Power capacity story fades as demand ebbs

Bureaucratic delays and delay in starting commercial operations add to slump

India's power generation capacity, which boasted of record addition for two successive years, seems to be running out of steam in 2013-14.

The third-largest economy in Asia added only 4,798 Megawatt (Mw) in the six months ended September, against a target of 7,936 Mw. With this, India missed realising investment worth over Rs 16,780 crore in 3,138-Mw capacity scheduled for first half of 2013-14. This would come as a double whammy for an economy that had expanded at a decadal-low of 5.3 per cent in 2012-13.

The power capacity addition between April and September was also 37 per cent lower than the 7,636 Mw added during the corresponding period last year, according to the latest power ministry data.

The new trend, which could partially dent economic growth, was a result of a confluence of factors - ranging from bureaucratic delays to subdued demand to companies delaying the start of commercial operations.

In the quarter ended June, the country added only 2,612 Mw of the targeted 4,432 Mw. About 1,800 Mw slipped from schedule, including a 270-Mw project of GVK Industries in Punjab, a 300-Mw project of Dhariwal Infrastructure in Maharashtra, a 135-Mw unit of Vandana Vidyut in Chhattisgarh, three 250-Mw projects by hydro major NHPC and three 865-Mw projects by the power generation firms of Madhya Pradesh, Rajasthan and Tamil Nadu.

The situation worsened in the second quarter, with only 820 Mw of the targeted 4,423 Mw coming on stream. The capacity that slipped from the second quarter included the 350-Mw Kamalanga project of GMR in Odisha and the 270-Mw Nashik project by Indiabulls in Maharashtra. Not one of the 10 projects planned to be commissioned in the central and state sectors during the three-month period fructified. These included ONGC's 363-Mw plant in Tripura and projects by the Delhi, Gujarat and Chhattisgarh governments.

"A major reason for the dip in capacity addition could be because companies are delaying announcing commercial operation declaration fearing not being able to service debt because of fuel constraints, leading to these being classified as non-performing assets," Debashish Mishra, senior director at accounting and consultancy firm Deloitte Touche Tohmatsu, told Business Standard.

The new trend of slowdown in power capacity addition comes on at the back of Reserve Bank of India Governor Raghuram Rajan's recent statement that revival of stalled projects has begun, which would help spur economic growth towards the end of the year.

He had referred to the recent approvals granted by the Cabinet Committee on Investment (CCI) to stalled infrastructure projects. The CCI has so far cleared 171 projects involving an estimated Rs 1.6 lakh crore worth of investment. However, bulk of these are power and coal sector projects, apart from a few others in roads, petroleum and defence sectors.

India wants to add 17,092 Mw power capacity in the current financial year. The target for the current Five-Year Plan period (2012-17) stands at 88,537 Mw of which 25,420 Mw, or 28 per cent, had been achieved at the end of September.