These issues are constraining growth in the power sector and may adversely impact economic growth in the long-term, it said, adding that unless the issues plaguing the sector are urgently addressed, the aspiration for 9 percent growth in the 12th Plan may not be met.
"We are hopeful that the upcoming meeting with industry leaders chaired by Prime Minister Manmohan Singh will identify solutions to these bottlenecks and chart out a roadmap for the power sector," Confederation of Indian Industry (CII) director general Chandrajit Banerjee said.
Fuel availability has emerged as the biggest risk faced by thermal power projects in India.
Coal production has not kept pace with power capacity addition in the current Plan and developers have been forced to import coal at a time when international coal prices have shot up, the study said.
A lack of clarity on financing this extra cost as well as added transport costs for plants in the interior of the country have led to uncertainty and reduced investment in the power sector.
"With coal-based capacity addition expected to account for over 50 per cent of total capacity addition in the upcoming 12th Plan, the issue of acute shortage of domestic coal in the country and its impact on project economics due to higher prices of imported coal needs to be urgently addressed," it added.
"In addition, there would also be financial stress on assets already built or committed by many private sector players," CII National Committee on Power and Tata Power Company Chairman Managing Director Anil Sardana said.
There is an urgent need for comprehensive coal sector reforms, including opening it up to competition to increase investment in the power sector, CII said.
More coal-bearing areas need to be opened up for exploration activity, the CII said in a press release ahead of a key meeting between Prime Minister Manmohan Singh and private players in the power sector.
This would boost productivity, increase the scale of operations and introduce competition, CII stated.