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India presents a curious paradox in its energy landscape: it exports electricity to neighbouring countries like Bangladesh, Nepal, and Myanmar, yet many of its own citizens continue to experience frequent power outages. This contradiction challenges the fundamental economic assumption that nations export only their surplus goods. Despite having surplus power on paper, India still struggles with domestic energy shortfalls and is expected to do so until at least 2027, according to a research report by the India Energy and Climate Centre at the University of California, Berkeley.

In recent years, India has significantly expanded its power generation capacity and has even emerged as a net exporter of electricity. The country has also entered into several high-level international energy agreements, including with Saudi Arabia. However, this progress raises a key question: if India is exporting electricity, why do power cuts remain common across its towns and villages? The answer lies not in generation capacity, but in transmission, distribution, and financial inefficiencies that plague the domestic electricity system.

India’s power sector has seen significant growth, driven by the government’s “Power for All” mission. Since independence, the country has made remarkable strides in expanding electricity access, and the pace has accelerated in the last decade. According to IRENA’s Renewable Energy Statistics 2025, India ranks third globally in solar capacity, fourth in wind energy, and fourth in total installed renewable energy capacity. As of June 2025, India had an installed power capacity of 476 gigawatts (GW), with renewables accounting for 226.79 GW of that total. Electricity generation rose from 1,168 billion units (BU) in 2015–16 to 1,824 BU in 2024–25, reflecting an annual growth of 5.2%, as reported by the Press Information Bureau (PIB). During this period, the average daily power supply in rural areas improved from 12.5 hours in 2014 to 22.6 hours in 2025, while urban areas saw average supply reaching 23.4 hours—a commendable improvement.

Despite this progress, the paradox remains: frequent power cuts persist. This is not due to insufficient generation. India has consistently been a net exporter of electricity since 2017, meeting peak demand levels on multiple occasions. The real issue lies in the inefficiencies of the transmission and distribution (T&D) network. State-run power distribution companies, known as DISCOMs, are responsible for supplying electricity to households across the country. However, as of March 2023, these entities carried a cumulative debt of over $75 billion. Many DISCOMs routinely sell electricity below cost, particularly to subsidised sectors such as agriculture and residential consumers, making their business model financially unsustainable.

India also suffers from alarmingly high transmission and distribution losses, estimated at 20%—more than double the global average of 8%. These losses stem from ageing infrastructure, power theft, poor maintenance, and a lack of investment in modernisation. As a result, a significant portion of electricity generated never reaches end consumers. Adding to this is the rigidity of long-term power purchase agreements (PPAs), including those for international exports. Many of these agreements, particularly those involving foreign nations, are difficult to renegotiate, even during domestic shortages, as they are closely tied to diplomatic relations and trade commitments. In fact, transmission infrastructure used for exports is often better maintained than the networks meant for domestic distribution.

Regional grid limitations further compound the issue. While India’s five regional power grids are technically interconnected, bottlenecks in inter-regional transmission corridors hinder the flow of electricity from surplus areas to deficit regions. For instance, excess power generated in the East may not reach the South or West due to limited transmission capacity or infrastructure constraints. This results in localized shortages even when the national generation numbers show a surplus.

Economically, the sector faces additional challenges. The structure of electricity tariffs—marked by cross-subsidisation and state-level pricing policies—creates imbalances. Industrial and commercial users often pay significantly higher rates to subsidise residential and agricultural users. State governments frequently delay subsidy reimbursements to DISCOMs, worsening their liquidity crises. Low bill recovery rates and political resistance to tariff hikes further erode their financial health. This restricts their ability to purchase additional power during peak times or invest in essential infrastructure upgrades.

Renewables, while offering a sustainable path forward, also introduce complexity. Solar and wind power are inherently intermittent and pose challenges for integration into the national grid. Without adequate energy storage systems and real-time balancing mechanisms, it becomes difficult to fully leverage these clean energy sources. Grid stability is often compromised when renewable supply fluctuates dramatically due to weather conditions.

To address these problems, India is turning to technology and innovation. Smart meters, load forecasting tools, and time-of-day pricing models are being deployed to enhance efficiency and reduce losses. Decentralised energy solutions, such as rooftop solar panels and local microgrids, empower communities and reduce the strain on centralised infrastructure. More flexible power contracts are being introduced to make better use of surplus electricity. These developments mark a shift towards a smarter and more responsive energy ecosystem.

Another critical focus area is India’s energy mix, which remains dominated by coal. While coal continues to provide a reliable base load, there is a growing need to diversify energy sources. Incorporating more nuclear, biomass, hydro, and renewable options is essential to build a resilient power system. Strategic energy reserves can help manage peak loads and seasonal shortages more effectively. Simultaneously, responsible energy use must be promoted through public awareness campaigns, energy efficiency programs, and pricing incentives to flatten demand curves and avoid grid stress.

To address the electricity paradox comprehensively, several key reforms are necessary. First, DISCOMs must undergo financial restructuring through tariff rationalisation and improved billing and collection systems. Second, power planning must be made more accurate using tools like STELLAR and mechanisms such as electricity futures for price hedging. Third, long-term contracts must be made more flexible to avoid wastage of surplus electricity. Lastly, inter-regional transmission infrastructure must be upgraded to ensure efficient electricity distribution, especially of renewable energy.

India’s energy sector is at a pivotal moment. The country is expanding capacity, integrating climate-friendly policies, and making bold investments in infrastructure. From green hydrogen to solar rooftops and rural electrification, India is aiming for a sustainable, inclusive energy future. These efforts align with global climate commitments while advancing domestic development goals. India’s transition to a more balanced and modern power system is not just about meeting growing demand—it is about ensuring fairness, reliability, and long-term sustainability.

As the world’s third-largest producer and consumer of electricity, India must ensure uninterrupted power supply to its citizens while also fulfilling its international energy obligations. Bridging this gap is essential if India is to truly become an energy superpower.