Lack of proper support slows FDI into power sector: NTPC

State-run NTPC has said that lack of "politico-administrative" support to tackle commercial losses and poor health of government utilities are among the main reasons for low FDI inflows into the Indian power sector. 

Cumulatively, the sector has witnessed FDI inflow of just USD 5.9 billion between April, 2000 and March, 2011. "The reason for low FDI inflow in power sector is that there is a lack of politico-administrative support on containment of commercial losses, coupled with poor financial health of state utilities in addition to capped regulatory returns on equity," NTPC said in its 2010-11 annual report. NTPC is the country's largest power producer and has an installed capacity of 34,854 MW. Out of the total, over 28,000 MW are from coal-based projects. Looking at capacity addition of about 17,600 MW in 2011-12, the power sector is grappling with environmental hurdles, project delays and fuel supply issues. "Delays in land, forest and environmental clearances, resulting in cost escalation and availability of fuel are not only reasons for low inflow of FDI into power sector but also for delay in setting up power plants," the report noted. The sector attracted FDI of USD 1.25 billion in the last financial year as compared to USD 1.44 billion in 2009-10. Many power distribution companies are incurring huge losses, especially due to a mismatch between power tariffs and the cost of generating electricity. Estimates show that electricity distribution losses touched about Rs 70,000 crore in 2010-11. Other major concerns for the sector include constraints on power equipment manufacturing capacity and shortage of skilled manpower. The country's energy requirement at the end of 12th plan (2012-17) is projected to be 1,392 billion units. And to achieve this target, power generation has to rise at a Compound Annual Growth Rate (CAGR) of over 9 per cent. Power generation has seen a CAGR of 5.17 per cent from 2001-02 to 2010-11. The total installed capacity stood at 1,73,626.40 MW at the end of March 31, 2011, with state sector accounting for over 47 per cent share.