Flow of funds Declines due to uncertainties in fuel supply and regulatory question marks
Private investment in the power sector slumped 44% last financial year to Rs 54,953 crore from Rs 98,283 crore a year ago, Union power minister Jyotiraditya M Scindia announced recently. Industry experts said the private investment has further declined in the current financial year.
Association of Power Producers’ director general Ashok Khurana said the declining trend in investments was due to uncertainties on fuel supply, regulatory affairs and policy framework.
“The private developers have slowed down or postponed their investments because of issues,” he said.
PwC executive director (infrastructure) Kameswara Rao said the investment was low as there was no demand for electricity from state distribution companies and also because no new projects are being bid by the government.
The country’s power generation capacity increased by 20.6 gigawatts in 2012-13 — the largest in any year.
“Whatever investments we have seen so far are on projects which were planned earlier. Companies with existing plants are suffering losses due to fuel scarcity so the ability to invest is low,” he said.
He said there have been no major power procurement tenders from state distribution companies besides Uttar Pradesh, Tamil Nadu and Rajasthan. “There is a need to create demand by the signing of power purchase agreements and announcing new projects like ultra-mega power projects,” Rao said.
The government has yet to finalise new guidelines for bidding power plants that were stopped in 2011. An empowered group of ministers is expected to meet on the issue.
On an average, 27% of the country’s available 1,46,000 MW power generation capacity is under outage.
Thermal power plants are stranded or under-utilised due to shortage of gas and coal. Data available with the Central Electricity Authority show that coal-based plants operated at 63% of their capacity in June, while gas power plants at 29%. Coal-based power plants can be run partially on imported coal, but it raises costs leading to non-purchase by state distribution companies. Power regulator Central Electricity Regulatory Commission (CERC) has allowed companies like Tata Power and Adani Power which operate imported coal-based plants to recover additional costs from state distribution companies.
The government has also recently allowed power-generating companies to bill the distribution utilities for additional cost incurred on imported coal. But poor financial health of distribution companies does not allow them to purchase power generated from imported gas or coal.
Last September, the government offered a debt-restructuring scheme to the state distribution companies that have aggregated . 1.9 lakh-crore losses.
Khurana said pick-up in investments in the power sector will depend on the regulatory outcome of coal cost pass-through and the CERC judgement in Adani Power and Tata Power cases on imported coal. In a written reply to the Rajya Sabha, Scindia said the share of private sector investment in new capacity addition increased to 41.9% during 2007-12 from 9.1% during 2002-07. He said the government has liberalised the FDI policy for power trading exchanges by allowing allowed up to 49% through automatic route.
Private investment in the power sector slumped 44% last financial year to Rs 54,953 crore from Rs 98,283 crore a year ago, Union power minister Jyotiraditya M Scindia announced recently. Industry experts said the private investment has further declined in the current financial year.
Association of Power Producers’ director general Ashok Khurana said the declining trend in investments was due to uncertainties on fuel supply, regulatory affairs and policy framework.
“The private developers have slowed down or postponed their investments because of issues,” he said.
PwC executive director (infrastructure) Kameswara Rao said the investment was low as there was no demand for electricity from state distribution companies and also because no new projects are being bid by the government.
The country’s power generation capacity increased by 20.6 gigawatts in 2012-13 — the largest in any year.
“Whatever investments we have seen so far are on projects which were planned earlier. Companies with existing plants are suffering losses due to fuel scarcity so the ability to invest is low,” he said.
He said there have been no major power procurement tenders from state distribution companies besides Uttar Pradesh, Tamil Nadu and Rajasthan. “There is a need to create demand by the signing of power purchase agreements and announcing new projects like ultra-mega power projects,” Rao said.
The government has yet to finalise new guidelines for bidding power plants that were stopped in 2011. An empowered group of ministers is expected to meet on the issue.
On an average, 27% of the country’s available 1,46,000 MW power generation capacity is under outage.
Thermal power plants are stranded or under-utilised due to shortage of gas and coal. Data available with the Central Electricity Authority show that coal-based plants operated at 63% of their capacity in June, while gas power plants at 29%. Coal-based power plants can be run partially on imported coal, but it raises costs leading to non-purchase by state distribution companies. Power regulator Central Electricity Regulatory Commission (CERC) has allowed companies like Tata Power and Adani Power which operate imported coal-based plants to recover additional costs from state distribution companies.
The government has also recently allowed power-generating companies to bill the distribution utilities for additional cost incurred on imported coal. But poor financial health of distribution companies does not allow them to purchase power generated from imported gas or coal.
Last September, the government offered a debt-restructuring scheme to the state distribution companies that have aggregated . 1.9 lakh-crore losses.
Khurana said pick-up in investments in the power sector will depend on the regulatory outcome of coal cost pass-through and the CERC judgement in Adani Power and Tata Power cases on imported coal. In a written reply to the Rajya Sabha, Scindia said the share of private sector investment in new capacity addition increased to 41.9% during 2007-12 from 9.1% during 2002-07. He said the government has liberalised the FDI policy for power trading exchanges by allowing allowed up to 49% through automatic route.
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