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Jaypee Business SchoolA consti tuent of Jaypee I nstitute of I nformation Technology

(Deemed University)A-10, Sector 62, Noida (UP) India 201301

www.jbs.ac.in

DETAILED STUDY OF PROCUREMENT, WORKS POLICY AND

AWARD OF CONTRACT IN

NTPC

Corporate Internship ReportInternship Report submitted as a partial requirement for the award of the two year

Master of Business Administration Program

MBA 2012-2014

Name: Anurag mani

NTPC, Noida

Corporate Internship Supervisor

Name: Mr. V.V Subramaniam

JBS - Faculty Supervisor

Name: M.A Sanjeev

Start Date for Internship: 10 june 2013

End Date for Internship: 15 July 2013

Report Date: 01 July 2013
http://www.jbs.ac.in/http://www.jbs.ac.in/http://www.jbs.ac.in/


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SELF CERTIFICATE

This is to certify that the summer training report submitted by me to Jaypee

Business School for the completion of corporate internship 2013 is a bonafide

record of work carried out by me under the supervision of Mr.V.V

SUBRAMANIAM, Finance concurrence Manager, NTPC Ltd. The contents of

this report, in full or in parts, have not been submitted to any other Institute or

University.

Name: BHAVYA MITTAL

(12609216)

Signature:

Date:


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ACKNOWLEDGEMENT

I would like to express my deepest appreciation to all those who provided me the possibility

to complete this report. A special gratitude I give to our final year project manager M.A

SANJEEV, whose contribution in stimulating suggestions and encouragement, helped me tocoordinate my project especially in writing this report.

Furthermore I would also like to acknowledge with much appreciation the crucial role of the

staff of NTPC, who gave the permission to use all required equipment and the necessary

material to complete the task VIJETA SAINI. Special thanks go to my team mates, who

help me to assemble the parts and gave suggestion about the task. Last but not least, many

thanks go to the head of the project, V.V SUBRAMANIAM whose have invested his full

effort in guiding the team in achieving the goal. I have to appreciate the guidance given by

other supervisor as well as the panels especially in our project presentation that has improved

our presentation skills thanks to their comment and advices.


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TABLE OF CONTENT

S. No. DESCRIPTION PAGE NUMBER

1 Executive Summary

2 Introduction & Objectives

3 NTPC Ltd. Profile

4 Industry Analysis

Indian Economy At a Glance

Power Sector Of India

Structure

Market Size

Growth Trends

PerformanceLegal Regulatory Issues

Technology

Competition Analysis

5 Financial AnalysisFinancial RatiosFinancial HighlightsProfitability RatiosLiquidity RatiosActivity Ratios

Leverage RatiosOther RatiosSWOT AnalysisOther Information

6 Study of The DepartmentIntroductionRole of the DepartmentFunctionsMy Contribution

7 Key Learnings

8 AnnexureAnnexureI (MPP)AnnexureII (Allocation of Power)Glossary of TermsList Of AcronymsList of Figures, Graphs, Tables

9 References


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EXECUTIVE SUMMARY

The report entitled is about the purchase practices followed at NTPC. These practices are

followed during all procurements by NTPC. The purchase procedure starts at Indenting by

the department that requires the material and goes to the cost department and finance

department for required approval. In between various activities like Liquidated Damages

calculation, Spare Parts procurement terms, etc. are undertaken. Once all the terms and

conditions are formulated and approved, the tender document preparation starts. The tender

documents are issued to the prospective bidder for a cost that starts from Rs 450 -Rs

22500($10-$500). The content of the tender document is prepared in such a manner that the

prospective bidder comes to know about all the important details about the contract. The

receipt of Bids follows the issuance of tender document from various vendors in the specified

format. Once all the bids are received, they are opened in presence of some nominated

officials from Finance, Contracts and Materials department. The representatives from the

bidders may also be present. Then a comparative statement of the quoted bids is prepared and

the contract is awarded to the lowest quoting bidder.

During the document preparation phase, payments terms are also decided and documented in

the General Condition of Contract, which is issued to the bidder with the tender documents.

Apart from payments, there are various other issues like Arbitration, which are dealt in the

tender documents. Liquidated Damages is one of the Very important clauses. Liquidated

damage is a payment to be made by the contractor in case he fails to complete the project in

the stipulated time. In case of equipment, it is related to the performance of the equipment.

The purchase is followed by the evaluation, which is done for two things, the vendors

performance and the purchase performance. The Vendor evaluation comes in handy forplacing future orders whereas the Purchase Performance evaluation provides detailed insight

into the procedures being followed to procure the required material.

The area of work undertaken in Finance-Concurrence division, at NTPC.

Arithmetic Error Location Financial Analysis Bid Evaluation Report Vetting of bidding documents Letter of Awards


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1. INTRODUCTION

Power development is one of the key infrastructural elements for the economic growth of the

country. National Thermal Power Corporation Ltd. an Indian public sector company was set

up in 7 November, 1975 with the objective of planning, promoting and organizing integrateddevelopment of thermal power in the country. Since, then, NTPC has been a key player in the

power sector of the country and has emerged as a major power company of international

standard and repute. Presently, the total installed capacity of NTPC stands at 36514 MW

(including JV's), which includes 14 coal and 7 gas based power stations.

It is listed in Forbes Global 2000 for 2012 ranked at 337th in the world.

NTPC's core business is engineering, construction and operation of power generating plants

and providing consultancy to power utilities in India and abroad.

VISION:-

To be the worlds largest and best power producer, powering Indias growth.

MISSION:-

Develop and provide reliable power, related products and services at competitive prices,

integrating multiple energy sources with innovative and eco-friendly technologies and

contribute to society.

OBJECTIVES

To realise the vision and mission, eight key objectives have been identified by the company.

Business Portfolio GrowthTo consolidate NTPCs position as the leading thermal power generation company and

establish a presence in hydro power segment.

Customer FocusTo expand the relationship with existing customers by offering a bouquet of services inaddition to supply of power.

Agile CorporationTo ensure effectiveness in business decisions and responsiveness to change in the business

environment.

Performance LeadershipTo run and maintain NTPC station at par with the best-run utilities in the world.


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Human Resource DevelopmentTo enhance organizational performance by institutionalizing an objective and open

performance management system.

Financial SoundnessTo continuously strive to reduce the cost of capital through prudent management of deployed

funds.

Sustainable Power DevelopmentTo lead the sector in the areas of resettlement and rehabilitation and environment protection

including effective ash-utilization, peripheral development and energy conservation practice.

Research and DevelopmentTo pioneer the adoption of reliable, efficient and cost-effective technologies by carrying outfundamental and applied research in alternate fuels and technologies.


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2. COMPANYS PROFILE

NTPC Limited (NTPC) is an India-based company engaged in the generation and sale of bulk

power to state power. The Companys other business includes providing consultancy, project

management and supervision, oil and gas exploration, and coal mining. As of march 31,

2012, the Company was engaged in executing two projects: Lata Tapovan hydro electric

project (171 mega-watts (MW)), located in Chamoli District of Uttarakhand and Rammam

Hydro Electric Project, Stage III (120 MW) located in Darjeeling District of West Bengal and

West Sikkim District of Sikkim. As of March 31, 2012, the Company had installed capacity

in India was 199877.03 mega-watts. During the fiscal year ended March 31, 2012, the

Company added 2,820 mega-watts of installed capacity. As of March 31, 2012, the Company

had five subsidiaries: NTPC Electric Supply Company Limited, NTPC Vidyut Vyapar Nigam

Limited, NTPC Hydro Limited, Kanti Bijlee Utpadan Nigam Limited and Bhartiya Rail

Bijlee Company Limited.

NTPC, India's largest power company, was set up in 1975 to accelerate power development

in India. It is emerging as an Integrated Power Major, with a significant presence in the

entire value chain of power generation business.

NTPC ranked 337th in the 2012, Forbes Global 2000 ranking of the Worlds biggest

companies. With a current generating capacity of 39,174 MW, NTPC plans to become a

128,000 MW company by 2032.

SUBSIDIARIES

Company Holding %

NTPC Electric Supply Company Ltd. 100

NTPC Vidyut Vyapar Nigam Ltd. 100

NTPC Hydro Ltd. 100

Bhartiya Rail Bijlee Company Ltd. 74

Kanti Bijlee Utpadan Nigam Ltd. 64.57

JOINT VENTURES

Company Holding %

Utility Powertech Ltd. 50

NTPC-SAIL Power Company Pvt. Ltd. 50

NTPC-Alston Power Service Pvt. Ltd. 50

NTPC- Tamilnadu Energy Company Ltd. 50

Aravali Power Company Pvt. Ltd. 50

NTPC- SCCL Global Venture Pvt. Ltd. 50


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Meja Urja Nigam Pvt. Ltd. 50

NTPC- BHEL Power Projct Pvt. Ltd. 50

Nabhinagar Power Generating Co. Pvt. Ltd. 50

CIL NTPC UrjaPvt. Ltd. 50

BF-NTPC Energy Systems Ltd. 49

Anushakti Vidhyut Nigam Ltd. 49

Transformer & Electricals Kerla Ltd. 44.6

Ratnagiri Gas & Power Pvt. Ltd. 30.17

National High Power Test Laboratory Pvt. Ltd. 25

International Coal Ventures Pvt. Ltd. 14.28

Energy Efficiency Services Pvt. Ltd. 25

National Power Exchange Ltd. 16.67

Trincomalee Power Comapny Ltd. 50

The total installed capacity of the company is 38,674 MW (including JVs) with 16 coal based

and 7 gas based stations, located across the country. In addition under JVs, 7 stations are coal

based & another station uses naptha/LNG as fuel.

Owned by NTPC Capacity (MW)

Coal based projects 26,875

Gas based projects 3,955

Sub-Total (a) 30,830

Joint Ventures & Subsidiaries

Coal based projects 1,424

Gas based projects 1,940

Sub-Total (b) 3,364

Total (a+b) 34,194

Capacity of NTPC

2.1 SHAREHOLDING PATTERN OF NTPC

Presently, NTPC generates power from Coal and Gas. It has also diversified into hydro power,

coal mining, power equipment manufacturing, oil & gas exploration, power trading &


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distribution. With an increasing presence in the power value chain, NTPC is well on its way

to becoming an Integrated Power Major.

It is an Indian public sector company listed on the Bombay Stock Exchange in which at

present the Government of India holds 84.5% (after divestment of the stake by Indian

government on 19 October 2009) of its equity. With an electric power generating capacity of

41,184 MW, NTPC has embarked on plans to become a 128,000 MW company by 2032.

2.2 DIVERSIFIED GROWTH

As per new corporate plan, NTPC envisages to have an installed capacity of 128 GW by the

year 2032 with a well diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear

energy, 9% renewable energy and 8% hydro power based capacity.

As such, by the year 2032, 28% of NTPCs installed generating capacity will be based on

carbon free energy sources. Further, the coal based capacity will increasingly be based on

high-efficient-low-emission technologies such as Super-critical and Ultra-Super-critical.

Along with this growth, NTPC will utilize a strategic mix of options to ensure fuel security

for its fleet of power stations.

Looking at the opportunities coming its way, due to changes in the business environment,

NTPC made changes in its strategy and diversified in the business adjacencies along the

energy value chain. In its pursuit of diversification NTPC has developed strategic alliances

and joint ventures with leading national and international companies. NTPC has also made

long strides in developing its Ash Utilization business.

Hydro Power: In order to give impetus to hydro power growth in the country and to have a

balanced portfolio of power generation, NTPC entered hydro power business with the 800

MW Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up

in Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is setting up hydro projects

of capacities up to 250 MW.

Renewable Energy: In order to broad base its fuel mix NTPC has plan of capacity addition

of about 1,000 MW through renewable resources by 2017.

Nuclear Power: A Joint Venture Company "Anushakti Vidhyut Nigam Ltd." has beenformed (with 51% stake of NPCIL and 49% stake of NTPC) for development of nuclear

power projects in the country.

Coal Mining: In a major backward integration move to create fuel security, NTPC has

ventured into coal mining business with an aim to meet about 20% of its coal requirement

from its captive mines by 2017. The Government of India has so far allotted 7 coal blocks to

NTPC, including 2 blocks to be developed through joint venture route.

Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary

was created for trading power leading to optimal utilization of NTPCs assets. It is the secondlargest power trading company in the country. In order to facilitate power trading in the


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country, National Power Exchange Ltd., a JV of NTPC, NHPC, PFC and TCS has been

formed for operating a Power Exchange.

Ash Business: NTPC has focused on the utilization of ash generated by its power stations to

convert the challenge of ash disposal into an opportunity. Ash is being used as a raw material

input by cement companies and brick manufacturers. NVVN is engaged in the business of

Fly Ash export and sale to domestic customers. Joint ventures with cement companies are

being planned to set up cement grinding units in the vicinity of NTPC stations.

Power Distribution: NTPC Electric Supply Company Ltd. (NESCL), a wholly owned

subsidiary of NTPC, was set up for distribution of power. NESCL is actively engaged in

Rajiv Gandhi Gramin Vidyutikaran Yojanaprogramme for rural electrification.

Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of

power equipment manufacturing capacity. NTPC has formed JVs with BHEL and Bharat

Forge Ltd. for power plant equipment manufacturing. NTPC has also acquired stake inTransformers and Electricals Kerala Ltd. (TELK) for manufacturing and repair of

transformers.

2.3 BUSINESS DEVELOPMENT

NTPC, with a rich experience of engineering, construction and operation of around 35,000

MW of thermal generating capacity, is the largest and one of the most efficient power

companies in India, having operations that match the global standards.

Commensurate with our countrys growth challenges, NTPC has embarked upon anambitious plan to attain a total installed capacity of 128,000 MW by 2032. Towards this end,

NTPC has adopted a multi-pronged strategy such as Greenfield Projects, Brownfield Projects,

Joint Venture and Acquisition route. Apart from this, NTPC has also adopted the

Diversification Strategy in related business areas, such as, Services, Coal Mining, Power

Trading, Power Exchange, Manufacturing to ensure robustness and growth of the company.


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3. INDUSTRY ANALYSIS

3.1 INDIAN ECONOMY IN POWER SECTOR

India currently has a power generation capacity of 169,748MW. By the end of the 12th plan

i.e. by the year 2017, the country is expected to add generating capacity of 100,000 MW. The

development of Ultra Mega Power Projects, a series of ambitious projects each with a

capacity of4000 MW and above, planned by the government; announcement of the National

Solar Mission that aims to create 20000 MW of solar power generating capacity by 2022 and

reforms encouraging increasing private sector participation are all indicators of the immense

potential of the Indian power sector.

3.2 POWER: ELECTRIC THERMAL AND NUCLEAR

Indias power sector has witnessed drastic changes in the past decade. The Electricity Act,

2003 (henceforth referred to as The Act) paved way for the advent of reforms and

competition in the power sector. A slew of policies and regulations followed, to facilitate an

accelerated growth in the sector. The process started with the restructuring of power

distribution utilities, with some states corporatizing the functional entities for power

generation, transmission and distribution.

The states of Orissa and Delhi went a step further by privatising the distribution function.

While Delhi came to be recognised as a successful model, Orissa could not keep up to

expectations.

3.3 GLOBAL POWER SECTOR (THERMAL POWER SECTOR)

Thermal power generation worldwide is poised for a staggering growth in the medium-to-

long term, with demand likely to expand a whopping 62% by 2030 from the present level.

Several countries across the world have already liberalized or are in the process of

liberalizing their electric power markets through opening up of wholesale markets and also to

some extent in retail markets. Effective mobilization of resources from private sector for the

development and expansion of power sector drive the liberalization process in developing

countries, while consistent pressures to reduce costs and prices of electricity force developed

countries to deregulate their electricity markets. Coal continues its dominance as a major fuel

source in the worldwide electricity generation and hence in thermal power generation.

However, natural gas is slowly making inroads at the cost of coal.

3.4 FUTURISTIC SCENARIO OF THE INDUSTRY

Thermal generation, comprising coal, gas and oil, is expected to grow by 5.6% per annum

during the period to 2015, but growth looks set to accelerate later in the decade.-Expect gas-

fired power generation to climb 16.7% perannum between 2011 and 2015, with an averageannual growth rate of 16.1% forecast to 2020.


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3.5 CHALLENGES OF INDIAN POWER SECTOR

Indian Power Sector has some of the major strengths such as abundant coal reserves to

support thermal power generation, huge potential for hydro-electricity generation and

abundant engineering skills to commission and run large-scale projects and a large consumerbase.

But at the same time Indian Power Sector has number of weaknesses/problems such as,

Inadequate domestic supply of quality fuel viz coal and gas result in high cost ofgeneration,high price of imported coal,volatilty in exchange rate and lack of demand

for such expensive power.the imported coal prices have been vastly affected due to

change in quality and regulations in coal exporting countries.

Inadequate power generation capacity SEBs weak financial health Lack of optimum utilization of existing generation capacity Inadequate inter regional transmission links Alarming level of Transmission and Distribution Losses Abysmally low level of collection efficiency Inadequate metering of consumers Large-scale theft Cross subsidization of Power and Skewed tariff structure Energy shortage of about 7.3% and peaking demand shortage of 12.5% Low PLF of Generating stations

3.6 ECONOMIC AND MONETARY INDICATORS

Unemployment or human resources requirementsThe Power sector is a capital and technology intensive sector requiring large number of

engineers, technicians and other skilled workers. Power projects require specialised technical

manpower during the project construction phase as well as the Operation and Maintenance

(O&M) phase. Due to the technology intensive nature of the business, technical and

managerial competency is critical in ensuring timely implementation of projects and optimum

performance upon commissioning.


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The country is poised to build more power generation capacity as well as supporting power

systems in the next 10 years as compared to the previous 60 years. This necessitates induction

of significant manpower in to the sector. Even though the country produces a large number of

new engineers every year, it is not possible to directly deploy them in to the work force

without proper training due to the technology intensive nature of the industry. The inductionprograms currently specified by the CEA range in duration between six to twelve months for

engineers, operators, supervisors and technicians based on the technology area. Further,

experienced professionals are required for critical activities and it is difficult to augment the

number of such professionals in a short period of time. Hence adequate capacity building

measures need to be undertaken to ensure the ready availability of manpower required for

achieving the plan targets. Further, continuous training should be provided to the current

manpower to ensure up-to-date technical skills, higher motivation and productivity. The total

manpower in the power sector at the end of 10th plan was approximately 9.5 lakhs as per the

Planning Commissions Working Group on Power for 11th Plan. The following are the

requirements for additional manpower for the 11th plan assuming addition of 68,869 MW of

generation capacity, 100,00014 ckt.Kms of HV, EHV and UHV transmission lines and 16

crore distribution consumers. It should be noted that the generation capacity addition target

was revised to 78,700 MW which further increases the manpowerrequirement.

3.7 INDUSTRIAL PRODUCTION

The current installed generation capacity of the country is 206,456 MW as of 31st July 2012.

In spite of significant augmentation in generation, transmission and distribution capacity, the

growth in demand has always outstripped the capacity additions.

While Indias per capita electricity consumption as of 819 kWh (as per provisional 2010 -11

data) is still a fair distance away from the National Electricity Policy target of 1000 kWh per

capita by 2012, it is undeniable that huge strides have been made in the power sector during

the 11th Plan period. A record generation capacity of 54,964 MW was added during the 11th

Plan, which is almost equal to the capacity addition during the 8th, 9th and 10th Plan periods

put together. The private sector played a very important role in this feat with over 42% of the

capacity being commissioned by private power developers. In fact, the private achieved more

than double of its 11th Plan target while both the Centre and State power generation utilities

were unable to meet their planned targets.

The boost in the private sector participation in the generation segment was brought about by

the Electricity Act 2003. It consolidated all the previous policies, thereby streamlining the

power sector and improving efficiency. The foundation for large scale private investments in

power generation was laid out with the de-licensing of generation. Tariff determination was

made a transparent process and competition was encouraged through the concept of Open

Access and competitive bidding for procurement of power. The figure below traces the rise in

importance of the private sector with respect to generation capacity addition.

The private sector is expected to play an even more important role in the 12th Plan. Out ofthe planned generation capacity addition of 78,000 MW, the private sector is expected to


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contribute around 56%. However, there are several viability issues plaguing the private

investments already made in the sector and which threaten to leave precious power

generation capacity stranded. Unless these issues are resolved, the power developers and the

banking community are likely to remain wary of further investments in the sector, thereby

affecting the power needs of the nation in the years to come.

3.8 CORPORATE PROFITS

A sharp rise in crude oil prices, depreciation in rupee and a rise in power cost have impacted

the performance of companies in the first quarter ended June 30, 2012. Besides power and

fuel cost, manufacturing companies have also seen a sharp rise depreciation and interest

outgo, resulting in a decline in net profits. A study carried out by the Centre for Monitoring

Indian Economy (CMIE) on the financial performance of the corporate sector for the first

quarter ended June 30, 2012, reveals that the net profits of 1,478 companies rose by a mere

2.7 per cent compared to the same period in the previous year. However, CMIE believes thatthe growth in corporate profits would improve to 10.2 per cent once the remaining 3,000 plus

companies listed on the stock exchanges come out with their financial results for the June

2012 quarter. This growth, however, will be much slower sequentially than the 22.1 per cent

growth in net profits clocked by corporates in the previous quarter ended March 31, 2012.

PROFIT MARGIN

CMIE estimates the net profit margin of corporate India to have contracted to 5.4 per cent in

the June quarter after jumping to 8.3 per cent in the March quarter. This would be the secondlowest quarterly margin witnessed by corporate India in the last 10 years, CMIE said in its

study. CMIE estimates corporate sales to have grown by 15.2 per cent in the June quarter.

Although healthy, the growth will be the slowest recorded by the corporate India in the last

10 quarters. CMIE, however, expects the profitability of companies to improve from now

onwards. The profit after tax margin is expected to expand from 5.4 per cent in the June

quarter to 6.4 per cent in the September quarter. It is expected to expand further to 7.4 per

cent in December quarter and 7.8 in the March 2013 quarter. The growth in profits too is

expected to accelerate from 10.2 per cent in June 2012 quarter to 23.6 per cent in December

2012 quarter. In spite of a healthy profit performance, the year-on-year growth in March 2013

quarter is expected to be weak at 3.2 per cent because of the high base, the CMIE report says.

For the financial year 2012-13, corporate profits are expected to rise by 17.7 per cent, after

contracting 0.5 per cent in 2011-12. The softening input costs, lower forex losses and slower

increase in interest outgo of the manufacturing sector due to the expected softening of interest

rates would result in the improvement in profits in 2012-13.

NTPC CORPORATE PROFIT

India's largest power generator National Thermal Power Corporation (NTPC) Monday

reported a 21.89 percent rise in net profit at Rs.25.97 billion in the third quarter endedDecember 2012 as against Rs.21.30 billion in the same period last year


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3.9 STRUCTURE

In December 1950 about 63% of the installed capacity in the Utilities was in the private

sector and about 37% was in the public sector. The Industrial Policy Resolution of 1956

envisaged the generation, transmission and distribution of power almost exclusively in thepublic sector. The Electricity (Supply) Act, 1948, envisaged creation of State Electricity

Boards (SEBs) for planning and implementing the power development programs in their

respective States. The Act also provided for creation of central generation companies for

setting up and operating generating facilities in the Central Sector. The Central Electricity

Authority constituted under the Act is responsible for power planning at the national

level.GOI promulgated Electricity Regulatory Commission Act, 1998 for setting up of

Independent Regulatory bodies both at the Central level and at the State level viz. The

Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory

Commission (SERC's) at the central and state levels respectively.

3.10 COMPANIES IN THE INDUSTRY

Private Companies

Tata PowerJaiprakash Power

VenturesSuzlon Energy

RelianceInfrastructure

CentralGovernmentCompanies

National Hydro-Electric Power

Corporation Ltd.

Power FinanceCorporation Ltd.

Power GridCorporation of

India Ltd.

National ThermalPower

Corporation Ltd.

Damodar ValleyCorporation


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3.11 MARKET SIZE

Current Status of Indian Power Sector

3.12 GROWTH TRENDS

Power generation increased by 3 per cent, from 699.1 billion kWh in 2007-08 to 723.5 billion

kWh in2008-09. Between 1998-99 and 2008-09, it increased at a CAGR of 4.9 per cent, from

448 billion kWhto 724 billion kWh.The PLF of thermal power plants rose from 64.6 per cent

in 1998-99 to 77.19 in 2008-09. The PLF of Indian plants is lower than that of their

international counterparts on account of old plants, inadequate maintenance, poor quality,

unsatisfactory transmission infrastructure and no means of assured fuel supply.

3.11 PERFORMANCE

Being one of the fastest growing economies and the second largest populated country, India

represents an attractive destination for the power industry. The working age population is

increasing at a rapid pace, thereby creating a strong demand for electricity. The rising

consumption of energy validates the fact. In the past few years, there has been a splendid

State ElectricityBoards (SEB)

Assam StateElectricity Board

Kerala StateElectricity Board

Jharkhand StateElectricity Board

Bihar StateElectricity Board

Maharashtra StateElectricity Board

West Bengal StateElectricity Board


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growth in the power generation and capacity and with the proper enactment of several

policies; the trend is likely to continue in the coming future. Reforms such as, the Electricity

Act and National Electricity Policy will provide the necessary impetus to the Indian power

sector.

State governments in co-operation with central and private players is devising strategies to

ensure that the power deficits can be reduced and large number of villages can be electrified.

The states are focusing on those aspects of energy, in which they have an edge, such as solar

power, wind power, or hydro power. To tap the underlying potential, the states are making

targets for capacity additions and funds availability. In other words, the states are

complementing the efforts made by the government at the central level with respect to the

power sector.

In order to properly address the demand-supply gap, one effective solution lies in the efficient

use of renewable energy sources. Renewable energy is the buzz word in Indian power sectorand most of the public and private players are coming up with plans to tap the potential

market.

3.12 LEGAL AND REGULATORY ISSUES


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3.13 STANDARDSTECHNOLOGY

Indias Integrated Energy Policy (IEP, see section above) examines several scenarios for

future development of the Indian energy sector. It does not however present scenarios aiming

for deepCO2 reductions. The policy envisages CO2 emissions for India in 2031/32 to be

between 5.5Gt CO2 and 3.9Gt CO2, compared to 1.34Gt in 2007, while the BLUE Map

Scenario in

ETP 2010 (IEA, 2010a) limits the CO2 emission increase to 2.2Gt in 2030. Based on an

average annual GDP growth report of 8% to 9% between 2006/07 and 2031/32, electricity

generation in2031/32 is estimated at between 3 628 TWh and 4 493 TWh. These figures

correspond to installed capacities of 778GW and 960GW.

Super Critical Technology in Power Generation

The Ministry of Power has launched supercritical power programme on the lines of the US,

Japan, Germany, Korea and Russia. Currently in India 69% of the gross generation of

electricity is coal based and only 1.2% is based on renewable energy sources. The Central

Electricity Authority (CEA) has estimated that meeting electricity demand over the next ten

years will require more than doubling the existing capacity, from about 132 GW in 2007 to

about 280 GW by 2017, of which at least 80 GW of new capacity is expected to be based on

coal. Moreover, the maximum contribution of renewable energy would be around 5.6% of

Indias total energy by 2031-32.Even though a large part of the power generation will be coal

dependent, it is important that India moves away from sub-critical pulverised coal or dirty

coal. There are no clear technology choices but their analysis suggests that commercialsupercritical combustion technology is the best option for India in the short-tomedium term.

The supercritical coal based units have faster starting time and load changes and are more

suitable for daily start up/shut down operation and have better efficiency at part load

operation. The task of induction of supercritical technology through bulk ordering of

generating units for PSUs is under active consideration of the Government. Discussions are

on for the procurement of 7 units of 600 MW and 6 units of 800 MW through bulk tendering,

through International Competitive Bidding (ICB). The selected bidders will have to set up

manufacturing facilities in India with a Phased Manufacturing Program.

3.14 OTHER ENVIRONMENTAL FACTORS

Water usage

The amount of water usage is often of great concern for electricity generating systems as

populations increase and droughts become a concern. Still, according to the U.S. Geological

Survey, thermoelectric power generation accounts for only 3.3 percent of net freshwater

consumption with over 80 percent going to irrigation.

Steam-cycle plants (nuclear, coal, NG, solar thermal) require a great deal of water forcooling, to remove the heat at the steam condensers. The amount of water needed relative to


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plant output will be reduced with increasing boiler temperatures. Coal- and gas-fired boilers

can produce high steam temperatures and so are more efficient, and require less cooling water

relative to output. Nuclear boilers are limited in steam temperature by material constraints,

and solar is limited by concentration of the energy source.

Thermal cycle plants near the ocean have the option of using seawater. Such a site will not

have cooling towers and will be much less limited by environmental concerns of the

discharge temperature since dumping heat will have very little effect on water temperatures.

This will also not deplete the water available for other uses. Nuclear power in Japan for

instance, uses no cooling towers at all because all plants are located on the coast. If dry

cooling systems are used, significant water from the water table will not be used.

Fossil fuels

Most electricity today is generated by burning fossil fuels and producing steam which is then

used to drive a steam turbine that, in turn, drives an electrical generator.

Such systems allow electricity to be generated where it is needed, since fossil fuels can

readily be transported. They also take advantage of a large infrastructure designed to support

consumer automobiles. The world's supply of fossil fuels is large, but finite. Exhaustion of

low-cost fossil fuels will have significant consequences for energy sources as well as for the

manufacture of plastics and many other things. Various estimates have been calculated for

exactly when it will be exhausted (see Peak oil). New sources of fossil fuels keep being

discovered, although the rate of discovery is slowing while the difficulty of extraction

simultaneously increases.

More serious are concerns about the emissions that result from fossil fuel burning. Fossil

fuels constitute a significant repository of carbon buried deep underground. Burning them

results in the conversion of this carbon to carbon dioxide, which is then released into the

atmosphere. The estimated CO2 emission from the world's electrical power industry is 10

billion tonnes yearly.[16] This results in an increase in the Earth's levels of atmospheric

carbon dioxide, which enhances the greenhouse effect and contributes to global warming.


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4. COMPETITION ANALYSIS

Competition in the electricity industry in India is primarily intended to enhance operational

efficiency. With the enactment of Electricity Act 2003, competition got a new nomenclature

and thrust.

Due to the gap between demand and supply in the Indian power sector, there has generally

been a stable market for power generation companies. NTPC Company is the largest power

generating Company in the country having a market share of approximately 16.34% in terms

of installed capacity and 25.32% in terms of national generation. The Maharashtra State

Power Generation Company Ltd. with an installed capacity of 9996 MW with market share

of about 5% is the next largest entity. The share of private sector capacity has increased to

54276 MW as of March 31, 2012 from 36761 MW as on March 31, 2011 and going forward,

the same is expected to increase even faster as is evident from capacity added during XI plan

so far. As far as generation is concerned, private sector has contributed to around 16% of total

electricity generation in the year 2011-12 as compared to 14% in the previous year .

Government of India has taken several policy measures which have provided an enabling

environment for private investors to participate in power sector. With the entry of private

players in power sector, the competition is expected to intensify.

4.1 PRODUCT DIFFERENTIATION

Access to affordable and reliable electricity is critical to a countrys growth and prosperity.

The country has made significant progress towards the augmentation of its powerinfrastructure. In absolute terms, the installed power capacity has increased from only 1713

MW (megawatts) as on 31 December 1950 to 118 419 MW as on March 2005 (CEA 2005).

The all India gross electricity generation, excluding that from the captive generating plants,

was 5107 GWh (gigawatt-hours) in 1950 and increased to 565 102 GWh in 2003/04 (CEA

2005).

Energy requirement increased from 390 BkWh (billion kilowatt-hours) during 1995/96 to 591

BkWh (energy) by the year 2004/05, and peak demand increased from 61 GW (gigawatts) to

88 GW over the same time period. The country experienced energy shortage of 7.3% and

peak shortage of 11.7% during 2003/04. Though, the growth in electricity consumption over

the past decade has been slower than the GDPs growth, this increase could be due to high

growth of the service sector and efficient use of electricity.

Per capita electricity consumption rose from merely 15.6 kWh (kilowatt-hours) in 1950 to

592 kWh in 2003/04 (CEA 2005). However, it is a matter of concern that per capita

consumption of electricity is among the lowest in the world. Moreover, poor quality of power

supply and frequent power cuts and shortages impose a heavy burden on Indias fast -growing

trade and industry.


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Oil and natural gas

The latest estimates indicate that India has around 0.4% of the worlds proven reserves of

crude oil. The production of crude oil in the country has increased from 6.82 MT in 1970/71

to 33.38 MT in 2003/04 (MoPNG 2004b). The production of natural gas increased from 1.4

BCM (billion cubic metres) to 31.96 BCM during the same period. The quantity of crude oil

imported increased from 11.66 MT during 1970/71 to 81 MT by 2003/04. Besides, imports of

other petroleum products increased from 1 MT to 7.3 MT during the same period. The

exports of petroleum products went up from around 0.5 MT during 1970/71 to 14 MT by

2003/04. The refining capacity, as on 1 April 2004, was 125.97 MTPA (million tonnes per

annum). The production of petroleum products increased from 5.7 MT during 1970/71 to 110

MT in 2003/04.

Indias consumption of natural gas has risen faster than any other fuel in the recent years.

Natural gas demand has been growing at the rate of about 6.5% during the last 10 years.Industries such as power generation, fertilizer, and petrochemical production are shifting

towards natural gas. Indias natural gas consumption has been met entirely through domestic

production in the past. However, in the last 4/5 years, there has been a huge unmet demand of

natural gas in the country, mainly required for the core sectors of the economy. To bridge this

gap, apart from encouraging domestic production, the import of LNG (liquefied natural gas)

is being considered as one of the possible solutions for Indias expected gas shortages.

Several LNG terminals have been planned in the country. Two LNG terminals have already

been commissioned: (1) Petronet LNG Terminal of 5 MTPA (million tonnes per annum) at

Dahej, and (2) LNG import terminal at Hazira. In addition, an in-principle agreement has

been reached with Iran for import of 5 MTPA of LNG.

Renewable energy sources

Renewable energy sources offer viable option to address the energy security concerns of a

country. Today, India has one of the highest potentials for the effective use of renewable

energy. India is the worlds fifth largest producer of wind power after Denmark, Germany,

Spain, and the USA. There is a significant potential in India for generation of power from

renewable energy sources, small hydro, biomass, and solar energy. The country has an

estimated SHP (small-hydro power) potential of about 15 000 MW. Installed combined

electricity generation capacity of hydro and wind has increased from 19 194 MW in 1991/92

to 31 995 MW in 2003/04, with a compound growth rate of 4.35% during this period (MoF

2005). Other renewable energy technologies, including solar photovoltaic, solar thermal,

small hydro, and biomass power are also spreading. Greater reliance on renewable energy

sources offers enormous economic, social, and environmental benefits.

The potential for power production from captive and field-based biomass resources, using

technologies for distributed power generation, is currently assessed at 19 500 MW including

3500 MW of exportable surplus power from bagasse-based cogeneration in sugar mills

(MNES 2005).


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4.2 MONOPOLY

Power trading inherently means a transaction where the price of power is negotiable and

options exist about whom to trade with and for what quantum.In India, power trading is in an

evolving stage and the volumes of exchange are not huge. All ultimate consumers ofelectricity are largely served by their respective State Electricity Boards or their successor

entities, Power Departments, private licenses etc. and their relationship is primarily that of

captive customers versus monopoly suppliers. In India, the generators of electricity like

Central Generating Stations (CGSs), Independent Power Producers (IPPs) and State

Electricity Boards (SEBs) have all their capacities tied up. Each SEB has an allocated share

in central sector/ jointly owned projects and is expected to draw its share without much say

about the price. In other words, the suppliers of electricity have little choice about whom to

sell the power and the buyers have no choice about whom to purchase their power from.

4.3 FOREIGN TRADE POLICY

Subject: Policy on foreign investment in Power Exchanges

Present PositionAs per extant policy, FDI, up to 100%, under the automatic route, is permitted in the

power sector (except atomic energy). This includes generation, transmission and

distribution of electricity, as well as power trading, subject to the provisions of the

Electricity Act, 2003. Extant policy, however, does not provide any specific

dispensation for foreign investment in power exchanges. Revised Position

The Government of India has reviewed the position in this regard and decided to

permit foreign investment, up to 49%, in Power Exchanges, registered under the

Central Electricity Regulatory Commission (Power Market) Regulations, 2010, as

below

i. Such foreign investment would be subject to an FDI limit of 26 per cent andan FII limit of 23 per cent of the paid-up capital.

ii. FII investments would be permitted under the automatic route and FDI wouldbe permitted under the government approval route.

iii. FII purchases shall be restricted to secondary market onlyiv. No non-resident investor/ entity, including persons acting in concert, will hold

more than 5% of the equity in these companies; and

v. The foreign investment would be in compliance with SEBI Regulations; otherapplicable laws/ regulations; security and other conditionalities.

Insertion of new paragraph 6.2.26Accordingly, a new paragraph 6.2.26 is inserted under 'Circular 1 of 20 12-

Consolidated FDI Policy', effective from April 10, 2012, as below

i.

6.2.26 Power Exchanges


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ii. 6.2.26.1 Power Exchanges registered under the Central Electricity RegulatoryCommission (Power Market) Regulations,2010

iii. 6.2.26.2 Other conditionsa. Such foreign investment would be subject to an FDI limit of 26 per

cent and an FII limit of 23 per cent of the paid-up capital;-49% (FDI&FII) Government(for FDI)

b. FIr investments would be permitted under the automatic route and FDIwould be permitted under the government approval route

c. FIr purchases shall be restricted to secondary market onlyd.No non-resident investor/ entity, including persons acting in concert,

will hold more than 5% of the equity in these comp:Uies; and

e. The foreign investment would be in compliance with SEBIRegulations; other applicable laws/ regulations; security and other

conditionalitys.

4.4 TECHNOLOGY UPGRADATION

The power sector is opening up and use of information technology and automation systems

can play a major role in bringing about standardization, transparency, revenue realization and

reduction in transmission and distribution losses in the sector. Technology innovation can

only benefit the sector and IT has a major role to play in empowering the power supply

utilities.

There is a huge need for specialized, customized and upgraded software systems for the

power sector. The restructured Rs 500 billion APDRP initiative gives high priority for

implementation of IT enabled solutions to reduce AT&C losses. The recently updated report

of IT Task Force in October 2008 also observes that technology will enable the

transformation of power sector in India.

The size and the scope of the software order are significant. Indias state-owned power

utilities are expected to place significant orders of software that can help them in project

monitoring and in managing their networks better..

4.5 BARRIERS TO ENTRY

Buyer Power

Based on the following parameters it can be said that Overall the buyer has weak power.

Low Switching Cost switching cost for the buyers is low as of now but is supposed to

increase when new players come in the market as the product in not differentiable i.e.

electricity.

Buyer sizeVery small.


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Oligopoly ThreatVery Low.

Undifferentiated product As the product i.e. electricity is undifferentiated product, so this

increases buyer power.

Tendency to switchBuyers will switch to the supplier who is efficient and cost effective.

Price sensitivityNot much price sensitive

Financial muscleNothing as compared to PSEs.

Buyer independence Low as of now but if more suppliers come into picture as Govt. has

sought competition in this market, the buyer power will increase.

Product dispensabilityVery Low.

Supplier Power

Based on the following parameters it can be assessed that the supplier Power in High.

Supplier sizeVery Large as the suppliers are Large PSEs.

Oligopoly threat Small number of suppliers enjoy monopoly, thereby contributing to the

supplier power.

Switching costsVery high, as only large govt. companies are the suppliers.

Player independenceLow

Substitute inputsAs no substitute inputs, so the firms have no choice.

Player dispensability - High

Differentiated input- Inputs are same i.e. electricity in case of company buying electricity

from wholesale market and selling to the end-users, and coal or gas in case the company is in

power generation field.

Threat of New Entrants

The Threat of new entrants is moderate based on the following parameters.

Low Switching CostSwitching cost for the enduser is low, so it increases opportunity for

the new entrants.

Undifferentiated product Product is not differentiable i.e. electricity, so the users have the

incentive to switch to the low cost supplier. This increases the opportunity for the new

efficient entrants.

Fixed costsHigh fixed cost acts as a barrier to entry for new entrants.


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Little regulationDelicensed generation and multiple licenses in the distribution in the same

area of supply acts as an opportunity for the new entrants.

Distribution accessibleIncreasing the threat of new entrants.

Suppliers accessibleIncreasing the threat of new entrants.

Market growthHigh, leading to great opportunities for new entrants.

Threat of Substitutes

The Threat of substitutes is Weak as per the following parameters.

Low Switching CostThe cost of switching to substitutes like gas, solar penal, etc. is high.

Rivalry among existing firms

The rivalry among existing firms is low as per the following parameters.

Competitor sizeVery Few companies very large in size like NTPC, NLC, NHPC, NPCIL,

PGCIL etc.

Number of playersVery few.

Hard to exit

Ease of expansionDifficult because of lack of investment and resources.

4.6 SCOPE

The World Bank has stated in its latest report that India can generate 68,000 MW of power,

costing less than Rs.6 a unit from renewable energy sources, a step that can address the

country's energy security concerns.

The report released here by the multilateral funding agency on Friday said the 68,000 MW of

wind, hydro and biomass energy can be harnessed at less than Rs.6 a unit. Developing

indigenous renewable energy sources, which have low marginal costs of generation, are more

economically viable in the long run,'' the studyPotential of renewable energy in India has stated.

India's electricity demand is expected to grow at an average annual rate of 7.4 per cent in the

next 25 years. The generation capacity will have to increase five-fold to keep pace with the

growth of demand.

At present, the installed capacity of the country stands at about 1.70 lakh MW from all

sources of energy, as per official data. The report also suggested that renewable energy

development can be an important tool for regional economic development within the country.

Himachal Pradesh, Jammu and Kashmir and Uttarakhand have 65 per cent of India's small


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hydro power resources. Much of the economically attractive wind potential in Orissa or the

biomass potential in Madhya Pradesh lies largely undeveloped, the report adds.

The report emphasises that coal, gas and oil have witnessed considerable price volatility in

recent years, renewables are the only free hedging mechanism against price volatility of fossil

fuels. The risk-adjusted cost of renewable energy is lower than that of fossil-based fuels, and

their use enhances the price certainty of the portfolio and increases energy security, the report

says.

The entire renewable potential, including solar, is less expensive than diesel, where the

existing 20,000 MW of diesel based installed capacity points to innovative possibilities of

scaling up renewable in a big way, according to N. Roberto Zagha, World Bank Country

Director in India.

The government has set an ambitious target of installing at least 44,000 MW of additional

capacity of renewables in the next 10 years.

4.7 COMPARATIVE VALUATION

(Major Players in the Energy Sector in India)

Electricity: The National Thermal Power Corporation (NTPC), National HydroElectric Power Corporation and the Power Grid Corporation of India are the major

public sector players. The main private sector players include Tata Power, Calcutta

Electricity Supply Corporation Limited, Reliance Infrastructure and AdaniEnterprises.

Oil and gas: Oil production in India is dominated by the Oil and Natural GasCorporation (ONGC) and Oil India, which control up to 85 percent of Indias total oil

production. Other players include Bharat petroleum Corporation Limited (BPCL) and

Hindustan Petroleum (HP). ONGC is also major player on the natural gas production

front, while the Gas Authority of India Limited (GAIL) is the major player in the

transmission and distribution of natural gas. Except for Reliance Industries Limited

(RIL) and Cairn India Limited, no private players have carved out a key role in this

sector. Coal: Indias coal production is dominated by Coal India Limited and Singereni

Collieries Company.

Renewable: The sectors dominated by private players like Suzlon Energy Limited,Tata BP Solar and Moser Baer Private Limited.

PRICE

The pricing has primarily been fixed/controlled by the Central and State Governments.

However, this is now being done by the Regulatory Commissions at the Centre and also in

the States wherever they are already functional. Power generation/ transmission is highly


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capital intensive and the Fixed Charge component makes up a major part of tariff. India being

a predominantly agrarian economy, power demand is seasonal, weather sensitive and there

exists substantial difference in demand of power during different hours of the day with

variations during peak hours and off peak hours. Further, the geographical spread of India is

very large and different parts of the country face different types of climate and different typesof loads.

PLACE

India is one of the largest in the terms of population. Thus, the demand for power is

extremely high. This factor has triggered the rise of several types of power agencies to fulfill

the requirement. In general, the power department of the country falls directly under the

Ministry of Power India. The name of the ministry was Ministry of Energy in earlier times.

Ministry of Power covers the entire sector of power. The huge variety of the climatic

conditions of the country has forced the country to depend on various sources of power. Allthese types fall directly under the power department. The sub divisions are organized in such

a manner, that they are able to interchange among themselves to be able to meet the exact

requirement. The power plant like hydro, solar, thermal requires huge investment and are

undertaken both by public sector and private sector enterprises at various locations within

India. Its worthwhile to mention that these power plant set ups are located in remote areas

away from the main cities owing to the fact of causing pollution and environmental

disturbance. Eastern region, western region, southern and northern region many plants are

been set up.

All India / NTPC Installed Capacity

Fuel MW (AllIndia)

MW

(NTPC)All India VS

NTPC

( %age)

Total Thermal 151530.49 41184 27.18

Coal 130220.89 35279 27.09

Gas 20109.85 5895 29.31

OIL 1199.75 0

Hydro 39491.40 0

Nuclear 4780.00 0

RES 27541.71 10 0.04

Grand Total 223343.6 41184 18.44


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PRODUCTS

Electricity-

Oil and gas-

Coal-India now ranks third amongst the coal producing countries in the world. Being the

most abundant fossil fuel in India till date, it continues to be one of the most important

sources for meeting the domestic energy needs and accounts for 55% of the countrys total

energy supplies. The development of core infrastructure sectors like power,steel, and cement

are dependent on coal.Coal has been recognized as the most important source of energy for

electricity generation in India. About 75% of the coal in India is consumed in the power

sector.

Renewables-They are imperishable and we can have unlimited amounts without distressing

over their exhaustion. They have the ability of being replaced by natural and biological

processes. There are several types of renewable resources. The abundant availability of

renewable resources in India keeps it at an advantageous position vis--vis other countries

and it can use the resources for its own betterment and can also cater to the energy security

concerns at the same time. Government of India is performing quite well in initiating

programmes and implementing projects in this regard. The availability, installed capacity and

achievement of the programmes in promoting the use of renewable resources, is what follows

now.


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5. FINANCIAL ANALYSIS

5.1 FINANCIAL RATIOS

Financial highlights of NTPC Ltd. VS TATA POWER (standalone) for last three years

Financial highlights of NTPC Ltd. VS RELIANCE POWER (standalone) for last three

years

Profitability Ratios

These ratios measure the efficiency of a firm. Profitability ensures optimum performance and

continued existence of a business unit. Profitability can be measured by expressing profits in

relation to (a) Investments and (b) Sales.

units (Rs. Crores) NTPC LTD. TATA POWER

As on March 31 2013 2012 2011 2013 2012 2011

Turnover (net) 65673.93 62052.23 55062.65 9567.28 8495.84 6918.48

Operating Profit 13717.30 11248.15 12705.91 1687.58 1214.28 1078.28

Profit before Tax after

Interest

16578.63 12337.58 10713.99 1703.38 1682.87 1111.82

Profit after Tax (PAT) 12619.39 9223.730 9102.59 1024.69 1169.73 941.49

Net Block 100045.50 87084.22 39064.75 8489.32 7783.07 5782.93

Total Assets 161116.50 140830.70 111572.40 28092.86 24981.3 21205.3

Share Capital 8245.46 8245.46 8245.46 237.33 237.33 237.33

Reserves & Surplus 72142.05 65045.71 60138.66 10803.48 10388.82 9801.41

Net Worth 80387.51 73291.17 68384.12 11040.81 10626.15 10038.74

Current Assets 41167.08 37396.37 35396.79 3795.13 5026.59 2767.6

Current Liabilities 22610.03 17231.58 13675.86 4560.95 3792 3105.33Net Current Assets 18557.05 20164.79 21720.93 -765.82 1234.59 -337.73

Capital Employed 133641.17 119199.44 97896.50 23531.91 21189.3 18099.97

Total No. of Shares units (in lakhs)

Issued 82454.6 2373.3


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1. Net Profit Ratio2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 19.21% 14.76% 16.53% 30%

TATA

POWER

10.71% 13.76% 13.60% -22%

JSW 15% 5% 22% 22.4%

2. Return on Capital Employed (ROCE)2013 2012 2011 % CHANGE FROM YEAR

2012

NTPC 10.26% 9.43% 12.97% 9%

TATA POWER 8.65% 6.93% 6.68% 25%

JSW 17% 9% 13% 10%

19.21

14.76

16.53

10.71

13.76 13.6

15

5

22

2013 2012 2011

NTPC TATA JSW


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3. Return on Total Assets (ROTA)

2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 10.28% 08.76% 09.60% 17%

TATA

POWER

6.06% 6.73 5.24% -10%

JSW 8% 2% 8% 30%

10.26

9.43

12.97

8.65

6.93 6.68

17

9

13

2013 2012 2011

NTPC TATA JSW

10.28

8.76

9.6

6.06

6.73

5.24

8

2

1

2013 2012 2011

NTPC TATA JSW


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4. Return on Net Worth (RONW)

2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 15.69% 12.58% 13.31% 25%

TATA

POWER

09.28% 11% 09.37% -16%

JSW 15% 4% 15% 29%

5. Return on Equity (ROE)

2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 15.69% 12.58% 13.31% 25%

TATA

POWER

09.28% 11% 09.37% -16%

JSW 15% 4% 15% 28%

15.69

12.5813.31

9.28

11

9.37

15

4

15

2013 2012 2011

NTPC TATA JSW


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Liquidity Ratios

Liquidity is the pre-requisite for the very survival of a firm. The liquidity ratios reflect the

short-term solvency of the firm. It helps to analyze the short term position of the company to

understand whether they can meet their short term commitments towards their suppliers, sub-

contractors, creditors, interest payments, etc. since this may affect the performance of thecompany.

1. Current Ratio2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 1.82 2.17 2.58 -16%

TATA

POWER

0.83 1.32 0.89 -37%

JSW 93 10.8 17.4 -14%

15.69

12.58 13.31

9.28

11

9.37

15

4

15

2013 2012 2011

NTPC TATA JSW


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2. Liquidity Ratio2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 1.91 2.04 2.32 -6%

TATAPOWER 0.13 1.10 0.68 -88%

JSW 0.81 0.86 1.45 -5%

1.82 2.17 2.580.83 1.32 0.89

93

10.8

17.4

2013 2012 2011

NTPC TATA JSW

1.91

2.04

2.32

0.13

1.1

0.68

0.810.86

1.45

2.13 2012 2011

NTPC TATA JSW


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3. Cash Ratio

2013 2012 2011

% CHANGE FROM

YEAR 2012

NTPC 0.74 0.93 1.18 -20%

TATAPOWER 0.09 0.28 0.26 -68%

JSW 0.09 0.20 0.48 -54%

Leverage Ratios

These ratios throw light on the long-term solvency of a firm. For stakeholders it is

desirable to ensure the long-term solvency of the company, as it may have implication on

performance of company.

1. Total Debt to Asset2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 0.33 0.32 0.35 1%

TATA

POWER

0.30 0.27 0.28 9%

JSW 636. 00 0.34 0.40 1850%

0.74

0.93

1.18

0.09

0.28 0.26

0.09

0.2

0.48

2013 2012 2011

NTPC TATA JSW


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2. Capitalization Ratio2013 2012 2011 % CHANGE FROM YEAR

2012

NTPC 0.39 0.38 0.36 3%

TATA

POWER

0.43 0.39 0.37 10%

JSW 0.74 0.75 0.76 -1.2%

0.33 0.32 0.350.3 0.27 0.28

636

0.34 0.4

2013 2012 2011

NTPC TATA JSW

0.39 0.380.36

0.43

0.390.37

0.74 0.750.76

2013 2012 2011

NTPC TATA JSW


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3. Debt to Equity

2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 0.66 0.62 0.58 6%

TATA

POWER

0.76 0.64 0.60 18%

JSW 2.88 3.02 00 5%

Activity Ratio

Activity ratio indicates the efficiency of the company with which it employs its resources to

earn the revenues. (Cost of Goods Sold is generally taken for the calculation but due to

unavailability I have taken Net Sales)

1. Inventory Turnover Ratio2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 16.92 17.02 15.76 -1%

TATA POWER 11.84 11.48 11.39 3%

JSW 12.01 8.65 10.80 3.8%

0.66 0.62 0.58

0.760.64 0.6

2.88 3.02

0

2013 2012 2011

NTPC TATA JSW


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2. Fixed Asset Turnover Ratio2013 2012 2011 % CHANGE FROM

YEAR 2012

NTPC 0.57 1.38 1.41 -59%

TATA

POWER

1.12 1.09 1.19 3%

JSW 0.97 0.88 1.13 10.22%

16.93 17.02

15.76

11.8411.48 11.39

12.01

8.65

10.8

2013 2012 2011

NTPC TATA JSW

0.57

1.38

0.14

1.12 1.09

1.19

0.97

0.88

1.13

2013 2012 2011

NTPC TATA JSW


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3. Total Asset Turnover Ratio

2013 2012 2011

% CHANGE FROM

YEAR 2012NTPC 0.43 0.46 0.48 -7%

TATA

POWER 0.14 0.20 0.36 -28%

JSW 0.45 0.37 0.37 38%

0.43

0.460.48

0.14

0.2

0.36

0.45

0.37 0.37

2013 2012 2011

NTPC TATA JSW


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6. PROCUREMENT PROCESS

Once the Feasibility report is prepared, then it is thoroughly scrutinized and evaluated to

ascertain whether the project is fruitful for NTPC Ltd. or not, if any anomalies are found then

a panel of experts decide on a solution or a way to counter it. The experts may be internally

sourced or NTPC Ltd has various third party consultants employed for this purpose.

After the project feasibility report is given a green signal by the top level management then

the contract and materials department start writing the requirements mentioned in the Bill of

Quantities and they are revised to accommodate change in prices/demand. The Bidding

documents are prepared by the contract department at NTPC Ltd. which is then distributed to

the interested bidders at a nominal price. A Bid document is a comprehensive document

consisting of various set of books; it contains the entire technical, legal and financial

requirement to be submitted by a bidder. An example of how a bid is analyzed by theFinance-Concurrence department is given as follows:

All the technical requirements, bidding procedures, and contractual obligations are mentioned

in the document.

The bidding documents include the following sections:

Section I - Invitation for Bids (IFB)

Section II - Instructions to Bidders (ITB)

Section III - Bid Data Sheet (BDS)

Section IV - General Conditions of Contract (GCC)

Section V - Special Conditions of Contract (SCC)

Section VI - Technical Specifications (TS)

Section VII - Forms and Procedures (FP)

1. Bid Form and Price Schedules2. Bid Security FormBank Guarantee2a. Bid Security Form - Bank Guarantee (in case of Bid from Joint Venture)

2b. Bid Security Form - Letter of Credit

3. a) Form of Notification by the Employer to the Bidderb) Form by Sight Draft

4.

Form of Notification of Award


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5. Form of Contract Agreement6. Performance Security Form6a. Performance Security Form in case of Contract awarded to Joint Venture

(if applicable)

7. (i) Bank Guarantee Form for Advance Payment(For supplyCIF / Ex-works)

(ii) Bank Guarantee Form for Advance Payment

(For Installation Services)

7a. Bank Guarantee Form for Advance Payment in case of Contract

awarded to Joint Venture

8. Form of Completion Certificate9. Form of Operational Acceptance Certificate10.Form of Trust Receipt11.Forms of Indemnity Bond (3 Nos.)12. Form of Authorization Letter13.Forms of Joint Deed of Undertaking14.Form of Bank Guarantee by Associate / Collaborator15.Form of Joint Venture Agreement (if applicable)16.Form of Bank Guarantee Verification Check List17.Form of Extension of Bank Guarantee

NTPC Ltd

SUB: Evaluation report for outdoor transformers package for NSTPP {660X3 MW}

BRIEF SCOPE OF WORK

Outdoor Transformers Package covers design, engineering, manufacture,testing at works,

short circuit testing on one transformer of each rating, transportation to NABINAGAR Super

Thermal Power Project (3x660 MW) site including Customs clearance & port clearance, port

charges (if any), receipt, Inplant transportation, handling and storage at site, insurance,

erection and commissioning of various Transformers along with neutral grounding resistors


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and inclusive of necessary tools and tackles and supply of mandatory spares & maintenance

equipment.

FINANCINGNTPC Ltd.intends to finance the project through External Commercial Borrowings (ECB)

and internal resources.

6.1 QUALIFYING REQUIREMENTS& ITS ANALYSIS

The Qualifying Requirements are the pre requisites which all the bidders must satisfy in order

to successfully bid for the contract. I, with my fellow trainee was assigned mainly this task of

scrutinizing the Qualifying Requirements and checking them with the documents submitted

by the bidders in support of their claims. QR is basically of 2 types namely Technical QR and

Financial QR.

Technical Criteria:

(a) The bidder should have manufactured & supplied at least two numbers(one each at two

different installations) of 16 MVA, 11KV or higher rating oil filled transformers which

should have been in successful operation for a period of at least two (2) years prior to the date

of Techno-Commercial bid opening.

(b) Bidder should have his own facilities for conducting all routine and type tests as per IS:

2026 (except short circuit test).

(c) 16 MVA, 11KV or higher rated oil filled transformer manufactured by bidder should have

been successfully short circuit tested.

The Technical QR basically deals with the checking of the prior experience of the bidder in

the same field, verifying the previous work done and checking the acknowledgement for the

same through the completion certificates.

Financial Criteria: The average annual turnover of the Bidder, in the preceding three (3) financial years

as on the date of Techno-Commercial bid opening, should not be less than Rs. 76million (Indian Rupees Seventy Six millions only) or in equivalent foreign currency.

The Net Worth of the Bidder as on the last day of the preceding financial year shouldnot be less than 25% of its paid-up share capital.

In case the bidder is not able to furnish its audited financial statements on standalone entity

basis, the unaudited unconsolidated financial statements of the bidder can be considered

acceptable provided the Bidder further furnishes the following documents for substantiation

of its qualification:

(i) Copies of the unaudited unconsolidated financial statements of the Bidder along with

copies of the audited consolidated financial statements of the Holding Company.


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(ii) A Certificate from the CEO/CFO of the Holding Company, as per the format enclosed

with the bidding documents, stating that the unaudited unconsolidated financial statements

form part of the consolidated financial Statements of the company.

In case where audited results for the preceding financial year are not available, certification

of financial statements from a practicing Chartered Accountant shall also be consideredacceptable.

In case a bidder does not satisfy the financial criteria mentioned above its Holding company

would be required to meet the stipulated turnover requirements , provided that the net worth

of such Holding Company as on the last day of the preceding financial year is atleast equal to

or more than the paid-up share capital of the Holdingcompany. In such an event, the bidder

would be required to furnish along with its Techno-Commercial bid, a Letter of Undertaking

from its Holding Company, supported by Board Resolution of the Holding Company, as per

the format enclosed in the bidding documents, pledging unconditional and irrevocable

financial support for the execution of the Contract by the bidder in case of award.

The unutilized line of credit for fund based and non-fund based limits with cash andbank balances including fixed deposits of the Bidder as on a date not earlier than 15

days prior to the date of Techno-Commercial bid opening, duly certified by its

Bankers should not be less than 88 million (Indian Rupees Eighty Eight million only)

or in equivalent foreign currency. In case certificates from more than one bank are

submitted, the certified unutilized limits shall be of the same date from all such banks.

Where another Company of the group acting as the Treasury Centre is responsible for

Treasury Management of the Bidder having combined credit/guarantee limit for the whole

group, the Bidder would be required to provide a Banker's certificate regarding the unutilized

line of credit for fund based and non-fund based limits together with cash and bank balancesincluding fixed deposits available to such Treasury Centre.

Further, Treasury Centre shall certify that out of the aforesaid limits certified by its bankers,

the Bidder shall have access to the line of credit of a level not less than the specified amount.

In proof of this, the Bidder would be0 required to furnish along with its Techno-Commercial

bid, a Letter of Undertaking from the Treasury Centre, supported by a Resolution passed by

the Board of Directors of the Holding Company, as per the format enclosed with the bidding

documents, pledging unconditional and irrevocable financial support for the execution of the

Contract by the bidder in case of award.

In case the Bidder's unutilized line of credit for fund based and non-fund based limits

specified above is not sufficient, a comfort letter from one of the bankers specified in the

bidding documents unequivocally stating that in case the bidder is awarded the contract, the

Bank would enhance line of credit for fund based and non-fund based limits to a level not

less than the specified amount to the Bidder or to the Treasury Centre as the case may be,

shall be acceptable.

NOTES FOR ABOVE CLAUSES:

(i) Net worth means the sum total of the paid up share capital and free reserves. Free reserve

means all reserves credited out of the profits and share premium account but does not include

reserves credited out of the revaluation of the assets, write back of depreciation provision and

amalgamation. Further any debit balance of Profit and Loss account and miscellaneous


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expenses to the extent not adjusted or written off, if any, shall be reduced from reserves and

surplus.

(ii) Other income shall not be considered for arriving at annual turnover.

(iii) For unutilized line of credit for fund based and non-fund based limits and Turnover

indicated in foreign currency, the exchange rate as on seven (7) days prior to the date ofTechno-commercial bid opening shall be used.

(iv) Two different installations imply two different project sites or two different contracts.

Notwithstanding anything stated above, the Employer reserves the right to assess the

capabilities and capacity of the Bidder/his collaborators/associates/subsidiaries/group

companies to perform the contract, should the circumstances warrant such assessment in the

overall interest of the Employer.

6.2 FINANCIAL ANALYSIS OF BIDS

The evaluation of the Financial QR is the most important task in the Finance-Concurrence

Department at NTPC Ltd. I and my fellow trainee have worked on such comprehensive

reports throughout our tenure of our training. The First and the foremost thing to be checked

is the average turnover of the past 3 years and the amount so calculated should suffice the

amount mentioned in the Financial QR. We used to find out the gross turnover from the

financial statements submitted by the bidder. Then the Net Worth was also checked to match

with the QR requirement.

If a bidder company had submitted their bids as a Joint Venture, Holding company or any

other strategic alliance then we also have to check the documents submitted for the same andwhether their agreement adheres to the Qualifying Requirements of NTPC Ltd.

Calculation of Financial QR:

1. Average Annual turnover:For Electrical and Mechanical packages =

Total Cost including Taxes & Duties X 12

Working period in months

For Civil packages =

Total Cost excluding free issue X 2 X 1.5


2. Bank Guarantee Limits:Usually, NTPC asks for around 2% of the estimated cost for the package as a Bank Guarantee

amount. The secondary reason behind asking such bank guarantee is to avoid bids from theplayers which doesnt qualify the requirements and which are less interested. The primary


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reason is that if in case of award of contract to a bidder and then the bidder doesnt agree to

the contract, then the amount of bank guarantee can be forfeited by NTPC under few

circumstances to cover up the costs incurred during the entire process.

3.

Unutilized Line of Credit:

Total Cost including Taxes & Duties X 3


This project not only involved the financial tasks, it also gave me an opportunity to look into

the legal perspective of how a contract is awarded at NTPC Ltd. The Qualifying Requirement

also required us to check the original documents submitted by the bidder like Joint Deed of

Undertaking, Board Resolution for approving the bid, Performance Certificates, Bank

Guarantee certificates, Integrity pact etc. We had to carefully scrutinize each and every

document and check whether it was in the prescribed format as per NTPCs guidelines or not.

We also worked closely with the contracts and materials department who used to guide us

and explain to us the technical aspects involving Joint Ventures, Consortium Agreements etc.

Once we were satisfied with the bidder meeting the Qualifying Requirements then we used to

prepare a comprehensive summary of all the participating bidders wherein we used to specify

that a bidder is qualified in all aspects and then the next step was to open the price bids of

those successfully qualified bidders.

The Price bid opening is done in a meeting where the sealed envelopes are opened in front of

the bidding companys executive (Who is authorized under the power of attorney). The Price

bid contains the prices quoted by the bidder for the pre-specified amount of items given byNTPC in various price schedules. We in a team had to perform an arithmetic check on the

price schedules and ascertain whether the figures quoted/submitted are accurate or not.

In case where the financial statements of the bidder were not in the departments archived

files then I had to prepare a consolidated Financial Statement using the Balance Sheets,

Income Statement, schedules to these financial statements.

A sample of such a statement is given below.


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TURNOVER:

SHARE CAPITAL:


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RESERVES AND SURPLUS


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CAPITAL EMPLOYED

PAT & EBIT


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INTEREST

6.3 DEFINITIONS OF PROCUREMENT

Procurement is the acquisition of goods and services in the right quantity, quality, at the right

time, in the right place, and the right price for the direct benefits or use of government,

corporation or individual.

It may also be defined as the process of identifying and obtaining goods and services. It

includes sourcing, purchasing and covers all activities from identifying potential suppliers

through to delivery from supplier to the users.

Procurement in NTPC is effected through the Procurement and works policy as laid down in

the Delegation of Power (DoP) of the company. This policy lays down the broad guidelines

to be followed in the acquisition of equipment, materials and services for the organization.

This policy permits centralized policy making and decentralized execution and administration

with a view of achieving the organizational goals in the most efficient and effective manner.

Objective:

The objective of this policy is to make available, the needed equipment, material, works and

services in the right quality and quantity, at the right time and at the right price after giving

fair and equal chance to tendered, subject to the policy guidelines laid herein, so as to obtain

the optimum value for each unit of expenditure.

Purchasing at NTPC is not a very simple process. The purchasing process is not same for all

kind of materials and equipment. The urgently required materials are procured through cash

purchase and single tendering, the routine purchase are routed through Material Management

Services and are procured by bidding. The materials department or the HR Services

department usually initiates the tender process. In case of construction and civil works; the

tender is initiated by Contracts Services. Tendering process is the most important activity

during the entire acquisition process and hence this is the main focus during the project.


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6.4 PROCUREMENT POLICY

CONTRACT SERVICES AND MATERIALS MANAGEMENT SERVICES

Procurement activities to be undertaken by NTPC are to satisfy varying project requirement

of equipment, materials and services. Any procurement-requiring adherence to IDA

procurement procedures, long equipment delivery period, intense engineering coordination orspecialized engineering knowledge during procurement etc. would be classified as category

A contracts. All other procurement contracts pertaining to a project will be classified as

category B contracts.

The responsibility of category A contracts for all the projects and related to pre-tender

planning, registration of contractors, award of contracts, monitoring and post contract follow

up till the delivery of equipment from the suppliers work will be that of the central contracts

services in the technical services division. The receipt and erection of plant and machinery

including storage of category A related goods whenever to be done by NTPC and

Tender Notification

Issuance of Tender Document

Receipt of Quotation

Has Tender

Evoked

Response?

Award of contract

NO

YES


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coordination in all commercial and other matters thereafter, procurement of construction

equipment and execution of civil works will be the responsibility of project management.

The entire responsibility of category B items is that of materials management services under

the general managers of projects. For this purpose, the contracts falling under category Awill be identified and listed in respect of each project and all other contracts will be deemed

to fall under category B.

Procurement action will be initiated on the basis of approved indents/requisitions indicating

budget and project estimate provisions.

The contract services / materials management services will receive the requisition / indents

for the procurement of materials/ Equipment / services duly approved by the competent

authority, they shall also keep them informed concerning sources of supply, prices/rates,

freight, taxes, lead time, etc. and plan and organize procurement action, maintain a keen

follow up and organize quality control till the order is executed and also arrange systematic

coordination by means of proper contract administration.

Timely execution of the projects will be the overall responsibility of GMs of the projects. For

monitoring of schedules of construction/ erection, the project management would develop

their own systems and procedures for setting and reviewing short time monthly, weekly and

daily physical target jointly with the construction/ erection agency.

The CCS will have a quality assurance (Q.A.) group to ensure that proper quality is built intothe materials, machinery and services made available to the site. This group will be

constantly working on the development of specification steps to be followed during all phases

of the procurement activities. This Q.A. group will also technically guide and control the

specialized field Q.A. activities under the project Management.

Inspection at manufacturers work for all categoryA contracts will also form an integral part

of the responsibilities of CCS without which no quality standard can be enforced. It is

however envisaged that inspection at the site for all contracts and at manufacturers works for

category B contracts will remai

bhavya word

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