The news on robust foreign inflows comes in at a time when domestic investor interest in the power sector is petering out and is clearly visible in the form of the tepid response by domestic banks and financial institutions to the funding of new private generation projects. The main concern is about adequate coal supplies for new projects, amidst signs that developers of projects close to commissioning could default on their loan repayments due to fuel shortages.
Subdued merchant power rates and reluctance among cash-strapped State Electricity Boards to buy power from the spot market are adding to investors' woes. The worsening financial position of the SEBs — their losses are pegged at Rs 55,000 crore — has already begun to affect existing power generators. While NTPC's bottomline was dented last fiscal due to lower offtake by SEBs, private developers also face the same risk.
The overall funding requirement in the Eleventh Plan (2007-12) was estimated at Rs 10,31,600 crore (about $230 billion at an exchange rate of Rs 45) by the Working Group on Power at the beginning of the current Plan period.