India is the 5th largest producer of electricity in the world and power is a very essential part of infrastructure affecting growth and welfare of the country. To end electricity blackouts and spur economic growth, the government passed a rescue package to encourage again the Indian Energy sector.
India’s Power sector is highly diversified and power sources range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar and agricultural and domestic waste. Its current power generation capacity accounts for 271.722 GW. Demand for electricity is boosted further due to expansion in industrial activity, a growing population, increasing market penetration and per-capita usage, large capacity additions which are targeted up to 2022 and ambitious projects and increasing investments across the value chain. In 2016-17 the total domestic energy production is supposed to reach 669,6 million tonnes of oil equivalent (MTOE) and in 2021-22 844 MTOE according to the Planning Commission’s 12th Five-Year-Plan. The British oil giant BP predicts the energy demand in India to be the highest among all countries by 2030-35.
Concerning renewable energy, the Indian power sector holds great potential. Till 2017 India’s annual Solar installations are expected to grow over four times and 10.86 GW of utility-scale solar and grid connected rooftop solar capacity are supposed to be added. Regarding wind energy India is the fifth largest wind energy producer and wind energy accounts for nearly 70 % of installed capacity. In future the total renewable capacity is targeted to be 175 GW by 2022.
The government has identified the Indian Energy industry as a key sector of focus so as to promote sustained industrial growth and targets by several initiatives to 24×7 power. Therefore, India approved a rescue package for its loss-making power utilities, a reform to end electricity blackouts and spur economic growth. According to Power Minister Piyush Goyal, states are now allowed to take on 75 % of the debts of their utility companies of 4.3 trillion rupees minimum size. The government is aiming thereby to make utilities returning to profitability before 2019. States and utilities which want to take up the rescue package will sign agreements with the power ministry committing them to improve performance in return for the debt swap. The debts taken by states are not supposed to be included in their fiscal deficits for this and next financial year.
The investment climate is thereby positive in the Indian Power sector. Due to the policy of liberalisation, the sector has witnessed higher investment flows than envisaged. Foreign Direct Investment (FDI) is allowed under the automatic route in the power sector, except atomic energy, subject to all the applicable regulations and laws. The Indian power sector attracted FDI worth $ 9,828.08 million during the period April 2000 to June 2015.
To read the latest news on the Energy & Utilities Industry in India click Energy & Utilities Newsletter