Country's largest electricity producer National Thermal Power Corporation (NTPC) has cited absence of "politico-administrative support" in containing commercial losses as a factor for foreign investors' lack of confidence in Indian power sector.
State-run NTPC is among the many power generators that are grappling with coal shortages, which in turn are impacting overall electricity generation in the country.
"The low FDI inflow in the power sector is indicative of lack of confidence of foreign investors which stems from lack of politico-administrative support on containment of commercial losses...," NTPC has said in its 2011-12 annual report.
Fragile financial health of state utilities, uncertainty of fuel availability, capped regulatory returns on equity coupled with delays in land, forest and environmental clearances which lead to cost escalation, are also impacting FDI (Foreign Direct Investment) into the sector.
The share of power sector in FDI as compared to other sectors is quite low, inspite of the fact that 100% foreign equity is permitted in generation, transmission, distribution and trading.
During April 2000 - March 2012 period, power sector attracted FDI equity inflow of just about four%, according to the report.
At the same time, service sector attracted 19% FDI inflows.
From acute fuel scarcity to precarious financial health of distribution companies, a host of problems are impacting the Indian power sector, which is projected to add over 80,000 MW of new capacity in the 12th Five-Year Plan (2012-17).
"Inspite of various measures taken by the government, non availability of coal and gas in desired quantity would have an adverse impact on the overall performance of the (power) sector," the report said.
Other major concerns highlighted by NTPC include enhanced compensation for land acquisition in the proposed Land Acquisition Bill and availability of water for power plants.