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Power scenario gloomy - Views on News from Equitymaster
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  • Aug 19, 1999

    Power scenario gloomy

    Power ministry officials have voiced concern that capacity additions in the power sector may not reach the targeted 40,000 MW. The estimated shortfall of 15,000 MW (37.5% deficit) has been attributed to the low capacity additions in the private sector.

    In FY99, electricity generation at 448 bn KwH was 6.6% higher than 421 bn KwH in FY98. Thermal generation at 366 bn KwH was higher by 5.7%, while hydel generation at 83 bn KwH was up 11%. Plant load factor (PLF) of thermal plants was marginally lower at 64.3% (64.7% in FY98).

    However, power generation in FY99 failed to keep up with the projections. While the projected capacity was 3,299 MW, actual generation was only 1,556 MW - a shortfall of 53%.

    The Ministry of Power attributed this shortfall to delay in the commissioning of independent power projects (IPPs) in the private sector. While the private sector was expected to generate 1,830 MW in FY99, it could generate only 485 MW.

    It seems private sector woes shall continue to plague the power sector for a while. Private sector power projects have failed to take off largely due to slow progress in financial closure, and poor financial condition of State Electricity Boards (SEBs).

    Of late, the 740 MW first phase of the Enron, Dabhol power project, was the only significant development in the private sector.

    As per projections of the International Energy Agency, India is expected to post 4.7% average annualised growth (AAG) between 1999-2020 in power consumption

    In June 1999, electricity generation posted a 4% rise, over the corresponding period last year. Power generation in 1QFY2000, improved by only 4%, as against 10% rise in 1QFY99.

    For a country that dreams of 6% GDP growth, the power scenario is gloomy, to say the least. A 4% growth in power generation can not be expected to fuel an economy as large as India's. Given the gradual turnaround in India's industrial fortunes, private sector power generation has to pick up significantly. Private sector companies in turn feel, and rightly so, that they haven't got sufficient backing from the financial institutions (FIs). The FIs on the other hand complain that as long as the State Electricity Boards (SEBs) continue to make losses, they are unwilling to take the risk of investing in power projects. SEBs have to buy power from private power companies, while they don't have the money to pay for it.

    The companies blame the FIs. The FIs blame the SEBs. This passing the buck threatens to cripple the Indian economy, unless the government does something about it quickly.



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