As per the report ‘India Energy inc.- Emerging Opportunities & Challenges’ released by CII at the CII-India Energy Conclave 2007 in December, a favorable policy and regulatory framework is required to attract private players in the power and energy sector. The report also said that an investment of $150 Billion is required in the next five years to meet the rising energy demand, reported The Statesman.

The main reason for encouraging private players participation and huge investment in this sector is to sustain the GDP growth at 9%. The GDP can be sustained through proportional increase in supply of energy, oil, electricity, coal, gas and other fuels. High economic growth will increase the demand for quality power, where country is currently lacking.

Private players in the country are not keen to invest in the energy sector. To attract them in this sector, necessary steps are needed, such as favorable regulatory framework. Regulatory framework will help to overcome the problem of distorted energy prices, which are currently influenced by unreasonable taxes, unplanned duty structure and politically motivated tariff structure. No player will come forward to invest in the sector unless there is a financial certainty.

Another important reason for lack of investment in this sector is absence of organized body to manage coal, oil and gas sector. Proper regulations and regulatory cohesions can accelerate the essential energy market reforms and attract private players. Competitive environment is what private players always look for.

The best way to persuade private players for investment is by providing clarity in pricing of energy products, market framework, government incentives and subsidies. However, some clarity has emerged in recent years, for example, oil and gas pricing, where the process for price determination is set out.

As per a Research Analyst at RNCOS, “The government has realized the urgent need of encouraging private players participation and investment in the energy sector. However, there are no clear polices that can encourage private players for investment. The investment is essential to achieve and sustain the projected GDP growth rate and it will help in meeting the energy demand by commercial, non-commercial and households. Energy sector also need good infrastructure.”