Slow environmental clearances, shortage of fund & domestic coal & gas supply to power sector threaten India’s economic growth.

India has an installed capacity of 187,000 MW, about a fifth of China’s capacity, and a peak-hour deficit of about 12 percent. Coal accounts for more than half of India’s power generation and will be required for about 85 percent of the target capacity addition in 2012-2017, the draft said.India has about 10 percent of the world’s coal reserves, but has struggled to provide enough of the fuel to power sector because of challenges in land acquisition and environmental clearances for mining.

Of the 89 thermal power stations in India, 43 had a coal stock of less than seven days as of Jan. 16 compared with an average requirement of 22 days, according to data on the Central Electricity Authority website. Soaring coal prices across Asia have led India’s richest families to shelve plans for a record $36 billion investment in new power stations needed to fuel growth in the world’s second-fastest-growing major economy. Also unprecedented number of power projects are stuck at the construction stage

A shortage of coal could prevent India from reaching its target of raising capacity by 75,000 MW in the five years to March 2017, a government draft report said late last year.In its 12th five-year plan ending March 2012, India will add only 52,063 MW, falling short of the targeted 62,374 MW, continuing a trend of missing power output targets.

A shortage of domestic supply is likely to push up coal imports by four times to 213 million tonnes in 2016/17 from 54 million tonnes this fiscal year. Costly imports, which may seem the only way to meet the country’s coal demand, make power more expensive, forcing distribution firms, which sell at subsidized tariffs, to slow procurement.

Fuel shortage due to stagnant domestic coal output and lower-than-expected gas output, slow environmental clearances, and shortage of funding have held up power projects and threaten India’s economic growth.Power sector executives are likely to push for swifter action to improve access to coal and make it easier to get funding, acquire land and get environmental clearances.

Policy gridlock in India, which has resulted in little economic reforms in the past few years, has crimped investment and contributed to a slowing of the economy.

A shortage of coal and gas and uncertainty over supply have thrown the business plans of the generators into disarray and made lenders reluctant to lend, delaying projects.Tata Power and Reliance Power, developers of 4-gigawatt plus power plants, are lobbying the government to free them from loss-making power sales contracts and want to be allowed to pass on rising fuel costs to consumers.

Plants that can produce about 20,000 megawatts thermal power are working at sub-optimal capacity, and another 30,000 MW of plants under construction are likely to be affected by fuel shortages, said Ashok Khurana, director general at the Association of Power Producers.