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Power sector: the Second Coming

CHENNAI: With the private sector, including foreign investors, rushing in to the power sector, the Union Power Ministry and the Planning Commission seem to be hopeful of achieving the target set for generation during the XI-year Plan.

Having failed miserably to reach the targets in the IX and X Plans, the authorities and planners have not only lowered their sights for the next Plan, but have tried to create a congenial atmosphere for the re-entry of private players.

As a result, a host of big names, including multinational players, have shown renewed interest now in investing in the Indian power sector. But what has really caught the imagination and spurred further interest in this public sector dominated field could well be the imminent entry of Reliance Power from the Anil Dhirubhai Ambani Group.

Industry sources and watchers alike feel that a ‘Second Coming’ may be at hand — with all its connotations. The experience of the 1990s and the Enron controversy may have died down, though the Dabhol plant itself has not materialised in its new avatar. Though industry sources feel that the Electricity Act 2003 has been the watershed, and the power sector appears much brighter now than it did before that, the energy sector may be brimming with a whole lot of operational problems and procedural hurdles.

Except for a few and small players, the bulk of the power generation in the country remains in the hands of the public sector — Central agencies and the State electricity boards (SEBs). As investment costs keep rising and tying up the fuel needs continues to pose serious problems, the State agencies have not been able to take on more projects. Even the hydel power sector has not tapped the full potential of the water resources in the country, perhaps because of the geographical locations.

After setting ambitious targets of about 40,000 MW of additional capacity during the IX and X Plans, the Planning Commission and the Power Ministry have now worked out a 78,000 MW target for the next Plan.

This, Planning Commission sources believe is "achievable," if the private sector gets on board. So, there is a conscious effort to woo private investments all over again.

Encouraged by these signals and the apparent willingness of State governments and their SEBs to not only welcome the private sector, but also commit themselves to a “reasonable Power Purchase Agreement (PPA),” big names are again being heard in the sector. A host of players including Sterlite, Jindal, Alps and even Videocon have evinced interest in entering the field. Some have also set up joint ventures to look at specific projects.

The hype generated by Reliance Power’s entry into the sector, the focus on its massive fund generation exercise, its tie up with the North American Coal Corporation for its huge project proposals, and its eying projects in Indonesia and Singapore, have raised expectations.

But the more cautious or conservative industry sources warn of pitfalls and problems. They are reminded about Y.B. Yeats’ ‘Second Coming’: “Turning and turning in the widening gyre, The falcon cannot hear the falconer; Things fall apart; the centre cannot hold.” But others believe “Surely some revelation is at hand; Surely, the Second Coming is at hand.”

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