India’s power sector warned of potential overinvestment risks amidst capacity expansion plans

As India aims to double its power capacity to 900 GW by 2030, a report by Aequitas Investments highlights concerns about potential overinvestment, cautioning against repeating past industry missteps.

The report points to aggressive bidding without firm power purchase agreements (PPAs) and a reliance on costly imported coal, warning that these practices could lead to financial instability reminiscent of the 2008 sector downturn.

The analysis reveals that private sector expansions since FY 2010 have faced cost overruns of nearly 70-80% above initial budgets, primarily due to project delays exceeding three years. Additionally, heavy borrowing across the sector has been a driving force behind this rapid growth, yet also presents financial vulnerabilities.

India’s ambitious expansion plans are underscored by a goal of reaching a 12% CAGR to support the projected doubling of primary energy demand by 2045. However, the report warns of potential demand-supply mismatches, noting that historical demand growth has averaged 6-7%. The sector now faces the dual challenge of managing robust renewable energy investments while ensuring balanced and sustainable growth.