Power sector reforms crucial for achieving 9% GDP growth: CII [Mar 2012]

Even as the Indian government draws up ambitious plans envisaging 100 GW capacity additions in the 12th Plan period, the country’s power sector is facing multidimensional challenges. These issues are constraining growth in the power sector and may adversely impact economic growth in the long term. The Confederation of Indian Industry (CII) statement says that unless the issues plaguing the power sector are urgently addressed, the aspiration for 9 per cent growth in the 12th Plan may not be met.
“Critical obstacles including fuel supply bottlenecks, distribution losses and lack of funding need to be urgently addressed to achieve double digit GDP growth,” said Chandrajit Banerjee, Director General, CII.
Fuel availability has emerged as the biggest risk faced by thermal power projects in India. Coal production has not kept pace with power capacity addition in the current plan and developers have been forced to import coal at a time when international coal prices have shot up. Lack of clarity on financing this extra cost as well as added transport costs for plants in the interior have led to uncertainty and reduced investments in power.
“With coal–based capacity addition expected to account for over 50 per cent of total capacity additions in the upcoming 12th plan, the issue of acute shortage of domestic coal in the country and its impact on project economics due to higher prices of imported coal needs to be urgently addressed. In addition, there would also be financial stress on assets already built or committed by many private sector players,” says Anil Sardana, Chairman, CII National Committee on Power and MD, Tata Power.

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