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India is trying to expand electric power generation capacity, as current generation is seriously below peak demand. Although about 80% of the population has access to electricity, power outages are common, and the unreliability of electricity supplies is severe enough to constitute a constraint on the country's overall economic development. The government had targeted capacity increases of 100,000 megawatts (MW) over the next ten years. As of January 2001, total installed Indian power generating capacity was 112,000 MW.

While India currently does not have a unified national power grid, the country plans to link the India's state electricity boards (SEB) grids eventually, and has set up a state company, Powergrid, to oversee the unification. India also plans to establish national and state level regulatory bodies to set tariffs and promote competition.

India's government approved a large number of "mega-projects," defined as plants with capacity of more than 1,000 MW for thermal plants and more than 500 MW for hydroelectric plants, from the mid-to-late-1990s, but project approvals have often not led to construction. The 740-MW initial phase of the Dabhol LNG-fired power plant began operation in May 1999, and Phase II, which would add 1,440-MW of capacity, is about 90% complete. Payment problems with the Maharashtra State Electricity Board (MSEB), however, prompted Enron-backed Dabhol Power Corporation (DPC) to serve notice of breach of contract on MSEB in May 2001. Construction on Phase II was halted in June 2001. General Electric and Bechtel, each of which own existing 10% stakes in DPC, have reportedly been negotiating in recent months for the purchase of the 65% stake held by the now-bankrupt Enron, as well as payment guarantees from the Indian federal government.

The DPC controversy is seen by many analysts as a test case for India's power sector, as it has demonstrated the lack of creditworthiness of the SEBs. The Dabhol plant, valued at $2.9 billion, is the largest single foreign investment in India. No major foreign-owned projects have been launched in the past year. The Indian government is attempting to implement reforms which would increase the financial strength of the SEBs in an attempt to attract capital back to electricity generation projects. New legislation on power sector reform was approved by the Indian cabinet in February 2002, and is to be introduced in the parliament.

Bombay Power Information GENI: Commentary / Copy of Original Web Page


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