Discussion has been made that a U.S.

recession will cause a decline in coal consumption by the

electric power sector. This is unlikely based on coal’s relative cost to generate electricity and the
historical coal consumption by the electric power sector in previous economic downturns.
In the last U.S. economic slowdown of 2001, coal consumption by the electric power sector fell
from 967.1 MM tons (in 2000) to 946.1 MM tons (in 2001).
THE global recession in the power equipment industry and the softening US dollar interest rate
regime is likely to benefit new power projects coming up in the country

FDI
Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission
and distribution, other than atomic reactor power plants. There is no limit on the project cost and
quantum of foreign direct investment.
Opportunities of Foreign Direct Investment (FDI) in the Power Sector in India exist in -

•Hydro Projects

•Captive Power

•Ultra Mega Power Projects

•Nuclear Power

•National Grid Program

•Rural Electrification

•Trading

•Renewables

GDP
The Market Potential to sustain the GDP Growth rate of India of 8% plus per annum needs the
power sector to grow at 1.8 - 2 times the GDP rate of growth as espoused by economists,
planners and industry experts. This would mean a YOY capacity addition of 18,000 - 20,000
MW to achieve this ambitious plan of moving India to a Developed Economy status, as an
Economic Global Powerhouse. The Target Mission : ‘POWER for All by 2012’ would mean
achieving the target of 1000 KwHr (Units) of per capita consumption of electricity by this
period.
Inflation

The increase in the sales tax rate and the withdrawal of power sector subsidies will
push inflation into the double-digit range during the financial year 2010-11. Due to
inflation the project cost of power plants will see a big upsurge due to rapidly rising
fuel cost in recent times. Thus this would lead to escalation in the cost of big power
projects.