Where is the electricity to power the bustling factories and homes of the teeming masses? Even as real economic growth averaged 8% in the last decade, power supply has grown only about 6% or so, according to Deutsche Bank AG. Even if capacity addition has picked up a tad in the past couple of years, fuel supply problems have led to falling or stagnant capacity utilization. The tariff structure and profitability issues with the power generation sector have been well-documented. That, plus problems in transmission and distribution, have stunted power availability for the paying consumer.
Deutsche Bank’s economists Taimur Baig and Kaushik Das warn that “if the supply-demand gap worsens from the present 5% to 7-8%, which could happen in 2012 and 2013 if the coal supply situation is not addressed expeditiously, the ensuing shortage could subtract as much as 0.5% from growth”.
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Graphic by Yogesh Kumar/Mint