Monday, 8th February 2010.

Indian Power Sector Scenario – an update

Written on Wednesday, 14th January 2009 by Neeta

images2 Indian Power Sector Scenario an update india Recessionary blues have started hitting India’s Power Sector. Not long ago the Power Sector was being considered in India as the fastest growing sector. The opportunities it offered were tremendous. Many middle managers left their cushy jobs with state run enterprises and joined newbie outfits, hoping to cash on. It was not long ago. But six months down the barrel the scenario has undergone a sea change. Most of the private promoters have resorted to “Go Slow” mode. Very few companies are going ahead with the same jest and vigour which was witnessed in the market not long ago.

Not long ago, even in the midst of recessionary voices, the economists presented very rosy picture of India’s Power Sector. They described Power Sector to be the last sector to get affected by slow down. But, six months is pretty long time. All major promoters have been affected and are facing drying up of funds. With demands in other sector logging negative growth, the power project developers are revisiting their plans.

Most worried are the equipment manufacturers, who have booked orders from India’s private sector projects. With private entities in India, declaring their intent to go slow, the equipment manufacturers have also decided to suspend or shelve their manufacturing for these private projects. This scenario has benefited India’s Central and state run power companies, who have witnessed prices of equipment dropping by whopping 25% in last 3-4 weeks. Every equipment manufacturer in competitive market is trying to grab orders from central utilities so that their operations remain stable and payments are not blocked.

So this is an aberration or a beginning of the end of Power Sector boom. It is true that India’s Power Sector needs tremendous investments. With 7-8% CAGR, India needs to have regular investments in Power Sector, in future. But Government alone can not sustain the capacity additions which the next five 5-year plans have envisaged. Private sector and funding agencies need to come together to resurrect India’s Private sector with little bit of nudge from Government.