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    Apr 2011

    Default Anil Ambani, Tata to make case to PM on power crisis

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    Anil Ambani, Tata to make case to PM on power crisis

    Some of India's biggest tycoons are set to make their case to Prime Minister Manmohan Singh on Wednesday on how to resolve the country's worsening electricity crisis, adding pressure on a government blamed for neglecting major policy initiatives.

    Reliance Power Chairman Anil Ambani, Adani Power chief Gautam Adani and Tata group Deputy Chairman Cyrus Mistry were among the leaders of private power firms in an industry delegation also expected to include Mistry's boss, Ratan Tata, who heads India's biggest business house.

    "We pushed for all issues, mainly augmenting domestic coal production," Ashok Khurana, director general of the Association of Power Producers said after the group met B.K. Chaturvedi, the member of India's Planning Commission responsible for energy, in one of several high-level meetings planned for the day.

    India does not produce enough power to meet the demands of a fast-growing economy and increasingly affluent population of 1.2 billion people. Outages in big cities, including the capital, are commonplace, and industrial users and office buildings must frequently rely on self-generated power.

    A lack of funding and fuel, as well as huge delays in acquiring land, have crimped the rollout of new capacity, and many big producers including Adani have put projects on hold.

    Singh's government, halfway through a second five-year term, has made little headway in pushing reforms or undertaking major policy initiatives the private sector has been clamouring for, crimping investment and contributing to slowing growth.

    It was forced to make an embarrassing reversal late last year on a move to allow foreign participation in the supermarket sector. This week, it appears to be relenting to pressure from the embattled airline industry to increase the limit on foreign ownership of Indian carriers to 49 percent.

    Fuel and funding

    Stagnant domestic coal output, lower-than-expected gas production, the high cost of imported fuel and an inability to pass along the full cost of fuel price increases have thrown the business plans of generators into disarray.

    Banks, already burdened with ***** to loss-making state-run electricity distribution firms, have been reluctant to lend to proposed power projects that do not have assured fuel supply.

    Plants that can produce about 20,000 megawatts are working below capacity. A lack of fuel means there may not be enough to fire the 30,000 MW in capacity under construction, Khurana said.

    India has installed capacity of 187,000 MW, about a fifth of China's capacity, and has a peak-hour deficit of about 12 percent. India's power output rose 8 percent to 72.7 billion kilowatt-hours in December from a year earlier.

    Power companies have been lobbying the government to free them from power sales contracts and want to be allowed to pass on rising fuel costs to consumers.

    However, because tariff agreements are set at the state level, the federal government can do little to change them. States would either have to take the politically unpopular decision to pass on costs to customers or absorb the higher cost, worsening losses for state power distributors.

    Private players want more access to coal blocks, swifter environmental clearances and a helping hand from the government on land acquisition.

    A shortage of coal could prevent India from reaching its target of adding more than 75,000 MW capacity in the five years to March 2017, a government draft report said in late 2011.

    In its 12th five-year plan ending March 2012, India will add only 52,063 MW, falling short of the targeted 62,374 MW.

    Coal accounts for more than half of India's power generation and will be required for about 85 percent of the target capacity addition in 2012-2017, the draft said.

    India has about 10 percent of the world's coal reserves but has struggled to provide enough of environmental clearances needed for mining and disputes over land acquisition.

    A shortage of domestic supply is likely to push up coal imports by four times to 213 million tonnes in 2016/17 from 54 million tonnes this fiscal year, the draft said.

    Power industry executives are also due to meet ministers in charge of finance, coal, petroleum and environment.



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