Powering the growth story
India’s huge demand for power to support its economic growth throws open new opportunities for the private sector
India’s power sector could become the next big success story after the telecom sector. Although India has the fifth largest electricity generation capacity in the world, power is still an immensely underserved sector.
The country’s per capita consumption is as low as 606 units which is less than half of China. Surprisingly, India’s power tariff is highest in the world due to huge demand-supply gap – 14% peaking deficit and 11% energy shortage. Sadly, the country also faces 27% T&D (Transmission and Distribution) losses which makes the scenario even worse.
India not only has to make up for the under-achieved target during Eleventh Plan but also has to double up its power generation capacity to meet future demand. It expects to achieve a capacity addition of 62,374 MW during the Eleventh Plan as compared to a target of 78,700 MW. On yearly basis, the govt has managed to achieve 9,585 MW capacity addition in 2009-10 against its target of 14,507MW. It has set a target of 20,359 MW for this year (2010-11) which will have 6110.5 MW from private players.
With the introduction of industry friendly policies, govt expects to have greater participation from private players. It has permitted 100% FDI in generation, transmission and distribution. Govt also offers income tax holiday for a block of ten years in the first 15 years of operation; waiver of capital goods import duties on mega power projects. The govt’s projection shows an increase of 55% in private investment in the electricity sector as compared to the original projections in Eleventh Plan.
According to govt’s estimate, over 150,000 MW of hydel power is yet to be tapped in India. It requires an additional 100,000 MW of generation capacity by 2012. The power sector outlook suggests that over 90,000 MW of new generation capacity is required in the next seven years which will create investment opportunity of about US$200 billion.
At present, the coal-fired plants constitute 57% of the installed generation capacity, followed by 25% from hydel power, 10% gas based, 3% from nuclear energy and 5% from renewable sources. Moving forward, India looks to increase its contribution from nuclear and renewal energy sources.
The power sector offers huge opportunities in generation for coal based plants at pithead or coastal locations (imported coal); Natural Gas/CNG based turbines at load centres or near gas terminals and Hydel power potential of 150,000 MW. There is substantial scope in the transmission and distribution segment also. India is expected to have additional 60,000 circuit km of transmission network by 2012. With the increase in demand due to ever growing industrial activities and domestic consumption, power is going to be the most happening sector in coming years.