Private investment in thermal power to surge: Crisil
Author: PPD Team Date: July 31, 2025
India’s thermal power sector is poised for a major investment revival, with private players expected to invest Rs 77,000 crore between FY26 and FY28, according to a report by Crisil Ratings.
This marks a shift from the past decade, as firms such as Adani Power, Tata Power, JSW Energy, and Vedanta Power move ahead with large-scale expansions, mostly through brownfield projects.
Overall investment in thermal power, both public and private, is projected to double to Rs 2.3 lakh crore over the next three years. The private sector, which previously contributed only 7–8 per cent, is expected to account for nearly one-third of total capital spending. This resurgence is linked to renewed investor interest in coal-based generation after a prolonged slowdown.
One key driver is the return of long-term power purchase agreements (PPAs). For the first time in a decade, four state distribution companies have signed 25-year PPAs with private developers. These contracts reduce revenue risk and enhance the bankability of thermal projects.
Growing electricity demand is another factor. India’s total power requirement is expected to reach 366 GW by 2031–32. While renewables are projected to meet 70 per cent of this demand, their variability reinforces the need for firm, dispatchable capacity from thermal plants. The government has approved 80 GW of new coal-based capacity by 2032, with 60 GW already under implementation.
Private developers are focusing on brownfield sites to speed up project timelines and avoid land acquisition delays. These sites benefit from existing infrastructure and pit-head coal linkages. Major players, including Adani, Tata, JSW, and Vedanta, are leading this push.
The upcoming projects are expected to operate at tariffs of Rs 5.5 to Rs 5.8 per unit. The two-part pricing model, comprising 60 per cent fixed charges and the remainder based on cost-plus recovery, is structured to deliver an internal rate of return (IRR) of 15 per cent, making these investments commercially feasible.