The power sector in India is full of opportunities and the coming years, which continue beyond the India’s 12th Five Year Plan, look promising. This positive outlook is, of course, necessary as power projects require long timelines from conception to commissioning to achieving productivity targets and profits thereafter. It’s the long-haul that the power players need to plan for, particularly the private sector players, and resist temptations to sell out if growth is slow.
So far, growth in the power sector seems to have shadowed the growth in India’s GDP, which has cautioned many investors, both Indian and foreign, forcing them to play the waiting game or look for opportunities in other markets. This is not in the interest of the power sector as investments are going to be critical to meet the demand-and-supply gap that currently exists in the country before any surplus can be created, utilised and traded.
In terms of power generation, India ranks no.5 globally with an installed capacity of 229,251.74 MW (which includes central, state and private sectors) as on end-November 2013 according to the Ministry of Power, Government of India. Even then, there is huge unmet demand with serious shortfalls, affecting operations and production in almost all industries, and denying access to electricity to at least a third of the country’s population. Moreover, with population and industrial growth, the demand for power is increasing every day, further widening the demand-and-supply gap.
The Ministry of Power and the Planning Commission, Government of India, are aware of this situation since the country’s economic growth is depended on it. Plans are underway to increase investments in the power sector over the next 8 years (12th & 13th Five Year Plans), and will be continued onwards towards a brighter future. These investments not only focus on power generation, which is the need of the hour to meet current demands, but also include power transmission and distribution, fuel supply chain, equipment, technology, renewables, and rural electrification.
According to the Planning Commission,
“India’s power sector has seen extreme changes in the last decades. A slew of policies and regulations followed the Electricity Act of 2003 to facilitate an accelerated growth in the sector. The process started with the restructuring of power distribution utilities, with some states corporatizing the functional entities for power generation, transmission and distribution. The states of Orissa and Delhi went a step further by privatising the distribution sector.
Another important aspect is to provide clean and convenient “lifeline” energy, critical for the well-being of deprived. Similarly requirement of coal, the dominant fuel in India’s energy mix will also need to be expand. Meeting the energy challenge is of fundamental importance to India’s economic growth imperatives and its efforts to raise its level of human development.”
Achieving India’s power needs is a mammoth task. Fortunately, the Ministries of Power, Coal, Petroleum & Natural Gas, Renewable Sources of Energy, and the Department of Atomic Energy, together under the guidance of the Planning Commission, are gearing up for growth. Other ministries and government departments have also agreed to contribute in terms of faster processing of licences, clearances for projects, acquisition of land, supply of water, supply of skilled manpower, etc., while respecting the environment, lives and livelihoods of people, and promoting ethical business practices.
The private sector, too, sees this growth as an opportunity and is bringing in finance, technology, efficient systems, better project management practices and experience. Apart from existing players in power generation like Tata Power, Reliance Power, Sterlite Energy, Jindals and Adani, a 26 December 2013 article in Live Mint reported that both Indian and foreign investors, such as India’s Piramal Group, USA’s JP Morgan Chase and Co., Singapore’s Sembcorp Industries and France’s GDF Suez SA, are taking an interest in investing in India’s power sector.
Quoting an industry analyst, the LiveMint article states,
“The Piramal Group led by Ajay Piramal is scouting for investment opportunities in the Indian power sector, in a move that is as much an indication of the intentions of a conglomerate with money to invest as it is of growing investor interest in the business…
JPMorgan Asset Management invested $150 million in the Bhaskar Group’s Diliigent Power Pvt. Ltd in May 2013; Nagarjuna Construction Co. Ltd has been reported to be in talks with Sembcorp to sell a stake in a power plant; and Meenakshi Energy and Infrastructure Holdings Pvt. Ltd has agreed to sell a 74% stake in a 1,000 megawatts (MW) coal-fired power project to GDF Suez.
The debt-laden Jaypee Group is close to selling two of its three operating hydroelectric projects to a consortium led by Abu Dhabi National Energy Co. PJSC, known as TAQA…”
The biggest news in power from the private sector has come from the commissioning of 2 Ultra Mega Power Projects (UMPP) in the last 2 years: the Mundra Ultra Mega Power Project in Gujarat from Tata Power (5 units commissioned); and the Sasan Ultra Mega Power Project in Madhya Pradesh from Reliance Power (2 units commissioned so far). A second UMPP from Reliance Power – the Tilaiya Ultra Mega Power Project in Jharkhand – is in early development stage. The UMPPs were envisioned by the Government of India during the 11th Five Year Plan (2007-2012) to provide ‘power for all’. Out of the 16 UMPPs proposed under Power Finance Corporation, 4 projects have been awarded so far (1 to Tata Power and 3 to Reliance Power).
The good news is, investment from the private sector is not restricted to power generation alone, which is expected to see substantial growth in small- and mid-sized power projects as well. New opportunities lie in power transmission and distribution, fuel supply chain, equipment manufacturing, renewable sources of energy like solar power and wind power, R&D, technology, project development, software and consultancy. All in all, a wide scope for growth and opportunity for the industry in the long haul.