27 June 2011

1 lakh MW capacity addition needed in 12th Plan for 9 percent growth

One lakh megawatt power capacity addition in the 12th Five-Year Plan is a must for the country to sustain 9 percent GDP growth, said economist and Prime Minister''s Economic Advisory Council Chairman C Rangarajan .

He said there has to be a coordinated plan between the power and coal sectors and issues like environment need to be considered to achieve the target.

"If we have to sustain the rate of growth at 9 per cent over a five-year period, we must ensure that additional capacity to the extent of one lakh megawatts is available or established in the 12th Plan period," Rangarajan told PTI.

The government has set a target for one lakh megawatt power capacity addition in the 12th Plan, which will begin from April, 2012, while reducing the 11th Plan target to 62,347 MW from over 78,000 MW.
The Power Ministry expects capacity addition in the current Five-Year Plan, ending March 31, 2012, to be around 51,000 MW, much less than the revised target.

Prevailing conditions like tighter norms for coal extraction may be a dampener for achieving the target for the next Five-Year Plan, according to industry.

The Indian Electrical & Electronics Manufacturers'' Association (IEEMA), a trade body representing the electrical and industrial electronics industry, anticipates that the government will significantly revise downward the power generation targets for the 12th Five-Year Plan.

"The delayed progress may force the government to revise downward the target for the 2011-12 and may also impact the 12th Five-Year Plan period starting April, 2012. The government had reduced the 11th Plan target to 62,347 MW from over 78,000 MW," the trade body said in a statement recently.

According to Fitch Ratings, coal supply issues are likely to hit the power sector and may not encourage investors to the sector.

Rangarajan said without a coordinated plan between the power sector and coal sector, the rate of growth at 9 per cent may not be sustainable.

"I think we need to tackle all these issues like environment and ensure that there is improvement in the use of power, there is improvement of coal efficiency and also greater availability of coal... All these are taken into account (to achieve the target)," the economic advisor said.
Replying to a question on the recent hike in diesel prices, he said there could be a medium-term effect on inflation that may ease out after some time.