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New Delhi: “India, with all its inherent strengths, is one of the best investment destinations and within the next two decades it will be one of the largest economies in the world”, Shri Sushilkumar Shinde, Union Power Minister, told a gathering of global investors in New York today. Addressing the 6th Annual Investment Forum, he said that even during the global downturn, India managed to achieve one of the highest growth rates in the world. In spite of all odds, the Indian economy exhibited significant resilience in 2008-09 and closed the year with a respectable growth rate of 6.7%, he added. India’s capacity to withstand the global shock better than many other emerging market economies was assisted largely by the sound macroeconomic and financial sector policy environment that had been put in place in the post reform period by careful assessment of the opportunities and risks associated with reforms, Shri Shinde observed.

The Minister further observed that the resilience of the Indian Economy has largely weathered not only the global economic meltdown but also a weak monsoon this year. “Despite serious concerns over scanty rainfall, we managed to record above 6% growth of the economy in the April- June quarter. More importantly, the growth in the Index of Industrial Production during the period registered a 16-month high of 7.8%. I am happy to share with you the fact that foreign direct investment in India during the last month crossed the US $3 billion mark”, he said.

Infrastructure growth remains the overriding priority for India with the power sector playing a pivotal role, Shri Shinde said. He pointed out that recognizing the need for an overall and comprehensive legal architecture and a policy framework conducive to larger and more sustained investment in the power sector, the Government of India has taken numerous steps to reform the sector.

“ The Electricity Act, 2003 allows the sector to align itself with market dynamics and clears the roadblocks especially in the way of greater participation by the private sector. Generation projects no longer require licenses and have reasonable assured returns on investments over the long term. An independent regulatory framework now provides business confidence to power companies and a fairly lucrative rate of return on equity of 14 per cent per annum.”

“Policy documents like the National Electricity Policy, 2005 and the Tariff Policy like 2006 have paved the way for renewed interest amongst both developers and investors. Bidding documents have been standardized and the competitive bidding route is slowly becoming the norm. Hundred Per Cent Direct Foreign Investment is allowed in all segments of the power sector including power trading. Investor confidence has returned to the sector which is amply borne out by the fact that all our projects of the 11th Five Year Plan have achieved financial closure.”

Reiterating the commitment to continue to facilitate changes in policy to accommodate concerns of the private sector and investors as well as to meet the requirements of the consumers, the Minister citied examples such as the New Hydro Policy 2008, Open Access, payment security mechanism, creation of a National Grid for Electricity, Restructured Accelerated Power Development and Reforms Programme (R-APDRP) and the massive Rural Electrification Programme called the Rajiv Gandhi Rural Electrification Project. Shri Shinde assured the gathering that the Government of India is pursuing a multi-pronged strategy, which has a mixture of legal, policy and operational reform measures.

The scope for investment in the power sector alone over the next few years, he said, is well over US $ 300 billion and the expansion programme in this sector would definitely need a large amount of Foreign Direct Investment. “The confidence of investors in our sector is reflected in the fact that the six IPOs of public sector undertakings under the Ministry of Power over the last 4 to 5 years have been over-subscribed between 13 to 77 times,” he observed.

Proposing a low carbon growth strategy for the Indian Power Sector, Shri Shinde highlighted the move towards Super Critical Technology in Thermal Plants, the rapid induction of Clean Coal Technologies and a sharper focus on renewables. “International majors like Mitsubishi, Toshiba, Alstom and Anlsando have already started the process of partnering with Indian manufacturers to set up Super Critical Manufacturing facilities in India. We are also planning the creation of a capacity of over 20,000 MW based on Solar Energy by the year 2020. Steps are being taken to provide incentives for the rapid deployment of Wind Energy throughout the country,” he said.

“Although India does not have any obligation under the United Nations Framework Convention on Climate Change and the Kyoto Protocol to take on commitments for reducing its carbon emissions, the Prime Minister of India has recently launched the National Action Plan on Climate Change. Eight missions have been identified under National Action Plan on Climate Change, out of which my ministry is deeply involved with the National Mission on Enhanced Energy Efficiency,” he added.

He said that a strategy has been drawn up for implementing this mission through a market transformation approach. Towards this end programmes such as Energy Saving Certificates, Mandatory Standards and Labeling and fiscal incentives to facilitate adoption of energy efficiency have been proposed. “I am confident that we shall launch this mission within the next few months” he said.

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