India power sector shows “worrying” lack of growth

India’s power sector has failed to meet expectations for growth in 2015, with a sharp decrease seen in private investment in new power projects.

This is according to a report published this week by Anil Sasi, Senior Editor of the New Delhi-based Indian Express newspaper, who called the drop in private investor interest “worrying” for the government’s economic goals.  

The report cites figures from official sources such as central electricity regulator CERC to show that 46 Indian power generation projects were granted transmission connectivity in 2010, but that number fell to just two in 2014 and two in 2015. And it said both 2015 projects were in the public sector, while 35 of 2010’s 46 projects were privately funded.

Among the problems for the power sector is stagnant demand. The report said India’s power capacity grew at 13.7 per cent per year from 2012-2015, while consumption grew by just 6 per cent. Because distribution companies (discoms) do not have the money to buy power, many thermal plants have been operating at around 60 per cent of their capacity. And on one day in May, the report said 57 baseload thermal plants in the country’s northern and western regions were shut down due to lack of demand.

In addition, the report said “a vast majority” of power projects are “distressed” due to either a prohibitive tariff or an inability to secure a reliable fuel supply. In addition, high construction costs, high fuel prices, bureaucratic hurdles and long delays can lead to cost overruns.

And the number of stranded projects is up, from 9 per cent of all power projects in Q3 to 11 per cent in Q4. According to the report, many of these projects are stalled due to “lack of promoter interest or commercial unviability”.

The report said these figures for the power sector, which is key to economic development, are in “sharp contrast to the [government’s] narrative of an impending industrial uptick”.

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