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Business News/ Home-page / Power sector faces fund crunch of 4,50,000 cr in 11th plan
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Power sector faces fund crunch of ₹4,50,000 cr in 11th plan

Power sector faces fund crunch of ₹4,50,000 cr in 11th plan

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New Delhi: After the dismal performance in the 10th Plan, the power sector is facing a similar fate in the 11th Plan with the Centre, states and private companies estimated to fall short of a massive 450,000 crore during 2007-12 , nearly 45 % of the total funds requirement.

The country needs about 10,31,600 crore to add more than 70,000 MW of generation capacity, besides creating and upgrading transmission and distribution systems. However, the sector would have a shortfall of 4,51,607 crore, as per the report of Working Group on Power for 11th Five-Year Plan.

The major chunk of the shortage is for states which are slated to make total capacity additions of around 24,000 MW in the 11th Plan and need 5,14,167 crore.

On a debt-equity ratio of 70:30, states need an equity capital of 154,250 crore, but surprisingly have no equity available to fund the expansion. Out of 3,59,917 crore of total debt required, the states can arrange 1,64,973 crore.

This leaves a gap of close to 2,70,000 crore in debt and equity for the states taken together, after considering an additional 80,000 crore in funding by special schemes such as APDRP and Rajiv Gandhi Gramin Vidyutikaran Yojana.

The massive shortage is not surprising given the fact that the state utilities suffered a loss of 26,150 crore and posted a negative rate of return of 27.43 %, according to the Economic Survey released in February 2007.

According to the report, the 11th plan capacity addition target has been set at 68,869 MW. Since then around 23,000 MW has been added in the 10th plan, compared to the targeted 41,000 MW, the 11th plan would need a capacity of 76,000 MW.

During 2007-12, the Centre would add at least 37,000 MW, private firms over 9,000 MW and states 23,000 MW.

Private players are also facing a shortage of funds. They need around 2,18,000 crore, including an equity of 65,500 crore.

The private firms have enough equity capital for expansion, but would require a debt of 104,700 crore.

In view of the massive shortage of funds, the Working Group has suggested modification in external commercial borrowings guidelines.

It favoured allowing infrastructure borrowers including intermediaries like Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Infrastructure Development Finance Company(IDFC) to borrow funds from overseas market under automatic approval route and exempting debt servicing from income tax to reduce the shortage.

It also said power bonds or ‘Vidyut Vikas Patra´ should be introduced as transferable bearer instrument for wider retail participation.

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Published: 18 Apr 2007, 05:43 PM IST
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