Dec 7, 1999|
Power sector needs sustained investments
P. R. Kumaramangalam, India's power minister, has opined that the power sector will require investments worth US$ 100 bn in the first decade of the 21st century and US$ 150 bn in the next decade.
While addressing the India Economic Summit organised by the World Economic Forum and Confederation of Indian Industry (CII), Kumaramangalam revealed that given the 7%-8% GDP growth that the country was striving to achieve, the power sector would need to grow at 14% annually. He was optimistic of sustained investments from both the public as well as private sectors.
Kumaramangalam reassured foreign investors that India's infrastructure (road, power and ports) was poised for quick growth. He also said that the problems of the power sector were at the state-level, and not Union-level. This was reported by a leading financial newspaper.
However, while Kumaramangalam may sound comforting, the Indian power sector scenario is far from reassuring. In FY99, the sector 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. The private sector was expected to generate 1,830 MW in FY99, but could generate only 485 MW.
However, the private sector is not entirely at fault. Procedural hassles apart, the poor financial condition of the State Electricity Boards (SEBs) is one factor that has discouraged large-scale investments. SEBs buy power from power companies without being in a condition to pay for the power. As a result of this, financial institutions (FIs), are unwilling to pump money in power projects. Many FIs have built up non-performing assets (NPAs) in their books due to this.
Some states have privatised their SEBs so as to invite investments from the private sector. Hopefully with better financial management, perception among investors could turn positive. However, it remains to be seen how quickly SEBs can effect such a sudden change in image. Speed will be crucial in attracting investments to the sector.
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