Power and telecommunication sectors have seen excess capacity and squeezing margins after aggressive bidding, both for electricity tariffs and spectrum, over the years. Regulatory challenges and setting templates for realistic bids could be the way forward.
India is targeting to add 1 lakh Mw of solar and 60,000 Mw of wind power by 2020 to meet its climate change commitment of 40% power generation from renewable sources. While solar power has seen an unprecedented rise, wind has slowed down due to change in bidding terms. Solar is also facing low tariff pressure and lack of financing. Low cost domestic financing, regular tenders in wind sector, and promoting domestic manufacturing could improve investment scenario.
Power demand touched new high in the past two years, crossing more than 1.5 lakh Mw. But thermal plants are running at lower capacity, driven by rising share of renewable energy and stressed thermal units shutting down. Growth of hydro units has been stagnant for a decade. The new government would have to look at reviving hydro power to balance increasing share of renewable energy. Coal supply scenario also needs to be boosted to address the stress in the sector.
According to a CRISIL report, aggregate external debt of state-owned electricity distribution companies (discoms) is set to increase to pre-UDAY levels of Rs 2.6 trillion by March 2020. With most states having limited fiscal headroom, continuous financial support to their discoms may be difficult. So discoms have to become commercially viable through prudent tariff hikes and reduction in AT&C losses.