What does National Infrastructure Pipeline have in Store for the Power Sector?

In the current era, India has a surplus capacity to generate power but lacks adequate infrastructure for the transmission and distribution process. So the power sector of India needs more than just a smart infrastructure to bring reforms to be able to make noteworthy progress. It is in genuine need of a robust networking system and efficient services to ensure a smooth power supply.

July 11, 2022. By News Bureau

The national infrastructure pipeline or the NIP is a great initiative announced by honourable Prime Minister of India, Mr Narendra Modi, in 2019, with the vision to provide world-class infrastructure to the nation through economic and social infrastructure projects to improve the living standards of the common people of India. The NIP is expected to improve project preparations to captivate direct and foreign investments for the country’s economy, and is on its way to make Indian economy worth approximately 5 trillion dollars by financial year 2025. The progression of this new infrastructure is guaranteed to stimulate income, develop infrastructure and boost employment with investments in affordable and clean energy, efficient transportation, logistics, quality education, digital services, healthcare, housing and water supply. One of the most important and focused goals is doubling farmer income. Together, they will reduce the infrastructure deficiencies and upgrade services in both rural and urban areas of India.

The task force constituted for the success of this mission comprised secretaries from Department of Economic Affairs (DEA), Department of Expenditure, Ministry of Finance (MoF), and CEO of NITI Aayog. The primary objective of this task force was to pave way for the development of various projects in Roads, Railways, Energy, Ports, Irrigation & Rural infrastructure, Social & Industrial infrastructure, Agriculture & Food Processing by instating agencies and through annual phasing of investments. The other responsibilities of the task force included project monitoring, financial assistance to ministries and evaluation of capital costs.

Contributions to the power sector - India, the third-largest producer of electricity in the world is still majorly relying on energies from fossil fuels, most of which is coal and only 21% of the energy is from renewable resources. In the current era, India has a surplus capacity to generate power but lacks adequate infrastructure for the transmission and distribution process. So the power sector of India needs more than just a smart infrastructure to bring reforms to be able to make noteworthy progress. It is in genuine need of a robust networking system and efficient services to ensure a smooth power supply.

The huge AT & C losses need to be curtailed and digitalization of services needs to be maximised. Furthermore, the huge debts of DISCOM’s that have resulted in regular load shedding, must be controlled. Clearly, the power sector is in dire need of reforms.

The vision of the task force of the National Infrastructure pipeline as of 2025 are highlighted as follows:
• Introduce Smart Metering
• Digitalization of Services
• Reduce AT & C losses
• Reduce RE share by up to 19%
• Provide 24*7 low cost and clean power
• Open access, tariff revisions and metering
• Increasing the capacity for up to 619 GW in the energy sector
• 1616 kwh per capita consumption

Investment for the power sector - Energy, Roads, Railways and Urban projects account for the majority of investment of the NIP. The power sector alone holds a 32% share in the total infrastructure investment. Under the initiative of the National Investment Pipeline, that focuses on reforms and revolutionizing the progress, has fragmented the power sector into three areas - Conventional Power, Renewable Energy and Atomic Energy, each with a share of 11.75, 9.3 and 1.54 lakh crores respectively. The assessment of agency wise contribution was implemented majorly from private investors whose contribution holds 44% of the total investment, while the central and the state authorities hold 30% and 26% respectively.

The main focus of the power sector with the aim to attract more investors and make substantial progress, should be to keep pace with the strong policy measures of the government to typically reduce tax and other regulations to boost the economy. The NIP is an endeavour to rejuvenate and flourish the power sector especially by boosting higher penetration of e-vehicle and more usage of renewable energy. This has also caught the attention of many investors.

The Power Sector has been the major preferred industry of investment for the NIP and is expected to attain the objectives in alignment of its vision to reform and develop the power sector. This is a great opportunity for the power sector of India to grow exponentially.

Obstacles to the vision of NIP
Although the report and the visions of the task seem to be increasingly attainable and positive, the downfall in the economy doesn’t seem to give the right feelers. The goal of the task force is to increase the capacity of the power sector up to 619 GW compared to the current installed capacity of just 368 GW. The growth rate that is required to attain the goal is at least 20%, However, from the FY(Fiscal year) 2014 to the FY( Fiscal year) 2020, the growth rate has only been 8%.

Private players, central authority and the state together need to work towards attaining the goal of the task forces assigned by the NIP. But, the biggest challenge for the NIP is to finance infrastructure investments from the State government and Private sector. Apart from a handful of states, most of the states are suffering from a huge economic downfall due to many reasons including farm loan waivers and other fiscal shocks due to UDAY (Ujjwal Discom Assurance Yojana). The burden of the poor condition of state power distribution companies along with huge debt have made it impossible for the states to be a good contributor to the NIP.

Insights that reflect the success of NIP
The financial health of various investors is equally important to create a robust and efficient infrastructure for the progression of the power sector of India. There is a strong need to assemble strong investors for the sector, and address the challenges with innovative approaches in collaboration of both the public and the private sector. The following measures have been introduced for the same:

1. Rate of interest: The RBI has slashed its interest rate to help the power sector to cope with indebtedness. The current high rates of interest are expected to increase investment interests of the private sector, and to attain the desired investment from the private sector which is up to 44%. The government has also introduced many debts resolutions such as Special mention account(SPA), Joint Lenders Forum( JLF) and many more.

2. Efficient Project Management and Monitoring: The government of India has launched many infrastructure projects that are expected to lead to large scale development, and the Power Sector is expected to gain the most from this.

3. Stimulation of the Private Sector Participation: The largest contribution to the investment in infrastructure in the last decade has been the Private sector with more than one-third of the total investment. India has been ranked second by the world bank for the largest number of investors in the private sector. This cumulatively is going to improve the Power Sector investment and lead to its progression.

The NIP package is worth Rupees 102 Crores, which accounts for roughly 40% of the GDP. Its excellent planning and goal mapping is certainly going to benefit both the power sector of India as well as the other focused sectors. It is expected to stimulate the power sector with its proposal to a single-window entity to encourage projects and help in the investment cycle.

It would be exciting to witness the strong will of the NIP to boost India’s economy by facilitating job creation, quality education and improving the standard of living. However, proper mechanism is required to face the other related challenges

- Manoj Kumar Chaudhary, Founder & Director, Vensor Electricals Pvt. Ltd.
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