New Delhi: To achieve the power generation targets fixed in the 11th Plan period, the government may have to revise investment in power projects in view of 25% rise in prices of key input materials including cement, steel, aluminum, copper and zinc over last two years, according to an Assocham study on the ‘Impact of Inflation on power projects’.
With WPI based inflation rate hovering close to 12% and expected to be in double digit for some time, the proposed power projects in India could take a hit from increased cost of inputs and a recent downturn in the core infrastructure industrial productivity.
* Planning Commission has estimated a fund requirement of Rs4,10,897 crore for likely capacity addition of 68,869 MW during 11th plan
* Key input requirement includes cement, steel, aluminium, copper and zinc; weighted cost of key input materials for power sector in 11th plan increased by 25% over last two years
* 45.88 million tonnes of steel and cement needed for planned capacity addition, constituting 95% of total key input requirements; rise in prices will impact cost of power projects under construction
* Between June 2006 to June 2008, WPI for cement and iron & steel increased by 30.63% and 11.73% respectively
* WPI for aluminium, copper and zinc rose over last two years with prces for aluminium and zinc increasing by 17.75% and 45.82% respectively while WPI for copper doubling to almost 99.08% over last two years
* Declining growth rate of six core infrastructure industries with combined weight of 26.7% in the index of industrial production (IIP) can pose problems for power projects
* Core infrastructure industries providing major inputs for power plants like cement, finished steel, coal, electricity have witnessed major slowdown in the growth rate for the first five months of 2008