It can be the silver bullet for India’s economic woes. It can attract long-term dollars, engender a large-scale manufacturing ecosystem, create jobs and, of course, power the economy. But the country’s power sector presents a sad contrast to what it can really be, says M. Ramesh in this comprehensive review of the sector.
Every segment of the power sector, be it thermal, hydro, nuclear or renewables, seems to have, to borrow from P.G. Wodehouse, stubbed its toe on the brick of Fate.
Genuine concerns — over the environment and re-settlement of displaced people, for instance — have sometimes impeded progress. But inspired obstructionism is to blame for much of it.
Recent developments, such as the Land Acquisition law, the hike in gas prices and the vertiginous fall of the rupee against the dollar bode further ill for the already moribund sector.
Today, 202 thermal power plants, with a total capacity of 93,600 MW, are technically “under construction”. All of them, save two, are behind schedule, many by three years or more. All of the 154 hydro-electric projects under construction (13,500 MW) are behind schedule, 57 of them (5,870 MW) by over five years. At last count (end March 2012), the power sector owed banks Rs 3.81 lakh crore. A lot of those borrowings have turned non-performing, making further financing a challenge.
With an outlay of Rs 15 lakh crore, the Government hopes to see 88,537 MW of capacity added in the five years to March 2017, (excluding wind and solar) The situation on the ground today leaves little hope of that happening.
Land and fuel are major issues. Not only is access to these tough, their costs are also rising and will intensify funding challenges. The Land Acquisition law will result in land becoming more expensive, and the depreciation of the rupee will make imported fuels costlier. As such, it is clear that electricity will cost much more in the years to come.
Electricity distribution companies, most of which are in the red, are hardly in a position to bear this high cost. So, ultimately, it will have to be passed on to consumers. But that creates a dilemma for political parties, none of which wants to hike tariffs, for obvious reasons.
Much will depend on next year’s elections and the kind of Government that is formed at the Centre. For now, the power sector does not have much to cheer about.