Power Industry in India SWOT Analysis Report
SWOT Analysis
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India
Power Business Environment SWOT
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Strengths
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- India is now
one of the biggest recipients of foreign direct investment (FDI) among
emerging markets, having attracted US$36.7bn of inflows in 2008 -- a 60%
increase from the previous year. This is according to the United Nations
Conference on Trade and Development (UNCTAD).
- A cheap but
skilled English-speaking labour force can do the jobs of Western workers
for a fraction of the wages paid in North America or Europe.
- At the end of
2009,hydro-electric power represented around 17% of India's total
installed generating capacity, with the country currently ranked sixth
in the world in terms of hydro-power, with more than 3.5% of global
total capacity.
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Weaknesses
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- Despite areas
of excellence, such as the IT sector, overall literacy rates in India
remain far lower than in other Asian and emerging market nations.
- India's
infrastructure is notoriously inadequate. A 500km road journey can take
as much as 24 hours, owing to poor road conditions, congestion and toll
booths.
- The
competitiveness of local firms is undermined by reams of official red
tape, from foreign investment restrictions to inflexible labour laws.
- Intellectual
property rights are poorly protected in India. India was one of nine countries
on the 'priority watch list' for 2008 compiled by the Office of the US
Trade Representative.
- There is a
shortage of reliable generating capacity, substantial power wastage and
a large part of the population without access to electricity supply.
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Opportunities
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- India could
enhance the competitiveness of local industry through further
liberalisation and deregulation.
- Ongoing
infrastructure projects such as roads, railways and airports should
provide opportunities for foreign investors for many years to come.
- Indian Prime
Minister Manmohan Singh is eager to reform the banking sector in order
to increase the availability of long-term financing, particularly for
large infrastructure projects.
- Substantial
hydro-electric and solar generation potential exists to provide a
long-term source of clean, renewable power.
- Major gas
discoveries by domestic explorers provide scope to limit import
dependency and fuel growing numbers of gas-fired power stations.
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Threats
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- The arrival
of Western players, including management consultant Accenture and
technology giant IBM, is bidding up local wages in the outsourcing
sector. India faces growing challenges from countries such as Vietnam
and (potentially) Bangladesh in a variety of sectors.
- China still
remains a major competitor for FDI flows into India. India has excessive
bureaucracy and poor infrastructure in comparison with China.
- Environmental
damage is high, reflecting the continued high-level use of coal as the
principal power station fuel.
Industry Overview
Global
Supply
and demand growth in the power sector is a reflection of population expansion,
increased economic activity and changing energy intensity/efficiency. Beyond
the weakness of 2009/10, consumption and generation growth are expected to be
significant, but with a wide variation of trends by fuel source. Oil is set to
continue to lose market share, particularly if prices remain high, with costly
but cleaner natural gas remaining first choice for many countries and regions.
Climate change and the entire environment debate are leading to a shift in
sentiment regarding nuclear power generation, which had been falling out of
fashion. Renewables should see the most dramatic growth, from a very low base,
in response to environmental pressures and the higher cost of conventional
energy sources. As with the hydrocarbons sector, non-OECD growth dominates the
supply and demand trends, overshadowing the developed markets. Expansion of
gas- and coal-fired power supply is at its greatest in these countries,
although the likes of China are likely to see rapid growth in virtually all
forms of electricity supply and demand.
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