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Union Budget 2015-16: 10-point agenda to rejuvenate the energy sector

Ravi Uppal     February 25, 2015

Ravi Uppal
With oil prices showing clear signs of a recovery, inflationary pressures are likely to return and trade deficits, which remained low despite dwindling exports, are likely to widen again. Given that nearly 40 per cent of India's import bill is on account of oil and gas, the country can achieve fiscal stability only by developing its own fossil and renewable energy resources. Here is a 10-point agenda that could help rejuvenate the sector.
1. Revive hydro: Plagued by years of neglect, our installed capacity for hydro power is 40,000 MW compared to the 150,000 MW we are capable of generating. It is important for the government to invest in large projects and open the way for the private sector or public-private-partnerships (PPPs) to develop relatively smaller projects with enabling policies and a transparent process.

2. Go for coal gasification: The government must give a strong policy impetus to the exploration and production of coal-bed methane. Coal mines can be allocated exclusively for gas production, much like what China has done with impressive results.

3. Incentivise integrated waste management energy projects: Special incentives need to be offered to encourage companies to harness this emerging energy source, which will help us serve both the Make in India and Swachh Bharat objectives.

4. Privatise distribution: Being critical of both the well-being and sustainability of the energy sector, the government must chalk out a time-bound plan for transferring the power distribution management to private or PPP entities.

5. Modernise distribution: Inefficiency and transmission losses have been the bane of India's power sector. Revival will entail both standardisation and a large dose of automation.

6. Expedite PPAs for sale: After the coal mines are allocated, the government must ensure that long- and medium-term power purchase agreements (PPAs) are signed to avert a crisis in the power sector.

7. Restore private investor confidence: Although 35 per cent of India's generation capacity is privately-owned, during the past three years not a single new power project has been taken up by the private sector.

8. Bail out stalled projects: An empowered government committee must take the steps necessary to revive the stalled power projects. If necessary, these projects could be acquired by NTPC or private companies.

9. Reform financing: The need of the hour is to institutionalise long-term funding. At the same time, the terms and conditions of refinancing should also be liberalised.

10. Lower debt-equity barrier: Since power and energy projects require massive investments, a lower -debt-equity ratio will ensure that competent private sector investors can enter the fray.

The author is managing Director & Group CEO, Jindal Steel & Power

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