India power deficit worsens as investment slows

Investments in India's power sector are slowing despite a chronic electricity shortage.

Executives identified the causes of the electricity woes to be coal shortages, land hassles and an inability by distribution companies to raise tariffs.

India's faces a peak power shortage of 13 percent as rising demand from industry, homes and shopping malls outstrips capacity growth.

It needs to add over 75,000 megawatts in the five years to March 2017 to support its target of 9 percent GDP growth, according to a government report.

This will entail investments of roughly 11 trillion rupees or $210 billion, with half coming from the private sector. But investor appetite is weak.

"We are very worried about the power sector, for the simple reason that it is the catalyst for growth," R Shankar Raman, chief financial officer at engineering conglomerate Larsen & Toubro, said at the Reuters India Investment Summitt.

"Unless we fix that, much of the other investments are not going to happen easily," he said. Larsen & Toubro last month slashed its overall order growth guidance for the current fiscal year by two-thirds to 5 percent, blaming slowing investments.

Firms struggle to get permission for land purchases and coal supplies from state and central authorities, while state-run distributors have ramped up debts due to their inability to raise low tariffs -- part of populist measures to provide cheap power to the poor.

For the source of this story, click here.