Power sector in the dark in 2009

Electricity, a basic minimum service that any citizen or industry should get for its development, witnessed severe fluctuations in progress in 2009 in terms of capacity addition.

Although the country hopes to achieve 78,000 MW in new generation capacity in the five years ending 2012, the way things are moving now make this target look like a tall order.

Yes, the government has awarded four 4000-MW Ultra Mega Power Projects to developers, but none of these are  part of the 11th Five-Year Plan target (2007-12).

The country produces 1,55,859 MW of power as on November 30, this year, but nothing can illustrate the slack pace of capacity addition better than the performance in the last fiscal - the country was to add 11,061 MW in FY'09 while it managed only 3,500 MW.

The return of UPA to power for a second straight term in office generated a lot of expectations about movement in this sector, but not many policy initiatives came by, resulting in a lacklustre performance.

The government has time and again said it would be able to add about 68,000-70,000 MW during the current plan period and has also reiterated that with some effort, the goal of 78,000 MW can be realised.

Sushilkumar Shinde-led power ministry has now set a target of adding 13,000 MW of electricity annually for the next three years. This appears to be a tall order given the slow movement on new projects front.

Even on the UMPP front, the sector saw the award of only one such project to Reliance Power at Tilaiya in Jharkhand.

Since then, the government has only made promises of inviting bids for four other UMPPs in the states of Orissa, Tamil Nadu, Andhra Pradesh and Chhattisgarh.

In its second term, the UPA government has made Divestment as the focal point. It has decided to offload its shareholding in public sector power majors like NHPC, NTPC and REC.

The government is geared to mop up about Rs 11,000 crore (Rs 110 billion) through stake sale in the country's largest power generation company. The NTPC FPO (Follow-on Public Offer) is likely to see the light of the day in February 2010.

Close on the heels of NTPC, another 'Navratna' PSU Rural Electrification Corp will hit the capital market with its follow-on public offer during the same time. REC also plans to raise fresh 10 per cent equity along with 5 per cent divestment of the Centre's holding.

The divestment fever will continue to grip the sector in the next years as well with the central transmission utility PowerGrid next on the radar. The company in all likelihood would come up with an FPO in the first half of 2010.

Taking a cue from this trend, private power players decided to test the stock market. Perhaps, the one positive that the year saw was a flurry of Initial Public Offerings (IPOs) and FPOs.

The market was flooded with power IPOs from private power players like Adani Power, Indiabulls Power and Sajjan Jindal-led JSW energy which launched its public offer this month.

However, the sector continues to be ridden with some fundamental problems. Slack capacity addition continues to be a serious worry as it may jeopardise infrastructure as well as economic growth.

Fuel supply for the gas-based power stations was a matter of concern for the sector usually irked by coal shortage for its thermal power plants.

NTPC's gas-based power plants received some respite after the company signed the Gas Sale and Purchase Agreement (GSPA) with Reliance Industries for sourcing the fuel for its gas-based power plants other than Kawas and Gandhar expansion units.

Another issue which almost stalled the gas power stations in the country was the legal battle between the two Ambani Brothers and its bearing on the NTPC and Reliance Industries case in the Bombay high court.

Though the decision on the case between the power PSU and the country's largest company by market capitalisation is still pending, NTPC has been assured fuel supply for its units other than the ones it is fighting the case for.

On the new projects front, the progress has been a tad slow, though, recently the power minister said that the qualifying bids for two more UMPPs would be invited very soon.

The construction work on the two of the four UMPPs so far awarded has begun. Reliance Power which bagged three of the four projects has commenced work on Sasan UMPP in Madhya Pradesh and Tata Power is also executing the Mundra project in Gujarat, first unit of which is expected during the current plan period.  

Power which is the backbone of any country's infrastructure development is yet to get its due in India. The sector which has a gigantic task of providing "Electricity to All" should list its focus areas and work on them one by one.

In the coming year the vital areas would remain the same -- power capacity addition, securing fuel supplies, building more UMPPs and also Divestment but the approach should be more dynamic.