Private Sector to Invest ₹77,000 Crore in Thermal Power by FY28: Crisil

In a major development for India’s energy sector, the thermal power industry is set to witness an investment surge of ₹77,000 crore from private sector players between FY26 and FY28, according to a report by Crisil Ratings. This marks a significant shift as private firms like Adani Power, Tata Power, JSW Energy, and Vedanta Power take the lead in strengthening the country’s thermal power capacity, largely through brownfield projects that sidestep land acquisition challenges.

Doubling of Thermal Power Investment

• Total investment in the thermal power sector, including both public and private projects, is expected to double to ₹2.3 lakh crore over the next three years.
• The private sector’s share, which was earlier limited to just 7–8 per cent, will now rise to nearly one-third of total investments.
• This reflects a revival of private interest in coal-based projects after a decade of stagnation.

Factors Driving Private Sector Participation

Long-Term Power Purchase Agreements (PPAs)

• For the first time in 10 years, four state power distribution companies (Discoms) have signed 25-year PPAs with private thermal producers.
• These agreements reduce financial risks for investors.
• They ensure stable revenue flows and improve the viability of thermal projects.

Rising Power Demand

• India’s power demand is projected to reach 366 GW by 2031–32.
• Renewable sources like solar and wind are expected to meet about 70% of this demand, but their intermittency makes thermal power crucial for round-the-clock supply.
• The government has announced plans for 80 GW of new coal-based thermal capacity by 2032, of which 60 GW has already been initiated.

Major Private Sector Contributions

Focus on Brownfield Projects

Most of the new capacity will come from brownfield expansions, which,

• Avoid land acquisition delays.
• Utilize existing infrastructure and pit-head linkages, ensuring faster project execution.

Key Players

• Adani Power, Tata Power, JSW Energy, and Vedanta Power are at the forefront of this expansion.
• Together, they are investing in projects that combine financial viability with operational efficiency.

Vedanta Power’s Strategic Expansion

Demerger and Growth Plan

• Vedanta Power is preparing for a demerger to operate as a standalone entity.
• Its long-term plan includes adding 15 GW of capacity, primarily through brownfield projects.

Revival of Existing Portfolios

Reviving a 2,200 MW portfolio, which includes,

• 1,200 MW at the Chhattisgarh Thermal Power Plant (formerly Athena).
• 1,000 MW at Meenakshi, both with pit-head advantages and existing linkages.

Financial Viability

Upcoming projects will operate under a tariff structure of ₹5.5–₹5.8 per unit.

The two-part tariff system ensures,

• 60% fixed charges for stable returns.
• The remainder based on cost-plus pricing.
• The projects are designed to yield an internal rate of return (IRR) of 15%, making them financially attractive and executable on schedule.