Private sector steps warily in power sector

 The capacity addition carried out by the private sector since 1991 has been equally lop-sided, with 70 per cent of the generation capacity from private projects coming up in just four states.

 Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu alone accounted for 4190 mw in the last 12 years.

 According to power ministry officials, the reasons for the slow growth of private players in the power sector are the failure of projects to achieve financial closure due to insistence by financial institutions on state government guarantees and escrow cover.

 The delay in finalisation of various contracts such as power purchase, implementation, fuel supply and fuel transportation agreements had also stopped several projects from taking off, they said.

 Other reasons for the private sector project not taking off include increase in prices of fuels like naphtha and withdrawal by equity holders and EPC (engineering, procurement and construction) contractors for various projects.

 While capacity addition from the private sector planned for the Ninth Plan could not be achieved, the targets set for the same during the first year of the Tenth Plan period had also been missed by a wide margin.

 In the first year of the Tenth Plan, the second phase of the Dabhol plant (1444 MW) was expected to be commissioned, but failed to take off due to disputes and legal proceedings between the Maharashtra State Electricity Board and Dabhol Power Company, officials added.