Power sector needs $200 bn to light up capacity: report

Mumbai, May 30 | Updated: May 31 2007, 05:30am hrs
Indian power sector will need an investment of $200 billion in the next five years in the field of additional generation capacity, transmission systems, renovation and modernisation, cross country grid, efficiency improvement in generation, reduction T&D losses.

According to a report titled electricity sector in Indiastatus and outlook by Citi bank, the investors, however, would have to tackle challenges such as low operating efficiencies, poor financial health, locational risks and fuel supply bottlenecks, regulatory bottlenecks and high open access charges. The report was released by the commerce minister Kamal Nath on Tuesday at the thrid GCC-India investment conference.

The report said that there are regulatory bottlenecks in forms of distorted and very high tariffs, slow progress of energy audit and unwieldy structural framework of state electricity boards.

Over 78,577 mw of new generation capacity is proposed to be added by 2012. Of the $200 billion investment, as high as $90 billion is needed for generation capacity addition of which $19 billion is expected from the private sector. Besides, $90 billion would be needed for transmission and distribution of which $15 billion is needed for the national power grid. Investment of $6 billion for the national powergrid is expected from the private sector, the balance from the central sector.

Balance of the investment in transmission and distribution is expected to be financed through a mix of the state and the private sector. The report has estimated an implied investment of $25 billion from the private sector.

Given the market opportunity and competitive positioning, India is an attractive destination for foreign destination, the report said. The report admitted that the incentives and government support have eased the process of raising finance. In the ultra mega power projects, the government has used a model of shell companies, easing the setting up process for the potential power generators.