Massive funds shortage set to short-circuit power capacity augmentation plans - Power Ministry admits to Rs 4 lakh crore crunch

The distribution and transmission sectors are the worst affected, with financing deficit pegged at Rs 2.02 lakh crore and nearly Rs 50,000 crore respectively.Power shortages are here to stay. In the penultimate year of the current Plan, the Government has admitted to a massive fund crunch that is set to short-circuit its power capacity augmentation plans.

The Power Ministry has said before a high-level Parliamentary panel that the sector is facing a funding shortfall of a whopping Rs 4 lakh crore, or around 40 per cent of the Rs 10.59 lakh crore financing requirement pegged for the five-year period ending March 2012. The Central, State and the private sectors are all facing difficulties in mobilising funds.

In its deposition before the Parliamentary Standing Committee on Energy, the Ministry has said that the targeted capacity addition and associated transmission and distribution infrastructure links are facing slippages due to paucity of funds.

T&D worst hit

While the generation sector is facing a shortfall of about Rs 1.60 lakh crore, the distribution and transmission sectors are the worst affected, with financing deficit pegged at Rs 2.02 lakh crore for distribution sector alone and nearly Rs 50,000 crore in the transmission sector.

What this means is that even for whatever generation capacity does come up, for which targets have already been pruned from 78,700 MW to 62,000 MW, the complementary transmission and distribution infrastructure to enable wheeling of power to the final customer is unlikely to be in place due to the funding shortfall.

The Committee, in its report, has mounted a scathing attack on the Government for not diligently dealing with “the elementary work of managing finances… while setting targets.”

“The management of finances appears to be an insurmountable obstacle in taking forward power projects… As of now the situation is so intricate that even if the resources are arranged, it would be impossible to achieve the physical targets of the Plan as there is considerable gestation period in completing the power projects,” the Parliamentary panel said in a strong indictment of the Government.