core sector communique

Minister of Power Addresses India Investment Forum in New York, Calls for Investing in Indian Power Sector

Minister of Power Shri Sushilkumar Shinde has said that India has taken several measures to make the power sector investor friendly in a fast growing competitive environment. He was delivering the keynote address at the 8th India Investment Forum in New York. Calling upon the American investors to invest in Indian power sector, Shri Shinde said that an independent regulatory framework in India now provides business confidence to power companies and a fairly lucrative rate of return on equity of 15.5 per cent per annum. Highlighting the reforms in the power sector the Minister said that the Electricity Act 2003 allows the sector to align itself with market dynamics and clears the roadblocks especially in the way of greater participation by the private sector.

Shri Shinde said that while the present installed generation capacity in India is about 1,81,000 MW, more than 80,000 MW of new power capacity is under construction. He informed the gathering that the 12th Plan aims at a capacity addition of nearly 100 thousand MW. The Minister said that in the 11th Plan period from 2007 to 2012, the funding requirement in Indian Power Sector had been estimated at USD 230 billion, and the similar investment is anticipated for 12th Plan.

Allaying the apprehensions of investors on the availability of fuel, Shri Shinde said India is working on increasing imports as well as domestic production of coal. He said a Group of Ministers has been formed to quickly address the coal shortage issue. The Minister added that in order to increase the availability of gas, India is working on an RLNG pooling mechanism.

On the policy front, Shri Shinde said that the National Electricity Policy, 2005 and the Tariff Policy, 2006 have paved the way for renewed interest amongst both developers and investors. He said the bidding documents have been standardized and the competitive bidding route is slowly becoming the norm. Shri Shinde said as of January 2011, all power to be procured is mandated through the competitive bidding route. He said 100% Direct Foreign Investment has been allowed for sometimes now in all segments of the power sector including power trading. The Minister said that investor confidence has returned to the sector which is amply borne out by the fact that all projects of the 11th Five Year Plan and 78,000 MW for the 12th plan have achieved financial closure.

Lauding the role of Indian public sector companies, Shri Shinde said that NTPC, PGCIL, NHPC are continuing to play a vital role in adding much needed generation and transmission capacity in the country. He said the Indian companies such as PFC and REC have emerged as pillars of strength in providing financial support to the power sector.

Shri Shinde informed that 16 Ultra Mega Power Projects (UMPPs) and 14 Inter State Transmission schemes have been identified for development by the private sector on competitive bidding route. Stating that while the bidding of four Ultra Mega Power Projects and six transmission projects have been completed, Shri Shinde said that more than 5 UMPPs are in the pipeline, for which Special Purpose Vehicles (SPVs) have been created by the PFC.

Regarding Hydro power Shri Shinde said that estimated potential in hydro sector in India is 1,50,000 MW out of which only 30,000 MW has been harnessed . The remaining capacity needs to be developed which provides the investors an opportunity. To enable the project developer in the Hydro Sector a reasonable and quick return on investment merchant sale of up to a maximum of 40% of the saleable energy has been allowed, making investments in the sector more attractive.

The Minister said that India is actively pursuing a low carbon growth strategy which includes Super Critical Technology in Thermal Plants, the rapid induction of Clean Coal Technologies and a sharper focus on renewables. He said that international majors like Mitsubishi, Toshiba, Hitachi, Alstom and Ansaldo have already started the process of partnering with Indian manufacturers to set up Super Critical Manufacturing facilities in India. Shri Shinde added that to facilitate these companies to stabilize and sustain, bulk tenders have been floated for 660/800 MW Supercritical units.

He also highlighted India’s commitment towards renewable energy and said that India plans to add 20,000 MW of solar power by 2022. He said that the State Electricity Regulatory Commissions (SERCs) are mandating a minimum Renewable Purchase Obligations (RPOs) to Discoms and a mechanism for trading of Renewable Energy Certificates (RECs) through power exchanges has also started working in India.

Touching upon the “Accelerated Power Distribution and Reforms Programme (APDRP)” and “Restructured APDRP”, Shri Shinde allayed fears regarding the financial health of Discoms. He said APDRP was launched in urban areas with an objective to bring down the Aggregate Technical and Commercial (AT & C) losses in the range of 15%. The Minister said that the programme size of R-APDRP during 2007-2012 is about USD 11 billion. He emphasised that there has been no default in payment to stakeholders.

Shri Shinde also emphasized on the key role of energy efficiency at addressing low carbon growth story and said that 37 Energy Service Companies (ESCOs) have been accredited by the Bureau of Energy Efficiency (BEE). He said that an investment of Rs. 74,000 crores ($ 15 billions) would be required for energy efficiency initiatives in India. He said that in order to improve confidence among the Financial Institutions, a robust and transparent energy audit system has been created. Sharing that both the Partial Risk Guarantee Fund and the Venture Capital Fund are being created for boosting investments in the area of energy efficiency, the Minister said that a National Mission on Enhanced Energy Efficiency is under implementation.

The India Investment Forum had distinguished gathering of top ranking India centric investors, captains of Indian and US Industries, especially those from power sector, senior government representatives, Fund Managers and Analysts. During the visit Shri Shinde also addressed CEO’s meet organised by USIBC. Shri Shinde was on a five day visit to the USA which aimed at enhancing cooperation between the two countries in the power sector.