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Power
Sector in India
By
Kumar Amitav Chaliha
For
a time, it looked as if India’s new Congress party-led
government might bring the recent resurgence of investment
in the country’s power sector to an abrupt halt.
When it was reviewing the Electricity Act 2003 — legislation
passed by the previous government that laid out a framework
for restructuring and privatizing the debt-laden state
electricity boards that long dominated transmission and
supply — share prices in India’s increasingly
active private power developers collapsed. This now looks
to have been an over-reaction.
Programs to reduce heavy transmission and distribution losses, and the
theft of as much as 35% of all generated power, are expected to continue
even if the state governments retain ownership of the network. Investors’ concerns
were further assuaged when the new government announced plans to offer
fiscal incentives, including lifting of all import taxes for new power
plants smaller than 1,000 MW, and approved ten power projects. So, it
now appears that some 10,000 MW in planned new generation capacity will
go forward after all.
Firdose Vandrevala, managing director of Tata Power, summarized the view
of many power project developers in a recent interview: "By itself,
the Electricity Act was not going to achieve much," he explained,
as action to improve the distribution system was also needed at the state-level.
He said that Tata Power would go ahead with investing in generation facilities
even if the distribution network remained in state hands, so long as
the state electricity boards "become productive and their payment
capacity improves." He added, "we are not worried whether
[the distribution network] is in private or public hands, so long as
it is efficient and has the ability to pay."
Foreign power developers, which all pulled out of India in the wake of
the collapse of the Enron-led Dabhol project due in part to non-payment
by the Maharashtra State Electricity Board, are still absent. But domestic
Indian conglomerates and trading houses are piling into the sector, along
with upstream major Oil and Natural Gas Corporation (ONGC) and gas operator
GAIL.
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