A shortfall of Rs 5 lakh crore slows down the pace of capacity addition

India is targeting to achieve 350GW of power generation by 2017 with 27000MW capacity addition per year.

If MoP (state) is to be believed, India is currently facing a shortfall of Rs 5 lakh crore for financing power projects which keeps a tab on the momentum of power capacity addition in the country..

Though developers argue to enhance the exposure limit of the banks and financial institutions to power project financing but financing institutions are still skeptical about the financing of generation based power projects due to its inherent risks.

One solution the govt can think of (ie) the ECB (external commercial borrowing) by financial institutions like PFC and REC may be brought under the automatic route that does not require the approval of RBI.

Besides the funding problem, one of the major drawback to the power developers are fuel linkage. The power ministry should focus more on securing coal linkages, natural gas and LPG for power plants.

India should have a long term fuel map for securing fuel linkage to its power plants in advance and it should go all out to secure fuel for future needs of energy.