India’s efforts to raise around $6 billion (around Rs24,350 crore) from countries in West Asia for power sector projects here have come a cropper and analysts and experts attribute this to the global credit crisis and the unwillingness of these countries to “expose” themselves to the domestic energy sector.
The inability to raise money could crimp the country’s plans for the power sector.
“It has been close to one-and-a-half years but we are yet to make progress. These countries are not interested in taking equity in our projects but only offer loans. We do not see much happening here as our firms are interested in taking loans only if the interest rates are lower,” said a Union government official who did not wish to be identified.
India plans to add a generation capacity of 78,577MW over the next five years at a cost of Rs10.31 trillion. The ministry of power says the government faces a shortfall of Rs4.51 trillion in funding this, which it hopes to make up by attracting investors.
Capital influx: An NTPC plant in Rihand, Uttar Pradesh. The firm is among the three agencies through which the initial investments from West Asia were targeted to be channelled into the power sector.
Three state-owned power firms—NTPC Ltd, National Hydroelectric Power Corp. Ltd, and Power Grid Corp. of India Ltd were targeting investments from West Asia on the back of the power ministry’s initiative to politically and economically engage these countries, as directed by the Prime Minister’s Office. The move would have also helped them secure fuel supplies, especially gas because these countries have significant reserves of oil and natural gas. The initial focus was to attract investments from Saudi Arabia, Qatar, United Arab Emirates and Kuwait; Bahrain and Oman were to be targeted later.
Email queries to the Saudi Arabia, the United Arab Emirates and Kuwait embassies in New Delhi were not answered.
Mustafa, an adviser at the Qatar embassy in New Delhi who goes by only one name, said that he “had no idea about this.”
The five projects India was shopping around for include India’s largest power generation company NTPC’s Kayamkulum combined cycle gas project, Ennore joint venture thermal power project and Cheyuur project; NHPC’s Dibang project; and a PGCIL project.
An executive at PGCIL, who did not wish to be identified, said that while some West Asian countries had earlier expressed an interest in investing in some projects, this resulted in nothing, despite the company’s efforts.
Executives at NTPC and NHPC said their experience was similar.
Executives at all three companies did not wish to be identified.
Each of the three companies was given an investment target of $2 billion as reported by Mint on 7 February.
On paper, India’s plan to raise money from West Asian countries with which it has typically enjoyed a good relationship looked good. Some of these countries had significant money at their disposal but were reluctant to park their money in US government bonds. They were looking for alternative commercial investment opportunities.
A Mumbai-based analyst, who did not wish to be identified, said: “There are a lot of reasons for this. First, these countries are not comfortable with investing in the energy projects in India as by doing so they would have made themselves susceptible to the energy demands of India such as oil and gas. There is also a liquidity crunch in the global financial systems, and their money is invested in financial institutions of developed markets through vehicles such as sovereign wealth funds.”