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Indian Power Sector:


Investment Possibilities Transmission, Distribution & Other Sectors. Indian Economy ... Electricity Appellate Tribunal : Operational 2005 ... – PowerPoint PPT presentation

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Title: Indian Power Sector:

  • Indian Power Sector
  • Growing Investment opportunities
  • Ministry of Power, Government of India
  • July, 2007

Indian Economy
Average GDP growth rates, 1998 - 2007
Key Highlights of Indian Economy
  • Real GDP growth
  • Average to be 8.6 for last 4 years
  • Expected to be 9.2 in 2006-07
  • Driven by Industry (10.2) Services (11.0)
  • Significantly high Savings rate 32.4 and
    Investment rate 33.8
  • International confidence is reflected
  • Upgrade of Indias rating to Investment Grade by
    all rating agencies
  • MOODYS rating Baa2
  • FITCH rating BBB-
  • S P rating BBB-
  • Significant rise in Foreign Investments through
    FDI ECB route in 2006-07
  • 6th Largest in the World with Forex Reserves of
    US192 billion at 31 Mar 07

India Second highest amongst key economies
Source United Nations Statistical Division
Source Reserve Bank of India
High growth in Indian Economy has led to rapid
growth in foreign investments
Installed Generation Capacity
Total Installed Capacity 134,686.63 MW as on
June 30, 2007
Excludes Captive Capacity connected to Grid
14,636 MW andCaptive Capacity not connected to
grid about 26,000 MW
Sectoral Break-up
Fuel Wise Break up
Source Central Electricity Authority
Growth potential in Indian Power sector
Growth in Indias Per Capita consumption
Demand Supply of Electricity
Source Central Electricity Authority
Source Central Electricity Authority
India Low Per Capita Consumption
Growth Projections (at 9 GDP)
Source Planning Commission Integrated Energy
Policy, Aug 2006
Above figures are as on 31st March of the
respective Years
SourceU.N. Development Programme, Human
Development Indicators 2006
Accelerated Capacity Addition for XI Plan
Source CEA, April 2007
13,500 - Non- Conventional energy sources /
12,000 - captive power plants / 10,000 - MPPs
Accelerated Capacity Addition for XI Plan
Of this, 1580 MW been commissioned and another
49,480 MW capacity is under construction
Source CEA
Investment Potential
Investment Requirements during XI Plan
  • The Working Group on Power for XI Plan has
    assessed funding requirement for power sector
    during XI plan as USD 224 Billion .
  • Thermal and Hydro Generation US 93 billion
  • Captive Generation and Renewable Energy
    Sources US 25 billion
  • Merchant Power Plants US 9 billion
  • RM US 3 Billion
  • Total Generation US 129 billion
  • Transmission, Distribution and Rural
    Electrification US 95 Billion

Macro View
  • Enabling provisions in place
  • Public sector investments have been stepped up
    will need to be supplemented through private
  • 100 FDI in all segments of power sector has
    been allowed
  • Power trading also covered for 100 FDI
  • Guidelines for setting up power exchanges issued
  • Power exchanges to become reality
  • Level playing field for both domestic and
    international investors.

Electricity Act 2003
  • The Act creates a liberal and transparent
    framework for Power Development
  • It facilitates investment by creating competitive
    environment, and reforming distribution segment
    of power industry
  • Entry barriers removed/reduced -
  • Generation de licensed, freed from all controls
    for thermal, with some checks for hydro
  • freedom to captive generation including group
  • recognizes trading as an independent activity
  • mandates open access in transmission
  • Open access to consumers above 1 MW within five
    years commencing from 27th Jan 2004 (date of
    enforcement of amendment to Electricity Act)
  • Permits multiple licensees in distribution for
    same area
  • Regulatory Commissions - to develop market
    (including trading)

Electricity Act ..
  • Legal and policy framework in place.
  • National Electricity Policy 2005 announced.
  • Guidelines for determining tariff through
    competitive bidding notified 2006
  • 5 Regional Power Committees set up 2005
  • Electricity Appellate Tribunal Operational 2005
  • CERC has notified regulations for open access in
    transmission 2005
  • Tariff Policy notified in 2006
  • Guidelines for private investment in transmission
  • Several SERCs-open access in Distribution
    action initiated

Vision Statement
National Electricity Policy - 2005
  • Aims and Objectives
  • Access to Electricity to all households in next
    5 years
  • Availability of Power demand to be fully met by
  • Supply of reliable quality power
  • Per capita availability over 1000 units by 2012
  • Minimum lifeline consumption 1
    unit/household/day as a merit good by 2012
  • Financial turnaround and commercial viability of
  • Protection of consumer interests.

Tariff Policy - 2006
  • Aims Objectives
  • Tariff Policy
  • Ensure availability of electricity reasonable
    competitive rates
  • Ensure financial viability and attract
  • Promote transparency, consistency and
    predictability in regulatory approaches
  • minimise perceptions of regulatory risks
  • Promote competition, efficiency in operations and
    improvement in quality of supply
  • Tariff policy elaborates tariff determination -
    u/s 62 63

Tariff Policy ...
  • Section 62 Tariff Policy lays down framework
    for performance based cost of service regulation
    in respect of aspects common to generation,
    transmission and distribution
  • Section 63 Tariff Policy - all future
    requirement of power should be procured
    competitively by discoms except in cases of
    expansion of existing projects or where there is
    State controlled / public owned company as an
    identified developer
  • Even for public sector projects, tariff of all
    new generation and transmission projects to be
    decided on competitive bidding after 5 years or
    when the ERC is satisfied that situation is right
    to introduce such competition

National Consensus on Reforms
  • Electricity is a concurrent subject under the
  • Frequent meetings
  • A recent National Conference of Chief Ministers
    on Power convened by the Prime Minister of
    India unanimously resolved on the following
  • Standing Group of Power Ministers of the States -
    chairmanship of Union Power Minister - to look
    into all issues impeding the power sector.
  • Subcommittee - chaired by Union Finance Minister
    Dy. Chairperson of Planning Commission as
    member - financing requirements of the power
  • National Power Project Management Board for
    monitoring timely commissioning of projects
    (States urged to set up similar authorities)
  • Task force on Hydro Power - to expedite hydro
    power development, Rehabilitation and
    Resettlement issues
  • The Power Ministry would incentivise meaningful
    structural reforms such as open access.

Reforms Consensus
  • Centre to provide financial assistance for
    upgrading TD systems
  • APDRP scheme being revised
  • All villages to be electrified by 2009
  • The States-
  • commit to achieving and sustaining drastic
    reductions in aggregate technical and commercial
    losses (ATC losses) through the next five years
  • commit to operationalising open access in
    transmission distribution sectors
  • to augment the quantum of power flowing into the
    grid -
  • resolve to appropriately restructure levies -
    cross subsidy surcharge, wheeling surcharge
  • facilitate captive power plants by removing
    restrictive levies, duties and regulations
  • will formulate clear, cost-effective and
    comprehensive rural electrification plans
    addressing concerns of sustainability,
    availability, affordability and delivery of power
  • Regulators basic rules established. Now urged
    to look at promotion of competition, efficiency,
    restructuring and investment

Ultra Mega Power Projects
A Major Investment Initiative
  • GoI initiative to facilitate setting up of 9
    large sized projects of 4000 MW each -
  • reaping economies of scale
  • quick capacity addition leading to cheaper power
  • efficient super critical technology
  • leading to cheaper power
  • Investment opportunities of about US 4 billion
    in each project
  • Tariff Policy mandates competitive procurement of
    future power requirements by Distribution
  • Such tariff is to be accepted by Regulatory

Criteria For Site Selection
  • Pit head location with domestic coal,
  • Coastal location with imported coal, or
  • Coastal location with domestic/blended coal
  • Through a preliminary scrutiny by CEA of a number
    of potential sites available in the country, 9
    suitable locations have been identified
  • Four pithead locations with indigenous coal
  • Five Coastal locations with imported coal

Role of Ministry of Power
  • IPP experience suggests desirability of
    Government intervention in
  • securing reliable fuel supply,
  • obtaining environmental clearances
  • co-ordination with states bulk power
    purchasers, for achieving financial closure
  • land acquisition and resolution of RR issues
  • Basically - to be a facilitator

Role of Ministry
  • Co-ordination with concerned Ministries/ Agencies
    for ensuring
  • Coal Block Allotment/ Coal Linkage
  • Environment/ Forest clearances
  • Facilitate acquisition of land
  • Required support from State Govt. Agencies
  • Financial Institutions towards financial closure
  • To facilitate PPA and proper payment security
    mechanism - with State Govt./ State utilities

The Shell Company Concept (SPV)
  • Shell company to work independently upto to a
    stage where major tie-ups, statutory clearances
    and linkages are in place -
  • Preparation of bankable project report
  • Acquiring land
  • Allocation of coal blocks for pithead projects
  • Allocation of water by the State Govt
  • Appointing consultants for EIA, Project
  • Various approvals and statutory clearances
  • Off-take/sale of power section 63 of EA 2003
  • Power Evacuation/ (Transmission) System

Incorporation of SPVs
  • Wholly owned subsidiaries of PFC -
  • Coastal Gujarat Power Limited
  • Sasan Power Limited
  • Coastal Andhra Power Limited
  • Jharkhand Integrated Power Limited
  • Orissa Integrated Power Limited
  • Coastal Maharashtra Power Limited
  • Coastal Karnataka Power Limited
  • Coastal Tamil Nadu Power Limited
  • Akaltara Power Limited

Payment Security Mechanism
  • UMPPs are based on single seller multi buyer
  • Direct payment of monthly bills by procurers
    against invoice raised by seller
  • As condition in PPA, direct payment backed by -
  • Letter of credit (LC) by distribution licensee
    1.1 times expected monthly bill
  • Escrow Account claims on receivables of
    distribution utility
  • Finally in the unlikely event of default, direct
    sale to customers/ other utilities as per
    provisions of the Electricity Act 2003

Present Status
  • Mundra Project
  • LOI placed on 28.12.2006 to Tata Power Ltd.
  • Project awarded on 23.04.2007 to Tata Power Ltd.
  • Sasan Project
  • LOI placed on 28.12.2006 to consortium of Lanco
  • Krishnapatnam Project
  • 13 firms qualified under RFQ Stage
  • RfP submission - 24th Aug
  • Jharkhand Project
  • 10 bids received under RfQ and under evaluation
  • More Projects to be brought under the initiative

Private Participation - Transmission
  • The Act provides for participation
  • Transmission licensed activity, but -
  • Dedicated transmission line can be set up by
    generating company or captive plant owner without
    any license
  • For granting license for inter State or intra-
    State transmission, Regulator shall consider
    recommendation of CTU/STU - However, such
    recommendation not binding
  • Policy frame work and guidelines developed (Apr
    06) for facilitating private participation
  • tariff based competitive bidding for transmission
  • Empowered Committee bid documents finalisation,
    bid evaluation, project identification through
    tariff based competitive bidding - 14 projects
  • REC PFC - advance project formulation to speed
    up projects
  • SBD for the RfQ finalized. Project specific RfQ
    likely to be issued in near future
  • Balance 10 projects also likely to be bid out

Private Participation - Distribution
  • Earlier licensees working satisfactorily
  • WB, GJ, MH
  • Now in Delhi, UP, OR
  • Orissa privatized in 1999
  • Turn around after initial difficulties. ATC
    loss reduction of over 4 in 2004-05. 11 to 14
    loss reduction in 3 years
  • Estimated financial gain to Orissa US 330
    million between 1996-2003
  • No tariff increase since Feb. 2001
  • Delhi privatized in 2002
  • ATC loss reduction as per target by all
  • Government annual cash outgo down - US 260
    million to US 35 million in 05-06
  • Transformer failure from 15 to 1
  • Load shedding substantially reduced

Private Participation Other Areas
  • International Conclave 4-5th July 07
  • Main plant equipment
  • boilers, turbines, generators
  • 6 7000 MW to be increased
  • BOP
  • coal handling plants
  • ash handling plants
  • LP piping
  • Construction machinery dozers, dumpers, cranes
  • Coal mining
  • Fuel supply

Other Areas
  • Possibilities
  • individually, or joint venture with private, or
    with public sector
  • Possibilities as
  • equipment supplier, equipment manufacturer,
    generator, transmitter, distributor
  • Portfolio investment - NHPC, REC, POWERGRID
  • Other infrastructure sectors ports, rolling
    stock, roads
  • Need of the hour cutting edge technology - from
    supercritical to ultra supercritical

Improving Health of State Utilities -
Distribution Sector Reforms
  • MoU/ MoA with States
  • Accelerated Power Development Reforms Programme
  • Rating of State Utilities
  • Reliability Index
  • Training of over 25,000 distribution personnel

Payment of Dues - State Utilities to CPSUs
  • Since 2003-04, the realization of dues by CPSUs
    improved to about 100 of current billing
  • 2001-02 76
  • 2002-03 95
  • 2003-04 Almost 100
  • 2004-05 Almost 100
  • 2005-06 Almost 100
  • Full payment to all private gencos, traders, fuel

Improving health of State Power Utilities
Commercial Losses of State Utilities as of
Turnover (Without Subsidy)
Revenue Gap (without subsidy) (Cents/ kWh)
Average Revenue Realized (ARR) (Cents/ kWh)