Power or electricity is one of the most critical components of infrastructure affecting economic growth and well-being of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.
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, 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.
With countries across the globe fast taking to the use of renewable energy resources, India has progressed well in adapting to both solar and wind energy on a large scale. Many states in the country like Gujarat and Madhya Pradesh have contributed tremendously in their support to use of renewable energy.
India is the fifth largest producer and consumer of electricity in the world after the US, China, Japan and Russia. It has a market potential of €2 billion (US$ 2.66 billion) for setting up high-voltage transmission lines by 2018, as per Alstom. The high-voltage direct current (HVDC) market is estimated at €50 billion (US$ 66.44 billion) in the next 10 years, and Alstom is targetting a 20 per cent market share.
India is set to become a global manufacturing hub with investments across the value chain. About 82 gigawatt (GW) worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure.
The investment climate is very positive in the power sector. Due to surge in the sector, the power sector has witnessed higher investment flows than envisaged. The power ministry has set a target for adding 76,000 megawatt (MW) of electricity capacity in the 12th Plan and 93,000 MW in the 13th Five-Year Plan (2017-2022).
The industry attracted foreign direct investment (FDI) worth Rs 36,200.05 crore (US$ 6.10 billion) during April 2000 to April 2013.
Some of the major investments made into the Indian power sector are as follows:
The Government of India’s decision to allow foreign direct investment (FDI) through automatic route in power exchanges while retaining the cap at 49 per cent will open up opportunities for overseas players to participate in the growth and development of the Indian power sector.
The Government has approved a scheme for the financial restructuring of DISCOMS to restore the health of the power sector.
Under the Union Budget 2013-14, the government plans to construct a transmission system from Srinagar to Leh at an investment of Rs 1,840 crore (US$ 310.26 million).
Some of the initiatives taken by the Government of India to boost the power sector are:
The Government of India has initiated several reform measures to create a favourable environment for the newly added generating capacity in the country. The policies and reforms have put in place a highly liberal framework for generation of power in the country. The government is also adopting constructive steps towards implementing large-scale solar power projects and is poised to position itself as one of the world’s major solar producer.
Renewable energy is fast emerging as a major source of power. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity in renewable energy. The country aims to increase the importance of wind power even further; there are plans to double wind power generation capacity to 20 GW by 2022.
Exchange rate used: INR 1 = US$ 0.016 (as on July 29, 2013)
References: Ministry of Power, Press Information Bureau, Media Reports, RNCOS Report