Indian minister calls for Canadian investment in power sector

Mr Sushil Kumar Shinde union minister of power has invited Canada to invest in the power sector of India which is growing at rapid pace with huge opportunities for investments and technological cooperation.Mr Shinde addressing the Business Luncheon Meeting with QIBC in Montreal highlighted the resilience shown by the Indian economy during the global slowdown with registering a 7.4% growth rate in 2009-10.

Mr Shinde said that India is one of the most attractive investment destinations today and keenly looks forward to investments and joint ventures from Canada in manufacturing energy equipments. Also, there is a vast potential for participation in India’s offshore exploration activities in the oil and gas sector. Mentioning about the longstanding bilateral relationship between the two countries, the Minister called for technological cooperation and collaboration in the area of shale gas, where Canada is far ahead. The Minister mentioned the areas of interest to India which include hydel power, nuclear power, supply of uranium, mining, clean coal technology, energy efficiency, oil and gas, smart grid, ultra high voltage transmission technology and collaborative R&D.

Mr Shinde said that with more than one hundred and sixty thousand MW, the Indian power sector has the fifth largest electricity generation capacity in the world today and is the world’s third largest transmission and distribution network. However, the demand from increased manufacturing activities, a growing population and the rising energy needs of a rapidly growing consumer base has led to a situation where the supply of energy falls short of the demand. In the electricity sector alone, the country face a peaking shortage of almost 12 % and an energy shortage of 9 to 10%, the Minister observed.

To meet this requirement the government is targeting a capacity addition of 62 thousand MW in the 11th Five Year Plan during the years 2012 -2017. During 2007-2012, the funding requirement in Indian Power Sector has been estimated at USD 230 billion, out of which USD 132 billion is in power generation and balance in power transmission and distribution. Such a gigantic task can be successful only when the efforts of Govt. are strongly supported and complemented by the private sector.

Mr Shinde highlighted the various steps taken by the Govt. of India to make the policy framework more conducive to larger and more sustained investment in the power sector. The Electricity Act 2003 allows the sector to align itself with market dynamics and clears the roadblocks especially in the way of greater participation by the private sector. Generation projects no longer require licenses and have reasonable assured returns on investments over the long term. An independent regulatory framework now provides business confidence to power companies and a fairly lucrative rate of return on equity of 15.5% per annum. Policy documents like the National Electricity Policy, 2005 and the Tariff Policy, 2006 have paved the way for renewed interest amongst both developers and investors. Bidding documents have been standardized and the competitive bidding route is slowly becoming the norm.

The Minister told the Business Community about Hundred Per cent Direct Foreign Investment permitted in all segments of the power sector including power trading in India. He pointed out that all the projects of the 11th Five Year Plan have achieved financial closure and are likely to add around 20 thousand MW in this Plan. Success of our Ultra Mega Power Projects, with each project of 4000 MW and involving investment to the tune of USD 4 billion, has renewed the faith of the private investors in our power sector. Bidding for 4 projects have already been completed and 5th and 6th are under process. Eight more projects are being planned, stated the Minister.

Mr Shinde also noted that we have made our Mega Power Policy more liberal. With two power exchanges already operational and conducting business, we feel that the power market will deepen further. Open Access, which is mandated under the Electricity Act, 2003 is already successful at the national level and the Government of India is trying its best to see that it is implemented by all the States of the Union.