Modi’s reforms drag, power plants to face low loads, study

India’s energy sector is facing low capacity utilisation in power generation as plant load factor is estimated to remain low at around 62 per cent until 2018-19, noted a recent ASSOCHAM-Crisil joint study.

The study also expressed concern over the slow pace of reform implementation in certain areas.

The study noted that India had made considerable progress in power sector in the past three years which resulted in improved access to electricity, better financial health of discoms and promotion of renewable energy generation.

However operational performance of discoms remains a concern, besides intensive rural electrification in Uttar Pradesh (UP), Bihar and north-eastern states also remained low.

MIXED RECORD ON REFORMS

The study on ‘Insolvency and Bankruptcy Code’ pointed out that not all economic reforms have shown good progress in India.

It said that the majority of reforms initiated by the Centre are in initial and middle stages of implementation, i.e. while a number of reforms have been announced, execution of the most remains a work-in-progress.

“While steps taken by Modi government do not create an immediate and strong upside, they improve India’s ability to achieve faster and sustainable growth over medium term,” it said.

It noted that reforms under goods market efficiency and institutions are in the advanced stage.

Reforms concerning macro-economic environment, infrastructure and financial market development are in the middle stage, and finally, those relating to ‘softer’ areas such as health, education and technological readiness are in initial stage of implementation.

It added that large-scale employment generation is difficult in an environment of tepid growth.

“Little progress has been seen in easing labour laws and absence of a uniform simplified labour law continues to deter investments in labour-intensive industries.”

It is also concerning to note that concrete reform measures are still pending in the labour market.

The study further said that improving pace of implementation will be highly challenging in reforms, such as those for employment generation, banking sector and power sector. Even as some of the earlier neglected areas, such as health, education and the labour market, continue to see a slow progress, it warned.

On the macroeconomic front, the study said that weak investments challenge sustainable growth and private investments are unlikely to pick up before 2019 owing to low capacity utilisation and weak balance sheets.

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