US$27b by World Bank

Annual losses in India's dysfunctional power sector are forecast to rise to US$27 billion in 2017 unless the government enacts sweeping reforms in the face of rising demand, a World Bank study said on Tuesday.

NEW DELHI: Annual losses in India's dysfunctional power sector are forecast to rise to US$27 billion in 2017 unless the government enacts sweeping reforms in the face of rising demand, a World Bank study said on Tuesday.

India has one of the world's lowest per capita electricity consumption rates, with the average person consuming less than a third of the annual global average of 3,044 kilowatt-hours, the study says.

But this is expected to rise sharply as the country industrialises and caters to the needs of its growing population which according to the United Nations is forecast to hit 1.45 billion by 2028.

The deficiencies of the power network were laid bare in July 2012 when a huge blackout across the north and east of the country left almost 300 million people without electricity.

"An inefficient, loss-making distribution segment and inadequate and unreliable power supply are major constraints to India's aspirations for growth," Onno Ruhl, the World Bank's India director, told reporters on Tuesday.

In 2011 the power sector incurred losses of US$12-US$13 billion. By 2017, the World Bank forecast the figure could rise to US$27 billion assuming tariffs increase around 6.0 per cent every year.

The problems stem from the state-controlled distribution sector which is undercut by leaks and theft, an inability to collect payments and chronic underpricing of power.

The World Bank also criticised ill-targeted subsidies which end up benefiting the rich.

"Distribution is the weakness and also the linchpin of the power sector," said Sheoli Pargal, economic adviser and co-author of the study at the bank.

The indebtedness of distribution companies has hampered their ability to invest in upgrading the infrastructure.

India's Power Minister Piyush Goyal, in office since May under the new right-wing government of Prime Minister Narendra Modi, faced massive power outages in New Delhi earlier this month at the height of summer.

He blamed insufficient investment in supply infrastructure.

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