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.