Power sector distortions dented GDP by 4% in FY’15-16: World Bank

Distortions in the power sector had imposed a total economic cost of around $ 86.1 billion or 4.13 per cent of India’s Gross Domestic Product (GDP) in the financial year 2015-2016 according to a World Bank report.

The fiscal cost, consisting of subsidies to distribution utilities, was $ 8.8 billion (or 0.42 per cent of GDP) in the financial year 2015-2016 according to the ‘In the dark’ report by Fan Zhang, Senior Economist, South Asia Region, World Bank.

Commenting on the immediate interventions the government can take, Zhang told BusinessLine, “It is very important to rapidly increase efficiency by addressing institutional distortions and this should be a top priority. Some of the tools to address this institutional distortion include promoting competition and providing non-discriminatory access to fuel.”

According to the report, the impact of power shortages on downstream rural households and firms is the second-largest source of economic cost, estimated at 1.42 per cent of GDP a year. “It includes the potential income losses of unelectrified households and the income losses of households and firms that are already connected to the grid but affected by power outages,” the report added.

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