Private sector ray of hope in black hole, says Shinde

Only 18,000 megawatt was added this year compared with 23,000 MW in the same period in 2010
Samiran Saha
New Delhi

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Union Minister of Power Sushil Kumar Shinde on Wednesday reiterated the pitiable state of the power sector in the last three decades admitting that India was way behind other countries.
India has consistently failed to meet the capacity addition targets in the last Five Year plans. This year, only 18,000 megawatt (MW) was added compared with 23,000 MW in the same period last year.
Shinde, in his address at the ongoing Power Summit 2011, held at the Taj Mansingh here on Wednesday, said that India was expecting a slew of investments in the crucial sector in coming years. “Private sector participation, which was 10 per cent at the end of the 10th Plan, has gone up to 30 per cent and will be more than 50 per cent during the 12th Plan. As a result of these initiatives, we have added more than 60,000 MW during the last five-and-a-half years. More than 80,000 MW capacity building is underway for the 12th Plan,” he added.
The minister said that the country’s fast pace of economic growth coupled with increased demand from the industry had led to an unprecedented demand for power. “Private sector would have to play key role in augmenting India’s power needs. “The segment is fully open to private investors. Recently, six projects were completed, and investment of Rs 19,000 crore is expected.”
Planning Commission member Gajendra Haldia admitted that serious trust deficit among investors and lenders in the sector had affected investment badly. “Investors are shying away. The entire sector will have to be restructured as structural issues are real determinants of change. Banks are weary to lend as they are already exposed to the power sector loans in a very big way,” Haldia said. He added that the sectoral cap for the power sector had already been breached by most of the banks. “Most banks have already reached the 14 per cent mark in their lending capacity in the power sector and in the coming years lenders would be weary of overexposure in the.”
Haldia added that already state electricity boards had sought restructuring of nearly Rs 65,000 crore this year. “The banks need to regain confidence in the sector before they lend any more to the power sector.”
However, Haldia said that financial institutions would be roped in, external commercial borrowings could be expanded and infrastructural bonds would be floated to fund the sector if the cash deficit continued. The infrastructure sector, Haldia pointed out, would need about $1 trillion in the next decade. “We have increased the outlook for the infrastructure sector from $half-a-trillion to $1 trillion to fast-track things.”
Rahool Paipanandiker of Boston Consulting, a leading consulting firm, said that the Indian power sector was deficient in fuel, manpower, policy clarity and land to fast-track growth. He added if the economy was expected to grow at 8-9 per cent of the GDP, power sector needed to grow at about 6-6.5 per cent.
By 2017, India would be nearly 250 million tonnes short on total coal production, the key fuel for thermal power plants. “Only 40 per cent of the target announced in 2010 has been achieved. The government could generate only 47 gigawatts instead of 121 gigawatts as planned.”
Paipanandiker said that due to lack of proper policy initiatives, the government has had to scale down its production targets from 1,78,000 MW to 1,50,000 MW. “A clear roadmap with measurable milestones is required to further the sector.”
Regarding availability of trained manpower in India, Paipanandiker said that though about 100,000 trained engineers were produced every year, during the 12 Plan, starting in April, the country would face problems as the required manpower would increase by three times. He added that significant cash crunch would also be a serious impediment in development of the sector. “We need to fix these problems in