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Will Power Sector Revive?

by Smita Mohta on Fundamental Analysis
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—3 minutes read—

Power is one of the most crucial components for the economic growth of the country. India’s power sector is one of the most diversified power sectors in the world.

The source of power generation in our country are mainly through conventional sources such as coal, lignite, natural gas, hydro and nuclear power and non conventional sources such as wind, solar, agricultural and domestic wastes.

The significant increase in the consumption of power will drive the growth of the power sector.

The sustained economic growth in the country is driving the electricity demand.

Also the competitive intensity is increasing at both the market and supply side.

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Government Reforms

GOI is supporting the power sector through various reforms and initiatives like the followings:

GOI had initiated “24*7 Power for All” as one of the missions for developing India and aims to provide continuous power in all the urban and rural areas of the country.

GOI has launched Deendayal Upadhyaya Gram Jyoti Yojana (DUGJY) for rural areas of the country. By this scheme, GOI aims to provide continuous power to rural areas.

GOI has also launched Integrated Power Development Scheme for urban areas. This scheme aims to provide continuous power to urban areas.

GOI has introduced Standard Bidding Documents (SBD) for carrying competitive bidding procedures for the procurement of power and transmission services license.

GOI is focusing on 4E’s for the development of power sector. The 4E’s represents Electricity for all, Efficiency to ensure affordable tariffs, Environment for a sustained future and ease of doing business to attract investments.

GOI has launched a scheme “Saubhagya” which aims to make electricity available to every household of the country.

GOI has also initiated the scheme ‘UJALA”. By this scheme GOI aims to replace the existing lights with power efficient LED bulb which will help in huge savings of both power and cost.

GOI has launched Ujjwal Discom Assurance Yojana (UDAY) scheme. This scheme aims to provide solution to the financial mess of the power distribution system.

GOI is focusing to develop green power through promoting solar power. GOI is creating awareness for the usage of solar power which will help in better placing the country towards greener power.

GOI has also launched various mobile applications to support the people with the schemes, benefits of the various reforms.

GOI has also initiated the “Samadhan” scheme for the debt structuring and asset management of the stressed power companies. Under this scheme GOI will derive ways to save these companies from being liquidated and commence the normal operation of the companies.

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Recent Developments

The power sector has witnessed substantial growth under the leadership of Mr. Piyush Goyal, Minister of State (MOS) for Power, Coal & Renewable Energy and Union Minister for Railways.

The sector has witnessed huge development in terms of reforms being undertaken and schemes launched.

India now ranks 26th in World Bank’s “Ease of Getting Electricity” Index, up from 99th in 2014.

India’s energy deficit is gradually shrinking with increased setting of new power plants and efficient operating of the existing plants. The recent developments in the “Samadhan” scheme have led to the resolution of 1 out of 7 stressed power asset.

The lenders have approved the sale of SKS Power Generation Chhattisgarh Unit for Rs 2170 crores to Hong Kong based Agritrade Resources and they have agreed to a 57% haircut on this sale.

Moreover the RBI’s February 12 circular on stressed power companies have been quashed by the Supreme Court which is a huge achievement for these companies.

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Advantages for Power Sector

  • With the growing consumption of power and its utilisation has led to huge demand of power. The demand growth is from both rural and urban areas.
  • The power sector is also witnessing huge support from GOI. Various reforms and policies are been drafted and implemented to help the growth of power sector.
  • The power sector is attracting huge investments from both public and private players.
  • Various technology are being developed which are helping in the growth of the sector as a whole.

Disadvantages for Power Sector

  • Setting up of newer plants requires huge investments which is keeping small players away from the sector.
  • Solar power output depends on climatic conditions, weather, time of the day which are beyond human control and hence this possess challenges.
  • Managing nuclear power waste should be properly done because they may cause severe damages.
  • Power produced by coal causes huge smog and pollution and also negatively impacts the water quality.

Key Stocks in the sector

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 Key Takeaways

  • The energy deficit of India has reduced from 4.2% in FY 2014 to 0.7% in FY 2018.
  • India is progressing substantially in the power sector and the future roadmap will even position India as a strong nation in terms of Power sector
  • With Government push for utilizing LED lights for all lighting needs, it can became the first country in the world to use LED lights for all its lighting needs.
  • GOI is on a mission of “Power 24*7 for all” by 2022.
  • A major problem of stressed power assets is also getting resolved with the Samadhan scheme

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