Power dearth may slow growth, warns PM

Prime Minister Manmohan Singh today called for a "crash programme" to increase the power generation capacity saying the high level of shortages "can be a serious impediment to sustained economic activity."

The capacity addition in the last five years (2002-2007) has been about half the targeted 41,000 Mw.

"This reflects poorly on the planning process as well as the implementation capability of various agencies in states and the Centre," Singh said at a meeting of the chief ministers on the power sector.

The average energy shortage in the country is 10 per cent and the peak-hour shortage is over 13 per cent. There are some states where peak-hour shortage is as high as 25 per cent.The prime minister also called for checking power theft, which, he said, "threatens the financial health of the sector."

The power sector is caught in a vicious circle with high level of transmission and distribution losses (which include losses due to theft) "� ranging between 30-45 per cent "� acting as a dampener on investment.

The aim is to eliminate shortages by 2012, for which he said private investment must be encouraged. To do that, "we have to look closely at all regulations to ensure that there is 'open access' in transmission and distribution."

Speaking at the conference, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the government needed to increase investment in the power sector by four-fold to Rs 10 lakh crore during the 11th Five-Year Plan (2007-12) as compared to Rs 2.6 lakh crore investment during the 10th Plan period.

The increased investment is needed to create 78,000 Mw additional power generation capacity.

"The cost of creating generation capacity on this scale is approximately Rs 350,000 crore. If investment required in transmission and distribution is counted, the total investment needed will be over Rs 700,000 crore.The target set for expanding rural electrification will add to our investment needs. "Taking all these requirements together, the investment requirement in the 11th Plan may be Rs 10 lakh crore," Ahluwalia said.

He said that the power sector is at present facing a "policy credibility" crisis. "We have been talking of power sector reform for over a decade. And yet, actual performance in this sector falls well below expectations, and indeed below the level of other infrastructure sectors," he added.

In the Tenth Plan period, against a target of adding 41,000 Mw power capacity, only 21,000 Mw capacity could be added.