Over 35 percent of India's energy generation target of 41,110 megawatt by 2007 is set to be contributed by the private sector, despite power reforms moving at a slow pace.

Power Minister P.M. Sayeed said the main reason for a turnaround in the energy scenario compared with the Ninth Five Year Plan (1997-2002) was improved transmission and distribution, better collection and better finances of state-run utilities.

"The enactment of the Electricity Act of 2003 and the notification of the new electricity policy in February have also helped to make the Indian power sector more attractive for investors," Sayeed told in an interview.

Private sector energy generation companies, he said, will generate 15,000 MW additional power during the Tenth Five Year Plan
that concludes in 2007.

"There is a revival in investors' confidence. It is not just the government but also the private sector which is coming forward to invest large sums," the minister said.

Giving statistics, Sayeed said 11 projects, with a total capacity of 4,000 MW, had already achieved financial closure involving an investment of Rs.150 billion ($3.4 billion).

In addition, he said, three projects with a total capacity of 2,200 MW had received approval from financial institutions (FIs) and eight others with a total capacity of 9,500 MW were close to financial closure.

"With these 22 projects, we expect to see private sector investments of Rs.600 billion (13.6 billion) flowing into the power sector with the participation of even foreign investors, either directly or indirectly," said Sayeed.

"This is the highest private investment seen in the Indian power sector so far. Inquiries from foreign investors are also pouring in," he added.

The minister expressed confidence that India will be able to meet its target of creating 41,110 MW of additional capacity during the current plan as part of the effort to double the generation capacity by 2012.

India's installed capacity stood at 100,000 MW at the start of the Tenth Plan.

"We are well on the way - 10,959 MW capacity addition projects have been completed, 24,152 MW projects are under execution and contracts are being awarded for another 1,815 MW," the minister said.

"We will also have another 5,000 MW capacity through captive power units."

Under the new policy, the government can draw excess or unutilised capacity with captive power plants for feeding the national power grid.

Sayeed said for the future too, the government is trying to meet the target of additional 60,000 MW during the Eleventh Plan (2007-12) to help energy-starved India and bridge the peak shortage of about 12 percent.

"We are in the advanced stages of giving finishing touches to the project plans, which will start giving results every year," the minister said.

"Unlike in the earlier plan periods where we saw a bunching of projects, you will see a steady stream of capacity addition throughout the five years of the Eleventh Plan," Sayeed added.

The minister said the central government remains committed to creating at least 50 percent of the total new capacity and fanning out the rest to the states and private sector.

As regards foreign equity, the minister said the example of Dabhol power project originally set up by US-based Enron and now mired in controversies, would not dampen the spirit of overseas investors.

"The reason why foreign investors were not coming to the Indian power sector was mainly due to the indebtedness of the state electricity utilities," he said.

"Now with the turnaround brought about by the new electricity legislation and the healthy state of power utilities, the investors are coming back."