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NOV 28 2014

Power minister Piyush Goyal says government will act soon to resolve fuel scarcity issue

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 28th NOV 2014

India's fuel-starved power projects would be able to give a bonus 30,000 MW capacity to fuel the expected surge in electricity demand when the economy turns around, as power, coal and renewable energy minister Piyush Goyal's assurance of quick action has raised industry's hopes that policy action would kickstart stranded plants.

Goyal, along with petroleum minister Dharmendra Pradhan, announced on Wednesday that the government will soon act to resolve fiscal difficulties and fuel scarcity of power plants based on coal or natural gas, so that people get affordable and uninterrupted supply. "The government will look at all possible options to avail fuel to the power projects with an aim to keep power tariff low for the utilities and end users," said Goyal.

The acute scarcity of fuel has hit new capacity of 30,000 MW but the industrial slowdown and slackening of demand made sure that consumers did not feel the pinch. India's power deficit shrank to 4,000 MW this week. But the situation would be different once industrial growth accelerates after crawling, stagnating or declining for a long time.

"Given the economic revival expected next year, power demand is going to shoot up from here. Fortunately for the country, we have enough installed capacity that can feed this demand provided the fuel side issues both in coal and gas are sorted out," said Debasish Mishra, senior director at Deloitte Touche Tohmatsu India Ltd.

"Positive noises from government are making the investors hopeful. However, government should soon come out with a detailed action plan to achieve the 1 billion tonne coal production target as well as pooling or other solution for gas plants, else skepticism would kick in," he added. Apart from fuel issues, power producers were also under pressure from banks which have a huge exposure in the sector. Goyal had announced that banks were on board to discuss the possibilities of relaxing lending norms to power sector.

"We are in discussions with banks to extend the term of payment for power plants to prevent them from turning nonperforming assets," said Goyal. The ministers held meetings with stakeholders in the power sector, who are facing an acute fuel shortage and are under pressure from banks to repay loans.

"Today's meeting was a precursor to final decisions which will be taken very fast," Goyal said. The government has already announced the auction of coal blocks and hopes to double the country's coal output to help meet the country's coal shortage. The power sector has suffered because Coal India, the state monopoly, could not keep pace with rising demand, while India's natural gas output was also inadequate. Industry expects good news for the gas-fired plants also after Goyal's announcement.

"We took comprehensive review of variety of problems that the industry has been facing. We have looked at all possible options to address the problems of gas based power projects. We have already initiated the coal block auction on process and looking at natural gas based plants to utilise stranded capacity with an aim to keep the tariff low," Goyal said.

While he has shown determination and speed to tackle the problems head-on, analysts said they are keenly watching the implementation of his ideas and policies. "These comments show that the government means business, but the proof of the pudding is inthe execution, as the government must do a careful balancing act between consumer and corporate concerns, no doubt they are very well intentioned but the actual on ground implementation will make all the difference," said Harish HV, partner, Grant Thornton.

The power sector is also awaiting a financial package as companies are unable to repay loans because they don't get fuel to operate their plants. In some cases plant construction was stalled because banks are reluctant to lend to power projects.Apanel of experts has recommended measures to help the sector. The government is also working on measures to thermal and hydropower plants with a combined capacity of 1,30,000 MW that are facing cost and time overruns and do not have adequate funds.

Tags

Renewable Energy Coal Gas Tariff Natural Gas Energy Fuel Shortage Coal Block Petroleum Power Deloitte Hydropower Electricity Consumer India

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