(a) whether the domestic and foreign investment in power sector has almost came to a halt
on account of non-cooperative attitude of the States;
(b) if so, the details thereof;
(c) whether the Government have issued instructions to the States for adopting a co-
operative attitude in power sector so that domestic and foreign investment in power generation
is increased; and
(d) if so, the details thereof?
THE MINISTER OF STATE IN THE MINISTRY OF POWER ( SHRIMATI JAYAWANTI MEHTA )
(a) & (b) : Though a number of foreign investors have shown interest in setting up power
projects in the country, only a few could achieve financial closure. The main factors why most
of the projects have not been able to achieve financial closure are mentioned below :
i. The poor financial health of the State Electricity Boards (SEBs), which do not have
the financial capability to support more than a few projects in terms of regular
reimbursement of bills, opening of letters of credit and escrow accounts.
ii. A bankable escrow cover has been sought by almost all the lenders financing
Independent Power producers (IPP). The states do not have sufficient resources to
accommodate all the IPPs. In several cases, the escrow-able capacity identified by
the State Governments have not been accepted by the financial institutions.
iii. The delay in non-finalization of various contracts such as Power Purchase
Agreement (PPA) and Fuel Supply Agreement (FSA) etc. acceptable to all the
concerned parties.
iv. Court cases in the form of Public Interest Petitions etc.
(c) & (d) : The Government of India has been assisting, wherever required, to resolve
issues coming in the way of setting up of power projects. With a view to improve the financial
position of the State Electricity Boards (SEBs), the Government of India has embarked on a
policy of reforms and restructuring of the power sector and has signed Memoranda of
Understanding (MoU) with many States. The MoUs are a joint commitment of the Center and
the States to undertake reforms in a time bound manner. The State Governments` commitment
in these MoUs include constitution/operationalisation of State Electricity Regulatory
Commissions, 100% metering, energy audit, reduction of technical and commercial losses,
achievement of commercial viability etc.
GOI has committed its support through additional allocation of power from
Central Generating Stations and financial assistance through Accelerated Power Development
and Reform Programme (APDRP) for strengthening of sub-transmission and distribution as well
as for renovation and modernization of thermal and hydel power plants. With a reformed and
restructured power sector and setting up of regulatory commissions at the Center and states,
cash flow to SEBs or successor entities, is expected to improve.
It is expected that with the reforms and restructuring of the power sector, the
confidence of investors/IPPs in power sector will improve facilitating greater flow of private
investment into the sector.