The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable non-conventional sources like wind, solar and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to increase further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required.
India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.
The country offers unlimited growth potential for solar photovoltaic (PV) industry as well. India is endowed with vast potential of solar energy and is quickly developing itself as a major manufacturing hub for solar power plants. Besides, it is expected that, the annual PV-installed capacity will grow at a compound annual growth rate (CAGR) of around 49.5 per cent during 2010-2014 to reach 1,500 megawatt (MW) by end of 2014, according to RNCOS research report titled, 'Indian Solar Energy Market Analysis'.
The installed generation capacity in the utility sector has increased to about 181,500 MW at the end of August 2011. The Indian power sector is largely coal based with the total installed capacity comprising 99,503 MW (55 per cent) coal based, 17,706 MW (10 per cent) gas based, 1,200 MW (1 per cent) diesel generation, 38,206 MW (21 per cent) hydro, 4,780 MW (2 per cent) nuclear and 20,162 MW (11 per cent) from renewable energy sources. Development of renewable energy sources is being accorded special emphasis in view of their inherent advantages. The installed capacity from renewable sources has grown to 20,162 MW in June 2011 comprising 3,226 MW in State sector & 16,936 MW in private sector.
The investment climate is very positive in the power sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth FiveYear Plan (2017-2022).
The Working Group on Power for formulation of the Twelfth Five Year Plan has estimated total fund requirement of Rs1,372,580 crore (US$ 256.14 billion) for the power sector. The main sources of financing are commercial banks, public financial institutions, dedicated infrastructure/power finance institutions, insurance companies, overseas markets, bilateral/multilateral credit, bond markets and equity markets. In addition, steps have been taken by the Government to make available funds through Credit Enhancement Schemes and Infrastructure Debt Fund etc.
The industry attracted foreign direct investment (FDI) worth Rs 172.80 crore (US$ 32.25 million) in the month of May 2012.
Some of the major investments made into the Indian power sector are as follows: