According to the budget released this week India’s GDP will grow by an estimated 5.4-5.9 %  year-over-year in 2014/15.  But the new government is aiming at sustained growth of 7-8 % in the next 3-4 years.  One of the key factors that will determine whether that goal is achievable is electric power.  Currently demand significantly exceeds supply.  For example, India’s coal-fired power plants which provide 50% of India’s power are expected to see demand of 551.60 million tonnes this fiscal year ending March 31, but supply will be limited to 466.89 million tonnes.

A major problem is getting adequate coal supplied to power plants.  A total of 44 plants have “critical coal stocks” sufficient for less than a week.  The majority of these plants are in the state of Maharashtra, where India’s financial capital Mumbai is located.  Of these 26 have “super critical coal stock”, only enough coal supplies to meet requirements for less than four days.

India has the world’s fifth largest coal reserves, but is also the third largest importer of coal.  The government intends to stimulate domestic production and well as reduce barriers to increase coal imports.

Electric power is an important priority in this week’s budget which included provisions for

• Fast tracking of stalled projects, easier access to power plants and coal mines
• Deregulation of electricity prices
• Tax concessions and incentives to promote investment into renewable energy

The Finance Minister announces several specific allocations for electric power-related activities.

• Rs 1,000 crore ($170 million) for the solar power sector
• Rs 500 crore ($85 million) for new and renewable energy,
• Rs 400 crore ($68 million) for solar power-driven agricultural pump sets and water pumping stations for energizing one lakh (100,000) pumps
• Rs 100 crore ($17 million) for the development of one-MW solar parks on the banks of canals.
• Rs 100 crore ($17 million) for coal-based supercritical Ultra Mega Power Projects (UMPP) and rationalization of coal linkages.  Measures will be initiated to provide adequate quantities of coal to power plants which are commissioned by March 2015.
• Rs 500 crore ($85 million) for strengthening rural electrification and transmission systems