Now, with the coming of Electricity Act 2003, the power sector, which was highly regulated with lot of licensing requirements, is amidst a long awaited change.

The government has set an ambitious target of providing 'power for all' by the end of the Eleventh Plan. To achieve this goal, India would require an additional capacity creation of nearly 100,000 MW by 2012.

Key Positives Large investment plans: Considering the energy shortage in the country, the government has embarked on a plan to add nearly 100,000 MW of capacity by 2012. This includes 41,110 MW of addition in the ongoing tenth plan (2002-07). This is likely to plug the demand-supply gap and result into improved performance for power sector players. Electricity Act 2003: The Electricity Act 2003 provides great opportunity for power companies, given its provisions relating to the abolishment of various licensing norms, liberalisation on the power distribution business and opening of power trading for private power companies. Benefits of unbundling: Provision for unbundling of power generation, transmission & distribution companies has been laid. This will result in reducing T&D losses, as incentives to these private players are directly linked to reduction in T&D losses. Securitisation Act: Passage of the Securitisation Act was another major development, as power companies will be able to pursue their expansion plans with ease.		Key Negatives T&D losses pinch: The T&D losses, which are still on the higher side, result in lower effective realisation of per unit of power produced by generation companies. Poor T&D infrastructure remains a cause of concern. It is due to this and few other factors that the losses are on the higher side as compared to other countries. As a result, the industry is able to deliver less than its actual potential. This in turn has also affected the ability of players to reinvest towards growth initiatives. SEBs reeling under losses: Poor financial health of the state electricity boards (SEBs) continues to be cause of concern. Though some measures have been taken to address this issue, these have been inappropriate. Inability to take hard decisions has been impacting industry fortunes.

This is part of Equitymaster's Budget 2005-06 series. Equitymaster.com is one of India's premier finance portals. The Web site offers a user-friendly portfolio tracker, a weekly buy/sell recommendation service and research reports on India's top companies.