Investment by private sector in power sector has declined sharply during 2012-13, according to the provisional figures provided by Central Electricity Authority. According to the data available, private sector investment in power sector in 2012-13 was just Rs. 54,953.02 crore as against Rs. 98,283.02 crore in the previous year, thus recording a fall of 44%. In fact, 2012-13 is the worst year since 2009-10 for private sector investment in power.
There are many reasons for decline in private sector investment. First tight liquidity condition and volatile capital market have made the task of fund raising for private investors very difficult. Secondly, there is no clarity on fuel supply and it is only after the intervention of the PMO that the Coal India entered into fuel supply agreement with many prospective developers. Lastly, problem relating land acquisition has affected many power projects too thus delaying their implementation.
The government hopes to revive the situation by some policy measures. The latest budget provided for 15% investment allowance which is allowed to be deducted by companies investing over Rs.100 crore in plant and machinery during 2013-15.