Category — Oil & Gas

India’s federal Planning Commission projects an investment of $300 billion in electrical power between 2012-2017 which is the period covered by the “Twelfth Five Year plan”, according to member B.K. Chaturvedi

The commission estimates that India will see capacity addition of 100 gigawatts during the period; this cCapacity addition will result in investment of at least $100 billion. Chaturvedi says a similar investment of around $100 billion is expected in distribution and transmission during the next plan period. And, that overall investment, including generation work in progress currently, will come to $300 billion of the $1 trillion infrastructure development planned.

The bulk of this power investment will result in coal-fired power plants, but India is also investing vigorously in nuclear, solar, hydro-electric, gas and oil, bio-mass and more. This investment will be a combination of government and private spending and may include debt funded from foreign sources.

This opens up many opportunities for foreign companies across the ecosystem, despite serious challenges in succeeding in this sector in India.

Indian Oil Corporation (IOC) may invest upto 26 percent of $2.7 billion to expand the Rajasthan Atomic Power Stations of India’s Nuclear Power Corporation Ltd (NPCIL). At present Indian law does not permit private sector investment into Atomic Energy. NPCIL is 100% owned by the Indian government via its Department of Atomic Energy. IOC is largely a public sector undertaking, under the Ministry of Petroleum.

In November 2009, IOC and NPCIL signed a memorandum of understanding to jointly construct nuclear power plants in India.  Last month NPCIL signed an agreement with Power Finance Corporation (PFC) to “facilitate NPCIL’s large capacity addition program.” Under the 28 October agreement PFC intends to provide a combination of debt financing, equity financing and consultancy services.

Similar understanding have been signed with the National Thermal Power Corporation and the India Expert expects will be signed by the likes of BHEL, and other public sector entities; this seems to be primarily a financing process for the equity portion of India’s massive nuclear energy expansion. NPCIL will retain operational and safety control of all such plants.

While President Obama visits India, a series of mid-range co-operative arrangements were initiated.

1) India-US agreement to set up a joint Clean Energy Research and Development Center. It will be backed by $50 million by both sides over five years and work to complete joint research in solar, biofuels and energy efficiency.

2) A Global Centre for Nuclear Energy Partnership. US will cooperate in India’s plans for a nuclear centre, to promote nuclear security and address threats of nuclear terrorism. To be based in Bahadurgarh, Haryana,  Memorandum of Understanding for co-operation in building the Center was signed by Dr. Srikumar Banerjee,  Secretary,  Department of Atomic Energy and Timothy Roemer, the US Ambassador to India. It will consist of four schools dealing with Advanced Nuclear Energy System Studies, Nuclear Security, Radiation Safety and application of Radioisotopes and Radiation Technology in areas of healthcare, agriculture and food.

3)  Establish an India-US Energy Cooperation Program. It will mobilize private sector expertise and resources to address clean energy-related issues both countries.

4) Agreement on technical cooperation to study India’s annual monsoon rains. Cooperation on weather forecasting for India’s crucial annual monsoon.

5)  India and the US will cooperate  on shale gas resources which will see US technology used to assess shale gas resources in India.

6) MOU on establishing and operating a Global Disease Detection Center in India, which will set up a laboratory in New Delhi designed to prevent the spread of infectious diseases.

Although India is  noted as producing some of the best creative technologically-oriented talents in the world today, too few young professionals concentrate their education toward civil engineering. This bottlenecks the nation from realizing its full economic potential. India is challenged by inadequate roads,  as well as an electric  power system that creates the need for individual office buildings to install their own generator-powered electricity.

Money is not really the problem since the government has plans for a $500 billion infrastructure investment through 2012 and more beyond. The problem stems from a lack of qualified home-grown civil engineers. During the British Raj and for years later, civil engineers were among the most respected tecnical professionals in India.  The first engineering college in India, now known as IIT Roorkee was established primarily to educate “overseers”, highway engineers, dam builders, soil specialists and all the flavors of civil engineering.

This once-enviable profession  no longer pays as well as writing software programs for the world’s leading companies.  So, what’s a modern-construction yearning society do do?

The Indian government acknowledges a critical shortage for civil engineers. Therefore, India has set on a path creating an additional 30 universities and is examining permitting foreign educational institutions to set up campuses in the country.

Foreign investment in India’s current infrastructure needs is also being called upon since no amount of emphasis upon home-grown talent will be appropriate. Kamal Nath, minister of road transport and highways, recently said the government plans to finance a highly ambitious road-building campaign through raising capital from overseas investments that include soliciting pension plans as well as securing long-term investments.

Kamal Nath, Union Cabinet Minister of Road Transpost & Highways

Plans are also underway soliciting foreign construction company participation in development projects that have been compared to the post-World WarII U.S. Highway construction boom.

This bodes well for American, British, Canadian, Japanese, Korean and Chinese engineering and construction companies if they can invest the time and effort to understand how India functions

The United Nations Conference on Trade and Development (UNCTAD) released its 2010 World Investment Report with India moving up four spots from 13 to nine. With a whopping $130 billion inflow in 2009 the U.S. remained at the top of the list with China trailing, bringing in $95 billion. The total inflows were reported at $1.11 trillion, though the 2008 total was $1.77 trillion. Interestingly enough, India’s total inflow decreased from $40.42 billion in 2008 to $34.61 billion, but the country’s global ranking still moved up.
The report also stated, “If the situation continues to improve, India is likely to be among the most promising investor home countries in 2010-2012, as well as the third highest economy for foreign direct investment in 2010-2012.
In the report was a list ranking the top 100 non-financial trans-national corporations by their foreign assets overseas. On the list were the Indian companies Tata Steel (15th), Oil and Natural Gas Corporation (20th), Hindalco (29th), Tata Motors (40th), and Suzlon (54th).

Of all things the report proved how much India has withstood the global recession in comparison to the rest of the world, and more importantly how the country is expected to increase its foreign investment revenue in the coming years.