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Knowledge centre for MBA students. |
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Power Sector in Senthuran Power is a vital input for the growth of
industrial development of any nation - higher the power, higher the
industrial growth and higher the employment. Since independence most of the projects
in this sector has been financed and managed by government agencies - Center
or State (nearly 90 per cent or more investment required for the power sector
came from the public sector through Five Year/Annual Plans). However, since
liberalisation, the role of private sector, inclusive of foreign players were
recognized in the power projects. Power projects involve huge investments and
overseas support in terms of financing as well as managing power projects
become inevitable for a developing nation like India, since electricity can
not be easily imported or stored and hence, creation of generation capacity
domestically is critical for meeting the country's demand for power. If the
capacity additions are not done in time, power shortages result in the system
which leads to inefficient operations and management, decelerate investment
in other sectors of the economy and hamper the growth process of the country
in general. In India, the endemic power shortages and cuts lead to inadequate
capacity utilization, unproductive expenditure such as in back-up generators
and much waste, all of which impose a major constraint on economic growth. Shortage of Power:
Demand and Supply In India there is a significant shortfall in
the availability of power. With the present installed capacity of about
84000MW, there is a peak shortage of about 15 per cent and an energy shortage
of about 5 per cent. The per capita electricity consumption in the
country, in spite of a rise to a level of 314KWH in the last four decades, is
one of the lowest in the world. In fact, this is in sharp contrast with the
average consumption in the developed countries, which is over 5000KWH per
annum. Over the years, sectoral consumption of
electricity in India has changed considerably. The shares of the agricultural
and domestic sectors have increased, while the share of the industrial sector
has declined. This can be attributed to the setting up of captive power
plants by the industry, due to the increasing tariffs and unreliable supply from
SEBs. The 15th Electric Power Survey has forecast an
energy demand of 570 billion kwh and a peak demand of 957,000 MW in 2001-02.
This forecast is less than that forecasted in the 14th EPS for the same year.
This is probably due to the enlarging base and the increase in the share of
the services sector in the GDP. In order to optimise the utilization of the
existing capacity, the Government is planning to initiate steps for the
conservation of energy and to reduce the difference in the peak and base
loads, through measures such as energy audits and tariff incentives. Power: Demand and
Supply: All India
(Source: Central Electricity Authority) The future projections made by CEA, the 15th Annual
Power Survey and similar other institutions have estimated a growth
requirement of about 6-7 per cent per annum. According to the Fifteenth
Electric Power Survey of July 1995, energy demand in 1999-2000 is projected
at 502254 million KWH. And the Power Survey is reported to have recorded a
peak power requirement of 95000MW at the end of the Ninth Five Year Plan
(2001-2002) and 130900MW at the end of the Tenth Plan (2006-2007), which
corresponds to an installed capacity of 160000MW and 280000MW respectively.
In other words, requirement of additional installed capacity during the ninth
Plan is 57000MW and 67000MW in the Tenth Plan. To meet the power needs of
India by 2005-2006, the country needs Rs.67900 crores of investment. Power Line has projected the loss to the
economy due to power shortages in the country as follows: v
The loss in GDP growth
is at least 2 per cent per annum and perhaps as much as 2.5 per cent v
GDP loss over the last
five years amounted to at least Rs.65000 crore (assuming a 2 per cent loss
per annum) v
GDP loss in the year -
1996-97 - is close to Rs.18000 crore. Assumes 6 per cent growth with
shortages and 8 per cent growth without shortages. v
The total projected GDP
loss over the next ten years will be at least Rs.1800000 crore. Assumes 6 per
cent growth with shortages and 8 per cent growth without shortages. v
Every 1000MW project
delayed is costing the economy over Rs.1300 crore per year. This is based on
the following assumptions: 20 per cent more peak power needed; 16 per cent
more capacity needed; 13500MW needed this year; and 18000 crore lost
attributable to the above shortfall. Thus, to attain considerable industrial
growth, India needs swift power. Power Finance During post-independence era, power - one of
the major core sector - has been funded by the government/government
agencies, when private participation was almost nil in power sector, thanks
to government policies. However, with liberalisation, this core sector was
opened to private sector and consequently to the foreign players. Further, due to constraints of funds with the
Government of India, the public sector would suffer from inadequacy of funds.
With present levels of finances, only 20000MW in each plan period could be
built in the public sector. Thus, the rest (84000MW) is expected to be
financed through private sector, both Indian and foreign. Since the cost outlay in power projects are huge,
financing the projects through internal accruals alone becomes inevitable;
and further, the government is also slowly changing withdrawing itself from
the role of producer and trying to stick-on only as a regulator in the long
run. Thus, power producers has to look in for alternate source of financing
such as, term loans from financial institutions (internally and
internationally) like World Bank, ADB, ICICI, etc. and debt market in India
and abroad. Some 70 per cent of the finance required by
the power sector over the next decade - total estimated at about Rs.5000
billion (US $143 billion) - has to be found through debt. While the sector
could expect special consideration in the allocation of foreign debt
entitlement, the bulk of the debt finance will have to be raised in rupees.
Identified level of rupee debt at present is about 75 billion per annum. This
would need stepping up significantly. The center has decided to allocate about
Rs.14000 crore for nuclear energy to generate an additional 1000MW during the
Ninth Plan period. This is a Rs.1000 crore increase over the Eight Plan
period allocation which was Rs.13000 crore. Further, according to the
estimation of Finance Minister, around 22.5 per cent of the proposed
voluntary disclosure scheme for harnessing black money, would be used for
financing infrastructure projects and basic minimum services program. The power sector so far in 1996-97 has
accessed $2 billion in ECB sanctions. Compared to the previous year ECB
sanctions of $0.61 billion, this is a considerable increase. Allocations in
power sector have largely been made to non fast-track projects and captive
power projects. Financial institutions have told the Power
Ministry that they will not be able to provide funds for additional power generation
beyond 5000MW during the Ninth plan. This falls woefully short of the power
ministry's target of adding 57000MW during the Plan. |
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