Author: Aaron Chaze

POWER SECTOR INSTALLS RECORD GENERATING CAPACITY

By Aaron Chaze

India’s power sector has installed the highest generating capacity ever in any fiscal year during the first nine months of the 2010-11 fiscal year.

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India powers up its energy capacity

A total of 9,730 MW was installed between April and December 2010 as compared to the 9,585 MW installed during the 2009-10 fiscal year (April-March). And for the first time ever the Indian private sector is responsible for more than half the total new generation capacity, installing nearly 5,000 MW—also an all-time high. In 2007-08, the Indian private sector installed only 8% of the new capacity. The Indian government had set a target to install 21,411 MW of power generating capacity during 2010-11 from both the public and private sector. According to industry estimates, though, it is likely the total for the year will be only around 14,000 MW.

Even as the power industry gears up for growth, megadeals are happening in the Indian insurance industry. Japanese insurer Nippon Life Insurance Company agreed to invest $720 million for a 26% equity stake in Reliance Life Insurance. The deal values Reliance Life, which until now was 100% owned by billionaire Anil Ambani’s Reliance Capital, at $2.9 billion. Reliance Life has changed its business mix recently to derive 50% of its premiums through traditional life products and the balance through annuities, versus 85% through annuities previously. The move is aimed at reducing earnings volatility. Under Indian insurance regulations, foreign insurance companies can own a maximum of 26% in an Indian insurer, which the Indian finance ministry suggests raising to a limit of 49%.

Foreign investors may become more cautious about pouring capital into India, however, after a report from consultant KPMG said corruption in the country is growing. The report says India is losing billions of dollars a year to corruption. KPMG surveyed 100 leading foreign and domestic businesses and more than two-thirds said that corruption prevented India from moving past a 9% annual GDP growth rate and that it could create an unstable political environment.