Powering India-The Road to 2017 : McKinsey

India’s demand for power will soar to a whopping 3,15,000mw by 2017, requiring an investment of $600 billion if the economy keeps its pace of growth at 8%, a McKinsey report has said. The forecast for the next 10 years shows that demand would be at least 1,00,000mw more than what most of the estimates have suggested so far. Thus, the country will need a 10-fold increase in capacity addition to 4,15,000mw, the report ‘Powering India - The Road To 2017’ said. To fulfill its power requirement of about 3,15,000mw, an extra 1,00,000mw is needed because of plant availability adjustments.At present, India has an installed capacity of 1,44,565mw.The key drivers of increasing demand are growth in household consumption, electrification of rural areas, manufacturing growing faster and realisation of demand suppressed due to load-shedding. Household consumption itself is expected to grow at a rate of 14%, it said. A concern has been expressed over the sporadic approach for achieving the targets. “The magnitude of task at hand shows that piecemeal measures will not be enough. To achieve this, India will need to adopt a radically different approach,’’ it said.The mechanism to achieve faster decision making should be strengthened so that bottlenecks are removed. Targets can be achieved by distribution reforms, including separating agricultural feeders and reduction of transmission losses should be reduced to 15%.“The sector is financially unviable due to high theft and losses in distribution and is unlikely to generate enough cash flows to stimulate investments,’’ the report said.Fuel shortages have also been been listed as an area of concern. The bottleneck has been attributed to regulated coal sector. There are shortages of gas as well. India has world’s fourth-largest coal reserves and also made recent gas discoveries but the fuel imports have risen and would continue to do so if the current oil price concerns remain, the report said.