With the increase in industrialisation coupled with population growth. the demand for power is rapidly increasing, thereby jeoparadising the economic and social growth of the country. In addition to power from conventional sources, the New & Renewable Energy Sources (NRES) has been found to have enormous potential. About 800 MW of power from renewables has already been created while about 2000 MW is likely to be added in near future. Among the NRES, bagasse based co-generation of surplus power in Indian sugar mills has been given a new boost, as more than 3500 MW olf surplus power potential exist in sugar mills only (10.700 MW from all industries). These industries are being encouraged by the Govt. of India to generate surplus power & feed to the grid by offering a number of incentive schemes. An attempt has been made in this paper to present energy scenario, co-generation potential, technological options available, incentives for encouraging power generation in sugar industry, techno-economic analysis of co-generated power and future scope of research & development in this vital field.