India’s power sector situation was expected to improve once the doors of liberalization were opened for FDI in early 1990’s. The move saw rush in investments mainly in the power generation side where risk-reward equation was largely skewed towards rewards until Enron debacle put a question mark on this opportunity. In order to make the sector structurally and financially more viable a slew of reforms were kicked off under the umbrella of Electricity Act 2003. The results that were expected through the reform initiatives spelt under EA 2003 are yet to be realized. While the country was busy fixing the power sector problem through policy measures, it was short-sighted on the problems that resource shortage could mean for the sector in the medium to long term. From being known as country with world’s largest coal reserves, India is now known for quantum of coal imports done over the last 2 years. While suddenly in 2013, coal side issue seems to be resolved and it’s amazing to see the turnaround time of this resolution. The developments around coal shortage and now sudden turn around either point towards creation of artificial shortage that somehow got busted as coal scam unearthed, pushing entire Bureaucratic and Government  machinery to act on the issue or there is seriously coal shortage that is likely to stay. Gas shortage anyways has created lot of issue for gas power plants that are lying idle and every alternative option is weighed to get enough gas to improve the gas crunch. India somehow believes in tackling the problem one by one and lacks the vision to the see the large picture of problems that’s likely to hit it so that a roadmap can be drawn to perpetually find resolve around each of them instead of fire-fighting when a spark becomes a fireball. What it is unable to see now is the inevitable water crisis that’s likely to hit the sector hard, if not now then in 10 years from now. Medium term again from where we stand today. Thermal power plants that were hit due to unavailability of coal would now be hit by severe shortage of water!

In thermal power generation, water is required for process cooling in the condenser, feed water in boiler, ash disposal, removal of heat generated in plant auxiliaries, and various other plant consumptive uses. Power plants located on main land use raw water from fresh water source such as river, lake, and power plants located in coastal areas uses water from the sea. The water requirement for coal based plant with cooling tower used to be about 7 m3 /h per MW without ash water recirculation and 5 m3/h per MW with ash water recirculation. In recent past, plants have been designed with water consumption requirement in the range 3.5 - 4 m3 /h per MW. This is important for a country like India, which has about 16% of the world’s population as compared to only 4 per cent of its water resources. With the present population of over 1,200 million, the per capita water availability is around 1.170 m3/person/year, which translates to 1170 litres/person/per year or less than 3 litres per day per person. In urban areas this number could be in upwards of 100-150 litres per day. Quick calculation over 130,370 MW of thermal power plants if assumed running even at 75% PLF would consume over 30 bcm of water. It is estimated that around 1200 bcm (nearly 60% of this is consumed by Irrigation) water is available in India every year for irrigation, domestic consumption, Industry and others, which means thermal power plants consume 25% of power as against 10% of China. The new projects under the stressed water condition scenario is likely to be under significant risk. Over 71 proposed coal plants in drought-prone Vidarbha in Maharashtra would consume water enough to irrigate more than 410,000 hectares of land. No wonder than political backlash has impacted private projects, Indiabulls Power Ltd’s 1,350 MW power project at Nandgaon in Amravati district of Vidarbha region faced wrath of a political outfit in Maharashtra; Maharashtra government decided to allocate water meant for irrigation for the Indiabulls power project. Difficulties are already being faced in siting thermal power plants due to non-availability of water, particularly in coal bearing states like Orissa, Jharkhand and Chhattisgarh. This problem is expected to be aggravated in future when more sites would be required. In States like Rajasthan, the land is available in plenty but there is scarcity of water and naturally drinking and irrigation uses have got priority over industrial uses.

In a country where hardly any city gets 24-hour supply of drinking water, the per capita water availability is shrinking at an incredible pace, Water levels of India’s dams are falling to record lows, agriculture draws approximately 90% of domestic water, it is inevitable that India will be water stressed not in the medium term but in the immediate short term. Signs have already started surfacing. This situation entails deeper insights into what is the gravity of problem at hand and how far it is likely to get deteriorated and what are the chances and options available to stem the situation. In wake of same, it is time to have few questions addressed: 1) Is there enough water to support India’s power expansion? 2) Should the Project financiers, investors and companies start factoring impact of water resource shortages and evaluate more efficient options before funding, investing and expanding investment portfolio in a sector which keeps getting riskier day by day. In order to comprehend these and many more questions, InfraInsights is coming up with its Research Report on “Is Water Shortage the next to hit Power Sector in India? Reach out to us to know more about the report and to suggest areas you would want to suggest to be covered in the report.

Clients