During the last few years, in India, we have been seeing frequent power cuts, both scheduled and unscheduled, and power holidays to Industries!!! Each State is competing with another in power cuts. Villages are not getting power for entire day time, particular in summer, when it is mostly needed. Thousands of small and medium scale industries are being closed due to lack of power, costing hundreds of thousands of jobs. The Banks are declaring thousands of crores of rupees of loans as NPAs.

Farmers are being pushed into debt trap, forcing the Government to rescue them with expensive but ineffective loan waiver schemes, among other things. The standby option of producing power through diesel generators is very expensive, many times more than the price of the conventional power.

Fossil fuels are getting expensive day after day. The energy needs of the world are increasing each passing day. Current crude oil prices are consistently above US $100/barrel. International coal prices went up significantly forcing even the winners of Ultra Mega Thermal projects like Tata Power, Reliance Power, Adani Power, etc, to request the Central Government to raise the rates of power, even though this is against the rules of the bidding!!! Natural Gas prices in the international market went up significantly over the past few years.

During the first week of July 2013, the Central Government took the decision to double the prices of natural gas to align the domestic prices with international prices. With this the prices of power produced from natural gas will double!!!

The Central Government also took an important decision to pass on the increase in imported coal cost to the consumers!!! It may increase the prices of power from thermal power plants by around 20 paise per unit!!! This might change as the world prices of the coal changes. The gap between the supply and demand of domestic coal is more than 15%.

We have to keep in mind that India depends on imported crude oil, coal and Natural Gas. India is not self sufficient in energy.

Why is this huge gap between demand and supply of power?

On the demand side:

We believe in renewable sources of energy which is abundant in India. As far as solar is concerned, we have bright sunshine for more than 300 days in a year!!! How to harness this huge potential of energy? We require lot of capital. We need latest technology. The setup cost is high. Once it is setup, it oddly needs any raw material. It can go on for the next 20 to 25 years. We neither have capital nor technology to harness renewable energy. Hence we need to bring in foreign technology and capital to overcome the initial hurdle.

How do we repay foreign capital? With the cheaper uninterrupted quality power supply, we can produce cheaper quality goods and services which can be exported. We could become manufacturing hub like China and other East Asian economies. Over the period of time we can become self sufficient in Technology. Once our capital market develops, capital would not be an issue.