BETTING ON INDIA

We focus on two key sectors—first power which has lagged in growth but has great potential, and telecom which is exploding, as 3 million new customers sign up every month

Empire Bureau

POWER

Economic growth in India will continue to be hampered as long as the country's power supply constrains industrial development and the financial losses of the power sector remain a burden on public sector finances. India’s power sector is plagued by capacity shortages, resulting in frequent blackouts, poor reliability, and deteriorating physical and financial conditions. National surveys of industrialists consistently rate power supply as one of their most critical constraints. 
With responsibility for supply shared constitutionally between the Centre and the states, the government has placed increased emphasis on improving the efficiency of supply, consumption, and pricing of electricity. This can only be achieved by reforming power sector management and financing at the state level.

1. Generation capacity of 122 GW; 590 billion units produced (1 unit = 1kwh) 
2. India has the fifth largest electricity generation capacity in the world 
3. Low per capita consumption at 606 units; less than half of China 
4. T&D network of 5.7 million circuit km - the 3rd largest in the world
5. Coal fired plants constitute 57% of the installed generation capacity, followed by 25% from hydel power, 10% gas based, 3% from nuclear energy and 5% from renewable sources 

STRUCTURE

1. Majority of generation, transmission and distribution capacities are with either public sector companies or with state electricity boards (SEBs)
2. Private sector participation is increasing especially in generation and distribution 
3. Distribution licences for several cities are already with the private sector 
4. Many large generation projects have been planned in the private sector 

POLICY

1. 100% FDI permitted in generation, transmission & distribution - the government is keen to draw private investment into the sector
2. Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods import duties on mega power projects (above 1,000 MW generation capacity) 
3. Independent regulators: Central Electricity Regulatory Commission for central PSUs and inter-state issues. Each state has its own electricity regulatory commission. 

OPPORTUNITY

1. Over 150,000 MW of hydel power is yet to be tapped in India
2. India requires an additional 100,000 MW of generation capacity by 2012

OUTLOOK

1. Over 90,000 MW of new generation capacity is required in the next seven years 
2. A corresponding investment is required in transmission and distribution networks 
3. Power costs need to be reduced from the current high of 8-10 cents/unit by a combination of lower
4. AT&C losses, increased generation efficiencies and added low cost generating capacity

POTENTIAL

1. Large demand-supply gap: All India average energy shortfall of 7 per centand peak demand shortfall of 12 per cent 
2. The implementation of key reforms is likely to foster growth in all segments: 
3. Distribution circles to be privatised 
4. Tariff reforms by regulatory authorities 

OPPORTUNITIES IN GENERATION FOR: 

1. Coal based plants at pithead or coastal locations (imported coal) 
2. Natural Gas/CNG based turbines at load centres or near gas terminals 
3. Hydel power potential of 150,000 MW is untapped as assessed by the government of India 
4. Renovation, modernisation, up-rating and life extension of old thermal and hydro power plants 
5. Opportunities in Transmission network ventures - additional 60,000 circuit km of transmission network expected by 2012 
6. Opportunities in Distribution through bidding for the privatisation of distribution in 13 states that have unbundled/corporatised their SEBs - expected to take place over the next 2-3 years
7. Total investment opportunity of about $200 billion over a seven year horizon.

click here for Telecommunication sector

June 2006