Power ministry expects long, dark hours ahead

Despite the apparent policy stress on the power sector, India’s capacity addition has remained far below target, including the Eleventh Five-Year Plan ending this month. The dismal performance is expected to continue during the Twelfth Plan period beginning next month, with the power ministry now expecting substantially lower capacity addition at 45,000-55,000 MW, compared with the ambitious 100,000 MW proposed earlier.

This means fuel shortage and flagging reforms will continue to cripple the critical sector for years to come, despite the award of several ultra-mega power projects (UMPPs).

The power ministry’s revised assessment comes in the backdrop of India being tipped to surpass China as the world’s biggest thermal coal importer in 2012-13 and consequently higher costs. Estimates are that India will import 120 million tonnes of coal next fiscal, as against some 70 mt this year. Imports could touch 240 mt by 2016-17, which, at today’s prices, entail an import bill of $30 billion.

Sources said though the official Plan target would be around 76,000 MW, there are already doubts in the power ministry. Major impediments include coal shortage due to depressed production by Coal India and a long list of pending statutory clearances on land, environment, water and forests.

The power ministry has explained the gloomy scenario to the Planning Commission in a presentation. The Commission will accept all inputs before finalising the target for the 2012-17 Plan.

The power ministry presentation said adding 76,000 MW would be difficult, since this assumes CIL’s production will cross 750 million tonnes per annum by 2016-17. CIL expects production to touch only 556 mtpa by that year — And in a more optimistic scenario, 615 mtpa.

“Most likely, Twelfth Plan capacity addition would be closer to about 52,000 MW — almost the same figure of the Eleventh Plan. Even this would be possible only if CIL’s production rises well beyond 600 mtpa in the terminal year of next Plan,” said a power ministry official, asking not to be named.

India’s primary coal source, CIL currently produces about 432 mtpa and is likely to end this fiscal with 450 mtpa. The Eleventh Plan target of well above 500 mtpa by CIL was earlier cut to 480 mtpa and further to around 450 mtpa. CIL has approached the coal ministry to lower it further to about 440 mtpa.

“The situation is grim. Peak demand during Twelfth Plan is expected to hit 1,98,000 MW. The poor level of capacity addition during the Plan will widen the demand-supply mismatch, condemning large areas of country to long power cuts,” said a power sector expert, asking not to be named as he was yet to make fully analyse official data.