Adani, Tata, Vedanta make a power play for coal-fired projects after five-year lull

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Private players such as Adani Group, Tata Power, Vedanta Group, JSW Energy, and Torrent Power are making a comeback in the thermal power sector after a lull of at least five years, with the government projecting a need for at least 80 gigawatts (GW) of new coal-fired power generation capacity in India by 2031–32.

Even public sector undertakings (PSUs), such as Coal India Ltd (CIL), which never had any link with power generation earlier, are getting into the thermal power business now. CIL said on April 21 that it will set up a 1,600 megawatt (MW) ultra supercritical power plant along with Damodar Valley Corporation in Jharkhand. This will be in addition to two thermal power plants announced last year by CIL in Madhya Pradesh and Odisha.

The increasing demand for coal-fired projects is also reflected in the orderbook of BHEL, the state-owned manufacturing major, which designs, manufactures, and installs equipment for thermal power plants. Moneycontrol found that the PSU’s outstanding orderbook in the power sector increased 63 percent to Rs 1,57,922 crore in FY25 from Rs 96,731 crore in FY24.

The plans

Adani Power informed its investors on April 30 that the company plans to add 13.12 GW thermal capacity by FY32 to reach 30.67 GW, up from 17.5 GW currently. “Thermal power will continue to provide base load supply for the growing economy. It will play an essential role in meeting India’s peak demand, which is likely to hit 388 GW by FY32,” the company said in its investor presentation for Q4FY25.

Praveer Sinha, CEO and MD of Tata Power, said that the rethink on the company’s decision to exit coal-fired power generation capacities to focus completely on clean energy sources has more to do with “timing” and “the need of the nation”. “Till 2031-32, the growth of firm round-the-clock renewable energy is unlikely to be commensurate with the increasing energy demand of the country. Hence, thermal power is necessary as an intermediate stable source that will be necessary for balancing the grid,” he said.

JSW Energy last month began constructing its largest greenfield power plant in Salboni, West Bengal, with a total capacity of 1,600 MW. Similarly, Vedanta is likely to commission a total of 1,300 MW of capacity by the end of the current financial year at two of its plants in Andhra Pradesh and Chhattisgarh. Torrent Power announced in January that it will build a 1,600 MW coal-fired power plant in Madhya Pradesh.

Rising demand

Gautam Shahi, Director, Crisil Ratings, said the capacity to supply electricity 24x7 is crucial for a growing economy like ours, where demand is continuously rising. “The government has estimated substantial thermal power capacity addition by fiscal 2032. Simultaneously, we see investments in renewable energy continuing and its share in total power production rising,” he said.

Government officials said the estimated capital cost for setting up new coal-based thermal capacity is at least Rs 8.34 crore per MW (at 2021-22 price level). Hence, the thermal capacity addition is expected to entail an expenditure of at least Rs 6,67,200 crore by 2031-32.

Vikram V, Vice President and Co-Group Head, ICRA Ltd, said thermal capacity addition slowed down post FY2017, driven by multiple factors including a lack of new tied-up power purchase agreements, delays in execution, cost overruns, fuel availability concerns and tariff viability issues. "All of these factors also led to a large stressed asset capacity in the thermal power segment. The thermal capacity addition over the last 5 years has been largely driven by public sector utilities. Nonetheless, the healthy demand growth has improved the thermal PLF (plant load factor) levels as well as prospects for new thermal power projects," he said.