Investment Opportunities in Power Sector

Power sector

Power sector presents immense investment opportunities. India is among the top five power generation countries. The power generation capacity of India is presently 122 GW; 590 billion units. Over the last four years CAGR is 4.6%. However, despite that per capita power consumption is still very low in India. It is just 606 units, which is less than half of China. India has third largest transfer and distribution network in the world which is around 5.7 million circuit km.

Power in India generated through various technologies. Power generated through coal is 57% , followed by 25% from hydel power, 10% gas based, 3% from nuclear energy and 5% from renewable sources

Power Production and Distribution Organization
State Electricity Boards and Public sector companies hold the major share in power generation and distribution in India. However in the recent years the share of private sector in Generation and Distribution has been increasing. The licence for distribution in many cities are already with the private sector. Many major power generation projects have been planned in the private sector




Major Players for Transmission, Generation and Distribution of Power

Government Policy
Government of India has come out with various policies to boost foreign investment in the power sector. Some of the major features of the policies of the government are:

• Government has permitted 100% FDI for power Generation, Transmission & Distribution
• In order to involve private players in power generation and distribution, government has passed Electricity Act 2003 and National Electricity Policy 2005
• To boost investment government has also announced sops and tax benefits tto the private players. The incentives include Income tax holiday for a block of 10 years in the first 15 years of operation and also wavering of capital goods import duties on mega power projects that is any project involving the generation capacity above 1,000 MW
• To look into the matters pertaining to power generation and distribution, Independent Regulatory authority has been appointed. Central Electricity Regulatory Commission looks a after central PSUs and inter-state issues. Each State has its own Electricity Regulatory Commission.
  
  

Overview

Due to rapid industrialization and growth of population, India requires huge amount of power. By 2012, India requires an additional power generation capacity of100, 000 MW. Moreover in India power generation through hydel power is still not tapped completely. According to report, over 150,000 MW of Hydel Power is yet to be tapped in India The supply of power is less than the demand. The situation is that there is all India average energy shortfalls of 7% and peak demand shortfall of 12%. Government initiatives regarding more tax benefits to the investors are likely to foster growth in all segments. Government has also decided to unbundled the vertically integrated SEBs. Government has also set to privatize the distribution circles whereas the regulatory authorities have come out with tariff reforms to boost investment.

Investment Opportunity Areas

Both domestic and the foreign investors can invest in the following areas for power generation:

• Investment can be done in the Coal based plants at pithead or coastal locations (imported coal)
• Power generation through natural Gas/CNG based turbines at load centres or near gas terminals
• Hydel power presents huge investment opportunity. As per government report nearly 150,000 MW is still untapped.
• Renovation, modernization, upgrading of old thermal and hydro power plants is another area where private and foreign players can invest
• Power transmission too presents huge opportunity for investment. Nearly 60,000 circuit km of transmission network expected by 2012
• Thirteen states in India have corporatised their State Electricity Boards. This provides opportunities to the investors to invest in the power distribution sector through bidding for the privatization of distribution in thirteen states that have unbundled/corporatised
• Total investment opportunity of about US$ 200 billion upto 2012