India's growth story has thrown open huge opportunities in power sector
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The growth prospect related to the power industry has been very well realised by both government as well as the private sector. As the government is pushing for greater private participation to expedite project execution, it needs to clear certain bottlenecks that the industry has been facing for a long time. Although India can take some solace from the fact that its pace for capacity addition has improved over the period of time, it still lags behind by huge margin.
India is expected to add 62,374 MW against the target of 78,700 MW during 11th Plan. While this is less than the target it has set, it is way above what the government had achieves during last five-year plan. India’s demand for power has been growing by leaps and bounds, thanks to robust industrial growth and booming economy. It now has to intensify its project execution process.
Opportunities up for grabs
The huge demand-supply gap which is pegged at 14% peaking deficit and 11% energy shortage calls for quicker capacity addition. With private sector contribution of 19,797 MW (31.7%) against total addition of 62,374 MW during 11th plan, the government estimates the contribution from private sector would be much more as many power plants in private sector have been planned during 12th plan.
The private participation in the power sector was long overdue which has started to change in last four-five years, thanks to industry friendly policies that the government brought in after it started to liberalise the sector.
According to a White Paper brought out by KPMG on power sector in India, the Electricity Act, 2003 was a turning point in the reforms process which removed the need for license for generation projects, encouraged competition through international competitive bidding, identified transmission as a separate activity and invited a wider public and private sector participation among other things.
The report further observes: “Some of the other major reforms that have been implemented over the years include: unbundling of SEBs, tax benefits, Accelerated Power Development and Reform Program (APDRP) for distribution, permission for trading of power, etc.”
Manoj Agarwal, MD, Adhunik Metaliks Limited says: “Since the promulgation of Electricity Act-2003, there has been a lot of development in the merchant power space and we have seen a large number of industrial houses coming in the sector and taking steps for substantial capacity addition in 11th & 12th Plans. Private investment in power sector has increased from around Rs12000 crore in 2002-03 to around Rs35000 crore in 2009-10, signifying the growth prospect.”
These reforms actually opened up great scope for private players who earlier chose to shy away from taking up power projects. “The government is looking to set an ambitious target of adding 100 GW of power generation capacity. This opens up huge opportunities for all the companies operating in a wide spectrum of power space. The private power developers have a tremendous opportunity as most of the power projects are likely to be awarded through competitive bidding,” says J Suresh Kumar, CFO, Lanco Infratech Limited. Lanco is one of the top three private sector power developers in India with 2087 MW under operation, 8468 MW under construction, and 1239 MW of projects under development.Kumar says there are ample opportunities in transmission network ventures with an additional 60,000 km of transmission network expected by 2012, translating into an investment opportunity of US$200 billion. “The Power trading market in the country is also growing fast. The demand for equipment supplies is also high and to bridge the gap, Indian companies are also in the process of establishing in-house equipment manufacturing facilities. So the overall growth prospects of power sector in India appear to be quite healthy,” Kumar adds.
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