Fundamental Analysis of Power Sector

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Analysis of Power Sector in India: A Structural Perspective
Niranjan Swain*, J P Singh** and Deepak Kumar***

The inhibitors to growth in power sector were many—small and big but the main roadblock in the growth path was Government Policy, which made it difficult or rather impossible for a private player to enter. This further aggravated the problem that Indian entrepreneurs didn’t have enough knowledge and experience in developing power projects. To worsen the scenario, the SEBs and other Government Agencies became financially weak to propel any future expansion or growth in the sector. Electricity Act, 2003 was a major step in solving the above underlying problems of the power sector. A whole new system was evolved where private players were invited to be an active participant. The system demanded financial, political and other infrastructural growth—with major requirement in roads and communication. Some of the bold steps taken in the Act were moving generation and distribution out of ‘License Raj’ regime, opening access to national grid and demolishing the ‘Single Buyer’ model. The failure of the huge federal structure and the changing global scenario have forced Government to think of ways to revive this fundamental infrastructure sector. Two of the avenues that government can count on for future growth of this sector is “Midgets or Small Power Plants” and “CDM—Clean Development Mechanism”.

India and Infrastructure
With traditional government controlled vertically integrated monopoly giving way for new multi-player market-driven scenario, the opportunity in power sector attracted entrepreneurs into the sector. The ever-growing demand gap asked for addition of 1000 MW generation capacity per year. These forces coupled gave rise to different strategies that were new to the sector. One of the fast growing strategies that attracted a lot of players was—Small…...

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