Crisis grips India's loss-making state power sector: Tata executive
Singapore (Platts)--20Feb2013/633 am EST/1133 GMT
India's state-owned electricity sector is groaning under the weight of
$40 billion of losses and is failing to supply enough electricity to
industrial customers despite having access to spare generating capacity,
Amulya Charan, a senior executive at Tata Power Trading Co told Coaltrans'
2nd Asia Coal Trading Forum in Singapore, Wednesday.
Charan painted a bleak picture of India's electricity sector, saying
industrial customers in India were having to spend $10 billion a year on
diesel fuel for their own back-up generators because of forced power outages,
or load shedding by state-owned power generators.
"State Electricity Boards or state government enterprises are in a
financial mess and are going ahead with load shedding rather than buying
power to meet demand," said Charan, a 22-year veteran of the Indian power
sector and currently Tata Power Trading Co's chief mentor for power trading
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"As a result, customers are left to fend for themselves when power is
switched off," he stated.
Indian regulators were laboring under the misconception that this load
shedding by state government-owned power companies was the result of
customers being unable to pay for their electricity.
"A significant amount of customers are paying three or four times what
power purchasers charge, and this is straining the competitiveness of Indian
industry," said Charan, who said Indian customers were paying an average of
Rupees 4.5 ($0.08) per KWh for their electricity.
SPARE GENERATING CAPACITY
Indian state power companies could avoid implementing power outages by
making use of 14-16 GW of available generating capacity, but
the sector was failing to utilize this spare capacity through offtake
agreements, he said.
Charan pinpointed "mounting losses" sustained by Indian state-owned
power companies as the cause of their load shedding, and said the sector's
financial crisis had brought forward a rescue package from the Indian central
In his presentation, Charan said India's state government-owned power
companies had combined losses of $20 billion last year, bringing their
cumulative losses to date to $40 billion, and their total debt was expected
to rise to $118 billion by the 2013-14 Indian fiscal year (April-March).
"India's central government has come up with a bailout for SEBs in the
form of a restructuring loan with a moratorium on interest for three years to
cover 50% of their liabilities," he said, adding that state governments in
India would cover the other half of the losses.
State-owned companies dominate the Indian electricity sector,
owning 80% of its 211 GW of generating capacity, while the balance or
20% is in the hands of private companies.
Each of India's 28 states has its own electricity market, and the
country is overseen by four different regional electricity boards for north,
south, east and west India, giving an overall patchwork framework.
The central government intends to add another 75 GW to national power
generation capacity by March 2017 under the state's 12th Five Year
Plan, and is expecting state-owned enterprises to build 42 GW of this
new power plant capacity, and the private sector 33 GW.
Coal-fired power stations will comprise 70% of India's new generating
capacity that will increase India's requirement for coal to 1 billion mt by
2017, said Charan, as he expressed doubts that the domestic coal industry
would be able to produce enough coal for India's growing needs.
"Coal India was only able to produce 500 million mt/year for the past
three years, and its production is practically stagnating," said Charan of
India's largest coal producer which is majority state-owned.
India could succumb to an increasing dependence on imported thermal coal
to meet this supply shortfall, he said.
"A shortfall in domestic coal production is another reason which is
causing serious stress to the electricity sector. If prices keep on rising,
and the rupee weakens, that will start stressing the ability of Indian
companies to produce power and to sell it at regulated prices," he said.
--Mike Cooper, email@example.com
--Edited by Jonathan Dart, firstname.lastname@example.org