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Rural Electrification- a distant dream !

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Rural_Electrification.jpegRural Electrification has been one of the key focus areas for the current government.The vision of “Power for All” has been shining brightly in the eyes of government and it aims to electrify all villages by May 2018.The following post will look at the current status of Rural Electrification and various initiatives taken by the government to achieve this target.

Meaning of Electrification

As per the earlier definition of Rural electrification “A village is classified as electrified if electricity is being used within its revenue area for any purpose what. so-ever..” However, the definition needs some revision and the overall purview of Electrification is currently amended definition of Electrification as follows :

Thus,as per the above definition it requires only 10 % of the households in a village to be connected for it to be classified as “electrified”. This implies that even if a large number of households remain un-electrified after covering 10%, still the village will qualify to be called as “Electrified”moreover, the definition doesn’t specify the minimum number of hours of electricity supply in the villages.

Initiatives/Schemes in Rural Electrification

Prima-facie, a couple of major steps have been taken by the earlier government and the current government.Some of these are :

  1. Establishment of REC (Rural Electrification Corporation) : REC was established in the 1969 with the objective of providing finance and promoting finance and promoting rural electrification across the country.Its main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.
  2. RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana) It was launched in April 2005 for attaining the National Common Minimum Program  goal of providing access to electricity to each and every household within a period of 5 years.The scheme was to officially end in 2009 ,however, due to non-attainment of the targets, certain allocation were made for the continuation in the 12th plan period (2012 -17). In terms of achieving the targets of lighting up unelectrified villages, the performance was much better in the initial years than in the last three years of the program.
  3. DDUGY(DeenDayal Upadhyaya Gram jyoti Yojana) : In Dec’14, the government announced DDUGY with some modification to the RGGVY scheme already in progress.It aims feeder segregation and strengthening of sub-transmission and distribution infrastructure in rural areas including metering of distribution transformers/feeders/consumers part from electrification of unelectrified villages,household.
    Villages Electrified
    Source :DDUGJY

     

    Current Status

As per the revised targets set by REC vis-a-vis government of India , 2,21,424 villages to be electrified out of which 95,977 have already been electrified ( Dated 20.04.2016 http://garv.gov.in/dashboard ) . Nine states (AP , Goa , Haryana, Kerala,Maharashtra,Punjab,Sikkim and Tamil Nadu) have achieved 100 % of the village electrification.Bihar is the worst performer in terms of household electrification. While 97 percent of the Bihar’s village are electrified, only 12 percent homes have electricity connections.

Targets 31.03.16
Targets of Balance Un-electrified Villages as on 31.03.2016
 Dilemma of Electrified and “Electricity”
As mentioned earlier around 98 % of the total inhabited villages have been electrified in India till dated but only around 64 % of he households have electricity connections. Many institutions have come up with independent research reports targeting the reality checks of the rural electrification program. A recent report by CEEW states in its report namely “Access to Clean Cooking Energy and Electricity, Survey of states” that only 4-5 % of households get supply for 20 hours or more.  This implies that a large part of electrification and energy access are superficial and the same needs to be cross-verified by third party agencies.
Conclusion
The benefits of energy access and security are no doubt immense as the electricity to distant villages has lead to significant improvements in the living standards of the villagers.In impoverished and undeveloped areas, even small amount of electricity have freed up large amounts of human time and effort.With the advent of rural electrification, use of kerosene oil has seen a significant dip in the recent years ,leading to and environment friendly solution.To ensure energy security in rural areas , a strategy needs to be evolved targeting :
  • Location specific technologies like solar,wind,mini-hydel so that target of electrification reach the granular level of society.
  • Technological improvement required at the micro level so that the systems are well maintained over longer duration with requisite maintenance strategies.
  • Last but not the least, there are still so many villages across India which have not experience the word “Electricity” and they are to be helped with utmost priority.

Decentralised and Distributed Generation(DDG): Policy Recommendations for Implementation

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Power is essential for the socio-economic development of a country and is being recognized as a basic infrastructural requirement. Although the installed capacity has increased to 210 GW but India faced an energy deficit of 10.1% in 2011-12.
Even today, 40 per cent of households are denied electricity; the other 60 per cent do not have reliable access to electricity and is lagging service, measured by hours of supply as well as penetration. Power cuts, erratic voltage and low or high supply frequency have added to the ‘power woes’ of the consumer.
Today, the need of the hour is sustainable power supply which will help address the need for increased demand. For a large and dispersed country like India, with its unique geography and current state of economy, innovative means of producing energy needs to be looked at to reduce its dependence on oil and coal as a primary source of energy.
Ministry of Power, Government of India launched Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005 for providing access to electricity to rural households. Electrification of about 1.15 lakh un-electrified villages and electricity connections to 2.34 crore BPL households by 2009 was on the agenda. Under the scheme of Rural Electricity Infrastructure and Household Electrification, DDG was introduced in the XIth Plan to address the issue with the recommendations of Gokak Committee.
Technologies which can be used for Distributed Generation are:
• The Internal Combustion Engine.
• Biomass
• Turbines
• Micro-turbines
• Wind Turbines
• Concentrating Solar Power (CSP)
• Photovoltaic
• Fuel Cells
• Small-Hydel
Penetration of DDG: As on 30-11-2012[ ], around 6% of the villages are still to be electrified and these villages will be electrified with a mix of GE and DDG.

Benefits of DDG
-Utilization of waste fuel to Energy
-Investment Deferral in Transmission Sector
-Power Quality and Ancillary Service
-Remote Areas Electrification
-Power Quality

Barriers to implementation of DDG
-Lack of Adequate Information for market development.
-Poor Access to Credit
-Lack of awareness of RET(Rural Energy Technologies) in rural India
-Limited Site specific issues may erupt
-Financial Viability-A major factor

To successfully implement DDG,Overall strategy that can be thought of is

-Support Incentive in the near term
-Transition to New Market
-Reducing remaining institutional barriers.

Model/Proposed Framework for Implementation of DDG:

• Rural Electrification Policy: The current REP Clearly discusses the means of achieving 100% rural electrification but it falls short of recommending a single nodal Agency for all rural electrification efforts as shown in Fig 1. The Agency will have to act as an overseer for channelizing of funds through various agencies like MNRE, REC etc. and encouraging private participation in the sector.

Under Sec 14 of Electricity Act 2003, no licence is required for electricity generation & distribution in notified rural areas (26 states have notified).RE Policy states that for villages/habitations, where grid connectivity would not be feasible or not cost effective, off-grid solutions based on stand-alone systems may be taken up for supply of electricity so that every household gets access to electricity.

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• Management of DDG systems: Local authority/panchayat/societies need to maintain the system as they are the real consumers and a sense of belongingness may incorporate in them.
• Selection of Technology: Relevant technology need to be adopted by the authorities with adequate feasibility analysis(in terms of raw materials, feedstock level, transportation facilities, usage pattern of consumers etc.) of particular region.
• Capital Subsidy from Government: Generally Rural cooperative societies manage the high expenditure of the DDG but owning to huge capital expenditure involved in the preliminary stage, government should provide adequate subsidy to the developers or the EPC companies whosoever is involved in the project. The incentives/subsidy should be based on the various factors like geographic location of area, planned capacity addition and output performance.
• Enabling guidelines for Tariff revision: Under the purview of CERC, Tariff setting and revision should be taken care by the concerned nodal agency which has been assigned the successful implementation of DDG in a particular area and moreover there should be crystal clear transparency in this process.
• CDM Benefits: All RE projects are eligible for CDM benefits, DDG projects can be made financially more viable and competitive after encompassing the monetary benefits associated with them.
• Considerations to be taken w.r.t various institutional Models recommended by Gokak Committee: Models like Sunderbans Model, TERI Model, Bangladesh Model may be adopted after suitable changes in order to increase people participation at large.

• Other recommendations:
 Extend RGGVY to fund evacuation infrastructure
 Develop transparent and simple interconnection rules and procedures.
 Streamlining Project Approval

In the long run, distributed generation will help consumers to get power at lower tariff as power will be available at lower per unit cost. More employment opportunities, both at plant management level and in the manufacturing sector for related machinery, will improve living standards of the people. Availability of power at low cost will attract more investments, which would be more evenly distributed throughout the country rather than being limited to cities alone.
Going forward, concerted efforts by the Union and State Governments, financial institutions, academic and research institutes, non-governmental organisations, as well as multilateral and bilateral agencies is required. A distributed generation matrix for India is recommended for lighting the lives of those for whom lighting a bulb still remains a distant dream!

References:
• Biomass Energy for Rural India Society, available at http://bioenergyindia.kar.nic.in Central Electricity Authority http://www.cea.nic.in)
• Village Electrification report of CEA
• Gokak Committee Report on Distributed Generation
• “Electricity Act 2003”, Ministry of Power, Government of India, New Delhi, India, Jun. 2003.
• World Bank Report on “Empowering Rural India: Expanding Electricity Access by Mobilizing Local Resources” 2010.
• California Energy Commission “Distributed generation and cogeneration policy roadmap for California” 2010
• Chandrashekar Iyer,” Decentralized Distributed Generation for India” – 2011

RPO(Renewable Purchase Obligations)- Where are we??

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Introduction of REC(https://www.recregistryindia.nic.in/index.php/general/publics/AboutREC) trading framework has been a significant step in 2010,transforming the renewable energy market to go for market based modelled approach. Success/ Failure of the REC Trading framework can be gauged from the inventory being built up in monthly trading sessions. Of the 712792 RECs put up for sale in the two power exchanges in Sep 2012 session, about 450000 remained unsold and moreover 37% of the REC holders didn’t participate in the trading session at that time. This growing demand supply mismatch is giving alarming bells to the project developers and various potential investors who are eager to invest in RE sector in the near future.
REC mechanism seeks to expand its horizon from resource rich states to the deficit states but the key factor which will lead to success of REC is the RPOs by various obligated entities. Nonetheless state power regulators need to play a proactive role in the development of REC market. Till date all states except Arunachal Pradesh and Sikkim have declared their RPOs explicitly(http://ceew.in/pdf/Appendix_F-Renewable_Purchase_Obligation_for_States.pdf).
A survey was conducted to gauge the total renewable energy capacity of states,RPOs declared by them, CUFs of various renewable sources of energy. It has been analysed that only 4 states -Tamil Nadu, Gujarat, Karnataka and Maharashtra have significant wind power installations and RPOs higher than those required in 2010-11 and 2011-12.For eg Tamil Nadu needed about 4000MW of renewable energy capacity to meet its RPO of 14 % and it has already installed capacity of 4908MW.Except these states, rest of them were unable to meet their solar RPOs.

Weak Links
-There is huge inconsistency in RPO norms across the states. NAPCC,2008 targets 5% of the total grid purchase to be achieved through renewable energy. However in the absence of national level RPOs, states have been fixing their own targets depending upon the availability of renewable energy in that particular area.
-Another risk that is quite prominent as far as REC market is concerned- regulatory capture by the obligated entities which further skews the market against developers and investors. Certain states have been revising their RPOs targets in a downward trend for e.g Tamil Nadu(wind rich state) revised from 14% (2010-11) to 10% (2011-12).According to regulators, unrealistic targets imposed by some state regulators could set a wrong precedent not only for the state. Similarly, in April 2012, MP Power Trading Company Ltd. requested MPERC to waive RPO targets for solar energy for 2011-12 and 2012-13 because no solar power plant has been commissioned in MP and solar RECs were not available for trading on any one of the exchanges.
-RPO setting in most of the states is based on the assessments that are outdated. Therefore, they are set much lower than what could be feasible. Some stake holders are worried about the impact on tariff due to these targets. Like a study conducted by CRISIL along with CERC indicated that compliance with NAPCC target will have a marginal tariff impact of Re 0.01/unit/consumer ,reducing every year to reach Re 0.005/unit/consumer by 2017.
-Another risk that is anticipated by developers is lack of visible long term RPO trajectory. Only 7 states(AP,karnataka, Delhi, HP, Kerela, Maharashtra, Odisha) have declared their RPO trajectory till 2015-16 or beyond.
Limited Focus on CPPs and Open Access consumers
While most of the states have amended their regulations to include open access customers and CPPs under the purview of RPO but still there are some states which have not notified their OA and CPP consumers to meet RPOs. The glim scenario can be seen from the trading of RECs over IEX in which over 90% of the participants are DISCOMs and there have been very few CPPs and Open Access users. But there are states like Karnataka i.e KPTCL directed OA users in the state to fulfill 5% RPO for 2011-12.Similary Chattisgarh has also notified CPPs to provide RPO compliance on monthly basis.
Small Beginnings
Recently Rajasthan high court dismissed an appeal raised by Hindustan Zinc, Ambuja Cements etc that had challenged RPO regulation enacted by RERC. The petitioners stated that RERC did not have authority to pass the RPO regulation and impose a surcharge(penalty) as CPPs and OA were completely de-licensed under EA 2003.However Jaipur bench of High court rejected the petition stating the exact meaning of word ‘total consumption’ as total consumption in the area of distribution licensees in all modes. One of the reason for non compliance is the lack of incentive mechanism to support RPO implementation.
Supportive Measures
-A key stumbling block in the implementation of RPO is the financially strained DISCOMs. Burdened with over 2 trillion of losses, how can one expect DISCOMs buying costly RECs? However a recent development is the Debt restructuring for the DISCOMs(http://powermin.nic.in/whats_new/pdf/Financial_restructuring_of_State_Distribution_Companies_discoms_Oct2012.pdf)
-Another encouraging trend is that several DISCOMs have been facing losses due to their inability to hike tariffs but recently over 17 states have revised their tariffs giving a good signal to the market stabilization for RE.
Need to Improve REC Market Design
-There is lack of visibility in floor and forbearance price beyond the initial five year period because only non PPAs based sales are eligible for RECs.
-REC trading is restricted to auction markets and can be conducted only on a “once through” basis, thereby not permitting forward contracting and liquidity reduction.There is a sheer need of secondary trading market,which both the exchanges as well as industry players have been seeking for some time.
-Finally compliance window has to be shortened to a quarter or half year to ensure that there is continuous procurement action on obligated entities.

Thus,REC markets will fail to bring the desired results unless regulators are empowered to enforce the RPOSs and DISCOMs are allowed to function as independent power utilities rather than as an arm of government.

References: Power Line Magazine,MNRE Website, ICRA report on DISCOM bailout,REC registry,RE Connect etc.

Solar Energy – World’s Future??

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Solar Energy has changed its face in the recent times in a big way,Talking about its expansion,it has transformed itself from a cottage industry to 100 billion $ company within the span of few years in Germany.Solar PV (Photo Voltaic- refer http://en.wikipedia.org/wiki/Solar_cell) price is decreasing alongwith the total Installed capacity has increased to a staggering figure of 65GW. Cost may decline to $2/ wp (Watt Peak) and leading for further developments in various OECD(Organisation for Economic & Non Cooperation development) countries across the globe.Both the downstream as well as upstream players are looking to tap its potential that will ultimately lead to their growth.

The transition has surely occurred in Solar Energy whether its cost or its installed capacity.

Cost dropped from 4$/pw to 1$/pw whereas installed capacity has increased from 4.5GW(2005) to 65GW today.Subsidies that related to Solar Power has attracted various players into the market leading to rise of competition.With the advent of Chinese manufacturers,market has become oversupplied & thereby mismatching the demand supply gap. Government is trying to reduce the subsidies levied in this regard in order to balance the situation. Number of companies have filed for bankruptcy in this case.(In India too Mosaer Baer Solar has posted losses in the 5th consecutive year). MAC Global Solar Energy index fell to 65% in 2011.Various companies like GE,SAMSUNG,Hanwa(Korea) are planning to enter in the field of the Solar PV manufacturers making a way for sustainable development for solar energy in the near future.

Annual Solar PV capacity will keep on increasing day by day and may even compete with other renewable sources of energy in the longer terms.As expected Solar PV cells will increase around 50 fold in 2020.

Some of the potential areas for Solar Power Development can be summarised as below:

  • Off Grid Applications; These are the high demanding areas for solar power such as Irrigation department,telecommunication towers,remote industrial sites,military area units etc.The dearth in local distribution area has led to its growth and is expected to grow by a figure of 15-20 GW by year 2020.
  • Residential as well as commercial retail consumers: Many small scale as well as medium scale industries are already generating their power using solar applications.Distributed power generators may take some steps in order to make Solar Power generation as unattractive.Companies have also opted for taking financial help from the World Bank in this very regard.Moreover there are some nations which has adequate potential of solar energy but retail electricity prices are on a high.
  • Isolated Grids: Small Grids fueled by D.G has an average LCOE(Levelised Cost of Energy- Refer http://en.wikipedia.org/wiki/Cost_of_electricity_by_source) require around $ 0.32 to 0.40 /KWH.This area has vast potential of Solar Energy.
  • Peak Capacity in Growth Markets: Various emerging markets are having a huge potential for the peak energy demands and thereby adequate are being taken too.Demand in this particular segment is exoected to grow by 175 -200GW by 2020.
  • New Large Scale Power Plants: New solar-power plants must reach an LCOE of $0.06 to $0.08 per kWh to be competitive with new-build conventional generation such as coal, natural gas, and nuclear.Steps are being by the government as well as Solar PV Companies to meet this target with the technological improvements they are trying to implement.Distributed Rooftop solar will be the major criterion in this regard.

How to Tackle the existing problems?

Key Factors for Upstream Players:

Various steps/options need to be explored by the players and should have around 50-100MW to compete in the solar market.

  • Development of scalable technologies:  Companies like MEMC,REC are opting for Fluidised Bed Reactor mechanism to reduce the energy intensity of  polysilicone manufacturing process thereby leading to the drop of price of Polysilicon.Manufacturers are also opting for copper indium gallium selenide manufacturing process.
  • Drive operational excellence in manufacturing: Employing an efficient workforce will help the manufacturers in this very regard to fulfill the objectives.This will help manufacturing companies to increase their capacity to more that 30-40 %.
  • Balance of Systems to be addressed : Balance of system(wires,switching, invertors) need to seriously taken by the Solar power manufacturers that can significantly reduce their costs.

Key success factors for downstream players:

Downstream players need to identify their customer choices and their aspirations:Some of the various options which can be taken up by the downstream players are

  • Develop targeted customer offerings.
  • Minimize customer-acquisition and installation costs.
  • Secure low-cost financing.
The solar industry is undergoing a critical transition. The rules of the game are changing, and many current players could face significant challenges as the industry restructures.But adequate steps are being taken to overcome these challenges.

Ref: Mckinsey Report on Solar Sustainability 2012.

Capacity addition Challenges to Indian Power Sector

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India being a developing country has put forth various targets that are needed to be achieved in order to become a Competitive Superpower in 2020.(VISION 2020). At present ,Installed capacity of India stands at around 185MU.Targets have been revised time and again by the Indian Government to meet with growing demand.There was a target of adding 78700 MW in last fiscal year,but that target has been revised again to 52000MW.So,Targets are set and then revised time and again to furnish the Political scenario leaving everything regarding power sector in a limbo.There have been many challenges to the capacity addition to the Indian Power Sector.These can be grouped as under:

1) Fuel Concerns
2)Social and Regulatory Concerns
3)Infrastructural Concerns
4) Delay in Financial Closure
The issues can be taken one by one as:-
1) FUEL SUPPLY GAP:

a) Domestic Supply Demand Gap is widening the Fuel shortage in various industries.Nodoubt,The Installed capacity is increasing BUT,there is a big question mark on the Demand Supply Gap.Until Unless this thing is solved,India will not be able to become a Power Honcho.
b)Stringent Environment and forest norms:

Another problem faced by the Indian Power Sector is the Stringent Environment and Forest reforms.In the past year,There have been cases in which Power Plant projects were either cancelled/halted due to non compliance with the environment norms.GO as NO-GO Areas have also come into picture in lieu of environmental norms and regulations.Although to tackle these issues,Special purpose Vehicle(SPV) has come in to picture in case of UMPPs.
c) Land Acquisition Issues:

Land Acquiring has become a major roadblock in the path of setting of Power plants.Although Private Producers are coming with major projects but the main thing that stands as a hurdle is the Land.Generation companies are not getting enough land to set up their power plants.
d) Long term Fuel

Although India is the 3rd largest produces of Coal in the world,still it is in dire straits as far as the Supply of coal is concerned.Last year,Targeted Coal Production was 550Million Tonnes,But it was achieved 533 Million Tonnes and that is only 2 MT Increase as compared to previous year.Moreover,Various regulations have been imposed on the Coal Mining Companies too,Import of Coal has also got a shock as Indonesia,Australia are looking for imposing stricter norms on their Coal Export making the condition more worse for Indian Power Sector.
2) SOCIAL AND REGULATORY CONCERNS:

a) Land Acquisition problems:
Acquiring Land has become as major bottleneck in setting of Power plants.Although,Private as well as PSUs have bigger plans to make India’s installed capacity grow leaps and bounds,But the “Foundation Stone” of Land Acquisition is coming on way due to socioeconomic cause.
b) Water Scarcity for Thermal Projects:
Water being a prime necessity in Domestic as well as industrial use esp. in Thermal power plants has also emerged as a road block to the new Power projects.Water can be termed as “Blood” for Thermal Power Plant.Various Power plants are facing problems due to uneven rainfall conditions and due to social conditions of using river water for power plants.As per analysis,for 1320MW Power plants,it requires around 43 million cubic meters of water per year.
c) Strict Environmental and Forest Clearances:
Getting Forest and environmental has also posed a detrimental effect on the capacity addition of Indian power sector.Number of projects have been brought to a halt due to environmental issues.Already India is ranked high on the pollution erupting countries in the world,therefore deforestation is not allowed.One always like”YOU CAN ELIMINATE THE THINGS FOR SHORT TERM ADVANTAGES/GOALS”.Forests are already on a depleting scale,so Environment ministry is quite dubious of allotting that land for power plants.
3)INFRASTRUCTURAL CONSTRAINTS:

a) Hindrance in obtaining Transmission access:

Having a healthy transmission system has also become a prime necessity in order to commission a power plant.Most of the Land issues come as a road block in the way of Transmission system.Moreover,There is also need to change the archaic Telegraph Act that does not talk about the compensation.Land acquisition is governed by Telegraph Act 1885 which provides for payment of only damages caused due to erection of towers.According to CEA Data,around 120 Power transmission projects have been either delayed or grounded due to various reasons as stated above.
b)Lack of Coal Handling Units:
No Doubt ,the installed capacity is increasing on positive scale,but the Upstream products has got numerous problems.one of which is Coal handling Units.Indian power sector is not sufficient enough to handle coal and thereby fulfilling the demand of the growing India’s power capacity.Lack of efficient systems of Coal handling units are posing a major problems,some of the solutions can be opting for Dust busters to optimize coal usage.
c) Lack of Ash Disposal Facility:
Disposing Ash is also seen as an albatross around government’s neck because,Producers dont have the sole purpose of generating power.Environmental conditions should also be taken into consideration.At present Indian power plants are lacking in this regard to leading to lower capacity addition.
4)DELAYS IN FINANCIAL CLOSURE:

a) Poor Financial Health of SEBs
SEBs(State Electricity Boards) have been bad for past so many years.Some of the problems that are being faced by SEBs is Lower collecting efficient,Power theft etc.According to recent Power Line report,TNEB is having the highest AT & C Losses and quite low collecting efficiency too.There are very few SEBs,which are doing well,still the revenue has become “stagnant” for the past so many years.So untill unless this is revamped in a better way,one cant think of adding more capacity addition to the Indian power sector.
b)Contractual Agreemnet violations including PPAs:
Most prominent case in the hindering of capacity addition is the violation of PPA.There have been a number of projects in which PPA that has been signed between the two parties is not taken as benchmark report to go about it.Companies keep on forcing to revise the PPA.Actually there are two sides of the coin,Input material is getting costly day by day,so it becomes a need for the compny to opt for revised PPA in order to get adequate ROR.
c) Lack of availability of equity and funds:
Banks are not willing to give adequate funds to new players in the market and they are looking for some “guarantee” from their side which banks can take as a base while giving loans.Moreover, Micro finance institutions can’t help bigger power companies which are looking to set large capacity power plants.
Thus,we see there are various bottlenecks that are still coming in the road of capacity addition ,thereby making India devoid of adequate power!!!!!