The Indian government is planning to launch a $11 billion fund to help finance the massive power generation planned during 2012-2017.

India plans to expand its power generation capacity by 100,00 MW during 2012-2017. The power ministry estimates that such a massive capacity addition would require close to $110 billion. The government had launched a similar $1.5 billion fund to add 78,500 MW during 2007-12. Concentrated and consistent investment in the power sector is extremely crucial for India's sustained economic growth.

One of the main goals of the Indian government is to connect the thousands of powerless villages with the national grid. Several millions people in the rural areas lack basic economic and social amenities. In order to spur economic upliftment and improve the living standards of its people, India needs to expand power generation and transmission infrastructure.

The government sets five-years targets for increasing generation capacity. For the period of 2007-2012, the government had aimed at installing 78,577 MW however, in all likelihood it is going to miss this target. While various media outlets have been reporting differing quantums of the percentage of the shortfall, it is clear that the power ministry would maintain its consistency of missing targets.

While several private companies have entered the power generation business in the recent years, the sector continues to be dominated by government-owned entities. Coal remains the backbone of the generation sector in India with more than 55 percent of the power generated by coal-fired power plants.

The indigenous coal reserves, which have lower energy content than the global average, are dwindling. Several public and private companies are looking for buyouts of coal mines in Australia, Indonesia and South Africa. Several proposals of mining in forest areas had also been disapproved on the objection of the Environment and Forest Ministry which has been taking a rather critical look at several infrastructure projects.

The government, however, is also taking significant new steps to meet the rising power demand while keeping in mind its environmental responsibilities. Retrofitting of old power plants to improve their efficiencies, switching to gas as the primary fuel and setting up ultra mega power plants with better efficiencies than the conventional coal-fired power plants are some of the steps taken by the government. Opening up forested land to supply coal for these massive coal power plants is now being considered by the government.

In addition to conventional energy, the government is also supporting renewable energy-based power plants. Under the National Solar Mission, 1000 MW generation capacity is estimated to be installed by 2013 which is expected to increase to 20,000 MW by 2022. Wind energy continues to be the favorite renewable energy source for power generation and several private companies have plans to install significant capacity in the near future. The government also gave boost to small hydro power plants by reducing the minimum capacity requirements needs for connecting the plant to the national grid.

It is imperative for India to invest heavily in core infrastructure sectors like power generation as it looks to evolve into a major global power. The government is likely to ask for international finding for this power fund possibly through the Asian Development Bank and the World Bank. The rest could be partially financed through the Clean Energy Fund and the Renewable Energy Certificates Scheme.

Hat tip: Indian Express
Image: Lava at Flickr (Creative Commons)

The views presented in the above article are author’s personal views and do not represent those of TERI/TERI University where the author is currently pursuing a Master’s degree.