Fuel Supply and Power Generation

Here is a very good description and theoretical analysis on power generation and the policy of our government for the same.

I am sure most parts of India are facing a severe power crisis. Especially, i face a very bad time with this power failure in chennai. Tamilnadu is one of the worst performing states when it comes to power.

For any economic to grow at a constant rate or at robust level, power generation is the most important and essential. According to recent data, the power generation in the latest five year plan which just concluded in March 2012 has witnessed a capacity addition of 53,000 MW. This figure is achieved despite the given fuel supply shortage mainly coal for power generation. Most recently the private power producers had met the PM and Power Ministry to augment the FSA – Fuel Supply Agreement –with Coal India. Among all the forms of generation of power like Nuclear, Hydro and thermal, the conventional thermal power generation through coal-based is most important and the major contributor of power generation.

The above mentioned power generation during the 11th plan is considered to be highest despite many hurdles in fuel availability, high import cost of fuel. The other problems that curtailed the power generation by power producers was also due to policy inaction in the form of delays in land acquisition approval by the government, environmental clearance by respective department and without assured fuel supply from Coal India. Despite a just increase of 4.6 per cent increase in coal production, the power sector has witnessed a more than 9 per cent annual increase in coal-based power projects.

To jump start the staggering industrial output and to boost GDP, the central government has asked the power ministry to initiate process of signing FSA agreement between power producers and Coal India with a much anticipated clause which stands to penalize Coal India for any deviation or short supply of fuel to any power producer. More recently the Power ministry has urged the PMO’s office to initiate action against Coal India to sign the fuel supply agreement immediately and to take action against Coal India of diluting the disincentive clause to the lowest level of 0.01 per cent. The country expects that the government initiate immediate power sector reforms and as always the investors are left in the limbo with much expectation.