A year of promise and trouble for energy sector

The NDA government may have set the bar high with the announcement of “Make In India” programme and promise of 24/7 electricity to households by 2019, but it has to take up the rather arduous task of cleaning up the scam-hit coal sector and increase power generation.

The year 2014 proved to be challenging for the coal and power sectors, as stalled projects put a freeze on investments worth billions of dollars.

The Supreme Court’s cancellation of 204 coal block licences since 1993 due to the flawed nature of the process adopted also hit power generation, steel and cement companies.  

Companies that secured the blocks claimed to have invested close to Rs 3 lakh crore for the coal blocks and a further Rs 4 lakh crore for the end-user plants.  Following the court order, the government promulgated an Ordinance and started the allocation process afresh through e-auctioning.

Initially, 65 mines will be allocated to private players and 36 will be directly allotted to state-owned companies.

The new dispensation headed by Prime Minister Narendra Modi also set an ambitious target of increasing Coal India Limited (CIL) production from the current 462 million tonnes to about one billion tonnes by 2019. There are some serious challenges in modernising the CIL, which takes care of 80 per cent of domestic supply.

Including the provision to allow commercial mining by private firms in the ordinance did not come without resistance, since many believed it would impact CIL, but Coal Minister Piyush Goyal assured that the CIL would get more allocations and the government would take up its modernisation.

Opening up coal blocks to private firms is important for the government since it aims to improve power generation and reduce the burden of importing coal.

India has an installed power generation capacity of over 2,50,000 MW but many plants are facing shortage of fuel supply resulting in lower production. About 53 million homes in the country are yet to get electricity and many industries depend on diesel generation sets to meet their requirements.

Though the government announced it would improve fuel supply to gas-based plans, it needs to work out a plan and complement it with some relief measures since the plants have been struggling without fuel.

Besides the promise of round-the-clock electricity to all households by 2019, the government also sees investment potential of up to Rs 250 billion in the energy sector in power generation, transmission, distribution and coal mining.

India's total power consumption would double to 2 trillion units by 2019. Though majority of investments in providing that demand would come from private sector, the government will also be increasing its investment.

 Besides, the government is also moving forward with plans for the renewable sector, especially solar energy, where it hopes to increase power generation to 1,00,000 MW by 2022.

It also aims to double the installed capacity of wind generation to more than 40,000 MW by 2019. IT is working to make maximum utilisation of existing assets and freeing up stranded assets.