Eighty percent of power projects in private sector to miss deadline

06 September, 2012

Eighty percent of the coal-based power projects in the country belonging to private sector are far behind the schedule of commissioning primarily due to regulatory clearances.

TWENTY PERCENT of the power projects which look on schedule so far, are also facing risk of getting delayed if various issues relating to policy framework and uncertainty over coal linkages continue to prevail.

Except a handful of projects being promoted by the front-ranking industrial houses including the Tatas, Reliance Power, Jindals and India Bulls, most of the other projects are running behind schedule, as per an study report by the industry body Assocham. In fact, different units of the Tata Power at Mundra in Gujarat are running ahead of schedule, even though the power sector is facing severe problem of expensive coal.

As per the official data, analysed by the Assocham, of the total capacity addition to be achieved by the private sector projects, only about 7,000 mega watt (MW) will be commissioned in time, sometime around the end of this year and the next year, while there could be long delays for rest of the about 44,000 MW planned in the 11th Plan.

“This is rather bad news, especially when India is a big energy deficit country and the industrial production is down and the investment sentiment weak,” said Rajkumar N Dhoot, President Assocham, in a statement.

The power sector, both in the generation and distribution segments, continues to operate under several inefficiencies - low level of the plant load factor and high level of transmission and distribution losses. Then, there are issues of coal linkages and the regulatory hassles such as delays in environmental approvals.

“It is thus no surprise that the bankers are also becoming wary of financing the power projects, given the policy uncertainty and other market risks including a very high price of coal in the international market,” the Assocham study pointed out.

Transmission and distribution losses are among the major problems faced by the sector and unless wholesale reforms are carried out with a political will, the basic power infrastructure will remain crippled for several years.

Even after several programmes like Accelerated Power Development Reforms Programme (ARDP) and Restructured ARDP, several states including the largest state of Uttar Pradesh have a very high degree of transmission and distribution (T&D) losses.

For instance, Jammu and Kashmir had as high as 73 per cent T & D losses in 2010-11, according to the Power Ministry figures, Uttar Pradesh had 40 per cent, Madhya Pradesh 38 per cent and Himachal Pradesh 35 per cent.

While these projects would be commissioned in time, the problem that may arise would be high cost of coal which has seen a big rise both in the domestic and international prices. It is no surprise the power stocks have fallen out of favour with the investors in the stock market and the banks are not too keen to finance the sector.

“Under these circumstances, we face a big challenge of reviving the sector which only can be engine of the India story. Without power and electricity we face a dark and uncertain future, which the country can ill-afford,” the study said.