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India Calls upon US Investors to Invest in Indian Power Sector

Union Minister of Power Shri Sushilkumar Shinde has called upon the US investors to invest in the growing power sector in India. He was speaking at the US-India Economic Opportunities and Synergies Summit in Chicago organised by FICCI in association with The Executive Club of Chicago. Shri Shinde said while the present installed generation capacity in India is more than 1,81,000 MW, over 80,000 MW of new power capacity is under construction. He added that during 2007-2012, the funding requirement in Indian Power Sector has been estimated at USD 230 billion. Stating that the 12th Plan aims at capacity addition of nearly 100 thousand MW with the similar investment requirement, the Minister emphasised that such a gigantic task can be successful only with the strong support from the private sector.

Highlighting the reforms in power sector in India, Shri Shinde said the Electricity Act 2003 allows the sector to align itself with market dynamics and clears the roadblocks in the way of greater participation by the private sector. He said an independent regulatory framework in India now provides business confidence to power companies and a fairly lucrative rate of return on equity of 15.5 per cent per annum. Underlining that the share of the private sector in capacity expansion has gone up substantially in the Eleventh Plan with 33 per cent of the total incremental capacity expected to come from the private sector, the Minister said that in the Twelfth Plan this share is expected to further increase to about 50 per cent. He said 100% FDI is permitted to facilitate private investment on automatic route for the projects of power generation, transmission and distribution.

Giving an outline of power projects in India with successful ingredients of public private partnership, Shri Shinde said that 16 Ultra Mega Power Projects (UMPPs) and 14 Inter State Transmission schemes have been identified for development by the private sector on competitive bidding route. He said while the bidding of 4 Ultra Mega Power Projects and 6 transmission project have been completed, more than 5 UMPPs are in the pipeline and offer unique opportunities for investment. Each UMPP is of 4000 MW capacity and requires USD 4.5 billion investment.

Regarding Hydro power Shri Shinde said that estimated potential in hydro sector in India is 1,50,000 MW out of which only 30,000 MW has been harnessed . The remaining capacity needs to be developed which provides the investors an opportunity. He said the new Hydro Policy 2008 goes a long way in balancing the developers concerns and the need of the people. The Minister added that to enable the project developer in the Hydro Sector a reasonable and quick return on investment merchant sale of up to 40% of the saleable energy has been allowed making the investments in hydropower projects more attractive.

Stating that India is actively pursuing a low carbon growth strategy, Shri Shinde highlighted India’s focus on Super Critical Technology in Thermal Plants, the rapid induction of Clean Coal Technologies and a sharper focus on renewables. He said that international majors like Mitsubishi, Toshiba, Hitachi, Alstom and Ansaldo have already started the process of partnering with Indian manufacturers to set up Super Critical Manufacturing facilities. The Minister said that bulk tenders for 660/ 800 MW have been floated to set up Super Critical units to help the investors to stabilize and sustain.

On the front of renewable energy, Shri Shinde said that India has launched Jawaharlal Nehru National Solar Mission and is committed to add 20,000 MW of solar power by 2022. He said that the State Electricity Regulatory Commissions (SERCs) are mandating a minimum Renewable Purchase Obligations (RPOs) to Discoms and a mechanism of trading of Renewable Energy Certificates (RECs) through power exchanges has started working in India. Addressing the concerns of investors towards the financial health of distribution companies, the Minister said that “Accelerated Power Distribution and Reforms Programme (APDRP)” was launched in urban areas, the main objective of which is to bring down the Aggregate Technical and Commercial (AT & C) losses in the range of 15%. He said the programme size of R-APDRP during 2007-2012 is about USD 11 billion.

As regards energy efficiency, Shri Shinde said the Indian Government has given due emphasis on this issue. Stating that 37 Energy Service Companies (ESCOs) have been accredited by the Bureau of Energy Efficiency (BEE), he said tremendous opportunities exist for Foreign ESCOs operating either independently or in JV for taking up energy efficiency projects in ESCO mode under the Performance Contracting Mode. He said it is estimated that investment amount of US$ 15 billion will be required to be made for energy efficiency initiative in India. Shri Shinde said that in order to improve confidence among the Financial Institutions, robust energy audit system has been created. He added that the Partial Risk Guarantee Fund and Venture Capital Fund are being created for boosting investments in the area of energy efficiency and a National Mission on Enhanced Energy Efficiency has been approved.

Shri Shinde is on a five day visit to the USA which aims at enhancing cooperation between the two countries in the power sector. He will also go to New York where besides addressing the Press Conference organised by Counsel General of India, he will meet Chief Executive Officers of various organisations organised by United States India Business Council (USIBC). He will also deliver closing keynote address at the 8th Annual India Investment Forum organised by Institutional Investor, FICCI and IIFL Institutional Equities.

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