We have a number of international investors including the leading private equity funds, pension funds and global energy players lining up to invest in India’s electricity sector, especially in the renewable energy.
The government is committed to promote renewable energy and move India towards a low carbon economy. As an economy, we are moving towards a $5 trillion mark with per capita electricity consumption way below the desired mark of 3,000 kWh per year.
So, what is the issue here? The issue on hand is the boom and bust cycles of investment in this critical sector of the economy. Since 1992, when the private sector was first invited to participate in the electricity sector of India, we have seen at least 3 cycles of leading Indian and international investors literally losing hundreds of millions of dollars of their investment. The reasons cited include lack of fuel, opaque fuel allocation process, tardy approvals system, and environmental issues.
But, the real issue that has often been soft pedalled, by the investors and governments alike, is the lack of payment capacity of the distribution companies. No industry, where your consumer does not have wherewithal to pay, can survive.
We have been putting the electricity sector on a lifeline from time to time with financial restructuring, loan waivers and government guaranteed soft loans.
The time is there now to call a spade a spade!
We are seeing a very strong government at the federal level, with commitment to make long term reforms. Electricity sector is one sector where these reforms are overdue.
In the recent budget, it was very encouraging to note that we are moving towards prepaid meters with the intention of letting the customers choose their own suppliers.