The total investment required in the energy sector in the country in the next five years is estimated at over Rs 5,00,000 crore, according to a government estimate.
The investment quantum is staggering by any order as in the Ninth Plan the total investment in the private and public sectors in the energy sector has been less than Rs 75,000 crore.
The Ninth Plan outlay for the entire public sector was just about Rs 6,50,000 crore with the total gross budgetary support at Rs 3,25,000 crore for all sectors combined.
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But experts said the hugely expanded investment in the energy sector in the next few years is required to meet the targets of capacity expansion for all areas including power, petroleum, coal and even nuclear power.
The power ministry has slotted a capacity addition of 46,000 mw in the next five years while the petroleum sector and the coal sector have equally ambitious expansion targets with both sectors expecting to move rapidly once the administered pricing mechanism is dismantled in the petroleum sector and the coal mines nationalisation is watered down.
The over five times increase in the need to increase investment for both private and public sector investment in the sector has been calculated to ensure the country a reasonable level of energy security in the first decade of the new century.
The estimate says the financing requirements are derived from the need for energy projected in the 10th Plan to push investment in all sectors of the economy. But the problem according to experts stem from the fact that the domestic markets can possibly finance only about half of such investment at about Rs 2,70,000 crore for these areas in five years.
Even this looks doubtful as the market will have to generate resources for other competing infrastructure sectors, which is likely to push up the required interest rates for such projects to attract funds.
Experts said the same problem could afflict both public and private sector companies when they look abroad for funds which would be costly.
The problem is expected to be exacerbated because of the continued weak performance of the power sector with the state electricity boards hardly expected to break even to be able to attract good quality funds.
According to the estimate, the power sector which is the weakest link in the energy sector, will need the most funds estimated at over 70 per cent of the total needs.
This is because the power companies have a far lower level of internal generation of resources.