Energy sector may need $150 b investment: KPMG

Mumbai: India will need $120-150 billion investments for power and upstream energy sectors such as coal, oil and gas over the next five years. The Government had recognised the need for private participation and was ensuring that investment promotion policies were implemented, the KPMG report `India Energy Outlook 2007,' said.

Private participation in coal mining for captive use, oil and gas exploration and power sector were already seeing significant progress. It was also expected that private participation in nuclear energy would be allowed as and when the India-US nuclear deal went through.

Private Participation


By world standards, India's energy consumption was low. For 2004-05, it was at 572 Mtoe (million tonnes oil equivalent) and the per capita consumption at 531 kgoe (kilogram oil equivalent).

However, with a targeted GDP growth rate of over 8 per cent and an estimated energy elasticity of 0.80, the country's energy requirements were expected to grow over 6.4 per cent over the medium and long term. This implied a four-fold increase in the country's requirement over the next 25 years, which was a significant challenge, the report pointed out.

Mr Arvind Mahajan, Executive Director, Advisory and Head Energy, Infrastructure and Government, KPMG, said: 'The general theme of private participation and competition has advanced in the past one year with some concrete examples on the ground to substantiate it. Looking ahead, the Atomic Energy Act is expected to be modified shortly allowing private participation, and anticipating this many large Indian and International players have started discussions for possible tie-ups.'

Regulatory Oversight


Along with private participation, there was a move to bring in market mechanisms in the energy sector under an independent regulatory oversight. The gradual approach was important till the supply side position improved and more players entered the sector so that the market could work effectively.

The study said the Government was seen making efforts to broaden the supply base both internally and externally. There were intentions to diversify the fuel basket by increasing shares of natural gas, hydro and even nuclear energy. At the same time, both the Government and the private sector companies were looking to acquire equity in energy assets abroad as seen in recent examples in the oil and gas and coal sectors.

The report also stated that the energy transport infrastructure such as ports, Railways, pipelines and power transmission networks needed significant investment. The report said tariff reforms in the energy sector and distribution reform in the power sector were two steps that should be successfully carried out. Tariff reforms to phase out subsidy and distribution reform to bring efficiency in the power sector were vital. Steps have been taken in this direction with mixed results. Going forward, this was an important area to manage.