Power sector to lead infra investments in 12th Plan

Robust and consistent investments in the power sector are expected to guide the target of $1 trillion (Rs 45 lakh crore) investment in infrastructure set out by the Planning Commission for the 12th Plan (2012-17).

“It is an ambitious target but is achievable. Power sector investments will guide the entire target. The total investment in the power sector itself, including generation work in progress, will be around $300 billion (Rs 13.5 lakh crore),” said Commission member B K Chaturvedi in an interview to Business Standard.

The Commission estimates India will see capacity addition of around 100,000 Mw during the period, with every Mw added costing at least Rs 5 crore. Capacity addition will, thus, result in investment of at least $100 billion. Chaturvedi says a similar investment of around $100 billion is expected in distribution and transmission during the next plan period. And, that overall investment, including generation work in progress currently, will come to $300 bn, which is 30 per cent of the overall target.

Investments in other sectors expected to contribute significantly to the target are in roads, irrigation, airports and railways. The railways are expected to have huge investments due to the ongoing freight corridor projects.In the 11th Plan period (2007-12), the Commission had estimated an investment of $147.8 bn in the power sector. It revised this marginally downwards to $146.05 bn in the mid-term appraisal. Even as investments in the sector have broadly kept pace with the set target, in capacity addition the sector is likely to see a 26.2 per cent drop to an addition of only 62,374 Mw by the end of the Plan period (March 2012), as against an original target of 78,700 Mw.

“We have lacked in capacity addition and it is expected to pick up in the 12th Plan,” added Chaturvedi.

Similarly, in the roads sector, investments fell short of the original target in the 11th Plan due to shortfall in the award of projects by the National Highways Authority of India (NHAI) during these first three years of the Plan. With the ministry of road transport and highways aiming to achieve a completion rate of 20 km of highways per day, the major build up of expenditure as a result of the acceleration is expected to be during the 12th Plan.The Commission had set the overall investment target in infrastructure in the 11th Plan at around nine per cent of the Gross Domestic Product, at $514 bn as compared to $218 bn during the 10th plan (2002-07). It estimated the private sector’s contribution in overall infrastructure investment would be 30 per cent.The investment in infrastructure during the 11th Plan has reached 7.18 per cent of GDP and is expected to reach 8.37 per cent by 2011-12. In the 12th Plan, the Commission expects infrastructure investment to constitute around 10 per cent of GDP, if the Indian economy grows at an average annual growth rate of nine per cent.