India's energy woes to affect growth?

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NEW DELHI, April 23 (UPI) -- A report from the World Economic Forum calls for more transparency in India's energy market, saying current practices are damaging the country's economic outlook.

"Costly and inefficient subsidies are damaging the economy. The energy market must be made more transparent and efficient to attract foreign and private investment," states the "New Energy Architecture: India" report.

Because residential and agricultural electricity prices are heavily subsidized, the WEF says there is little incentive for private companies to invest in the power sector.

The report calls for the removal of subsidies and increased separation between the government and state-owned companies.

Coal India Ltd., which is 90 percent state-owned, controls most of the electrical power in India.

International Business Times quoted Siddharth Bhargava, a research analyst at Matthews International Capital Management in San Francisco, as saying, "India's over-reliance on a single firm for its fuel is a problem, especially considering this company has missed production targets by about 10 percent each year for the past three years."

Further compounding India's electricity woes, Bhargava says, is that nearly one-third of the power India generates is lost through inefficiency and theft.

"Power facilities in every country experience some level of power loss during distribution but in India this loss is nearly three times higher than the International Energy Agency's acceptable standards."

As India's energy demand outpaces supply, power outages and blackouts are becoming more frequent, and nearly 400 million people, about one-third of India's total population, have no electricity at all.

Last month the gap between electricity demand and supply rose to 10.2 percent from 7.7 percent a year earlier, The New York Times reports. Because of ongoing blackouts, factories in some states receive a larger share of electricity from their diesel-run generators -- an added expense -- than they do from the power grid.

India's power problems also appear to be linked to a slowdown in the country's economic growth. While India's gross domestic product is expected to rise 7 percent this year, that's a slower rate than the 10 percent growth it experienced in 2010.

For India to achieve economic growth of 9 percent, estimates indicate that the country's energy supply would have to increase 6.5 percent per year, Press Trust of India reports.

Meantime, India's power needs continue to rise.

Indian Power Minister Sushilkumar Shinde, speaking to the World Energy Leaders Summit in Istanbul, Turkey, said his country is projected to be the world's third-largest energy consumer by 2020, after the United States and China. It currently ranks fourth.