vikas gupta, mba (et),upes

8/9/2019 Vikas Gupta, Mba (Et),Upes

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POWER SECTOR SNAPSHOT Page 1

POWER SECTOR SNAPSHOT

BY: - VIKAS GUPTA

M.B.A. ET

Roll No. 39


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TABLE OF CONTENT

S.NO. Topic Page No.1 Executive Summary 3-9

2 Introduction 10-12

3 Generation 13-19

4 Transmission 20-27

5 Distribution 27-34

6 Rural Electrification 35-37

7 Power business:-Incentives 37-388 Generation 37-39

9 Transmission 39-40

10 Distribution 40-42

11 Power Companies in India 44

12 Power Trading 45-46

13International Scenario in

Power Trading47-50

14Indian Power Trading

Scenario50-58

15 Conclusion 59

16 List of Abbreviations 60


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EXECUTIVE SUMMARY

POWER SECTOR SCENARIO DEVELOPMENT AND IMPROVEMENT

Power is a critical infrastructure for economic development and for improving the

quality of life. The achievement of increasing installed power capacity from 1362 MW to

over 100,000 MW since independence and electrification of more than 500,000 villages

is impressive in absolute terms.

However, it is a matter of concern that the annual per capita consumption of India, at

about 700 kWh is among the lowest in the world. Further, people in a large number of

villages have no access to electricity. The end users of electricity like households,

farmers, commercial establishments, industries are confronted with frequent powercuts, both scheduled and unscheduled. Power cuts, erratic voltage and low or high

supply frequency have added to the power woes of the consumer. These problems

emanate from:

inadequate power generation capacity; lack of optimum utilisation of the existing generation capacity; inadequate inter-regional transmission links; inadequate and ageing sub-transmission & distribution network leading to

power cuts and local failures/faults;

large scale theft and skewed tariff structure;

slow pace of rural electrification; Inefficient use of electricity by the end consumer; lack of grid discipline

Power is a concurrent subject under the Constitution. The States have the greater share

of generation and transmission assets and almost the entire distribution under their

control. They would need to play a very proactive role in effecting institutional and

result oriented changes. Many strategies outlined in the document are inter-linked and

are mutually supportive in terms of addressing the problems. However they have been

classified subject-wise for the purpose of this document.


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GENERATION

Addition and creation of generation capacity to remove shortages

CURRENT INSTALLED CAPACITY (As on 30-04-10)

The large coal reserves in the country provide a ready and economical resource and

ensure energy security. Hence, coal has been identified as the mainstay fuel for power

generation till 2012. Emphasis has been laid on setting up large pit head stations to

avoid high costs associated with transportation of high ash bearing Indian coal and

overstraining the already stretched rail network.

Tentative Capacity Addition Plan during 11th

Plan

(Figures in MW)

Hydroelectricity is clean energy and its generation is not linked to issues concerning fuel

supply, especially the price volatility of imported fuels. It enhances our energy security

and is ideal for meeting peak demand. Less than one fourth of the vast hydel potential

of 1,50,000 MW has been tapped so far. Compared to the high utilisation of hydro

All

India

Thermal Thermal Thermal Thermal Nuclear Hydro Other Total

Coal Gas Diesel Total

MW 84448.38 17055.85 1199.75 102703.98 4560.00 36863.40 15521.11 159648.49

%age 52.9 10.7 0.8 64.3 2.9 23.1 9.7 100.0

Sector/Fuel Total

Hydro 17,189

Thermal 46,114

Coal/Lignite 44,000

Gas/LNG 2,114

Nuclear 3,160Total 66,463


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potential in countries like Norway (58%), Canada (41%) and Brazil (31%), the utilisation

of only 17% of its hydel potential by India is extremely low. In fact, the share of hydro

generation in India has gradually declined during the past 25 years.

Consequently, thermal generation, which should generally be used for base load

operation, is also being used to meet peaking requirements. As against the desirablehydro share of 40 per cent, the current share is only about 25 per cent in India.

It is estimated that for building over 1,00,000 MW of additional power capacity and

associated transmission & distribution infrastructure, nearly Rs. 8,00,000 crores of

investments would be needed in the next decade. The investors have been wary of the

sector due to lack of confidence in getting returns on their investments. The payment

security measures taken till now have not yielded desired results. There is little doubt

that resource generation within the sector through prompt and efficient collection of

appropriate user charges from all the electricity consumers is the only long-term

solution to attract investments in the sector. The sector has to be made financially

strong from within in order to attract investments from outside. Pending fructification

of the long term measures in this regard, the Ministry has taken steps to set up an

alternate payment security mechanism for the investors as an interim resource

mobilisation strategy.

There have been major slippages in meeting targets of capacity addition during the VIII

and IX Five-Year Plans. Only 53.77 per cent of the capacity addition target was achieved

during the VIII Plan. During the IX Plan, too, only about half of the target of 40,245 MW

is likely to be achieved. To avoid such slippages in the X and XI Plans, a comprehensive

project monitoring and control system has been put in place. Special emphasis has been

laid on monitoring of projects at pre-implementation stage. A Power ProjectsMonitoring

Committee has been set up. Special Secretary (Power) has been taking weekly reviews

to monitor the progress of power projects to be identified for commissioning up to

2012. To ensure greater success in capacity addition, the central power generating

companies under Ministry of Power are being asked to add 43 per cent of the total

required capacity as against a contribution of 23 per cent during the IX Plan.

In view of the fact that addition of new capacity takes relatively longer time, strategies

have also been formulated to augment power supply in short/medium run. These are:

Increased generation through Renovation and Modernisation (R&M) of oldstations.

Utilisation of the surplus capacity of the captive power plants into the grid Demand Side Management (DSM) to flatten the demand curves (introducing

time of day tariffs and metering).

Introduction of a new system of matching time and load profiles for differentzones in the country.


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Energy Conservation (The Ministry is piloting the Energy Conservation Bill, which,when enacted, will provide necessary legal framework for promoting

conservation and efficiency).

Evacuation of power from the power surplus eastern region.

Transmission

Inadequate investments in transmission & distribution infrastructure have resulted in

power evacuation constraints from the generating stations. The problem has been

severe in the eastern region. Concentration of coal reserves and hydel sources in a few

geographic pockets calls for an effective inter-regional network to transmit the

electricity generated in fuel rich regions to other regions. Accordingly, a perspectiveplan has been developed to build 30,000 MW inter-regional transmission capability by

2012. The formation of a national grid will improve reliability, quality and economics of

power supply. Ultimately, national grid is the solution to the problem of inter-regional

imbalances.

However, in view of idling of surplus power capacity in eastern region, immediate steps

to facilitate transfer of power from eastern region are being undertaken. Pursuant to

the enactment of legislation in 1998, permitting private investment in transmission,

detailed guidelines have been issued for attracting private investment in transmission

projects. Due to mismatch in generation and demand, there is a tendency among stateutilities to overdraw from the grid. This coupled with inadequate capacitors, results in

low frequency and low voltages in the grid and the cascading effect could lead to

collapse of the entire regional grid. Any failure of this proportion leads to colossal

economic losses. To maintain grid discipline, measures have been identified for strict

enforcement of the Grid Code formulated by the CERC. The failure of the Northern Grid

on January 2, 2001 had effectively derailed normal activities besides causing losses

amounting to several hundred crores.


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Distribution Reforms - The Core of Sector Reforms

The toughest roadblock stalling power sector development has been the poor financial

health of the SEBs, which, in turn, is mainly due to poor performance on the distribution

front. Out of total energy generated, only 55% is billed and only 41% is realised. The gap

between average revenue realisation and average cost of supply has been constantly

increasing. During the year 2000-2001, the average cost of supply was 304

Paisa per unit and average revenue per unit was 212 paisa per unit i.e. there was a gap

of 92 paisa for every unit of power supplied. All this has caused erosion in the volume of

internal resources generation by the SEBs.

The annual losses of SEBs have reached a level of about Rs. 26,000 crores. Consequently

they are unable to make full payments to CPSUs for purchase of power and coal. This

has resulted in accumulation of outstanding of more than Rs. 40,000 Crores by the SEBs.

The growth and performance of Central Power

Sector Utilities (CPSUs) are also adversely affected by this. Poor creditworthiness of SEBs

has effectively blocked investments by private sector despite the enabling andencouraging framework laid down by the

Centre.

The major factors responsible for financial sickness of SEBs are:

l Skewed tariff structure leading to unsustainable cross subsidies l Huge T&D losses, largely due to outright theft and unmetered supply. It has

been estimated that theft alone causes loss of about Rs. 20,000 crores annually

Lack of accountability in distributionPower sector development cannot accelerate until the above issues are addressed with

full commitment at all levels. Accordingly, distribution reforms have been identified as

the key area for putting the sector on the right track. The strategies identified by

Ministry of Power in this direction include:

Development of district level distribution improvement plans/projects for alldistricts. The Ministry/CEA will help the States in capacity building measures in

areas related to technical and commercial activities as well as planning and

deployment of personnel. Assistance would also be provided to SEBs to improve

their accounting practices.

Setting up of district level Energy Committees for monitoring and resourceplanning.

Development of 60 distribution circles as Centres of Excellence for distributionreform. The funds for the project would be provided by the Centre under the


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Accelerated Power Development Programme (APDP). These Centres would act

as models for replication in other districts.

Hundred per cent metering and effective Management Information System (MIS)for monitoring at feeder level, backed up by detailed energy audit to bring

accountability into the system at all levels.

Taking high voltage lines up to the load centre to prevent theft of power andreduce technical losses.

Signing of MOUs with States for undertaking distribution reforms in a timebound manner and linking the support of Government of India to achievement

of predetermined milestones. (Sixteen states have signed the MOUs so far).

Privatisation / corporatisation of distribution Tariff rationalisation by SERCs (16States have set up SERCs and 9 have issued tariff orders).

Electrification of Villages and Households

The pace of rural electrification in the VIII and IX Plans has declined. Nearly 80,000

villages are yet to be electrified. Only 31 per cent rural and 45 per cent urban

households have been covered so far. It is planned to cover all non-electrified

households by the year 2012. In order to accelerate rural electrification, it has been

proposed to treat rural electrification as a Basic Minimum Service in the Prime

Ministers Gramodaya Yojana. The Ministry is also taking a number of other specificmeasures including strengthening of the rural distribution network under the

Accelerated Power Development Programme (APDP). The objective of the Ministry is to

complete electrification of 62,000 villages by 2007, that is within the next 6 years and

18,000 remote villages (through renewable sources) by 2012. Decentralised generation

and distribution through district level Energy Committees have been envisaged to

contribute in this endeavour. All households are to be covered by 2012.

Providing affordable powerWith increasing prices of fuels and cost of installations, the cost of power generation has

significantly increased. While attending to the task of doubling the countrys generation

capacity by 2012, high priority is to be given to reduce the cost of power to enable

different segments of population and the economy to effectively utilise power as an

input. In order to recommend strategies to reduce the cost of power, an

Inter-Disciplinary Group of Experts was constituted. The Group has submitted its Report.

The implementation of a number of strategies outlined in the Report would help in cost

reduction efforts and provide affordable power to the consumer.


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Benchmarking in project costs, adoption of best practices, and choosing least cost

options in capacity addition are going to be promoted. Competitive bidding will be

adopted as a transparent and cost reducing approach. Already the Ministry has ensured

that its PSUs post all their tenders on web-sites. Some State power utilities have also

done so.

Sustainable power developmentConcerns relating to pollution and the disposal of the large amount of ash from coal

based power stations, which are the mainstay of Indias power generation, are being

addressed through strategies to promote environmentally sustainable power

development. The useful recommendations of the Fly Ash Mission of TIFAC are to be

implemented. The Ministry is taking steps for making the use of fly ash mandatory for

road and bridge construction, as well as for construction of Government buildings. Fiscal

incentives to supplement the market mechanism for taking up production and

promotion of fly ash products are also envisaged.

All Central utilities have been advised to adopt ISO 14001 standards. Afforestation is

being given major emphasis and a Special Purpose Vehicle (SPV) is being set up for

afforestation. Introduction of super critical technology and clean coal technologies is

also planned to generate power with maximum efficiency and minimal pollution. The

Ministry is taking environmental initiatives in keeping with the global developments and

mechanisms. Thus, the Ministry is striking a fine balance between the power

development imperatives and the emerging concerns for the environment.

Upgrading technical efficiency and skill levels, and re-orientationTo make the power sector truly efficient and competitive in the changing scenario, steps

have already been taken to impart greater thrust to research and development, training

of the human resources in the power sector and adoption of progressive management

practices and tools, (including IT). Personnel are also being educated about their

changed roles in the power reform scenario.

Emphasis on commercialisation of the sector is also being imparted. A Standing

Committee on Research and Development has been constituted to draw up a

Perspective Research and Development Plan to ensure optimum utilisation of the

infrastructure and provide a standing forum for R&D activities in the power sector.

Another Committee has been set up to formulate a National Training Policy for PowerSector and to develop a national level action plan for training of the power

professionals to align their skills and mindset to the changing requirements. Integration

of training facilities available in the sector is also planned to optimise their utilisation.


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INTRODUCTION

Accelerating economic growth and achieving higher standards of living depend upon the

availability of adequate and reliable power at an affordable price. Unlike other

commodities, electricity cannot be stored for future use. In other words, its generation

and consumption have to be simultaneous and instantaneous. It is noteworthy that

within a fraction of a second of clicking the power switch, the consumer puts into

motion an intricate transaction involving a power generation company (like NTPC), a

power transmission company (like POWERGRID), and a bulk power purchaser and retail

distributor (like DVB). The unique features of power as a commodity or service make the

dynamics of its supply and demand difficult to manage. Installing power generation,

transmission and distribution capacity is a complex, time consuming and expensive

process. Power is among the most capital-intensive infrastructure sectors.

Power has been placed in the list of concurrent subjects under the Indian Constitution

with the Centre and the States both having jurisdiction. After independence, the StateElectricity Boards (SEBs)/State Electricity Departments were the sole utilities (except a

few licensees in private sector) responsible for generation, transmission and distribution

of electricity. To supplement the efforts of States in bridging the yawning gap between

demand and supply of power, it was decided, in mid seventies, to set up generating

stations and associated high/ extra high voltage transmission lines in the Central Sector.

Today, States control about 60 per cent of the countrys generation capacity, 70 per

cent of the transmission network, and almost 100 per cent of the distribution system.

Problems confronting the sector

The achievement of increasing installed power capacity from 1362 MW to over 100,000

MW since independence and electrification of more than 500,000 villages is impressive.

However, it is a matter of concern that the annual per capita consumption, at about 350

kWh is among the lowest in the world. Still many households in a large number of

villages have no access to electricity. The end users of electricity like households,

farmers, commercial establishments, industries etc. are confronted with frequent power

cuts, both scheduled and unscheduled. Power cuts, erratic voltage levels and wide

fluctuations in the frequency of supply have added to the power woes of the

consumer. The consumers are resorting to captive power supply arrangements of

various types ranging from 300 Mega Watts (industry) to 250 Watts (households).

Almost every shop in an urban market place has a generator set. Most establishments

have battery operated inverters and diesel generation sets. Most urban households

have voltage stabilizers for different appliances.

In fact the money spent by the domestic consumer on these standby power supply (DG

sets / Inverters) and power conditioning (stabilisers) arrangements could be among the


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highest in the world. The same money could be more gainfully invested through

corporate investments in power generation, transmission and distribution with assured

returns on investments.

The major reasons for inadequate, erratic and unreliable power supply are:

Inadequate power generation capacity; Lack of optimum utilisation of the existing generation capacity; Inadequate inter-regional transmission links; Inadequate and ageing sub-transmission & distribution network leading to

power cuts and local failures/faults;

Large scale theft and skewed tariff structure; Slow pace of rural electrification; Inefficient use of electricity by the end consumer.

Strengths and opportunities in the sector

Abundant coal reserves (enough to last at least 200 years). Vast hydroelectric potential (150,000 MW). Large pool of highly skilled technical personnel. Impressive power development in absolute terms (comparable in size to those of

Germany and UK).

Expertise in integrated and coordinated planning (CEA and PlanningCommission).

Emergence of strong and globally comparable central utilities (NTPC,POWERGRID,).

Wide outreach of state utilities. Enabling framework for private investors.

Well laid out mechanisms for dispute resolution. Political consensus on reforms. Potentially, one of the largest power markets in the world

Objectives

To provide Power on Demand by 2012. To make the sector commercially sound and self sustaining. To provide reliable and quality power at an economic price. To achieve environmentally sustainable power development. To promote general awareness to achieve consensus on the need for reforms.


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Strategies

The strategies to realise above objectives have been evolved after a comprehensive,

integrated and realistic assessment of the strengths of the sector and of the challenges

confronting it.

The process has led to a range of mutually interdependent and complementary

strategies to counter the challenges and exploit the strengths/opportunities. The

strategies integrate the supply side imperatives with demand side management, short

and medium term measures with long-term action plans, operational measures with

institutional and structural changes.

The laid down objectives can be realised only if the plan is effectively implemented by

all stake-holders in the power sector. Power is a concurrent subject under the

Constitution.

The States, have the greater share of generation and transmission assets and almost the

entire distribution under their control. They would need to play a very proactive role in

effecting institutional and result oriented changes. Many strategies outlined in the

document are inter-linked and are mutually supportive in terms of addressing the

problems.


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GENERATION

Today, most of the regions in the country are plagued with power shortages leading to

erratic and unreliable supply. The problem becomes acute during peak hours and thus

necessitates planned load shedding by many utilities to maintain the grid in a healthy

state. The all India average shortages during 2001-2002 were 7.8 per cent in terms of

energy and 13 per cent in terms of peak load. There were considerable regional, local,

rural-urban and seasonal variations. The region wise shortages during the year are

depicted in the bar diagram. Based on the projections of demand made in the 16th

Electric Power Survey, additional generation capacity of over 1,00,000 MW needs to be

added to ensure Power on Demand by2012. This amounts to nearly doubling the

existing capacity of about 1,00,000 MW. In other words, the achievements of more than

five decades need to be replicated in the next decade. Apart from massive resource

mobilisation, the task of identifying a basket of techno-economically viable and

environmentally sustainable projects in itself is a daunting challenge. The major

strategies to augment the generation capability to the required level are:

Planning of targets for each sector.

A capacity addition of 46,185 MW has been fixed for X Five Year Plan and balance 60,

885 MW in XI Plan. Central Utilities under Ministry of power are targeted to add 43

percent of required capacity (against 23% in IX plan).


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The large coal reserves in the country provide a ready and economic resource, which

ensures energy security. Hence, coal would continue to be the mainstay fuel for power

generation till 2012. Emphasis has been laid on setting up large pit head stations to

avoid high costs associated with transportation of high ash bearing Indian coal and

overstraining the already stretched rail network. To reduce the environmental impact

and increase efficiency, the strategies adopted by the Ministry include introduction oflarge sized units (660 MW) employing the state-of-the-art super critical technology .

Further, in view of their shorter gestation period, higher thermal efficiency and

environmental benefits, few combined cycle power projects have been identified.

Coastal locations have been given preference for such plants in order to minimise cost.

Resource Planning

It is estimated that for building over 1,00,000 MW of additional power capacity and

associated transmission & distribution infrastructure, nearly Rs. 8,00,000 crores of

investments would be needed in the next decade.The problem of non-availability of escrow capacity with most State utilities has been

holding up the financial closure of most private sector projects. There is little doubt that

resource generation within the sector through collection of appropriate user charges

from all the electricity consumers is the only long term solution to attract investments in

the sector. The sector has to be made financially strong from within in order to attract

investments from outside. In view of the current policy against giving counter

guarantees and pending fructification of reforms measures, the Ministry has taken steps

to set up alternate payment security mechanism for the investors as an interim resource

mobilisation strategy. The mechanism has been evolved in consultation with leading

financial institutions like IDBI, ICICI, SBI Caps etc. on the basis of a memorandum ofagreement/ understanding to be signed with the reforming States wherein the States

agree on milestone based package of reforms like restructuring of SEBs, setting up of

SERCs, reduction in T&D losses, 100% metering, improvement in PLF, energy audit etc.

This would bring about improvement in revenue collection and financial health of the

SEBs and enable them to provide escrow before the commercial operation date of the

power project. In fact, 16 states have already entered into such MOUs. A system of

monitoring the performance in the Ministry has been introduced.

A Committee of Experts has been constituted to identify the sources of funds including

Government funding, multi-lateral and bilateral assistance, institutional financing,

market borrowings, internal resources, private investment etc; and\ suggestinstitutional policy and other measures required for such massive resource mobilisation.

An action plan to expedite financial closure of private sector projects is on the anvil. The

policy framework has also been liberalised to encourage domestic/Foreign Direct

Investment in power sector. The measures taken in this regard include allowing Foreign

Direct Investments in generation, transmission, distribution and power trading on the

automatic route without any monetary ceiling.


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Comprehensive monitoring of project implementation

Against targeted capacity addition plan of 30, 538 MW in VIII Five-Year Plan, actual

capacity addition was only 16423 MW (54%). Similarly, in IX Plan, against the target of

40,245 MW, only about 20,420 MW (51%) is likely to fructify. Thus, there have been

major slippages in both Plans. In order to ensure that such slippages are not repeated in

future, the Ministry has reviewed the project monitoring mechanism of the major

Central Power Sector Undertakings. It emerged from the review that most of the CPSUs

are having a three tier monitoring system to monitor the progress of projects under

implementation the three tiers are; a milestone oriented detailed scheduling at working

level (Level III), detailed package wise scheduling at the Project Manager level (Level II)

and an overall Master Control Network scheduling at top level The monitoring at

oganisational level is supplemented by a comprehensive and periodic review by CEA and

Ministry of Power (Level 0). With the help of NIC, the progress of ongoing projects is

reported on the Wide Area Network (WAN) integrating the Ministry of Power, theCentral Electricity Authority and all CPSUs. Thus the project monitoring of ongoing

projects is comprehensive and the problem of slippages of these projects is unlikely.

The review of the system revealed that monitoring mechanism of the projects at pre-

implementation stage was not as vigorous as it was for projects already under

implementation (or ongoing projects). The Ministry of Power has now strengthened the

monitoring systems for such projects. This would enable monitoring and follow up from

feasibility to ordering stage. A Power Projects Monitoring Committee has been set up.

Special Secretary (Power) has been taking weekly reviews to monitor the progress of

power projects to be identified for commissioning up to 2012. Efforts are also underway

to have an institutional arrangement to expedite interstate inputs for early clearance of

projects.

Integrated Action Plan for power development including Nuclear and Non

Conventional Energy Sources

India is endowed with vast energy resources, both conventional and non-conventional.

Meeting the additional capacity demand of over 1,00,000 MW requires taking

advantage of all economically viable sources of energy in an optimum manner within

the energy mix. Till now there has been a pre-dominance of coal based thermal power

plants in Indias power sector. The present nuclear capacity is 2900 MW which accounts

for only 2.9% of the installed capacity. Similarly the total installed capacity based on

nonconventional energy sources is only about 1700 MW consisting of 1269 MW wind,

257 MW biomass and 217 MW small hydro power. This constitutes less than 2% of tota

installed capacity in the country.

In the new millennium, environment compulsions on one hand and the need to achieve

energy security on the other demand thrust on development of nuclear power and


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power from nonconventional resources. The Vision 2020 of the Department of Atomic

Energy envisages a cumulative installed capacity of 20,000 MW by the year 2020.

Similarly, the Ministry of Non-Conventional Energy Sources has recently announced a

National Renewable Energy Policy. The policy envisages capacity addition of 10,000 MW

during the time-frame 2002- 2012. Hydro projects up to 25 MW have already been

designated to this Ministry for speedier development. To ensure integrateddevelopment, a Coordination Committee for Power has been constituted for close

coordination amongst the concerned Ministries to deliberate on issues pertaining to

generation programmes, evacuation schemes, operational issues and grid related

problems. Secretary (Power) chairs the Committee, with Secretary (Department of

Atomic Energy), Secretary (Non-Conventional Energy Sources) Principal Adviser, Energy

(Planning Commission) and Chairman(Central Electricity Authority) as members.

SHORT TERM MEASURES

Since the gestation period for building fresh capacity is large, short term measures havebeen identified for quick increase in generation. These are:

Supply of surplus captive power to the grid

The captive power capacity in the country is estimated at about 20,000 MW. One of the

options available to increase generation in the short term is to enable surplus captive

power capacity to flow into the Grid. Accordingly, the States have been requested to

evolve a comprehensive captive power generation policy with facilities for purchase of

power and wheeling of surplus power from captive generating plants. In this regard a

draft Captive Power Policy prepared by CEA (in consultation with States) has been

forwarded to all the States/Union Territories in July, 2001. The suggested captive policy

guidelines are:

Liberal permission may be accorded for setting up of hydro or cogenerationcaptive plants in the States.

Captive power plants may be allowed if State/SEB or successor entities areunable to supply required power supply. Such a captive power plant can be

considered for the uninterrupted power supply to the industry even if the State

is surplus in power.

Units in Special Economic Zone (SEZs) and industries/ entities may be liberallyallowed to set up captive power plants.

The captive power plant based on coal/ liquid fuel/ gas as a fuel may bepermitted to build 200% of the requirement of industry (if the State is deficit in

power) and sell the surplus power to SEB..

Third party sale is also permissible with the approval of SEB.


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Improved generation through Renovation & Modernisation (R&M)

Though the average growth in capacity addition during the last decade has been around

4.4 per cent, the growth of electricity generation during the same period has been

around 7.0 per cent. This has been achieved through steady improvement in the

average All India Plant Load Factor (PLF) from 53.8 per cent in 1990-91 to 69 per cent in2000- 01.

CEA has identified that 170 thermal units, with installed capacity of 11,000 MW and 35

Hydel units with installed capacity of 3000 MW need renovation and modernisation.

Uprating their performance/ life extension are cost effective methods of capacity

creation (Rs. 1 crore per MW for Thermal and Rs. 60-70 lakhs per MW for Hydro as

compared to Rs. 4 to 5 crores per MW for new green field power projects). State-wise

R&M action plan is being formulated. Annual additional generation benefit of about 90

billion units (20% of existing annual generation) is expected through R&M measures.

Under the Accelerated Power Development Programme (APDP) funds would be

provided for Renovation and Modernisation schemes.

Improved PLF through other short term measures

CEA has been asked to prepare an action plan for improvement in the Plant Load Factor

and identifying generating plants having PLF less than 75%.

Capacity creation through Energy Conservation & Demand Side Management.

There has been over emphasis on the supply side management in the power sector so

far in India. There is an estimated potential of 20, 000 MW through energy efficiency

and Demand Side Management (DSM). In order to minimize the overall requirement

and cost of power, energy conservation & DSM have been accorded high priority.

It was resolved, in the Chief Ministers / Power Ministers Conference on 3rd March 2001,

to implement an effective programme in the field of DSM through:

Energy efficient bulbs, tube lights and agricultural pump sets Time of the day metering and differential tariff for peak and off peak hours Suitable mass awareness and extension efforts. The Ministry is promoting

introduction of time-of-the day tariff, which will induce industries to shift

production from peak to off peak period.

The potential benefits to be derived by promoting end-use efficiency are:(i) Possibility of availability of nearly 15,000 MW through end-use energy efficiency.

(ii) Saving potential of 30-35% each in industry and agriculture by retrofitting with

efficient equipment / pump sets.

(iii) Saving potential of 25-30% in commercial / Government establishments and

residential houses.


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OTHER PERFORMANCE IMPROVEMENT INITATIVES

Energy efficiency/conservation measures encourage consumers to use energy more

efficiently, which will result in reduced energy consumption thereby reducing cost and

increasing productivity. Load Management will help in shifting electricity load from peak

to off peak period.

Enactment of an enabling legislation on energy conservation giving the Central and

State Governments statutory powers for promoting and enforcing a regime of energy

conservation in the country is being promoted. The scope of the proposed Energy

Conservation Bill includes all forms of energy viz. coal, oil, nuclear, renewable sourcesetc. For implementing the provisions of the proposed Bill, a Bureau of Energy Efficiency

is to be set up. The Bill is pending in the Parliament for enactment. The salient features

of the Bill are:

Setting up of energy conservation standards for any equipment or applianceconsuming, generating, transmitting or supplying energy. Certain industries,

establishments and users of energy to be notified as designated consumers

keeping in view the intensity and quantity of energy consumed. Mandatory

energy audit for all designated consumers, as and when required by the

designated authority.

Promotion of mass awareness at both the Central and the State levels for energyconservation, consumer education and guidance.

Government to take steps to encourage preferential use of energy efficientequipment and appliances.

Constitution of an Energy Conservation Fund at the Centre and the States forutilizing any grant or loans made available for promoting energy conservation.


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Time zones planning

The Ministry has decided to set up a Committee to go into the issue of matching time

and load profiles so as to help manage the demand (specially peak demand) across

different regions in accordance with the identified timings of high and low demands in

different parts of the country.

Higher performance targets in the MOUs with the Central Power Sector Utilities

(CPSUs)

The Ministry is planning to make the CPSUs further improve their performance on all the

parameters. One of the steps envisaged in this regard is to make the MOU targets in

terms of generation, efficiency, productivity and capacity addition etc. progressively

higher. With a view to achieving excellent ratings, the CPSUs will strive harder and this

will result in gains to the sector.


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TRANSMISSION

The investments in and growth of Transmission, sub- Transmission and Distribution

Systems have not matched the increase in generating capacity. Consequently, there are

constraints of power evacuation from generating stations. The problem is severe in the

eastern region, where surplus capacity is idling due to lack of absorption network and

evacuation facilities. The power sector development demands a thrust on Transmission

sector and the following blueprint is envisaged for this sector.

Formation of National Grid

Before the beginning of the planning era in 1951, the electricity supply industry in the

country consisted of generating stations supplying power to loads in their immediate

vicinity. With a view to promote reliability of power supply and achieving operating

economies, interconnections of individual systems was done leading first to the

formation of State grids. The uneven geographical distribution of exploitable energyresources (coal and hydro potential in the country) necessitated large scale

transportation of coal across the State boundaries. A decision was taken in the early

sixties to create regional electricity grids as basic units for power planning and

operations of the electric power system. In the seventies, the regional grids were in

position and advantages of sharing generating capacity between the States, and the

inter-connected operation were being obtained. In the eighties, with the commissioning

of the Regional power stations by Central sector Generating Companies (NTPC, NHPC)

and construction of EHV transmission lines by them transcending state boundaries, the

development of regional grids was further accelerated.

This has necessitated the formation of a National Power Grid to fulfill the following

objectives:

Enable transfer of power from power surplus regions to deficit regions. Enable optimal development and utilisation of coal and hydro resources, in the

overall interest of the nation.

Improve economy, reliability and quality of power supply.Towards the objective of formation of National Grid, a number of inter-regional

schemes have been planned for phased development. The brief status including inter-

regional links under operation, approved schemes and future programme is presented

ahead:


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With the help of the above links, transfer of power among the regions, especially from

the power surplus Eastern Region


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Future Programme

Looking into the future demand and availability of generation resources, a Perspective

Transmission Plan has been drawn up indicating the major inter-regional transmission

highways to be developed by 2011-12. This will ultimately lead to the formation of a

strong National Grid. These highways are proposed to be established in phases matchingwith the requirement of inter-regional power transfer.

As per the envisaged programme, cumulative capacity of the inter-regional links will be

enhanced as shown in the graph.

Evacuation of surplus power from Eastern Region

Eastern Region at present is having substantial energy surplus, as load growth has not

been commensurate with the generation capacity addition, leading to non-utilisation of

available capacities. The total installed capacity in the Eastern Region is of the order of

15,000 MW(out of which NTPC contributes 3900 MW) whereas the peak load is around6500- 7500 MW and off-peak load is 4000-4500 MW.


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While the formation of National Grid is an ultimate solution to remove inter-regional

imbalances, the following schemes have been completed on priority basis to facilitate

power transfer from surplus Eastern Region to other deficit Regions,

220 kV 3rd Ckt Korba-Budhipadar connecting ER & WR Jeypore-Gazuwaka HVDC Bipole between ER & SR 220 kV S/c Balimela-Upper Sileru between ER & SR 400 kV D/c Bongaigoan-Malda between ER & NER 220 kV D/c Birpara-Salakati between ER & NER 220 kV S/c Dehri-Mughalsarai between NR & ER 400 kV Sasaram-Sarnath-Allahabad line between NR & ER

With the above concerted efforts, energy exchange from Eastern Region has increased

to the tune of about 6,790 MUs in 2000-2001 as against 5500 MUs in 1999-2000,

registering a growth of more than 23%. However total transfer of only 1100 MW is

possible currently.

Inter-regional links to increase the transfer to 4400 MW in short run involving an

investments of Rs.17,600 crores are proposed.

A task force under the Chairmanship of Special Secretary (Power) has been constituted

by Ministry of Power to formulate a short-term action plan for evacuation of surplus

power from Eastern Region.

Monitoring of grid discipline and grid issues

Grid discipline is a pre-requisite for maintenance of primary grid parameters namely

frequency and voltage within permissible limits for safe, secure and stable operation of

the grid. However in India, the operating frequency goes beyond the permissible range

of 49-50.5 Hz. Mainly due to: -

Mismatch in generation and demand.

Due to chronic power shortages, there is a tendency among state utilities tooverdraw from the grid during peak hours. Predominance of thermal / base load stations and inadequate peaking capacity

(hydro / Gas Turbines) limiting the flexibility of generation control as per load

pattern of the grid.

Lack of grid discipline leads to critical situations of the kind, which happened on the 2nd

of January 2001 in the Northern region, when the entire grid failed. A failure of this


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proportion not only causes severe stress on the power plant equipment and reduces its

life, it also has a cascading effect on the industries and the people. It adds up to huge

economic losses and causes immense damage to the countrys image. After the grid

failure in January 2001, at the instance of the Minister of Power, the Chairman, CEA

conducted an inquiry and submitted its report. Follow-up action on the report is being

taken on priority. The following measures have already been taken. :

Modification and modernisation of Panipat 400 KVA substation. In-principle approval of CEA given to (i) series compensation for Panki-

Muradnagar, (ii) providing interconnection between 400 KVA substations of

POWERGRID and UPPCL at Agra, and (iii) preponing of Allahabad-Mainpuri-Ballabgarh 400 KV double circuit line.

All States have been advised to observe strict grid frequency discipline, promptlycarry out the instructions of RLDC, ensure free governor operation of their power

plants and expedite capacitor installation programme.

As a result of these measures, there has been substantial improvement in grid

frequency. However the situation is being closely monitored to prevent its recurrence.

Encouraging FDI in Transmission

Out of the Rs. 8,00,000 crores required for doubling the power capacity to 2,00,000 MW

by the year 2012, about Rs. 2,00,000 crores would be required for the associated

transmission system including creation of a National Grid. Out of this, an investment of

about Rs.70,000 crores would be required in Central Sector Transmission Systems alone.

POWERGRID is expected to mobilise an investment of Rs.41,000 crores from its own

resources. The balance requirement of Rs.29,000 Crores is proposed to be mobilisedthrough private investments.

Considering the scale of investment and the volume of expansion required, attracting

large private investment in transmission is essential. The Government of India amended

Indian Electricity Act and Electricity Supply Act in 1998, to enable private sector

participation in transmission sector. In January 2000, the Ministry of Power has issued

detailed guidelines for private sector participation in transmission. The Guidelines

envisage two routes for inviting private sector participation. One route is through Joint

Venture of POWERGRID and private investor. The other route called IPTC (Independent

Power Transmission Corporation) shall facilitate private investor including investors

coming through FDI to invest 100% by themselves.

Preparation of Manual on Disaster Management

Power is an essential service and it is one of the first to be affected by natural disasters

like the earthquake in Gujarat in January, 2001 and the cyclone in Orissa in October,

1999. It is, therefore, necessary to have a clear-cut action plan ready for managing


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major breakdown of essential power supply posing wide-spread and protracted

problems. Ministry of Power has directed all power sector utilities and State

Electricity Boards to prepare contingency plans to meet situations arising out of

breakdown of machinery and equipment and disruption of power system due to any

reasons including natural calamities. Such action plans have already been drawn by a

number of State Electricity Boards and Central Power Sector Undertakings such NTPC,NHPC, PGCIL, BBMB.

DISTRIBUTION REFORMS

The poor financial health of bulk power purchasers (SEBs/ State utilities) is a major

roadblock in the development of the sector. The continuously rising commercial losses

of SEBs have touched Rs. 26,000 crores in 2000-01. They The poor financial health of

SEBs also seriously affects their ability to invest in new generation capacity, to upgrade

their Transmission & Distribution network and to undertake system improvement. owe

to Central Power utilities, Railways and coal companies, nearly Rs. 40,000 crores. Thispayment deficit continues to rise and threatens the viability of the Central

power utilities. The inability of SEBs to pay has been the basic reason for poor private

investment, both domestic and foreign, in spite of liberalisation of policies at Central

Government level. Till the health of the SEBs improves, major investment from the

private sector cannot be expected.


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Distribution is the weakest link in the chain of power supply. Hence distribution reforms

have been identified as the key area of focus in the power sector reform process. The

initiatives taken in this regard include:


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Development of district level distribution improvement plans for all districts in

the country.

All the districts in the country will have a detailed distribution improvement plan. The

Ministry/CEA will help the States in capacity building measures in areas related to

technical and commercial activities as well as planning and deployment of personnel.Assistance would also be provided to SEBs to improve their accounting practices.

The Expert Committee on Distribution has prepared technical manuals for project

formulation, energy audit & accounting, technical specification of equipments and

training. NTPC, CPRI, NPC, WAPCOS and POWERGRID have been assigned the task of

capacity building in SEBs, guide them to prepare DPR, train the manpower and also

supervise the execution of works in the identified circles in each States. A meeting was

held with these five organisations in July 2001 wherein it was agreed that

(a) The technical manual prepared by the Expert Committee be sent to all the States for

guidance(b) Each of these organisations be assigned certain States

(c) These organisations would station their team in assigned States

(d) The team would identify the area of data collection and under their supervision get

the necessary data collected through the counterpart team set up at the SEB level as

well as the circle level

(e) Analyse the data in the presence of the counterpart team using the appropriate

software

(f) Obtain computer aided HVDS model

(g) Help the SEB, thereafter, to prepare DPR

(h) train the manpower. In other words, the State officials will collect the data, analyse

the same using computer software and prepare DPR under the supervision andguidance of these organisations.

Such an approach will help in capacity building through on the job work and also

through training. The Ministry of Power is preparing the detailed scope of work for

these organisations, time frame for each activity, methodology and deliverables in order

to operationalise the project preparation for each of the identified circles.

District level Committees for Distribution Reforms Monitoring and District level

Generation Resource Planning

In order to provide for an institutional arrangement at the district level to oversee work

relating to formulation and implementation of projects aimed at strengthening the sub

transmission and distribution system and for promoting power generation from

renewable energy sources, district level committees are proposed to be constituted.

The district-level committees would be headed by the District Collector/Deputy

Commissioner. The committee could include the following:

i. Members of Parliament representing the District;


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ii. Members of the Legislative Assembly/Legislative Council to be nominated by the

State Government;

iii. Chairman, Zilla Parishad; and

iv. A few non-official Prominent Persons to be nominated by the State Government.

The Superintending Engineer of the State Electricity Board/ State Power Utilityresponsible for distribution in the district could be made the Convener of the

Committee.

The Committee would be entrusted with the following functions:

To review steps taken to formulate and implement projects aimed atimproving/upgrading the sub transmission and distribution system;

To oversee the implementation of the metering programme and theintroduction of Energy Accounting System;

To review the implementation of energy conservation measures includingDemand Side Management (DSM);

To promote local entrepreneurs in setting up power generation projects basedon Biomass, Wind, Solar and Small Hydro;

To encourage involvement of local bodies and NGOs/ Cooperatives in themanagement of generation and distribution;

To explore the possibility of supplying decentralized grid energy to remotevillages which cannot be Connected to the grid;

To organise funding of projects from funds provided by the Ministry of RuralDevelopment, Ministry of Non-conventional Energy Sources, MPs Local Area

Development Fund, RIDF, Rural Electrification Corporation and agencies such as

IREDA.

100% metering and MIS for reduction of T& D losses

Huge Transmission & Distribution (T&D) losses are a major drain on the revenue stream

affecting the very survival of the SEBs. Although reported total energy losses in T&D are

24 per cent on an all India average basis, a closer examination reveals that actual losses

including theft and wrong classification could be in the range of 40-45 per cent. Under

reporting of losses is revealed from the following table:


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The T&D losses are pegged at around 10 per cent in better managed power systems in

the developed countries. In order to reduce the T&D losses, the following measures

have been initiated.

Static meters on all 11 KV out-going feeders and HT consumers have beeninstalled in most of the States. These meters will record active energy, powerfactor and load information for 45 days at a time. The data recorded in the static

meters can be down loaded to a computer network and software packages will

be effectively utilised to process the data for meaningful management of the

distribution system. Consequently, it should now be possible to accurately

account for the energy received in each 11 kV sub-station and 11 kV out-going

feeders; energy billed and T&D losses at the various stages of transformation. It

is expected that by October 2001, the metering at 11 kV outgoing feeder level

will be accomplished in all the states.

In the next phase of the programme, meters will be installed in all thedistribution transformers and, thereafter, in the premises of the consumers.

With the installation of meters at all the transformation stages and in the

premises of consumers, it will be possible to operationalise the concept of cost

and profit centre. The implementation of energy accounting system, with billing

unit at subdivision level as the nodal point, the problem of commercial losses can

be solved. This will help fix proper responsibility at the sub-divisional, divisional,

circle and zonal levels.

Other measures required will include installation of capacitors at all levels;reconfiguration of feeder lines & distribution transformers in such a way as to

reduce the length of LT lines (which are characterised by large technical and

commercial losses) and make the system less LT oriented, installation of smaller

size energy efficient distribution transformers so that each\ transformer suppliespower to 10 to 15 households only; re-conductoring of over loaded sections;

development of digital mapping of the entire distribution system; and load flow

studies so that investments could be undertaken for long-term strengthening of

the distribution system.

Along with 100 per cent metering in the districts, it is necessary to enforceenergy accounting and auditing. In this regard an effective Management

Information System

(MIS) will be put in place to ensure effective flow of information to facilitate quick

decision-making and to improve the operation and management of the distributionsystem. With the adoption of above steps, it will be possible to develop the data base

essential for energy accounting and also to undertake system study and promote

measures aimed at improving load management.


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60 Distribution circles as Centres of Excellence for Distribution Reforms under \

Accelerated Power Development Programme (APDP)

Under APDP, 60 distribution circles have been identified in different States for

improvement / strengthening of the sub-transmission & distribution network in such amanner as to develop Centres of Excellence. This would enable States to replicate the

strategy in other circles. The objective is to ensure that the investment in these

distribution circles would result in quantifiable physical & financial benefits.

During the year 2000-01, Rs.576.22 crores were sanctioned under APDP for the States to

undertake short-term measures like metering at all levels covering all consumers within

the circles, installation of capacitors to correct power factor and replacement of failed

distribution transformers (DTs) and augmentation of transformation capacity which

could result in

(a) Immediate financial gain(b) Reduction of technical losses and (c) reduction of system break downs.

All the States have taken action to implement the short-term projects. Certain States

where metering has been completed, have shown immediate gain in revenue ranging

from 20 to 30%.

Strengthening of sub-transmission & distribution network involves three broad areas of

action viz. commercial, technical and manpower restructuring.

(a) Commercial action includes tamper proof metering at all level of transformation and

for all the consumers; operationalising energy accounting up to feeder level; de-

centralised computerized billing & collection; development of MIS and proper duties &responsibilities up to the line man. Commercial activities target reduction of commercial

losses and improvement of revenue.

(b) Technical action involves conversion of the existing distribution network into a high

voltage distribution system (HVDS) which covers reduction of LT lines; taking high

voltage line up to the load centre and supplying power through smaller capacity energy

efficient distribution transformation; reconductoring of over loaded lines; power factor

correction; Geographic Information System(GIS) mapping; polewise consumer

information etc. This requires detailed energy audit & accounting studies, analysis of the

data using software for developing component aided HVDS network model.

(c) Restructuring the manpower involves review of the manpower right from the

Superintending Engineer to line man and fixing proper duties, responsibilities and

accountability at each level.


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KV Feeder as Profit Centre

The approach mentioned above will need to be implemented for each 11 KV feeder

upward up to 33/11 kV sub-station and in the entire identified circles. This will ensure

energy accounting and reduction of commercial and technical losses in the entire

feeder. This way each feeder can be operationalised as an independent profit centre.This is possible as one junior engineer deals with two feeders on an average. Full

responsibility can be assigned to him.

Capacity Building

Even though SEBs have expertise in different fields, strengthening of sub-transmission &

distribution network as suggested above requires an integrated knowledge. SEBs, during

the regional meetings held in April and then later in June, 2001 expressed their inability

to take up such work with their own manpower. It is necessary to promote capacity

building exercise in the SEBs/State Power Utilities. This will enable SEB personnel toprepare detailed project reports for each of the districts/ circles and implement the

project using APDP funds at a later stage. It is proposed to take up capacity building

exercise in the SEBs/ Utilities, so that they are able to take up energy audit & accounting

studies, analyse the data, using computer tools, prepare project reports and implement

the same aimed at improving sub-transmission and distribution network.

Capacity building exercise will cover:

a) Training the manpower

b) Making the SEB officials collect relevant data from each 11 KV feeder in the identified

circle.

c) Analysis of the data using computer tools to prepare feeder wise computer aided

least cost project report.d) Supervision of implementation

Reform MOUs with the States and their monitoring

To give a strong impetus to the process of reforms, the Ministry of Power organised a

Conference of Chief Ministers / Power Ministers on Power Sector Reforms on 3rd March

2001. The Conference was chaired by the Prime Minister and was also attended by the

Deputy Chairman (Planning Commission), Union Finance Minister, and Union Power

Minister. In the Conference, a number of decisions on reforms, having farreaching

Consequences, were taken. Of various discussions on reforms, signing of MOUs withStates for undertaking reforms and restructuring in a time bound manner and linking

the support of Government of India to achievement of predetermined milestones is

expected to provide the necessary impetus to the reform process.


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Privatisation / Corporatisation Models of Distribution through the Policy level

Committee

In the Chief Ministers conference held in March 2001, it was also decided to constitute a

Committee under Secretary (Power) to suggest strategies and measures for attracting

private sector investment in distribution with special reference to:

Methodology of seeking private sector participation; Handling of past liabilities and making privatisation offer attractive to potential

investors

Possible linking of private sector investments in generation with distribution; and Increasing the number of potential investors.

The committee has made sufficient progress and is likely to submit its report shortly.

World Bank Reform Packages

The Ministry of Power is working on a special package for reforming states, whereby,

the reform process could be partly funded through World Bank assistance. During the

visit of the President of World Bank to India in November 2000 the issue of providing

structural loans to reforming states was discussed and the World Bank has agreed to the

following in principle:

Assistance for preparation of bankable DPRs for run of the river hydro projects. Structural adjustment assistance for reforming states. Assistance for renovation, modernisation and uprating of generating stations.


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RURAL ELECTRIFICATION

Implementation of Action Plan for electrification of villages

The pace of rural electrification in the VIII and IX Plans has declined. Nearly 80,000

villages are yet to be electrified. Only 31 per cent rural and 45 per cent urban

households have been covered so far. In order to accelerate rural electrification the

proposed Action Plan is as under:

(i). Rural Electrification will be treated as a Basic Minimum Service under the Prime

Ministers Gramodya Yojana (PMGY).

(ii). Completion of electrification of bulk of the remaining villages is targeted in the next

6 years. Full coverage of all households may be targeted for the end of the XI Plan, that

is, by the year 2012.

(iii). Setting up credit support from Rural Electrification Corporation to SEBs for speedyelectrification of dalit bastis, households of scheduled tribes and other weaker sections

of society.

(iv). Improving the quality of power supply in villages by strengthening of the

distribution network in rural areas is being supported by REC under the Accelerated

Power Development Programme.

(v). Earmarking a sum of at least Rs. 750 crores out of Rural Infrastructure Development

Fund (RIDF) for rural electrification works.

(vi). Augmenting the resources of REC, by allowing it to float capital gains tax exemption

bonds.

Sustainable Power Development

Concerns relating to pollution and the disposal of the large amount of ash from coal

based power stations, which are the mainstay of Indias power generation, are being

addressed through strategies to promote environmentally sustainable power

development.

Special Purpose Vehicle (SPV) for Afforestation

A Special Purpose Vehicle is being set up jointly by NTPC and other Central Power Sector

Undertakings as a Registered Society to take up afforestation and environmental

measures in order to reduce the carbon dioxide in the atmosphere. The objectives of

the Society shall be to:

Undertake fruitful channelising of investments by members to increase thenational forest cover.


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Identify suitable lands for afforestation for power projects of NTPC and othermembers through Ministry of Environment and Forests (MOEF) which will

coordinate

with the State Forest Departments/District Rural Development Authority etc. Facilitate quick procurement of forest clearance for the forestland proposed to

be acquired by NTPC and other members for the future projects to be set up. Interact with MOEF to score off the necessary compensatory afforestation

required for projects of NTPC and other members, which needs diversion of

forestland.

It is noteworthy that NTPC has already planted over 1.45 crore trees, which is one of the

biggest afforestation efforts in the country. In fact the ambient temperature around the

Ramagundam Station of NTPC has come down by 30 Celsius due to the afforestation

done by NTPC as revealed in a study by the National Remote Sensing Agency (NRSA),

Hyderabad.

Fly Ash Utilisation Action Plan

All the coal based power stations put together generate around 90 million tonnes of fly-

ash per annum. The Fly Ash Mission of TIFAC has made several useful recommendations

for utilisation of fly-ash in the manufacture of cement, bricks, pavement materials, floor

tiles, wall panels etc., and in agriculture, road construction, land-filling and back-filling of

mines. Armed with the findings of the national laboratories that Fly ash is superior in

strength and durability as compared to conventional products, the Ministry of Power is

taking steps to make the use of fly ash products mandatory in road and bridge

construction, and construction of Government buildings as is being done in the

developed countries and to provide fiscal incentives initially to supplement the marketmechanism for taking up production and promotion of fly ash products.

Initiatives for improving the environmental performance of coal based stations

i) NTPC has achieved ISO-14001 standards for 11 plants owned by it and 2 more, being

managed by it. The Company is in the process of achieving the same in case of its

balance power plants.

ii) Improvement of Heat-rate is a continuous exercise in NTPC, which has yielded

significant benefits. NTPC officials have been asked to submit a detailed action plan for

the next five years for heat rate improvement not only in NTPC but also in powerstations of State Electricity Boards.

iii) Sipat Super Thermal Power of NTPC will adopt Super Critical Technology for the first

time in India. Thereafter, NTPC has planned to adopt super critical boiler technology for

North-Karanpura, Barh, Kahalgaon-II projects.

iv) With regard to setting up a commercial scale demonstration plant based on IGCC

technology, NTPC has sent coal samples to the Department of Energy in USA to find out


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feasibility of IGCC with Indian coal. Thereafter, a team of officials from NTPC will visit

the concerned laboratory as well as IGCC plant under operation in USA.

Clean Development Mechanism (CDM)

To address increasing concerns related to the environment and to improveenvironmental performance, the services of Tata Energy Research Institute (TERI) have

been engaged for providing consultancy services to the Ministry of Power on CDM. The

terms of reference include project formulation, base line surveys for each project,

negotiations with the CDM parties, identification of the counterpart CDM parties from

the developed countries, cost of CO2 monitoring and verification of CO2 emission

reduction and supervision of project implementation.

POWER BUSINESS AND INDUSTRY ANALYSIS

INVESTMENT OPPURTUNITIES

INVESTMENT OPPORTUNITIES IN THERMAL POWER DEVELOPMENT

70% of the country's total installed capacity and more than 80% of the totalelectricity generation is contributed by thermal power.

Coal continues to be the main source of for thermal generation. The major thrust in thermal generation could be fructified through significant

jump in unit size and steam parameters resulting in higher efficiencies and better

economics. The largest unit size in the country at present is 500 MW and 600MW super critical units are in the pipeline. The projected future unit size is 800-

1000 MW with still higher super critical parameters which will have low cost of

generation, higher efficiency and are environment friendly.

With the identification of new gas sources and availability in internationalmarket, there is renewed thrust in gas based combined cycle plants. Such CCGT

plants are increasingly becoming techno-economical viable with advancements

in efficient gas turbine technologies and their environmental benefits.

The post Electricity Act 2003 scenario provides for the opportunity for anygenerating company to establish, operate and maintain a thermal generating

station without the need of a license, thus providing a free hand in setting up of

a thermal generating plant.

Strong supportive factors conducive to investment opportunity such a vibrantstrong and stable economy, low cost indigenous fuel, availability of skilled

manpower, indigenous power plant manufacturing capability, presence of

independent power producers and power sector reforms initiatives as

confidence building measures for prospective investors.


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Thrust to R&M / life extension activities with large investment potential forimproving the performance of old thermal power stations. The 10th Plan (2002-

07) is targeted towards 57 units (14270 MW) for R&M works and 106 units

(10413 MW) with anticipated total cost of more than Rs.10000 crores.

INVESTMENT OPPORTUNITIES IN HYDRO POWER DEVELOPMENT

The 10 Plan program envisages capacity addition of\ 14393 MW from hydelprojects in the total capacity addition of 41110.

The Govt. has initiated advance action for taking up new hydro projects. A50,000 hydro initiative has been launched and pre feasibility reports for 162

projects prepared. In the second phase of this programme, DPRs for about

30,000 MW are under preparation for eventual implementation through both

public & private sector agencies.

Govt. would take up for execution, all the CEA cleared projects and take steps toup to date and obtain clearance for pending DPRS.

Survey and investigations for new green field sites. Restart and activate the pending hydro projects for want of funds/inter state

issues.

Promoting small and mini hydel projects by simple design of turbines, generatorsand the civil works and in a shorter period.

Greater private investment through IPPs and joint ventures would beencouraged and conducive atmosphere created for attracting private sector

funds.

R&D in Power Sector

Government of India has set up a Standing Committee on Research in the Power Sector

under the Chairmanship of Chairman, CEA and DG, CPRI as the Member Secretary.

Members are drawn from various concerned organizations in the Power Sector, CSIR,

CFRI, TIFAC, NPC & other. The Committee has already identified the research projects to

be taken up on short, medium & long term basis. Action is being taken to initiate

research in each of these areas on prioritized basis.

Financial Requirements

The high capacity inter-regional transmission links, forming the back bone of the

National Power Grid would require an investment of the order of Rs. 40,000 crores of

which about 50% would be needed during the Tenth Plan period and the balance during

the Eleventh Plan period. Simultaneously, strengthening of the regional system for

meeting the increased transmission needs on account of increased inter-regional


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transactions as well as for evacuation, transmission and dispersal of power from

generation resources within the regions would have to be continued and the

transmission and distribution system in the State sector would also need to be

strengthened. The requirement of funds for transmission and distribution system in the

country corresponding to the programme of 1,00,000 MW of generation addition in the

next ten years has been estimated to be of the order of Rs.3,00,000 Crores as per thefollowing break-up:

Opportunities for Private Sector Participation in transmission

The Government made enabling provision for private sector participation intransmission sector way back in 1998 by amending the then existing ElectricityAct 1948. Generation of electricity was opened for private sector in 1991.

In the newly enacted Electricity Act 2003, any private player can seek licensefrom the Appropriate Commission to carry out business in transmission of

electricity.

Government of India envisages two routes for private sector participation intransmission ventures. IPTC route provides 100% fund mobilization by private

entrepreneurs as Independent Private Transmission Company. And JVC route -

provides formulation of a Joint Venture Company (JVC) with CTU/STU by

selecting a private investor as joint venture partner.

To start with, Central Electricity Regulatory Commission granted transmissionlicense on 13-11- 2003 to M/s Powerlinks Transmission Limited, a joint venture

company of the Power Grid Corporation of India Limited and Tata Power. This

Joint Venture (JV) project is first of its kind in India and is being promoted by

Government of India as a pilot project under its policy of encouraging private

sector participation in transmission of electricity.


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As a first project to be undertaken under the IPTC route, the Government hasalready identified the Bina- Nagda-Dehgam 400kV Double Circuit transmission

line of about 700 KM route length to be taken up for private sector participation.

Opportunity of massive investment in Transmission exists and it is envisaged thatupto Rs.9,000 crores can be invested by the private sector by the end of Xth Five

Year Plan.

Distribution Reforms and Performance Improvement

Accelerated Power Development Reform Programme:

The Distribution Sector could not grow with the required pace due to paucity of funds

and therefore, Distribution Reforms were initiated by the Government.

MoUs and MoAs were signed with the States for linking the support of Government of

India through APDRP which is ambitious plan for upgradation and strengthening of

subtransmission and distribution system with the objective of reducing the AT&C lossesto around15%.

INVESTMENT OPPORTUNITIES IN DISTRIBUTION SCHEMES

Six Level Intervention Strategy:

In order to achieve commercial viability Ministry of Power has formulated six level

intervention strategy that encompasses initiatives at National level, State level,

SEB/Utility level, Distribution Circle level, Feeder level and the consumer level.

Anti-Theft Measures:

Several States viz. Andhra Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh, West

Bengal, Maharashtra, Kerala and Gujarat have taken number of initiative to curb the

theft of power which have shown improvement in collection of revenue by the

SEBs/Utilities. The Electricity Act, 2003 provides a legal framework for making theft of

electricity a cognizable offence. Under Section 135 of the Electricity Act, 2003, whoever

dishonestly taps lines or cables or service wires, tampers, damages or destroys meters

etc. shall be punishable with imprisonment for a term which may extend to three years

or with fine or with both.

100% Metering Programme:

A programme of 100% metering has been taken up by States subsequent to PowerMinisters/Chief Ministers conference held on 26.2.2000. As on 30th September, 2004,

95% and 87% metering have been achieved in respect of 11 kV feeders and consumer

feeders respectively.


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Consumer Care Centre:

To address consumer grievances various States have taken initiatives by setting up

consumer care centres and these centers are effectively operating at Hyderabad,

Vadodara, Bangalore, Faridabad, Delhi and almost all States are taking steps for

implementing the consumer care centres for large towns of the States

INFORMATION TECHNOLOGY (IT) INITIATIVES:

(i) Supervisory Control and Data Acquisition (SCADA) System:

To improve reliability and quality of power Supervisory Control and Data Acquisition

(SCADA) System has been introduced in Accelerated Power Development Reforms

(APDRP) Schemes.

(ii) High Voltage Distribution System (HVDS):

HVDS has been introduced for arresting power pilferage and reduction of losses by

Andhra Pradesh, Delhi, West Bengal, Noida Power Company Ltd. etc.

(iii) Electronic/Static Meters:

Almost all States are installing electronic / Static meters on feeders and at consumer

premises to introduce energy accounting and auditing. Andhra Pradesh, Uttar

Pradesh, Orissa have successfully introduced Meter reading Instrument (MRI) for their

towns, as also Delhi having facilities of spot billing.

FUTURE INVESTMENT REQUIREMENT

Even after investment made by the Union Government through APDRP in ST&D system,the distribution sector needs further investment considering the growth rates of various

segments of the distribution system the projections by the end of 2006-07 are as

follows:

An investment of Rs. 86357 crores was assessed by the Working Group on Power at the

beginning of the Tenth Plan. However the same has gone to Rs. 1,00,000/- crore as on

today for the entire 10th Plan period (2002-07).


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According to the National Perspective Plan on R&D in Indian Power Sector up to 2015,

distribution sector was identified as the key area for taking up the Research and

development (R&D) in this sector. The identified areas are:

High voltage distribution system (HVDS) Demand side management Custom power devices Compact transformation devices Distribution automation Metering

Quality of Power Supply and Customer Satisfaction:

With the enactment of the Electricity Act, 2003 the emphasis has been given on

providing quality and interruption free supply to customers. Keeping this objective inview Central Electricity Authority (CEA) has started monitoring of reliability index,

average tripping per month in respect of 11 kV feeders in respect of towns having

population of more than 8 lakhs. This will facilitate in bench marking various indices for

the annual frequency and duration of tripping. Various State Electricity Regulatory

Commissions (SERCs) are also in the process of making regulations for standard of

performance in compliance to various provisions of the Electricity Act, 2003.

Regulation on Installation and Operation of Meters:

In compliance to provision of Section 55 of the Electricity Act, 2003, CEA is making

regulation on installation and operation of meters. This will facilitate in uniformity ofapproach for location of meters, selecting type of meters and their specification, new

investment opportunities.


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MAJOR CLEARANCES REQUIRED FOR POWER SECTOR


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Power Companies in India

Many government as well as private organizations have taken up the task of power

generation in India. The major Indian power companies playing prime are:

Bhakra Beas Management Board Enercon Systems India Essar Group GMR Group Gujarat State Petroleum Corporation Ltd Jindal Steel & Power Limited Karnataka Power Transmission Corporation Limited (KPTCL) Karnataka Renewable Energy Development Limited Konarka Magnum Power Generation Limited Nippo Batteries Reliance Energy Ltd. Shri Shakti Durgapur Projects Limited Satluj Jal Vidyut Nigam Ltd. United Power Ventral Systems Pvt. Ltd. Enron India Power Plant Celetronix Power India Caterpillar Power India Alton Power India Thorium Power India GE Power Controls India Green Power India


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POWER TRADING

AGENDA

Introduction Global scenario in power trading Indian companies

Introduction

India is the third largest producer of electricity in Asia with an installed capacity that has

increased from 1362 MW in 1947 to about 143311 MW as of March 31 2008. However,

alongside this growth story is the existence of shortages in meeting peak (16.6% in FY

08) as well as overall demand (9.8% in FY 08). In spite of the overall shortage, the

inherent diversity in demand of various States and Regions in the country results in

periods of seasonal surplus in one State or region coinciding with periods of deficit in

another.

This coexistence of overall shortages with complementary geographical and temporal

surplus-deficits provides substantial opportunities to improve the economic efficiency

and security of supply through trading of power both within as well as across Regions.

Realizing the full benefits of trading requires the availability of adequate transmission

capacity and inter-regional links for transfer of power from a surplus to a deficit entity

and support the development of a power market in the country.

Trading is an activity in which transactions take place directly between two participants

or indirectly through an exchange.

In India, while there is a huge section of consumers, who are power deprived, there are

a lot of Captive Power Plants (CPPs) that are underutilized and a lot of merchant

capacity also expected to be added in the near future, there is a need to encourage the

peaking power plants and bring the surplus captive generation in the grid. The Electricity

Act, 2003, mandated development of power markets by appropriate commissions

through enabling regulations. This paved the way for the new trends to emerge like

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