Given the global scenario during the last year, the growth of Indian economy was a bitsubdued. There is an estimation that our economy grew by 6.9% last year, significantlybelow the 8% growth rate which it had been delivering for the past couple of years. While2008 was marred by the problems emerging from US economy, the epicentre for the currentsituation is the sovereign debt crisis of Europe. The threat of splitting up of theEurozone looms large, which has dampened the sentiment surrounding the global economy. Theslow recovery of the US economy has diminished any hopes of quick turnaround in the worldeconomy. Political turmoil in Middle East and slowdown of growth in the erstwhile highgrowth regions has further aggravated the scenario.
On the domestic front, multiple factors affected our growth, ranging from slower thanexpected economic reform on the part of the Government to a persistently high andfluctuating rate of inflation. High cost of borrowing resulting from RBI continuouslyraising the interest rate to tame inflation coupled with steep commodity prices dampenedthe investment mood in the economy. However towards the end of the year we did see RBItaking measures to soften the impact and we are hopeful this marks the beginning of a morebenign interest rate regime.
Coming to the sector in which we operate, the power sector has been in the news largelydue to negative issues. The demand for power however continues to significantly outpacesupply and the opportunity remains intact. India has consistently fallen short of capacityaddition targets; the capacity addition in the 10th Plan was just half of the target of41,110 MW. In the 11th Plan, it is expected to be about 65% of the original target ofabout 78,000 MW, which has subsequently been scaled down to around 62,000 MW. Thermalenergy has the major share of our power portfolio which in turn is heavily dependent onthe steady availability and supply of coal.
The challenges to coal availability and supply are well documented. Further challengeslike land availability, increasing cost, environment clearances and safety are alsodogging thermal power. Even nuclear power is faced with challenges especially in light ofthe events in Japan last year.
All of this only helps to highlight the solution offered by renewable energy and theprospects and opportunities that it would be faced with. Apart from being a safe, stableand sustainable source of energy, it is able to integrate itself seamlessly into theecosystem. The improvement in technology over the last few years coupled with increase ingenerating cost of thermal power have brought renewable energy on par with conventionalmethods of power generation.
Further, incentives offered by regulators like Generation based incentive scheme andRenewable Energy Certificate (REC) mechanism have also contributed to the increasingadoption of renewable energy in India.
As one of the largest independent renewable power generating companies in India, yourcompany is at the forefront of developments in the sector.
The financial year gone 2011-12 has been an immensely challenging year for your companybut we are pleased to share that we have undertaken several efforts and initiatives totake the business forward. While we delivered healthy revenue growth, profitability wasunder pressure due to multiple challenges on the regulatory front and due to hardening ofinput prices and interest costs. However, our vision of becoming the largest renewableenergy producer in India remains intact.
During the year we have enhanced operating capacity to 366 MW compared to 220 MW; thisconsists of 305 MW of wind power assets and 61 MW of Biomass power assets. The increase inoperating capacity is not fully reflected in revenues due to issues pertaining to poorwind availability, adverse weather conditions, grid back downs, and unplanned shutdowns.
However, despite these challenges, we have delivered higher revenues and drivenoperational improvements. Several of our plants which were affected due to various reasonsduring the financial year 2011-12 have improved their operational performance as on date;we have reworked unfavourable tariff arrangements and are witnessing improvement inblended tariffs and we started realizing revenues from RECs during the year 2011-12 andthis trend is expected to improve during the coming years.
Our core business continues to remain strong and the recent additions in capacitycombined with the pipeline of adequately funded projects have placed the company on astrong trajectory.
I would like to assure you that your company is making steady progress. We areevaluating our power off take arrangements to ensure revenue optimization between supplyof power to Group Captives, Third Parties or PPAs depending on the location and theschemes available. We are actively engaging the regulators to consider reasonable tariffhikes to compensate for the increased cost of generating power.
Our efforts to improve sourcing and procurement of feedstock for Biomass Plants willreflect on our cost of generating power and the higher capacities and increased volumes ofREC will help to improve contribution and economies of scale. Our efforts to moderateinterest cost are also expected to positively reflect in our profitability from theensuing financial year.
To conclude, we continue to have a robust portfolio of power generation projects whichare well diversified between Wind and Biomass. The imminent additions to capacity and astrong expansion plan over the next two years provide the visibility for growth and willhelp us scale our business to the next level. We are focused on executing our plans and onimproving efficiencies as we look to deliver profitable growth.
I would also like to take this opportunity to thank our employees, bankers, theGovernment / Regulators and other stakeholders and last but not the least you, ourShareholder for the continued support.