The Indian power sector is hampered by a shortage of funds of about $102 billion in power-generation projects. The Indian Minister of State for Power, Bharatsinh Solanki, presented the grim scenario while addressing a three-day trade fair organized in New Delhi late last week by the Federation of Indian Chambers of Commerce & Industry (FICCI) (New Delhi). Solanki said that the country's power sector is facing several obstacles, including threats of relatively less expensive Chinese equipment being dumped in the country, the lack of a level playing field in India's power sector, the high cost of debt, and disparities in duties and taxes. Other issues that plague the Indian power sector include viability of projects, marketing risks, operational inefficiencies, and inadequate fuel supplies.
Solanki suggested that the exposure limit of banks, international institutional investors and non-banking firms should be increased from 20 to 30 percent for individual borrowers, and from 50 to 70 percent for group borrowers in order to enable timely financial closure of power projects. He also suggested that external commercial borrowings by financial institutions such as Rural Electrification Corporation Limited (New Delhi) and Power Finance Corporation Limited (New Delhi) should be brought under the automatic route, and should not require approval from the Reserve Bank of India (Mumbai).
India aims to achieve a target of 350,000 MW of power generation capacity addition by 2017, which would require an annual addition of 27,000 MW of power-generation capacity. Recent estimates reveal that India has a very low per capita consumption of power at 600 kilowatts (kW), compared to 10,000 kW in the United Arab Emirates, 8,000 kW in the United States, and 1,800 kW in China. The country's power sector is estimated to require investments of about $600 billion.
Solanki said that while the country's power sector presents immense opportunities, it requires long-term commitment and planning to overcome low growth, slow pace of implementation, obsolete technology, and low-performing power plants in terms of plant load factor and thermal inefficiency. The minister stressed the need for support to the power sector in development of supercritical technology and equipment manufacture.
The Indian power sector has a shortage of key players ranging from equipment suppliers to contractors, with Bharat Heavy Electricals Limited (Mumbai) the only major supplier of power plant equipment in the country. The situation is further aggravated with only a handful of balance-of-plant suppliers operating in the country. As a result, power projects that have attained financial closure and could be commissioned within a period of 32 months now require a minimum of 46 months to go on stream.
Solanki also suggested that a national campaign on energy efficiency ought to be launched for propagating energy efficiency measures among all stakeholders and interest groups at the national as well as regional levels, and estimated that such a campaign would enable the country to save 20 to 25 percent of the current energy use. The Ministry of Power has rolled out the National Mission on Enhanced Energy Efficiency under the National Action Plan on Climate Change, which was launched last year.
Solanki stated that his department is working with the ministries concerned in order to ensure adequate supply of fuels such as natural gas, coal and liquefied natural gas to power plants. Power Secretary H S Brahma also said that about 37 applications for gas-fired power plants, with a combined power generating capacity of 35,000 MW, are pending with the government, primarily due to non-availability of gas. Brahma said that the ministry is confident of achieving at least 62,000 MW of new power generation capacity against the target of 78,000 MW by the end of the ongoing 11th five-year plan period, 2007-12. The power ministry has requested for an allocation of 40 million metric standard cubic meters per day of gas by 2012, and is confident of generating an additional 8,000 MW by the end of this period if the allocation of gas were to be approved. Solanki also expressed concern over human resources being lured away from public sector utilities by players in the private sector, but stressed that his department is working towards development of human resources in all the business segments of the power sector.
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