India Misses Power Capacity Addition Target for April to September by 2,029 Megawatts

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to a report released by India's Central Electricity Authority (CEA) (New Delhi), India has missed its power capacity addition target of 6,462 megawatts (MW) for April to September 2009, the first six months of the current fiscal year, by 2,029 MW. The country added 4,394 MW of thermal power instead of the targeted 6,103 MW, registering a slippage of 1,709 MW. The target for hydropower addition was 139 MW, but the nation added only 39 MW during this period. There was no addition of nuclear power capacity, although the target was 220 MW. The CEA report states that 1,424 MW of the slippage was accounted for by state power projects. Of this, 1,324 MW of thermal power capacity is under construction.

According to Union Power Minister Sushil Kumar Shinde, the primary reason for the slippage is delays in the supply of balance-of-plant equipment. He said that if supply targets had been met, the nation would have been able to meet the power capacity addition targets in the 11th Five-Year Plan period, 2007-12. According to the plan, India's capacity addition target is 78,700 MW, of which about 76%, or 59,693 MW, will be contributed by the thermal power sector; about 20%, or 15,627 MW, by the hydropower sector; and the remaining 4%, or 3,380 MW, by nuclear power. In recent times, however, the Planning Commission has made it abundantly clear that under the existing conditions, only 60,000 MW of power is likely to be added to the nation's power production capacity.

The only way to meet the power production target is to focus on securing a steady supply of fuel and increase equipment manufacturing capacity of the suppliers, one of which is state-run Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi). The CEA report indicates that thermal power projects should increase their coal import quantities so they can meet generation targets. The report also states that orders are yet to be placed for about 20% of the critical equipment required to commission power units, scheduled to begin operations during the 11th Five-Year Plan period. According to a recent report released by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) (New Delhi), India will have to import almost $1.3 billion worth of power generating equipment per year. Some of the other reasons cited for the target slippage are inadequate skilled manpower; delays in acquiring land; inadequate infrastructure; contractual disputes; shortages of fuel for gas-based plants and atomic stations; and inadequate deployment of construction machinery.

The annual economic outlook, released by the prime minister's economic advisory council (EAC), has advised the power sector to diversify fuel sources and encourage private sector investments. The EAC has said that almost all the projects being implemented by the private sector are progressing on time and are sometimes ahead of schedule. In fact, the sector is likely to contribute more than the planned capacity during the current plan period. The private sector already has added 2,899 MW of generation capacity in the first six months of the current fiscal year, against a target of 6,164 MW for the whole year. The sector's target for the 11th Five-Year Plan is 15,043 MW, all of which will be contributed by thermal power.

The EAC has stressed the need to diversify from thermal power and increase the share of power generation capacity based on liquefied natural gas and atomic energy. The council has urged the government to make the necessary legislative changes that would allow the private sector to play a part in nuclear power generation.

An emerging factor that is likely to affect the ability to meet the capacity addition target is the unavailability of Chinese workers. Work on about 4,000 MW of generation capacity that was to be commissioned during the current fiscal year has been stalled, as the Indian government tightened visa norms for Chinese workers. The unavailability of Chinese commissioning engineers is likely to affect an increasing number of projects if the situation is not sorted out soon. Visas of many Chinese technicians and workers were cancelled when it came to light that they did not have employment visas but were working under business visas, which is not permissible.

According to government sources, a new visa regime to tackle the issue soon will be implemented. The government envisages a visa allocation system that specifies the exact category of work that can be performed during a stipulated time frame. The Ministry of External Affairs and the Ministry of Home Affairs are in consultation to sort out the problem. Both countries are keen to resolve the issue, as China is India's biggest trading partner in terms of volume of goods. Any kneejerk reaction will affect the economy of both the nations. The Chinese have argued that since the workers usually work on turnkey projects, which narrowed the time window, it is necessary that their workers acquire visas quickly, come to India, complete the designated work in the stipulated time frame, and return home.

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