New Delhi: Anxious that the global financial meltdown could hurt India’s power project development plans, the Union power ministry will shortly meet private sector players to help resolve their problems.
“I am calling a meeting of all private sector developers for ongoing projects over the next one year who require credit, equity and fuel. The idea is to find out what kind of hand-holding is required,” Anil Razdan, Union power secretary, said over the phone on Thursday. The ministry’s concerns stem from the fact that some private developers are finding it difficult to raise credit for taking delivery of power generation equipment.
Of the 11th Plan (2007-12) target of adding 78,577MW of capacity in the country, the private sector is expected to contribute 10,760MW, which will require an investment of about Rs43,000 crore.
Public sector utilities, however, are not finding it difficult to go ahead with their plans because they have huge cash reserves. A case in point is state-owned NTPC Ltd, which had cash reserves and surplus of around Rs44,393 crore on its books as on 31 March.
Jairam Ramesh, minister of state for power and commerce, had told Mint earlier: “There have been no problems (for power projects) till date, but going forward, there are concerns over funding.”
India has a power generation capacity of 145,000MW. The 11th Plan target of adding 78,577MW of capacity will require, at current estimates, around Rs10.31 trillion in investments. But according to the power ministry, the government expects a Rs4.51 trillion funding shortfall in the sector. While 39,865MW is expected to be added in the Central sector, the state sector is expected to contribute 27,952MW.
India allows 100% foreign direct investment in the power sector and the Electricity Act, 2003, has opened significant opportunities for private sector investments. However, with global finances drying up, overseas investments are not something the developers are banking on.
“The situation is bad. When the 11th Plan started, only 18,000MW of private sector projects were identified. After that the private sector started announcing projects, with 1,25,000MW private sector projects being in different stages now. They are the ones who are scouting to raise resources,” said Madanagopal, an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd.
There are also issues related to coal and gas availability for power projects. Gas shortage is a problem faced by power generation firms across the country, with average efficiency of the projects at around 50%. Of the 78,577MW power that the country aims to add by 2012, 5.45%, or 4,290MW, will be gas-based.
While coal-based projects are not facing a similar level of shortage, the situation for them has also been grim due to the drop in the country’s coal production.
According to India’s Economic Survey, 2007-08, growth in coal production dropped from a high of 6.2% between April and December 2006 to 4.9% in the same period of 2007.
“We have been insulated from the crisis as a majority of our orders have been placed by the government entities. Even the private sector companies are increasingly turning towards us to place their orders,” K. Ravi Kumar, chairman and managing director, Bharat Heavy Electricals Ltd, said.
India does not have a good track record in terms of adding generating capacity.
In the five years to 2007, the country saw only 20,950MW capacity being added, against a target of 41,110MW.
In the five years to 2012, it has a target of 78,577MW additional capacity but, as Mint reported on 28 August 2007, India could miss this by 60% because of shortage of equipment.