Investment firm Aequitas has raised concerns about excessive power sector investment without purchase agreements.
Aequitas Investments highlights the risks of aggressive bidding without safe power purchase agreements and dependence on pricey imported coal. It stresses that careful planning is essential to avoid financial instability.
The report cautions against over investment and past industry mistakes in India’s ambitious power capacity expansion plan.
The aggressive bidding without solid power purchase agreements (PPAs) and excessive reliance on expensive imported coal are the causes of this warning. Financial instability could result from such actions, reiterating the 2008 downturn in the industry, the report cautions.
As a result, India’s power sector, set to double capacity to 900 GW by 2030, may face potential risks due to over investment.
The report also notes that since FY 2010, the majority of capacity expansions started by private power producers have had significant cost overruns, approaching 70–80% of the initial budget. The primary cause of these overruns is the more than three-year delay in the project.
The analysis also identifies significant borrowing in all industry sectors as a driving force behind the rapid expansion of the power sector.
With a 12% compound annual growth rate (CAGR) and a goal to double its capacity to 900 GW by 2030, the Indian power sector is poised for significant change. However, considering the historical 6-7% growth in power demand, this growth is overshadowed by potential demand-supply mismatches.
By 2045, primary energy demand is expected to double, and significant investments in renewable energy highlight the sector’s dual challenge of managing rapid growth and sustainable planning.
