Indian thermal power projects stare at a 13% price escalation

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Following implementation delays thermal power projects that are in various stages of across India are staring at a 13% cost escalation. The original cost for these projects which have a total capacity of 65,861 megawatts (MW) was estimated to be Rs.4.46 trillion.

However, with the lapse of time ranging from 4 to 78 months this escalation was inevitable.

As per data published by the Central Electricity Authority, 18 of these projects most of which are being executed by state run National Thermal Power Corporation, have a combined time overrun of 519 months. Apart from this, projects proposed by private sector companies such as Lanco Power, India Power, KVK Nilachal and Ind Barath also have been impacted by cost overruns.

India added 17461 MW of power capacity in 2015-16 and after that the country has been going downhill. Thermal capacity addition was seen slowing down to 13,440.5 MW in the last fiscal year. The story is expected to continue in 2017-18 as well. By December 2017 the country had added 4,765 MW of the target of 13,171 MW. It is most unlikely that in the remaining one quarter the country would complete the target by achieving the rest of the capacity.

India’s power ministry has predicted a gloomy picture for thermal segment this fiscal in its annual report. Performances of both central and state-owned utilities have been shoddy. Central owned utilities were supposed to have added 4,800 MW capacity but could muster only 910 megawatts. State utilities performed no better adding only 660 MW against an intended capacity of 3,546.15 MW.

Private sector was more promising by getting closer to their set target. Private thermal power units reportedly added 2,730 MW as against their target of 2,940 MW.

Nuclear power capacity and hydro power capacity additions during the fiscal year were almost negligible during the time, as reported by Business Standard