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For the first time in seven years, foreign direct investment inflows into the power sector failed to register any growth in the previous financial year ended March 31.
The sector attracted foreign investments to the tune of $1,252 million during the year, a 12.8 per cent decline compared to $1,437 million registered in the previous year, according to latest data released by the Department of Industrial Policy and Promotion (see table).
Foreign investment inflows have not only fallen but also continue to be in the range of 5-6 per cent of the overall investments in the sector.
For instance, foreign investments in rupee terms stood at Rs 6,908 crore (Rs 69.08 billion), just 5.4 per cent of the overall investments worth Rs 1,25,958 crore (Rs 1,259.58 billion) in the power sector in 2009-10.
According to experts, this is a pointer to the overall dip in investor confidence fuelled by issues of historic coal shortages coupled with enormous delays in clearances.
"The dropping FDI in power is impacting the sector's growth.
"The current issues have made it difficult for the investors to deliver infrastructure projects.
"The issue of dropping FDI in infrastructure sectors has been flagged by the industry in its meetings with the government," said Gokul Chaudhri, partner, BMR Advisors.
The concerns in the power sector have prompted Prime Minister Manmohan Singh to call a high-level meeting on Tuesday to take stock of the deteriorating fuel supply situation.
The meeting would be attended by Power Minister Sushilkumar Shinde, Coal Minister Sriprakash Jaiswal and Finance Minister Pranab Mukherjee along with Planning Commission Deputy Chairman Montek Singh Ahluwalia.
The review meeting would focus on the progress made in the two sectors in the current Plan period so far and set the course-correction agenda for this year, according to a senior government official.
The meeting comes in the backdrop of Environment Minister Jairam Ramesh calling the 12th Plan's power capacity target of 100,000 Mw 'ecologically unsustainable' during a full meeting of the Planning Commission in April.
In power, the original capacity addition target of 78,700 Mw for the current Plan period (2007-12) has already been revised downwards by the government to 62,000 Mw.
Official sources confirm the actual addition in power capacity in the entire period is not likely to exceed 50,000 Mw.
Coal production, during the five-year period beginning April 2007, was originally expected to grow by 9.5 per cent to reach 680 million tonne (mt) by March 2012.
The mid-term appraisal brought it down to 629 mt falling short of the demand by 83 mt to be met through imports.
The latest analysis shows imports could go up to as high as 142 mt.
The coal shortage has already led the power ministry and the domestic power industry to demand a temporary stoppage of e-auction sales of coal to meet the demand of stranded power projects.
With Jaiswal opposing the idea, the matter is likely to come up for discussion in the meeting with the PM.
In a meeting last month with the power ministry brass, private companies under the aegis of the Association of Power Producers had demanded diversion of e-auction coal, which accounts for 12 per cent of the state-owned Coal India's production, and liquidating the pithead coal stocks of 70 mt.
"Investors have made investments based upon the Letter of Assurance issued by the coal ministry after 2006 for supply of fuel for power projects to come up after 2009. In a crisis situation.
"Therefore, the power companies have a better claim on the available coal based on commitments made rather than any e-auction consumer," APP director general Ashok Khurana said.
According to the power ministry's estimate, if coal supply is not ramped up immediately, over 24,000 Mw power capacity would become stranded.
Plants of 5,593 Mw capacity commissioned in 2009-10 will operate at only 42 per cent Plant Load factor, while those commissioned in 2010-11 (6,911 Mw) and to be commissioned in 2011-12 (10,070 Mw) will not operate at all.
