good thing emerged from the US-based Enron's dispute with a
state government in India: it proved that India has an international
class judiciary which allows anyone to challenge the government.
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shortage is one of the biggest problems confronting India's economy.
This spells opportunities for foreign power companies.
market size (US$ mn)
to be noted:
is perennially short of electric power. The generating capacity
in 1997 was 76,700 MW which, it was estimated, would have to be
doubled in the next 10-15 years, requiring an addition of some
7,000 MW of new capacity per annum. This calls for an investment
of some US$30 billion over the next 10 years. There is no way
the Indian government can carry out this enormous job on its own,
which is why foreign and domestic players are now allowed into
the power industry. The most famous foreign company involved in
India's power sector is the US-based Enron Corporation.
the gaping disparity between demand and supply, the Indian power
sector is being chased by the world's most prominent independent
power project developers, generation equipment suppliers and project
financiers from all over the world. The largest participation
has come from the United States.
is the most important fuel for India 's power sector. It is the
source of more than 70 per cent of generating capacity. But, coal
shortages, delays in coal transportation and the low thermal quality
of coal supplies cause disruptions in power generation and result
in lower plant load factors. The all-India average plant load
factor in 1995 was less than 60 percent. Transmission and distribution
losses in India are high, in the range of 20-23 percent. State
Electricity Boards (SEBs) generate and distribute power, set tariffs
and collect revenues. However, they suffer from chronic financial
problems because of rising generating costs accompanied by eroding
revenues due to pilferage, bad debts and supply of power at subsidised
rates for the agricultural sector. They continue to operate without
a clear guideline on how to price power. Every year the government
loses US$ 2.9 billion on power subsidies to agriculture.
- Enron Corporation
was recently locked in a bitter dispute with the government of Maharashtra
state in western India. The situation had deteriorated to a level
that Enron was reportedly already talking to lawyers about suing
the state government for breach of contract. The matter was however
settled out of court and Enron emerged with an even bigger contract
from the same government. This goes to show the extent to which
both India needs foreign investment in the power sector and multinational
giants such as Enron need the Indian market.