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UPDATE 2-Indian minister says $250 bln needed to tackle energy crunch

* Govt wants more coal mining, renewables push (Adds company comments)

* Meeting power demand key Modi pledge

* Govt wants more coal mining, renewables push (Adds company comments)


By Tommy Wilkes

NEW DELHI, Nov 6 (Reuters) - India needs to invest $250 billion over the next five years to tackle chronic energy shortages and provide power for all its 1.2 billion people, its power minister said on Thursday.

Piyush Goyal said the bulk of the investment would need to come from the private sector but the government would also invest more.

"I visualise an investment of nearly $250 billion in this sector in the next four or five years," Goyal told a World Economic Forum conference in New Delhi.

The government is targeting $100 billion of investment in renewables and $50 billion in transmission and distribution to "create a national grid where power can seamlessly flow", Goyal said, as it seeks to avoid a repeat of 2012 when one of the world's biggest blackouts hit swathes of northern India.

He also said that nuclear power offered the "potential" to help resolve India's energy shortages.

Rapidly growing demand that outstrips supply and an antiquated transmission system mean much of India still suffers regular outages, which hamper investment and force many businesses to rely on costly generators for back up.

As many as 400 million Indians are still not connected to the grid, while the average Indian household uses about a third of the power consumed by a family in China.

Total energy consumed in India will double by 2019, Goyal said.

Prime Minister Narendra Modi, elected in May, has made a commitment to bring uninterrupted power to all India's people a key plank of his government's programme.

To achieve that, Goyal said India needed to rapidly raise the amount of coal it mined for power generation, cut back on electricity lost on transmission lines and through theft, and promote the use of renewable resources such as solar and wind.

Coal, which generates about three-fifths of the country's energy, would retain an "essential role" in India's energy mix, as in the United States, despite more environmentally friendly alternatives, Goyal said.

Past governments have struggled to attract foreign cash into the power industry, partly because companies remain unconvinced they will be able to earn a return on their investment while tariffs are kept low to please consumers.

"The most important thing for infrastructure related investments (in India) is how to make the project bankable," Masakazu Sakakida, Managing Director of the Indian arm of Japan's Mitsubishi Corp, said earlier this week.

"In a coal based power plant, the price of electricity is almost fixed, it's not related to the price of the coal."

Dong-Kwan Kim, Managing Director at Hanwha Group, a Korean conglomerate with interests in solar, said India's high cost of capital was also deterring investors from renewable projects because they could earn far better returns elsewhere. (Reporting by Tommy Wilkes; Editing by Biju Dwarakanath and Alan Raybould)

Published on:
November 6, 2014
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