India's power sector seeks a spark
Published: Thursday, Jul 28, 2011, 8:00 IST
By Neeraj Thakur & G Seetharaman | Place: New Delhi, Mumbai | Agency: DNA

The last half-a-decade in the power sector is notable for what could have happened but didn’t.

Sure, more was done than in the preceding years but it was nowhere near as much as required for India’s growth story.

The government had set a capacity addition target of 78,700 mw for the 11th Five Year Plan (2007-12). The figure, one-third of which was to come from private projects, was nearly four times the actual capacity added in the previous five years.

During the mid-term appraisal, the ministry had revised its target to 62,000 mw. But, as per latest estimates, there is a further downward revision. In 2010-11 only 12,160 mw of capacity could be added against the targeted 20,359 mw. Out of the 12 planned ultra-mega power projects only four have been awarded.

Key to the government’s plan to add 1,00,000 mw in the next five years is fuel security. Coal is the most commonly used fuel. While the domestic availability of coal this year is said to be 554 million tonne (mt), the demand is 142 mt higher, of which nearly 67 mt will be imported.

Power developers are increasingly looking to acquire coal blocks overseas to meet their huge capacity addition ambitions.

Santosh Kamath, executive director, KPMG, wrote in a report earlier this year, “Coal imports which were negligible a few years back are likely to rise to around 30% of the total coal requirement by 2017.”

Added to the shortage are the environment ministry’s strict recent rules. The ministry’s categorisation of no-go mining areas resulted in a huge problem for Coal India that saw 44% of its mining area falling under this category. Due to this, CIL refused to sign fuel supply agreement with the power companies, resulting in banks refusing to finance projects.

NTPC CMD Arup Roy Choudhury said one of the other main challenges for developers relates to “supply of power equipment in a timely and sequential manner, adequate resource deployment by the construction and erection agencies with right number of skilled persons.” Various private players like L&T-Mitsubishi, JSW-Toshiba and BGR-Hitachi are recent entrants in the BTG market.

The power ministry in its assessment said Bharat Heavy Electricals could meet only 51% of its target of supplying main plant equipment. There has also been the issue of the financial woes of state electricity boards, Kotak Institutional Equities in a July 15 report mentioned that the total state electricity (SEB) losses in the country amounted to ¤52,600 crore in 2008-09.

“We note that Rajasthan, Tamil Nadu and Uttar Pradesh together contributed 49% (of that),” it added.