New Delhi: Electricity trader PTC India Ltd has deferred plans for a $1 billion energy infrastructure fund, reflecting the waning interest in the country’s power sector, once a big draw for investors but now buffeted by a resource crunch and corruption allegations on coal block allotments.

After ending its alliance with UK-based management company Ashmore Group Plc, PTC was seeking partners in the fund that was to acquire equity stakes in power projects. It was unsuccessful in this as potential partners shied away after the allegations of improprities in coal block allocations surfaced.

“The plans for the fund have been deferred," said Deepak Amitabh, PTC chairman and managing director. “The initial plan was to partner with Ashmore but it didn’t work out. They (Ashmore) were supposed to bring investors. In the present scenario, investors are finding it difficult to come here and invest. No one wants to put money given the current state of the sector after the allegations regarding the coal block allotments."

The Indian power sector has been facing uncertainties over issues such as fuel supply, land allocation and funding. These challenges were exacerbated after a report by the Comptroller and Auditor General of India (CAG) that alleged a notional loss of 1.86 trillion to the exchequer because captive coal block allocations were made in a non-transparent manner.

“No international investors are willing to invest in the Indian power sector due to the difficulties involved here," Amitabh said. “Even if we plan to start afresh looking for investors, these things take time."

An inter-ministerial group set up to investigate coal allocations recommended cancelling the award of blocks to central and state government-owned firms and levied penalties. The Central Bureau of Investigation is, meanwhile, continuing its own investigation into the allotments.

A PTC board member said on condition of anonymity, “For the time being, the plans for the fund are not being pursued and the company is waiting for an opportune time for the situation to improve."

The deferment of PTC’s plans comes at a time when concerns have been expressed about India’s power sector plans coming unstuck in the absence of adequate funding. The sector will need around $400 billion of investment in the 12th Plan (2012-17), according to the power ministry’s initial estimates. The government has been trying to boost investor interest in the sector as India needs to step up capacity sharply to end shortages and ensure that growth, already faltering, isn’t further constrained.

A high-level committee on financing infrastructure headed by Deepak Parekh recommended “rationalization" of tariffs to maintain the inflow of investment in its report submitted to the government in October.

The draft plan document for the 12th Plan period expressed the concerns of the industry. “Although the pace of creation of generation capacity has picked up considerably, the fuel supply capability has not kept pace and serious fuel supply problems have arisen in the last year of the Eleventh Plan," it said. “Since 80% of the additional generating capacity will be coal-based, resolution of coal supply to the power plants coming on stream will be crucial."

India has an installed power generation capacity of 207,876 MW and plans to add around 88,537 MW during the 12th Plan.

Despite the setback on the fund, a 16 November MSFL Research report was upbeat about PTC’s prospects. “Despite facing transmission constraints, PTC was able to deliver reasonable growth in trading volumes," it said. “The management is also sounding confident of receiving its dues outstanding with appropriate surcharge income and thus we expect positive surprises for PTC on both the trading volume and margin front."

PTC has signed power purchase agreements of around 14,402 MW and reported 16.9% growth in revenue for the second quarter after five consecutive quarters of revenue decline.

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