Pvt power sector poised for growth

Seeks government and regulatory support to obviate risk.

The country's power sector is seeing some slick action from the private sector, finally.

These private players have carved out aggressive plans for capacity addition "" Reliance Power is planning almost a 25-fold increase in capacity "" while companies which do not have a presence in the sector like Reliance Industries and Oil and Natural Gas Corporation (ONGC) are planning to get a foot in.

Power generation capacity in the private sector totals about 18,500 Mw today, which is about 14 per cent of the overall installed capacity, and is still dominated by the central and state governments. 
 

CAPACITY INCREASE
Company	Present  capacity*	Capacity in  pipeline*
Tata Power Company	2,376	8,000
Reliance Power	951	24,000
GVK Power & Infrastructure	900	2,000
Essar Group	1,500	2,500
GMR Group	800	1,300
Lanco Infratech	519	3,175
Reliance Industries	Nil	4,000**
ONGC	Nil	2,700
*in megawatt (Mw)      **Captive

"Though it is difficult to say on how much would actually be contributed by the private sector over the next few years, it would be substantial," says a power ministry official.

The investments are driven by huge demand for power. "It is a seller's market," says an energy analyst. With an average energy deficit of about 9 per cent and peak deficit of 12 per cent, there's a huge demand for power.

Moreover, with the recent changes in the government policies and in the regulatory framework, the private players are assured that they would get returns on their investments.

"These investments are result of the changes brought about by the Electricity Act of 2003," says Santosh Kamath, associate director, KPMG.

In the next five years, 13,000 Mw of the 78,000-Mw capacity addition targeted would be contributed by the private sector. Of course, the projects under various stages of construction total more than the figures speak of. For instance, Tata Power Company, the largest private sector power company, has projects of 8,000 Mw underway including an ultra mega power project of 4,000 Mw at Mundra in Gujarat.

Likewise, the Anil Dhirubhai Ambani Group company Reliance Power Ltd has also planned a capacity addition of almost 24,000 Mw, a huge jump from its current capacity of just 951 Mw. Lanco Infratech, which recently lost Sasan mega project to Reliance, is upbeat about adding over 3,000 Mw in the next five years though its current capacity is a mere 500 Mw.

Also, there are nine ultra mega power plants of 4,000 Mw each expected to come up in the next 10 years. That means, 36,000 Mw would come from these mega plants alone, which would be implemented through the public-private partnership route.

There are however risks to the investment momentum. "At the moment, the private players are riding on their own strengths but they need government and regulatory support," says an industry observer.

For instance, the regulation for open access that allows large buyers to choose their power supplier, has been issued in only a limited number of states.

"The power market is very volatile," agrees a member of Independent Power Producers Association of India (IPPAI), "with the success of the venture being dependent on external parameters like transmission lines and system integrity."