Planning Commission deputy chairman Montek Singh Ahluwalia also warned that source of funding to the sector will soon dry up unless corrective steps were taken to restore financial health of distribution entities.
Commercial banks have to watch their balance sheets and cannot provide loans indefinitely, Ahluwalia said, adding that some distribution firms have not raised tariffs for 10 years and their total losses are estimated to be R70,000 crore.
Talking about recent problems in power generation, Mukherjee said that the sector is facing shortage of coal and natural gas. He added that issues like land acquisition, deteriorating health of the state electricity boards and environmental clearances have also been adversely affecting this sector.
The efficiency of distribution companies remain "woefully low", and the aggregate technical and commercial (AT&C) losses average over 40%, Mukherjee said. A large number of power projects requiring funding of R5,000 crore or more are held up due to delay in clearances, both at the Centre and state levels.
Ahluwalia warned that unless corrective actions are taken, the power sector will experience shrinkage of credit and loss of investors' confidence and will not be able to pay money to generators. Power sector, which is crucial for achieving over 9% economic growth target, is aiming at a capacity addition of nearly 1,00,000 mw in the 12th Plan. It is expected to close 11th Plan (in March 2012) with a capacity addition of close to 50,000 mw.
Source- Indian Express