Aequitas flags power investment risks in India

The report expressed concern that supply may outpace demand.

Aequitas Investment has raised concerns about India’s overinvestment in its power sector, as it fuels efforts to achieve its 2030 target of 900 gigawatts (GW).

In a report, Aequitas said that “almost all capacity additions undertaken by private sector power producers from FY [fiscal year] 2010 onwards have faced significant cost overruns, which were close to 70-80% of the originally appraised project cost.”

This was attributed to time delays exceeding three years.

The heavy borrowing across segments has also underpinned the power sector’s rapid growth.

Whilst India has set a target of 900 GW by 2030, which means a 12% compound annual growth rate, power demand historically has grown at 6% to 7%. Aequitas warned that this might lead to demand-supply mismatch.

“With demand-supply mismatch again in 2022-23, we have started seeing investments, however, the peak demand has already started reducing as of 2023-24,” the report said.

New power projects are still being announced despite a 2023-24 surge and nearing oversupply. Meanwhile, the peak power deficit which was at ~9 GW has already come down to 0.009 GW over the last year, whilst electricity demand in August was down 5% year-on-year.

“The big question mark is, with massive capacity additions outstripping demand, are we looking at a scenario similar to yesteryears?” Aequitas concluded, referring to the 2008 crisis.