India Electricity 2007
September 20-22, 2007, New Delhi

Speech by Shri Sushilkumar Shinde, Union Minister of Power

It gives me great pleasure to address this august gathering and to inaugurate "India Electricity 2007", an event jointly organized by my Ministry and the Federation of Indian Chambers of Commerce and Industry for showcasing the immense investment opportunities that the Indian power sector offers today. I am sure that over the next three days this event will provide an excellent opportunity for exchange of information and for business networking.

It is our aim to provide power to all by 2012. Considering that almost 45% of rural India does not yet have access to power, this is a truly formidable task. It virtually means doing as much work in the next five years as was done in the last fifty years. Through our Rajiv Gandhi Gramin Vidyutikaran Yojana we plan to electrify more than one lakh villages, provide access to electricity to more than seven crore rural households, and provide connections free of charge to 2.34 crore Below Poverty Line families. I may add that out of this, 42,000 villages have already been electrified, and more than 12 lakh BPL connections already provided. The mobilization that is required in terms of equipment supply, turn-key contracts, finance and project planning and monitoring is a great challenge that we have taken up. The rural electrification backbone that is being created under this programme will not only cater to domestic demand for electricity, but can also be augmented by States to cater to requirements of agriculture, small industry and other applications of electricity. This will change the very face of rural India within a short time.

The other major challenge for us is to add 78,000 MW in the next five years to the existing capacity of about 1,34,000 MW. It might be said that this is too ambitious a target, considering that only about 21,000 MW were added in the tenth five year plan. However, with 50,000 MW already under implementation, and the balance orders expected to be placed by the end of this year, this target does not seem over-ambitious. Again unprecedented mobilization of all stake-holders is required to complete the on-going and planned projects on time. In order to ensure this, a National Power Projects Monitoring Board is being set up soon, as announced by the Hon'ble Prime Minister at the Chief Ministers' Conference in May earlier this year.

The third major challenge is reducing the currently very high levels of Aggregate Technical and Commercial losses of around 35% to a much more respectable level of 15%. The Planning Commission has estimated that improvements in the distribution sector that are necessary for drastically reducing the AT&C losses may require investments of upto Rupees one lakh crores. Going by the experience of APDRP in the tenth plan and by its evaluation carried out by various experts, there seems to be a consensus that the pre-requisite for major investments in the distribution sector is an IT enabled, automated energy accounting system which will enable managements to pinpoint responsibility for commercial losses, correctly plan network improvement investments, and track parameters relating to consumer satisfaction. With a heavy input of technology through a modified APDRP, we plan to establish such a state of the art IT enabled energy accounting system all over the country.

During the Chief Ministers' Conference, the Hon'ble Prime Minister had also announced that a Standing Group of Ministers would be appointed, with due representation from States, to address all the major issues confronting the power sector. Such a Group has now been appointed and it will be having its first meeting later this month. I am confident that this new mechanism will help address all important issues on a fast track.

It has been estimated that the investment requirements in the Indian power sector over the next five years amount to a staggering figure of over rupees ten lakh crores. This would cover the entire value chain from generation through transmission to distribution. Obviously, this kind of investment is possible only with the full involvement of all the stake-holders who have gathered here today. This magnitude of investment requirement poses a great challenge for all of us; at the same time it also provides a unique investment opportunity to those who want to be on a very high growth trajectory. However, making such huge sums available would be challenging task for the financial system, which may need some special enabling dispensations. A financial sub-committee of the Group of Ministers has therefore been formed under the Deputy Chairman, Planning Commission, to suggest appropriate enabling measures.

The recent phenomenal response to the IPO of PowerGrid has demonstrated that there is tremendous investor enthusiasm for the power sector. We need to capitalize on it not only for the IPOs of REC and NHPC which are being lined up, but also for channelising this enthusiasm into actual equity and loan financing of projects.

On the generation side, having sorted out the initial problems in respect of Sasan Ultra Mega Power Project, I am now reasonably confident of the success of the Ultra Mega Power Project model. Having successfully handed over two projects of 4000 MW each, we are now looking forward to replicating this model at other places shortly.

Needless to say, the private sector has to play a stellar role in this.

Although the private sector is quite keen to enter hydro projects in a big way, and several private companies have secured a number of potential sites from State governments, actual investments have been slow in coming for lack of a framework enabling them to enter into Power Purchase Agreements with utilities and then to achieve financial closure. It is for us to resolve these issues and to help these projects secure PPAs and achieve financial closure. As announced by the Hon'ble Prime Minister in the Chief Ministers' Conference in May, a Special Task Force on Hydro Projects has recently been formed, in which the major hydro states and some load-centre States are represented.

Lack of adequate domestic manufacturing capacity for generation equipment has been a major bottleneck coming in the way of timely completion of generation projects. Creating more players in this field is the only way to increase capacities, bring in cost competitiveness and accountability to timelines. This would be one of the major areas of our initiatives in the coming few months.

I have only mentioned a few broad areas which would be of interest to potential investors in the Indian power sector. The Conference will also be focusing on a number of specific areas such as coal mining, transport, material supply and manufacture. I wish the deliberations all success and am sure that the Conference will provide very valuable input for our future policy initiatives.

Thank You!