Power sec­tor

Dalal Street Investment Journal - - SPECIAL REPORT -

Power sec­tor in In­dia is another cru­cial sec­tor ac­corded the in­fra­struc­ture sta­tus in In­dia that is strug­gling at the cur­rent junc­ture in spite of en­cour­ag­ing growth tra­jec­tory in the en­ergy space over last few years.

The power sec­tor has still not been able to sus­tain the re­quired ca­pac­ity ad­di­tion match­ing the grow­ing de­mand for power in In­dia.

The risk pro­file of ther­mal power plants is grow­ing and is lead­ing to in­crease in the cost of cap­i­tal for the ther­mal power com­pa­nies in In­dia. The volatil­ity in coal prices has in­creased and the un­cer­tainty with re­spect to the cost-ef­fi­ciency of do­mes­tic coal pro­duc­tion is be­com­ing a cause of worry for the sec­tor. Non-avail­abil­ity of coal is yet another is­sue that could eas­ily turn the a lu­cra­tive and vi­able coal power plant into a non-per­form­ing as­set.

As of now, a large per­cent­age of

In­dia’s ther­mal power ca­pac­ity is stranded and sev­eral of the ther­mal plants are run­ning at just above 50 per cent ca­pac­ity util­i­sa­tion. With such a sit­u­a­tion, it be­comes dif­fi­cult for the lenders to fi­nance ther­mal projects. The ther­mal power pro­duc­ers, on their part, have also not been able to up­grade tech­nol­ogy to meet the stan­dards ow­ing to high costs and com­pli­cated pro­ce­dures.

When it comes to re­new­able en­ergy sec­tor in In­dia, the sec­tor’s reliance on im­ported so­lar pan­els ex­poses the sec­tor to the for­eign cur­rency risks as is the case with the coal im­ports.

For the re­new­ables sec­tor, the cur­tail­ment risk is om­nipresent due to un­avail­abil­ity of trans­mis­sion in­fra­struc­ture, grid con­ges­tion and grid in­sta­bil­ity. Even though the re­new­ables sec­tor is ex­empt from en­vi­ron­men­tal clear­ances risk, there is al­ways ad­di­tional risks such as de­lays in ex­e­cut­ing off-take agree­ments, de­lays in pay­ments from util­i­ties, etc. plagu­ing the in­dus­try.

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