Report calls for immediate action on Indian power deficit

BANGALORE, INDIA - A study conducted by the Federation of Indian Chambers of Commerce and Industry and the Credit Rating Information Services of India Limited, indicates that India's power requirement will increase dramatically, with an additional need of 161 gigawatts (GW) according to the Eleventh Five-Year Plan (2007-12) and the Twelfth Five-Year Plan (2012-17).

The report, covering the country's power capacity and requirements, manpower needs, power deficit and economic impact, was presented at the recently held India Electricity 2008 in New Delhi.

Data from July 2008 by the Ministry of Power show that India's total installed capacity for power generation is 145.58 GW. India's government has allocated $95 billion to meet the increased demand and to achieve the new power generation targets.

The study gave credit to the Electricity Act of 2003 for transforming the country's power sector. With the implementation of the act, many private players have shown interest in investing in the sector. Private-sector investments could prove to be a boon for meeting increasing power generation requirements.

The report dissuaded the Indian government from relying completely on conventional fuel sources like coal and emphasized the need to extend focus to alternate energy sources like gas and hydropower. A holistic approach toward effective coal mining in India was also recommended.

Though a lot of political, media and public attention in India has been focused on the Section 123 Agreement on nuclear deals, the study did not delve much on nuclear power, which could revolutionize the power sector in the country. It also noted that power distribution was not given its due importance and has recommended that the government renew focus in this area.

The report validated the proposed government investment of $66 billion in this area during the Eleventh Five-Year Plan and also expressed hopes that the Accelerated Power Development and Reform Program that was restructured to provide distribution to the National Thermal Power Corporation will usher in positive results. Power will be distributed to towns and cities in India with a population of more 30,000 with the aid of the latest IT-enabled applications to minimize distribution losses.

The study also highlights the stark realities of India's power industry — target slippages and power deficit. While there have been ambitious plans to increase generation capacity during the Eleventh and Twelfth Five-Year Plans, the target slippage in the Tenth Five-Year Plan (2002-07) alone has been around 40 GW.

The report identified the inadequate policy and regulatory framework as one of the primary causes. On a more positive note, the study recognized the implementation of the Electricity Act 2003 and its regulations as being instrumental in overcoming these slippages.

The infrastructure advisory study recommends that the Indian government takes immediate and concrete steps to reduce the gaps in the power deficit. A prolonged power deficit would lead to severe economic slowdown and hold long-term repercussions for the Indian economy, the study states. The current electricity demand deficit of 12%-13% and shortage of 6%-8% could be a huge deterrent to India's economic growth and ambitions of being a superpower.

With the Ministry of Power announcing the "Mission 2012: Power for All" plan and the ongoing rural electrification scheme in India, meeting the electricity demands has become not just an economic necessity but has a social facet, as well. To bring about this transformation, it is not just the generation, transmission and distribution channels that need to be revitalized but also the other supporting entities like resources, manpower and technology.

The study states that to make India self-sufficient in the power sector, the industry would require an additional 2 million people in skilled labor during the Eleventh and Twelfth Five-Year Plans. It also emphasized the need to develop more industrial training institutes to provide training in areas of power generation and management and also impart specific IT training.

The study is bullish on private sector investments in India's power industry. With huge investments required for immediate turnaround, private investments — both domestic and international — will play a very significant role. India is poised for huge economic growth and the power industry can most definitely accelerate this development.