Growth Potential

While as per the above diagram, capacity addition is commendable, there is still huge scope for growth. With a targeted gross domestic product (GDP) growth rate of 6-8 per cent and an estimated energy elasticity of 0.8 per cent, India's energy requirement is expected to grow at 6.4-8 per cent, implying an almost five-fold increase in India's energy requirement in the next 25 years. Consequently, there is a need to increase the electricity generation capacity to sustain the growth momentum.

According to a report by KPMG and CII, India's energy sector will require an investment of around US$ 120 billion-150 billion over the next five years.

Moreover, while the annual per capita electricity consumption has increased from 613 kwh/year in 2004-05 to 672 kwh/year in 2006-07, it is still low compared to the world average of 2596 kwh.

Consequently, the government revised its target of power capacity addition to 90,000 MW in the 11th Five-Year Plan (2007-12), up by 11,423 MW from the earlier estimate of 78,577 MW to sustain the growth momentum of the economy.

Of the earlier projected capacity of 78,577 MW, projects worth 63,312 MW are currently being implemented. Of these, 18,177 MW are in the private sector. This, however, does not include captive generation projects, and projects whose benefits will be taken into account during the 12th plan period (2012-17), such as the three ultra-mega-power projects.

The projects currently being implemented include 32 coal blocks having total extractable reserves of 9,916 million tones (MT), and having the capacity to feed 29,000 MW. These have been allotted to various state and central public sector units and Independent Power Producers (IPPs).

Indian Energy sector - An Overview

India - 5th Largest Energy Consumer

Total Installed Capacity (As on September 30, 2008)

World

Asia Pacific

India

Energy Consuption (MTOE) 10224 3199376
Energy Mix(%)
Coal 27% 47%54%
oil37% 34%32%
Natural Gas 24% 10%8%
Nuclear 6% 4%1%
Hydro6% 5%5%
Oil & Gas imports (MTOE) 2647 83698 (US$ 30billion)
Growth in Energr ( last 10 yrs)
Total Primary Energy2.1% 4.2%4.8%
Natural Gas 2.6% 6.0%6.8%

Now that the Indo-US nuclear deal has gone through and India has got the clearance from the Nuclear Suppliers Group (NSG), nuclear power generation is likely to throw up an opportunity of US$10 billion in the next five years, according to a JP Morgan estimate. As per the report, the Nuclear Power Corporation of India Ltd (NPCIL), a public sector undertaking spearheading India's nuclear power programme, is likely to undertake 6800 MW of planned future projects which would translate into orders of US$ 10 billion over the next five years. GMR and Reliance Power have also expressed interest in nuclear power.

Government Initiatives

The government has taken several proactive steps to open the sector for the private players and realise the full potential of the country in the power sector.

  • Introduction of the Electricity Act 2003 and the notification of the National Electricity and Tariff policies.
  • Constitution of Independent State Electricity Regulatory Commissions in the states.
  • Unbundling of the State Electricity Boards (SEBs) into generation, transmission, and distribution companies for better transparency and accountability.
  • Allowing the private sector to set up coal, gas or liquid-based thermal projects, hydel projects and wind or solar projects of any size.
  • Allowing foreign equity participation up to 100 per cent in the power sector under the automatic route.
  • Deregulation of the ancillary sectors such as coal.
  • Providing income tax holiday for a block of 10 years in the first 15 years of operation and waiver of capital good's import duties on mega power projects (above 1,000 MW generation capacity).

The government has also taken up some ambitious programmes like the Ultra Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY), Accelerated Rural Electrification Programme and the goal of Power for All by 2012 among others to rapidly increase the installed capacity as well as expanding the network of people who have access to electricity.

Investments

Out of US$ 132.13 billion of total corporate announcements made in the first half of calendar year 2008, power sector attracted the maximum number of investment announcements totaling to US$ 40.84 billion between January to June 2008, according to an ASSOCHAM study.

In fact, a recent study titled "Powering India: The Road to 2017" by consultancy major McKinsey estimates India's power demand to increase from the present 120 gigawatt (GW) to 315-335 GW by 2017-100 GW higher than the current estimates-if India continues to grow at an average of 8 per cent over the next 10 years. This would require a five to ten-fold rise in power production, entailing investments worth US$ 600 billion over the next ten years.

ENERTECH 2010 will showcase all the above along with latest products, machinery, equipment & developments in the industry.