Power Sector at a Glance ALL INDIA

As on 18-02-2016
Source: OM SECTION
1.Total Installed Capacity:(As on 31.01.2016):

Sector MW %age

State Sector 97,951 34.0

Central Sector 74,807 26.0

Private Sector 115,248 40.0

Total 288,005

Fuel MW %age

Total Thermal 200,740 69.7

Coal 175,238 60.8

Gas 24,509 8.5

Oil 994 0.3

Hydro (Renewable) 42,663 14.8

Nuclear 5,780 2.0

RES** (MNRE) 38,822 13.5

Total 288,005

Renewable Energy Sources(RES) include SHP, BG, BP, U&I and Wind Energy

SHP= Small Hydro Project ,BG= Biomass Gasifier ,BP= Biomass Power,

U & I=Urban & Industrial Waste Power, RES=Renewable Energy Sources

Policy Initiatives / Decision Taken

Electricity Act 2003 has been enacted and came into force from 15.06.2003. The objective is to introduce competition,
protect consumers interests and provide power for all. The Act provides for National Electricity Policy, Rural
Electrification, Open access in transmission, phased open access in distribution, mandatory SERCs, license free
generation and distribution, power trading, mandatory metering and stringent penalties for theft of electricity.
It is a comprehensive legislation replacing Electricity Act 1910, Electricity Supply Act 1948 and Electricity Regulatory
Commission Act 1998.The Electricity Act, 2003 has been amended on two occasions by the Electricity (Amendment)
Act, 2003 and the Electricity (Amendment) Act,2007. The aim is to push the sector onto a trajectory of sound
commercial growth and to enable the States and the Centre to move in harmony and coordination.
Policies, Rules and guidelines etc. issued under the Electricity Act.

Generation Performance

1.0 ELECTRICITY GENERATION PERFORMANCE

1.1 The electricity generation target for the year 2015-2016 was fixed as 1137.5 Billion Unit (BU). i.e. growth of
around 8.47% over actual generation of 1048.673 for the previous year (2014-2015). The generation during (2014-
15) was 1048.673 BU as compared to 967.150 BU generated during April- March 2014, representing a growth of
about 8.43%.

1.2 Programme, actual achievement and growth in electricity generation in the country during 2009-10 to
2015-16 :-

Year Target Achievement % of target % of growth

2009-10 789.511 771.551 97.73 6.6

2010-11 830.757 811.143 97.64 5.56

2011-12 855.000 876.887 102.56 8.11

2012-13 930.000 912.056 98.07 4.01

2013-14 975.000 967.150 99.19 6.04

2014-15 1023.000 1048.673 102.51 8.43

2015-16* (Upto January 2016) 947.166 921.862 97.33 4.62

* Provisional

1.3 The electricity generation target for the year 2014-15 has been fixed at 1137.5 BU comprising of 966.700 BU
thermal; 128.000 BU hydro; 38.000 nuclear; and 4.800 BU import from Bhutan.

2.0 Plant Load Factor (PLF):

2.1 Notwithstanding the fact that many of the Thermal Power Station (TPSs) in the country are vary old, the plant load
factor has shown improvement over the years 2009-10 to 2012-13.
 2.2 The PLF in the country during 2009-10 to 2015-16 is as under:

Target Actual Sector-wise Actual

Year
% % Central State Private

2009-10 77.2 77.5 85.5 70.9 83.9

2010-11 72.1 75.1 85.1 66.7 80.7

2011-12 68.7 73.3 82.1 68.0 69.5

2012-13 70.0 69.9 79.2 65.6 64.1

2013-14 69.60 65.60 76.10 59.10 62.10

2014-15 65.52 64.46 73.96 59.83 60.58

2015-16 (January 2016) 66.61 61.81 71.73 55.26 59.94

3.0 Power Supply Position

The power supply position in the country during 2009-10 to 2015-16 :

Energy Peak

Surplus(+)/Deficts(-
Requirement Availability Peak Demand Peak Met Surplus(+) / Deficts(-)
Year )

(MU) (MU) (MU) (%) (MW) (MW) (MW) (%)

-
2009-
8,30,594 7,46,644 -83,950 -10.1 1,19,166 1,04,009 15,15 -12.7
10
7

-
2010-
8,61,591 7,88,355 -73,236 -8.5 1,22,287 1,10,256 12,03 -9.8
11
1

-
2011-
9,37,199 8,57,886 -79,313 -8.5 1,30,006 1,16,191 13,81 -10.6
12
5

-
2012-
9,95,557 9,08,652 -86,905 -8.7 1,35,453 1,23,294 12,15 -9.0
13
9

2013-
10,02,257 9,59,829 -42,428 -4.2 1,35,918 1,29,815 -6,103 -4.5
14

2014-
10,68,923 10,30,785 -38,138 -3.6 1,48,166 1,41,160 -7,006 -4.7
15

2015-
8,37,958 8,19,225 -18,733 -2.2 1,53,366 1,48,463 -4,903 -3.2
16*
*Provisional Upto January, 2016

Introduction

Power is one of the most critical components of infrastructure crucial for the economic
growth and welfare of nations. The existence and development of adequate
infrastructure is essential for sustained growth of the Indian economy.

Indias power sector is one of the most diversified in the world. Sources of power
generation range from conventional sources such as coal, lignite, natural gas, oil, hydro
and nuclear power to viable non-conventional sources such as wind, solar, and
agricultural and domestic waste. Electricity demand in the country has increased rapidly
and is expected to rise further in the years to come. In order to meet the increasing
demand for electricity in the country, massive addition to the installed generating
capacity is required.

Market Size

Indian power sector is undergoing a significant change that has redefined the industry
outlook. Sustained economic growth continues to drive electricity demand in India. The
Government of Indias focus on attaining Power For All has accelerated capacity
addition in the country. At the same time, the competitive intensity is increasing at both
the market and supply sides (fuel, logistics, finances, and manpower).

The Planning Commissions 12th Five-Year Plan estimates total domestic energy
production to reach 669.6 million tonnes of oil equivalent (MTOE) by 201617 and 844
MTOE by 202122. By 203035, energy demand in India is projected to be the highest
among all countries according to the 2014 energy outlook report by British oil giant, BP.

As of November 2015, total thermal installed capacity stood at 196.2 gigawatt (GW),
while hydro and renewable energy installed capacity totaled 42.6 GW and 37.4 GW,
respectively. At 5.8 GW, nuclear energy capacity remained broadly constant compared
with the previous year. India's rooftop solar capacity addition grew 66 per cent from last
year to reach 525 Mega Watts (MW), and has the potential to grow up to 6.5 giga watts
(GW)1. Indias wind power capacity, installed in FY2016, is estimated to increase 20 per
cent over last year to 2,800 Mega Watt (MW)2, led by favourable policy support that has
encouraged both independent power producers (IPP) and non-IPPs.

Indias wind energy market is expected to attract investments totalling Rs 1,00,000 crore
(US$ 15.7 billion) by 2020, and wind power capacity is estimated to almost double by
2020 from over 23,000 MW in June 2015, with an addition of about 4,000 MW per
annum in the next five years.

Investment Scenario

Around 293 global and domestic companies have committed to generate 266 GW of
solar, wind, mini-hydel and biomass-based power in India over the next 510 years. The
initiative would entail an investment of about US$ 310350 billion.

Between April 2000 and September 2015, the industry attracted US$ 9.97 billion in
Foreign Direct Investment (FDI).

Some major investments and developments in the Indian power sector are as follows:

SunEdison, worlds largest renewable energy company, plans to continue its focus on Make in India by further
reducing the cost of renewable energy and developing over 15 gigawatts (GW) of wind and solar projects in the
country by 2022.
ThyssenKrupp India, the Indian arm of the German engineering conglomerate, plans to make high-grade
environment-friendly boilers which use less fuel, for the Indian power sector by collaborating with a foreign
company.
 Aditya Birla Group has announced a partnership with the Abraaj Group, a leading investor in global growth
markets, to build a large-scale renewable energy platform that will develop utility-scale solar power plants in India.
Sterlite Grid, Indias largest private operator of transmission systems, is joining hands with US major Burn &
McDonnell for its Rs 3,000-crore (US$ 462.5 million) power transmission project in the Kashmir valley.
Inox Wind Ltd, a subsidiary of Gujarat Fluorochemicals, a wind energy solutions provider, plans to double its
manufacturing capacity to 1,600 MW at a total investment of Rs 200 crore (US$ 31.6 million) by the end of the next
financial year.
The Dilip Shanghvi family, founders of Sun Pharma, acquired 23 per cent stake in Suzlon Energy, with a
preferential issue of fresh equity for Rs 1,800 crore (US$ 284.8 million).
Reliance Power Ltd signed an accord with the Government of Rajasthan for developing 6,000 MW of solar power
projects in the state over the next 10 years.
Hilliard Energy plans to invest Rs 3,600 crore (US$ 600 million) in Ananthapur district of Andhra Pradesh in the
solar and wind power sector for the generation of 650 MW of power.
Solar technology provider SunEdison signed a definitive agreement to acquire Continuum Wind Energy,
Singapore, with assets in India. The company, headquartered in Belmont, California, would take over 242 MW of
operating wind assets that Continuum owns and operates in Maharashtra and Gujarat as well as 170 MW of
assets under construction.
Japanese internet and telecommunications giant SoftBank, along with Bharti Enterprises (of Sunil Mittal) and
Taiwanese manufacturing giant Foxconn, plan to invest US$ 20 billion in solar energy projects in India.
Government Initiatives

The Government of India has identified power sector as a key sector of focus so as to
promote sustained industrial growth. Some initiatives by the Government of India to
boost the Indian power sector:

The Union Cabinet has approved the Ujwal DISCOM Assurance Yojna(UDAY) for financial turnaround and revival
of power distribution companies (DISCOMs), which will ensure accessible, affordable and available power for all.
The Government of India has resolved the issues regarding transfer of mining leases and grant of forest
clearances to the winning bidders of coal blocks. It expects operations to start in about 10 more mines by March
2016, easing coal availability to the projects attached to these mines.
The Ministry of Power has planned to provide electricity to 18,500 villages in three years under the Deendayal
Upadhyaya Gram Jyoti Yojana (DUGJY). Out of these, 3,500 villages would receive electricity through off-grid or
renewable energy solutions.
The Ministry of New & Renewable Energy is implementing two national level programmes, namely Grid Connected
Rooftop & Small Solar Power Plants Programme and Off-Grid & Decentralised Solar Applications, in order to
promote installation of solar rooftop systems, as per Mr Piyush Goyal, Minister of State (Independent Charge) for
Power, Coal & New and Renewable Energy.
The Government of Odisha plans to set up a large 1,000-MW solar power park under public-private partnership
(PPP) mode involving an investment of about Rs 6,500 crore (US$ 1 billion).
The Government of Telangana plans to set up an incubator centre, in collaboration with University of Austin, Texas,
for start-ups in the renewable energy sector, to support new companies entering the renewable energy market.
A Joint Indo-US PACE Setter Fund has been established, with a contribution of US$ 4 million from each side to
enhance clean energy cooperation.
The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this
comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass,
and 5,000 MW from small hydro power projects.
 The Union Cabinet of India approved 15,000 MW of grid-connected solar power projects of National Thermal
Power Corp Ltd (NTPC).
The Indian Railways signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC).
The agreement was signed between North Central Railway and DVC. This is the first time the Railways will directly
buy power from a supplier.
US Federal Agencies committed a total of US$ 4 billion for projects and equipment sourcing, one of the biggest
deals for the growing renewable energy sector in India.
The Road Ahead

The Indian power sector has an investment potential of Rs 15 trillion (US$ 237 billion) in
the next 45 years, thereby providing immense opportunities in power generation,
distribution, transmission, and equipment, according to Union Minister Mr Piyush Goyal.

The governments immediate goal is to generate two trillion units (kilowatt hours) of
energy by 2019. This means doubling the current production capacity to provide 24x7
electricity for residential, industrial, commercial and agriculture use.

The Government of India is taking a number of steps and initiatives like 10-year tax
exemption for solar energy projects, etc., in order to achieve India's ambitious
renewable energy targets of adding 175 GigaWatts (GW) of renewable energy, including
addition of 100 GW of solar power, by the year 2022. The cumulative installed capacity
of solar power in India has crossed the 4 Gigawatt mark as of June 30, 2015. The
government has also sought to restart the stalled hydro power projects and increase the
wind energy production target to 60 GW by 2022 from the current 20 GW.

Exchange Rate Used: INR 1 = US$ 0.015 as on December 17, 2015

References: Media Reports, Press Releases, Press Information Bureau (PIB)

Note: 1 - by 2020 as per India Solar Rooftop Map | 2016 Edition by Bridge to India, 2 -
as per rating agency ICRA
India to invest US$ 1 trillion in power sector by 2030
Times of India: February 10, 2016

Sydney: Power, coal and renewable energy minister Piyush Goyal on Tuesday offered a $1-trillion or approximately Rs
65 lakh crore investment cake for Australian companies to come and make in India.

The figure spells out the investment estimated in India's power sector by 2030, by which time domestic manufacturing would
account for 40% of power gear supplies and creation of 10 lakh jobs. "When the world is witnessing a depressed economic
atmosphere and there is almost no growth, India is a shinning spot. We will use this image and further strengthen it to invite
countries such as Australia to invest in the country," Goyal said during a series of round-tables with Australian business
executives, policy hands and a CII delegation from India.
Goyal's pitch comes in the backdrop of government pegging economic growth at 7.3% for the October-December quarter,
marking a slight drop on previous quarters but still outpacing China.

After years of doddering, India's power sector is at an inflection point where the Narendra Modi government is focusing on
structural reforms with an integrated outlook for the energy sector.
The government has in the last 18 months put in place policies that are transparent, consistent and make it easier for
investors to do business.

Indeed, Goyal has been exploiting to the hilt the size of India's appetite for energy to sway investors in focus countries.
Last month, he was in Japan to tell the India Story to investors and technology partners. He is in Australia in quest gas for
his power plants that can be used as a stabiliser for his 100 GW solar dream, mining expertise, training for skill development
and of course investment for making in India.

"We have to use technology. But we also need to ensure that the price is right. For a company or country to sell technology
to India, it should understand that we have a very, very large market, which will give them good returns in the long term. The
cost challenge can be met through 'Make in India'.

This will help in achieving the ideal combination of Indian manpower and Australian innovation," Goyal said.

ndia has the fifth largest power generation capacity in the world. Indias installed
capacity stood at 272.5 gigawatts (GW), as of FY15. Thermal power, the largest
component, was 189.3 GW, followed by hydro 41.6 GW, renewable energy 35.8 GW
and nuclear 5.8 GW. Indias total power generation capacity has increased at a
Compound Annual Growth Rate (CAGR) of 9.4 per cent over FY0915.
India is the third largest producer of electricity in the world. In FY15, India generated
1,048.7 terawatt-hours (TWh) of electricity. Over FY1015, electricity production
expanded at a CAGR of 6.3 per cent.As per the 12th Five Year Plan, India is targeting a
total of 88.5 GW of power capacity addition by 2017, of which, 72.3 GW constitutes
thermal power, 10.8 GW hydro and 5.3 GW nuclear.
Renewable energy is fast emerging as a major source of power in India. Wind energy is
the largest source of renewable energy in India. It accounts for an estimated 60 per cent
of total installed capacity (21.1GW). There are plans to double wind power generation
capacity to 20GW by 2022. India has also raised the solar power generation capacity
addition target by five times to 100GW by 2022.
The Government of India has been supportive to growth in the power sector. It has de-
licensed the electrical machinery industry and also allowed 100 per cent Foreign Direct
Investment (FDI) in the sector. Total FDI inflows in the power sector touched US$ 9.7
billion during the period April 2000 to May 2015.
With many bilateral nuclear agreements in place, India is expected to become a major
hub for manufacturing nuclear reactors and associated components. Foreign
participation in the development and financing of generation and transmission assets,
engineering services, equipment supply and technology collaboration in nuclear and
clean coal technologies is also expected to increase.

Power or electricity is very essential constituent of infrastructure

affecting economic growth and welfare of the country. Currently, the
power sector is at a crucial juncture of its evolution, with many private
producers and domestic manufacturers also playing a significant role in
various capacities, and greater reliance on markets, subject to
regulation. Developers of Power Plants have been facing numerous
constraints like coal/gas allocation, environment clearance, land
acquisition, financing and funds tie-ups, etc. for last about 4 years. This
has resulted in only very few new projects coming up.

1. Performance of the industry

India is the 5th largest producer of electricity in the world. At an

electricity-GDP elasticity ratio of 0.8, electricity will continue to
remain a key input for Indias economic growth. Electricity demand
is likely to reach 155 GW by 2016-17 & 217 GW by 2021-22 whereas
peak demand will reach 202 GW & 295 GW over the same period
respectively. In India, the total power generated has been 1048.5 BU
during the FY 2014-15. There has been a shift to renewable power
as the same constitutes of 27.25% of the total installed capacity.
India has a huge hydro power potential of 148 GW, out of which only
42 G has been realized till date. Steps have been taken to attract
investments into the hydro sector and increase the falling share of
hydroelectricity in the countrys installed capacity mix. Government
is planning Hydropower Purchase Obligation (HPO), which will
obligate the power distribution companies to purchase power from
hydro power plants. This has led to signs of revival in hydro power
segment. However, the Supreme Court verdict staying 23 Hydro
Projects in Uttarakhand has acted as a dampener, thereby delaying
the imminent revival in the sector. The Nuclear business is primarily
driven by government policies, public perceptions and global
dynamics.

2. Installed capacity in India

For the 12th plan period (FY 13-17), the Government of India has
targeted capacity addition of 88,537 MW against which capacity
addition of 61,014 MW has been achieved up to FY 14-15. During FY
14-15, a capacity addition of 22,566 MW has been achieved which is
127% of the target of 17,830 MW. Private sector contribution
accounts for 59% in the total capacity addition during FY 14-15.

India is likely to add 600 GW to 1200 GW of additional new power

generation capacity before Year 2050. The target for 12th Five year
plan is that of 118.54 GW out of which 88.54GW is to come from
conventional sources while the remainder to come from Renewable
energy. The government plan is not only on target but seems it will
exceed the targeted capacity. Break up of Power sector is such that
188.90 GW is Thermal power which is 70.6% of the total installed
capacity while Hydro accounts for 41.27GW which is 15.4% of total.
The share of Renewable energy is 31.69 GW which is 11.8%.

Indias around 36 per cent of power capacity is in western region

followed by 26 per cent in northern region, 24 per cent in southern
region, 12 per cent in eastern region, and only 1 per cent in north-
eastern and island regions. Western region leads in thermal power
and northern region in hydro with 78594.42 MW and 17946.77 MW
respectively. Southern region leads in Renewable Energy Sources
(RES), with 42 per cent share in all-India aggregate, followed by
western region (36 per cent) and northern region (21 per cent).

Marking a major change from pattern till recently, private sector has
increasingly forayed into power infrastructure in recent years. Thus,
during the 11th Plan 39 per cent of conventional energy capacity
addition was from private sector, while 35 per cent coming from
state government utilities and around 26 per cent from central
government power companies. Most of the capacity in private sector
was in thermal power with 56899.73 MW.

3. Power Generation

The total power generation in the country during FY 14-15 was 1048
BU (including Bhutan import) as against a generation target of 1023
BUs, about 2.5% above target. The contribution from the private
sector was 281.53 BU which was 109.5% against target of 256.98
BU. Moreover, the government has set a target of producing 1,098
BUs of power during 2015-16. The central sector plants will
contribute 411 BUs and state sector 401 BUs to the total targeted
capacity. Of the total 1,098 BUs that the government is aiming to
generate in the current fiscal, 965 BUs will come from thermal power
and the remaining from hydel plants (133 BUs). As many as seven
hydro projects, which are likely to come up during the current
financial year, will contribute 2,766 million units of electricity to the
total generation.

The power generation in September 2015 surged 10 per cent to

95179.43 million units (MU) from 85928.86 MU in same month
previous year. The power generation between April- September
2015 stood at 555447.85 MU, up by 4.42 percent as compared to
531954.11 MU in year ago period.

4. Government initiatives

Govt. set to allot mines for commercial coal mining to the

state entities

The government, which is armed with Coal Mines Special Provisions

Bill, 2015, is all set to allott mines to the state entities for
commercial mining of coal. The government will continue auctioning
coal blocks to private companies after passing of the Coal Mines
Special Provisions Bill, 2015 in Parliament. However, the government
has decided to assign mines to private entities only in second phase.
Overall, the centre is in the process of allotting 204 coal blocks in a
transparent manner of which 67 blocks have been allotted by either
auction or on a nomination basis to state entities. Till now, 29 blocks
have been auctioned and another 38 allotted to the state-owned
entities. Further, the objective of the government was for a
methodology of offering linkages in a transparent manner and
auction was not the only option available to them. The government
had appointed SBI capital to suggest on this and a policy paper is
expected be ready on this by June 30, 2015.

Govt. to invest 1 lakh crore to set up 5new UMPPs

Indian government is planning to set up 5 new ultra mega power

projects (UMPPs), under the plug and play model, entailing
investments of around Rs 1 lakh crore. UMPP is coal-based thermal
power project that has 4,000 MW generation capacity. The govt.
however did not announce the states where these projects are
proposed to be set up. Under the plug and play system coal blocks
will be auctioned after they are granted various clearances to speed
up and simplify mining and get better valuation. One such project is
likely to be set up in power starved state of Bihar. The proposed
plant in Bihar may be fed from a mine either in Jharkhand or Odisha.
Power Finance Corporation (PFC) is the nodal agency for UMPPs in
the country. So far, 4 UMPPs have been awarded, of which Sasan
(Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya
(Jharkhand) have been bagged by Reliance Power. Tata Power is
operating the Mundra UMPP in Gujarat.

Investments

The investment climate is positive in the power sector. Due to policy

of liberalisation, the sector has witnessed higher investment flows
than envisaged. The Ministry of Power has sent its proposal for the
addition of 76,000 MW of power capacity in the 12th Five Year plan
(2012-17), to the Planning Commission. The Ministry has set a target
of adding 93,000 MW in the 13th Five Year Plan (2017-2022). The
industry has attracted FDI worth Rs 48,357.00 crore or $9,828.08
million during the period April 2000 to June 2015.

5. Recent developments

Cabinet working on proposal to resolve discom issues

The Power Ministry is working on a proposal to deal with over Rs 4

lakh crore loans of power distribution companies (discoms) with a
view to bring down their liabilities and will put it soon before the
Union Cabinet. Hit by subsidised tariffs, state electricity discoms are
facing cash crunch and are incurring annual losses of about Rs
60,000 crore. This is also affecting public sector banks as their bad
loans are rising. The governments will entirely take over the debt of
power discoms of eight states under the new financial restructuring
plan (FRP) for power distribution companies. These eight states are
Rajasthan, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana,
Jharkhand, Bihar and Telangana.

Odisha to invest Rs 887 crore for renovating 3 hydel projects

In a bid to raise production of green electricity in the state, the

Odisha government has decided to renovate three major hydro-
power stations. In this regard, the state government will invest
around Rs 887 crore and the hydel-power stations at Hirakud,
Chipilima and Balimela would be renovated in phases. Of total, the
Odisha government will invest Rs 158 crore to renovate two units
(37.5 X 2) of Hirakud power station. The capacity of Hirakud station
would increase from 75 MW to 86 MW after renovation. The state
govt will also invest Rs 65.67 crore in renovation of 34-MW power
station at Chipilima, while Rs 664 crore will be spend in the
renovation of Balimela Hydel Project, which has an installed capacity
of 510 MW.

Government to waive transmission charges for clean power

In a bid to give a push to clean energy projects in the country, the

government has decided to waive transmission charges for
electricity generated from renewable sources. In this regard, the
government is bringing out a legal framework where all inter-state
transmission of renewable energy will be at zero cost. So renewable
energy will not be charged any transmission charges across the
country. The government has already started with Rs 38,000 crore of
green energy corridors and it is identifying more areas and are
urging states to come with area where it can expand renewable
energy so that more transmission grids can be made which the
Central government is doing. The government has set a target of
175 GW of renewable energy capacity by 2022, which includes 100
GW of solar power, 60 GW of wind power, 10 GW of biomass-fired
power and 5 GW of small hydro power.

Corporate developments in power sector

Leading power trading firm PTC India has inked pact with the Solar
Energy Corporation of India (SECI) for sale and purchase of power
generated from 3,000-mw solar projects.

Wind turbine maker Suzlon Group has completed commissioning of

50.40 mega watt (MW) wind power turnkey project for Ostro Energy
which is owned by Actis.
Welspun Renewables 32 MW solar power project in Bathinda has
been commissioned, making it Punjabs largest solar photo-voltaic
power plant.

TAGS: Power Sector

Overview

India is among the largest power-generating countries in the world with an installed capacity of 156.8 GW
(as of Jan 2010). Over the last 6 years, the installed capacity of the country grew at a CAGR of 5.60%
while the total power generated grew at a CAGR of 5.33%. The government has set an ambitious capacity
addition target of 78.55 GW to be achieved by 2012.
Generation Capacity based on Ownership

The ownership of generation capacity lies in the hands of the Centre, State, and Private sector players. In
the Centre, generation is mainly owned by NTPC, NHPC, and NPCIL. States have their separate corporations
while in the private sector, Tata Power, Reliance Energy, GMR, and Jai Prakash Hydro are the major players.
While the public sector players generate electricity from all sources (coal, gas, nuclear, hydro, renewable
energy sources or RES), the private players generate power from hydro, thermal, and Renewable Energy
Sources (RES) only. No private player is in the nuclear power generation space, but as Indias nuclear
isolation has come to an end now, this space is likely to witness the entry of private players.

Over the last 2 years, however, private capacity increased from 13.7% (as on Jan 2008) to 18% (as on Jan
2010) and there was a simultaneous fall in the states share in capacity from 52.8% (as on Jan 2008) to
50% (as on Jan 2010). The Centres share, also, decreased (though marginally) from 34% (as on Jan
2008) to 32.1% (as on Jan 2010).

Generation Capacity based on Location

The total power generation capacity in India can also be studied on a regional basis. The Western region
has the highest share in the all-India power generation capacity at 31.3%. In the Western region, power is
mostly generated from thermal source; in fact around 34% of the countrys thermal capacity is installed in
the Western region. The Northern region has substantial hydro potential and it accounts for 36% of the
countrys hydro capacity, but still most of the hydro potential is untapped. The Southern region has the
largest source of renewable (RES) generation and it accounts for 51.4% of the countrys (RES) generation
capacity. The Eastern region has huge coal reserves and major portion of its capacity comes from coal; due
to the easy availability of coal, most of the pit head coal base power plants are situated in the eastern
region.

Generation Capacity based on Feedstock

The generation capacity in India comprises of a mix of thermal, hydro, nuclear, and renewable energy. Over
the years thermal energy has become a dominant source of power generation. As of Jan 2010, thermal
energy contributed 64% (100,351.5 MW) of the countrys total power generating capacity, while hydro
energy contributed 24% (36,885.40 MW), renewable energy sources around 9.8% (15,427.10 MW), and
nuclear energy contributed 3% (4,120 MW) to the total capacity.

Thermal fuel maintains a leading position among the fuel used for power generation. In spite of efforts to
reduce the countrys dependence on thermal base generation, the cost (relatively higher for other sources
of generation) or the unavailability of other sources of energy have remained a constraint. During the Tenth
5-year Plan, the planned capacity addition had a greater focus on the thermal generation space and the
same trend has been continuing during the Eleventh 5-year Plan. Most of the power generation capacity will
continue to be thermal as most upcoming projects are coal-based.

Hydropower is an environment-friendly alternative for thermal power generation and the operating cost for
running a hydro plant is also very low; however, its share in generation has remained constant and has not
attracted much investment. The hydro-thermal mix has maintained a leading position over the years, but
the share of hydropower plants in total generation has fallen over the years. In the mid-eighties, the share
of hydropower in total generation was comparable to that of thermal generation, but, since then,
investments in hydropower generation have risen at a lower rate than investments in thermal generation.
Though the operating cost for hydropower plants is lesser, the capital investment required in the initial
stage is huge. Investors have shied away from the sector because of delays in environment clearances that
have made the sector an unfavourable choice and have restricted capacity addition in the sector. Thermal
energy, on the other hand, has gained a greater share over the 5-year plan periods and its growth rate has
also been much higher, as investments from public as well as private sectors have continued to pour in. In
the Eleventh Plan also capacity addition focuses more on thermal power generation, which suggests that
thermal energy will remain the dominant source in the coming years.
Nuclear energy has had a very small share in the power generation pie, but its share in total power
generation is likely to rise post the Indo-US Nuclear Civilian Agreement. India has only one nuclear power
generation company, NPCIL, with a capacity of 4,120 MW, but due to recent developments many private
and public sector utilities have envisaged plans for setting up nuclear plants. NTPC, Tata Power, GMR,
Reliance Infrastructure, and GVK are some such companies.

The renewable sources of power generation include wind power, small hydro power, biomass power, Urban
& Industrial (U&I) waste to power, solar power etc. Among these sources, wind power has a leading share
of 70% in the RES, while small hydro has 7%, cogeneration-bagasse 7%, biomass 5% and solar & waste to
energy constitute less than 1%.

India has an expansive coastline belt from Gujarat to Kerala and from Kerala to West Bengal that provides
ample scope for wind power generation. Indias wind power potential has been assessed at 45,000 MW.
During the last 5 years, wind power generation projects received increased investments from the
government as well as from private players, which resulted in significant capacity additions.

Indias solar power capacity is around 2 MW and the share of solar power in the current fuel mix is not very
high. However, the trend is all set to change as large number of small and large-size solar projects are
coming up in the near future. The Rajasthan government is set to approve solar thermal projects of 250
MW. Many other states like Haryana and West Bengal are implementing solar power projects.

During the last 6 years (FY04-FY09), growth in power generation capacity based on different fuel types was
impressive. Among the sources, renewable energy sources grew at a CAGR of 39.71%, and most of the
growth in this segment came from wind power. The capacity addition in the segment based on thermal
energy grew at a CAGR of 3.7% (FY04-FY09), hydro energy at 4.6%, and nuclear energy at 8.7% during
the same period.

Future additions to power generation capacity are likely to be affected by a number of factors, including
signing of the Indo-US nuclear deal, which could lead to more generation capacity being set up on nuclear
fuels, the Ultra Mega Power Projects (UMPPs) and Merchant Power Plants (MPPs), which would largely be
based on coal, and the policy of basing 5% of generation capacity on RES.

Power plants based on scale

Ultra Mega Power Projects (UMPP)

The UMPPs are large-sized projects with a capacity of around 4,000 MW. Such projects are awarded under a
bid process, where the government identifies specific project, location, fuel linkages, clearances and the
bidders quote the most beneficial price of power for that specified project. This initiative started out with
four ultra mega projects and now there are nine in the pipeline. The Central Electricity Authority (CEA),
through a preliminary scrutiny, has identified a number of potential sites in India; in the first phase, four
projects at pit head site and five projects at coastal locations were identified for development of UMPP. The
projects at pithead locations use domestic coal for fuel and the ones at coastal sites use imported coal as
fuel.

The UMPPs, each having a generation capacity of 4,000 MW, will help the countrys growing demand for
power and will aid overall economic growth. Further, the Electricity Act 2003 has opened doors for
privatisation, which will broaden the prospects of financial credibility of the UMPPs and will also help in
successful implementation of the MPP.

A Special Purpose Vehicle (SPV) is set up for these plants to reduce the difficulties faced by the investors in
early stages of project development. The payment securities of these projects are done through escrow
mechanism. The projects are awarded on the basis of domestic and imported coal, respectively. Three
UMPPs are awarded till date, Sasan in Madhya Pradesh, Mundra in Gujarat, and Krishnapatnam in Andhra
Pradesh.

These projects get the privilege of UMPPs in extension of MPP and are offered the following concessions:

Zero customs duty on imports

Exemption on income tax for 10 years preferred by developer within 15 years after commissioning
of the projects

Exemption from local taxes and duties when a directive is issued for the same by the Government of
India.

Merchant Power Plants

India is on its way to develop an electricity market and the merchant power plant is a new initiative in this
direction. The merchant power plant enables generators to choose a buyer with negotiated price. This
method has discarded the old pattern of long-term agreement with the buyer (as per provision in the
Electricity Act 2003) and has allowed only 49% of the project to be bound under long-term contracts and
the remaining 51% to remain untied. The fuel needs of the project are likely to be facilitated by Ministry of
Power (MOP) in consultation with the Ministry of Coal.

Merchant power plants can either contribute towards regular supply of electricity or support the power
system when the demand is high. Merchant power plants are creating additional generation reserve
through their 51% untied capacity and therefore can relieve Indias power woes; currently (FY09) India is
facing a peak deficit of around 12% and an energy deficit of 11%. The merchant power plants are the ideal
input for a future competitive electricity market. These plants have ample scope for selling their power
through exchanges as trading is now recognised as a separate activity under the Electricity Act 2003. Open
access in transmission will provide a right of way to sell power to buyers at any location. The merchant
power plants have many options to sell power to customers through different channels.

Captive Power Plants

A captive power plant (CPP) is any generating station set up by an organisation to meet its own power
requirement. The CPPs cater to the electricity requirement of industrial units in a large scale. The captive
power generation capacity in India is 19,509.49 MW (Apr 2008).

The Electricity Act 2003 encouraged captive power generation in India and further provisions in the Act
took captive power to competitive market by opening the market for players to invest in captive power
generation. Open access allows captive generators to sell power to any buyer no matter what the location.
CPP capacity grew at a CAGR of 5% during the last 5 years (FY04-FY08) and industrial and commercial
demand were the drivers of growth. Increasing demand from industrial consumers, who are suffering from
inadequate power supply and high tariff rate charged by State Electricity Boards (SEBs), find captive
generation as the best alternative for meeting their demand. Coal-based generation dominates captive
power generation also and constitutes around 42% of the captive capacity. Another reason for higher
capacity of coal-based captive generation is the cost of generating electricity from coal, which is cheaper
than diesel and naphtha. Different industries like manufacturing, commercial, service, hospitality, as well as
educational institutions have captive power capacity based on diesel generators. In recent times,
cogeneration and waste heat recovery are emerging as the best alternatives among all fuel types for CPPs,
as companies get the Clean Development Mechanism (CDM) benefits under this system in addition to
achieving energy efficiency.

The future of captive generation is very bright as industrial demand will keep on increasing and activities
like trading through exchange will provide a platform to captive generators to sell surplus power at a
profitable margin.

Regulations in Power Generation

Specific Policies for Power Generation

The Indian government over the last 15 years has introduced several policies for promoting power
generation. The governments liberalisation policies of 1991 and the consequent amendment in the
Electricity (Supply) Act have given way for a new framework of the industry that involves private efforts
and investments. Further, the government has taken measures to improve investments in the power sector,
especially from private players. Some of the major policy initiatives in generation are:

Private Power Policy 1991 Under this policy any private company can set up thermal projects, hydro
projects and wind or solar projects of any size. Foreign investors are also allowed to invest in projects with
ownership upto 100% with government approval. Due to this policy, many private players entered the
power generation business during this period and set up generation plants.

Liquid Fuel Policy 1995 This policy permitted private players to set up short gestation power projects
using fuels like naphtha and fuel oil. The policy has in a way aided quick capacity addition from these liquid
fuel-based power plants and encouraged the use of liquid fuel in power plants; under this policy, capacity
addition of 12,000 MW was planned based on liquid fuel.

Policy for Renovation and Modernisation of Existing Plants 1995 The government decided that Renovation
and Modernisation (R&M) of generating stations was beneficial and efforts were taken to realise these
benefits. Both public and private investments were made and the funds were raised through traditional
funding like loans from financial institution and external agencies. However, the ownership of renovated
plants remained with SEBs. Under a separate option, the R&M was carried out through privatisation or
through transfer of ownership. While taking any of the options, factors like relative economics, financing
other priority areas and the result price of energy was considered. The participation from private
investment in R&M programme, however, was on a lease, rehabilitate, operate and transfer (LROT) sale of
plant and joint venture between SEBs and private companies basis.
Hydropower Policy 1998 Hydropower is economic, non-polluting, and environment-friendly; due to all
these benefits, the government announced a policy on hydropower development for exploiting the vast
hydropower potential available in India. Several initiatives were taken to provide incentives to hydropower
projects, which included the following:

Tariff was rationalised for hydro projects

The procedures of tech-economic clearance and the ceiling limits for techno-economic clearance by
CEA were simplified

Small hydro projects upto 25 MW capacity were transferred to the Ministry of Non-conventional
Energy Sources (MNES)

Hydropower projects on MOU route were enhanced and notified to cover geological risks.

Mega Power Policy 1998 This policy focused on the development of projects with capacity of 1,000 MW
and more, those catering power to more than one state and considered them as a mega power project.
Projects were being awarded through competitive bidding mechanism. CEA, Power Grid and NTPC were to
provide support in identifying sites, arranging transmission network and preparation of feasibility report.
This policy was revised in 1998 and the revised policy offered some fiscal incentives. The incentive given to
these projects were:

Zero customs duty (capital equipment imported for these projects was declared customs free)

Deemed export benefit was conferred as per the EXIM policy

Rapid clearances

Income-tax holiday regime

Exemption from sales tax and local levies etc

This policy created interest among private players to enter into mega projects as different incentives and
benefits were available to them. Private participation not only increased competition but also increased
economies of scale in mega projects to bring tariff at a comparatively lower rate than tariff of other
projects.

New Hydro Policy 2008 The new hydro policy addresses different issues pertaining to development of
hydro potential. The provision to award projects to developers through tariff base bidding up to 2011 will
give private players flexibility to tie up with states for setting up projects. In order to enable the project
developer to recover the cost incurred by him in obtaining the project site, the policy permits a special
incentive by way of up to 40% of saleable energy for trade as merchant sales. This policy aims for the
welfare creation and creation of infrastructure and common facilities to achieve 1% additional power above
the existing 12% free power provided exclusively for local area development. Under the policy, the
government is likely to provide soft loans for small hydro plants with capacity up to 25 MW.

Supply Dynamics
Capacity Addition

India has a target to achieve power for all by the end of the Eleventh Plan. According to the CEA estimation
78,577 MW is to be added during the ongoing Eleventh Plan and the contribution is divided among different
sectors and types of sources.

The capacity addition initiatives taken during the Tenth 5-year Plan have a distinct skew towards coal-based
thermal plants and this has been carried forward for the Eleventh 5-year Plan as well. In fact most of the
planned capacity addition depends on thermal energy.

According to a research done by the Working group report for the Eleventh 5-year Plan and monthly update
project status by CEA and primary research of companies, it is estimated that 84,907 MW of capacity is
likely to be added during the 5-year period, of which 77% is likely to be in the public sector and 23% in the
private sector. In the private sector, 80% of the projects are already under construction and the remaining
20% are yet to start. The public sector projects are in the ratio of 53:47 of announced and under
construction.

RES and Nuclear Power

The RES sector merits a report on its own because of the plethora of opportunities it has to offer. The
working group on the Eleventh Plan states that the RES sector programmes of the Ministry for the Eleventh
Plan have been drawn up in the light of the recommendations made by CASE, the Planning Commission,
and IEPR. Accordingly, it is proposed that the development and deployment strategy be rationalised and in
case of development a thrust is to be given through a sector-based approach in place of individual
technology approach adopted during the Tenth Plan. The approach adopted hitherto was somewhat lacking
in focus, suffered from lack of effective coordination, even led to duplication of efforts in some cases, with
the result that desired outcomes and impact might have been somewhat affected at times. These
shortcomings are sought to be overcome through well defined aims, target areas, integration of efforts and
proper coordination among different programmes.

A plan outlay of about Rs 40 bn has been set aside for subsidies for the projects in case of implementation
within the Plan period. A ball park figure of Rs 731 bn of investment is needed. This will be done mainly in
the private sector and hence, there is a good opportunity to explore in terms of financing potential.

The estimated cost per MW for setting up a nuclear power plant is around Rs 65 mn. Most nuclear projects
are under construction and have a plan outlay of about Rs 219.70 bn.

Shortfall in Capacity Addition

The shortfall in capacity addition has been carried over from the Tenth Plan period to the current Eleventh
Plan. The capacity addition targeted for the Tenth Plan fell short by 51%, which indicated the massive
shortfall.
During the last 6 years, less than half of the capacity was achieved by thermal and hydro power. The major
reason behind the shortfall in thermal energy was the fuel and equipment shortage whereas in hydro,
procedural clearance like necessary approval and acquisition of sites hampered the pace of capacity
addition.

Key Input Requirements

Fuel Coal is a major input in power generation, and almost 76% of planned generation capacity during
the Eleventh Plan was from thermal sources, and the contribution of coal was about 90%. The total
demand of coal at the end of Eleventh Plan was projected at 544.5 mn tonnes as compared with 482 mn
tonnes, indicating a shortfall of around 62 mn tonnes.
Indias current coal demand is increasing at a rapid pace as majority of the upcoming projects are thermal-
based; however, the situation is very critical on the supply side as many coal-based power plants are
running with less than a weeks stock of coal. This situation started becoming critical from the beginning of
2008 when many companies suffered huge losses. As of Sept 2008, 50 out of 81 thermal power plants in
India had less than a weeks stocks.

Material Many materials are required for commissioning power projects that involves plant equipment
and several construction activities. Steel, cement, copper, aluminium, etc are the main materials used for
power projects. The demand for these materials varies according to the type of plant (hydro, thermal, or
nuclear) and type of project (green field or expansion).

Manpower requirement - This segment has huge requirement of skilled and unskilled manpower for
operation as well as for maintenance of power plants.
Overview

Under the Power for All mission, India has set a target of 200,000 MW of installed capacity by the end of
2012. The transmission segment has a major role in achieving this mission as an efficient transmission
capacity and network will prove essential to transfer power from generating stations to distribution
networks.

In the past, transmission planning was done with respect to generation and was focused on setting up
transmission systems that could evacuate power safely; however, with the changing scenario, the
transmission sector started to move towards integrated system planning because generation capacities are
distributed unevenly in different regions. While thermal capacity is in the eastern region, hydro capacity is
concentrated in the Northern and North-Eastern regions. The capacity is used to evacuate power according
to the demand in other regions like the Western region; thus, the integrated system planning has turned
out to be a good option.

In the central sector, the central transmission utility (CTU), known as the Power Grid Corporation of India
Ltd (PGCIL), is responsible for national and regional transmission planning while the state sectors have
separate State Transmission Utilities (STU). Private sector participation is negligible in transmission and
there is only one public-private partnership project, the Tala Transmission Project. Four private companies
have been granted licences for developing transmission projects. While three companies have entered joint
ventures with PGCIL, one company is a private company that has been awarded independently.

Transmission network includes transmission lines and transmission substations through which electricity is
evacuated from a generator to a distributor. India has over 126,999 circuit per km (ckt km) of 220 KV of
transmission lines upto Jan 2010 and its substations are of 188,155 Mega Volt Ampere (MVA) capacity for
220 KV upto Jan 2010.
Growth in Transmission Network over the Plan Period

The development in the transmission system was carried out in coordination with the growth in generation
capacity. New and advanced technologies were introduced in the transmission system for bulk power
transmission. 220 KV of transmission power was introduced in 1960, and another 400 KV was introduced in
1977. HVDC and HVDC bi-pole transmission was set up back-to-back in 1989 and in 1990 respectively.

The transmission line expanded from 52,034 ckm during the sixth plan to 221,549 ckm during the eleventh
plan (upto Jan 2010) while the transmission substation size increased from 46,621 MVA to 303,637 MVA
from the Sixth 5-year Plan to as on the period under review (Jan 2010).
Inter-Regional Transmission

During the fifties, electricity was supplied by generating stations to load centres; however, with the increase
in capacity, a state grid was built for ensuring reliability in power supply. Even though demand from
different regions was rising, the resources were confined to some regions like the eastern and north
eastern regions. One way to cater to the demand was to set up plants near the load centre but that was an
expensive option. Another option, which was taken during the seventies, was to form regional grids. A
regional grid interconnects regions and transfers energy, which further keeps pace with formation of public
sector utilities like NHPC and NTPC.

The existing inter-regional power transfer capacity is around 18,700 MW, and is targeted to be raised to
37,150 MW by the end of the Eleventh Plan period. Power Grid Corporation has plans to enhance its
capacity to 37,000 MW. Around 20,700 MW of new inter-regional links have been planned for the Eleventh
5-year Plan. India is now looking at linking the transmission system with its neighbouring countries Bhutan,
Nepal and Sri Lanka. There are also plans to develop an undersea HVDC transmission link between Sri
Lanka and India. Moreover, investments of Rs 550 bn have been planned at the interstate and intrastate
levels to increase the inter-regional transmission capacity for the Eleventh 5-year Plan period.
The inter-regional transmission capacity was developed over the plan periods to promote the inter-regional
power exchange business among players in different regions. The surplus and deficit regions are the main
drivers of growth in inter-regional energy transfer. During FY08, 43,000 MUs of inter-regional energy
transfer was facilitated, which was 13% higher than the previous year (about 38,000 MU).

The eastern and Northern region systems have a major share in the inter-regional transmission capacity.
While the eastern region is abundant in coal, the Northern region is endowed with hydro resources; as a
result these regions generate the most power and also meet maximum demand. Evidently, these regions
have a major share in inter-regional transmission capacity also.

Formation of the National Grid

Due to Indias uneven distribution of resources regional grids were created in the early sixties for power
planning and for operation of the electric power system. During the seventies, regional grids were in place
and inter-connected operations were obtained. The development of regional grids was further accelerated
by the central generating companies (NHPC, NTPC) that introduced regional power stations and constructed
EHV (Extra High Voltage) transmission lines.

In the current 5-year plan, a transmission plan has been evolved for strengthening the regional grids to
establish and to operate both the regional and the national power grid to facilitate transfer of power across
different regions and to support the generation capacity addition programme of around 80 GW.

Power Grid is now working on the planned set up of a national power grid to facilitate transfer of power
within the different regions in India by the end of the Eleventh 5-year Plan. This grid will support the inter-
regional energy transfer and will exploit the countrys unevenly distributed energy resources. The national
grid will also help the power-deficit regions to fulfill their demand from the regions that have excess power.

The Power Grid has achieved several milestones towards the development of National Grid such as the
implementation of Asias longest Talcher-Kolar High Voltage Double Circuit (HVDC) bipole link including its
upgradation and the commissioning of Muzaffarpur-Gorakhpur high capacity 400 KV D/C that interconnects
all four regional grids (Northern, Western, Eastern and North-Eastern) and is operating as a synchronous
grid.

The difficulty encountered during the construction of the transmission lines was the Right of Way (ROW),
especially in the hilly terrains of the Northern and North-Eastern regions, which are endowed with hydro
resources. Transmission Super Highways are the solution for the ROWs so that they do not cause
bottlenecks in harnessing generating resources. Interconnection of these highways from different parts of
the country will ultimately lead to formation of a high-capacity national power grid.

The objectives underlying the formation of National Grid are:

To transfer power from surplus regions to deficit regions

Utilise maximum resources from diversified regions

Ensure reliable, economical and quality power

Many inter-regional schemes have been planned for the phased development of the National Grid. The brief
status of inter-regional links under operation is provided in the table below.
Structure

Distribution is the last segment in the electricity supply chain; it is however, a key segment as it forms the
vital link between the end consumers and the power companies. Until some time back, the State Electricity
Boards (SEBs) handled the distribution segment completely. Power distribution in a few regions/areas has
been privatised, however the SEBs are still handling a large part of power distribution.

Power distribution caters to both rural and urban areas, both of which have different characteristics. The
consumer mix in the rural areas is largely residential and agricultural, while in the urban areas, the
consumer mix is residential, commercial, and industrial to a certain extent. Both the consumer segments
have their distinct characteristics and their own set of problems. In the rural areas the distribution network
needs to be widely dispersed in relatively larger areas with long lines, implying higher cost of supply. This
region has a large number of subsidised consumers, flat rate/tariff to farmers, low load and low rate of load
growth and non-metering due to high cost and practical difficulties. Distribution in the urban areas is
characterised by higher consumer density and higher rate of load growth.

A big challenge facing the power distribution sector is T&D losses, which are estimated to be as high as
26.9% in FY08. Though it has come down over the years from 32.5% in FY04, it continues to be much
higher than T&D losses reported in other countries of the world. A number of technical and non-technical
factors are contributing to the high transmission and distribution losses (T&D). These include political
interference in terms of free power supply or subsidised power supply to agricultural users, lack of
consumer education, theft, and inefficient use of electricity. A major share of these losses occurs in the
distribution sector. Inadequate investments in the sector over the years for system improvement have
resulted in unplanned extension of the distribution lines, overloading the distribution system elements.

T&D losses were computed taking into account electricity bills issued to consumers as accrued income and
not on actual collection. The concept of Aggregate Technical & Commercial (AT&C) losses was introduced in
2001-2002 to capture the difference between the billing and collection, which was not captured by the T&D
loss figures. AT&C loss is the difference between units input into the system and the units for which the
payment is collected.

The commercial losses in the sector can be eliminated by improving metering efficiency, proper energy
accounting & auditing and improved billing and collection efficiency. Greater accountability across the
different segments would also help reduce the AT&C losses considerably.

The government initiated the Accelerated Power Development & Reform Programme in 2001 for
strengthening the T&D network and reducing the AT&C losses.

Accelerated Power Development and Reform Program (APDRP)

The APDRP programme was launched in 2002 to promote and incentivize distribution sector through the
policy initiatives and controlling fund flow. The main objectives of the programe is to reduce the Aggregate
Technical & Commercial (AT&C) losses to 15%, decrease the power outages and interruptions, ensure
commercial viability, creating better management information system and increase consumer satisfaction.

The APDRP programe was formulated to improve the financial viability of SEBs (State Electricity
Boards)/Discoms. The SEBs average cost of supply was too high and average revenue was very low, as a
result the SEBs were under financial crunches and they were not able to make payment to the Central
Public Sector Undertakings (CPSUs). The APDRP has been tasked with restoring the commercial viability of
the Distribution Sector. MOP set up the guidelines to be followed by states to be eligible for the APDRP
funding.

The APDRP scheme gives its support through two components investment by states and incentives from
the centre. The allocation of funds by both the parties was in the ratio of 50:50. During the 10th plan
period (2002-2007), the scheme had an allocation of Rs 400 bn with Rs 200 bn each for investment and
incentives.
Investment component The Government of India (GOI) provides assistance for strengthening and up-
grading of the sub-transmission and distribution network for which additional assistance covers 50% of the
project cost in the form of 25% grant and 25% loan and remaining 50% have to arrange from PFC (Power
Finance Corporation), REC (Rural Electrification Corporation) or any other financial institution. Special
category states (like J&K, Himachal Pradesh, Uttaranchal and Sikkim) get 90% of the grant and remaining
10% loan. Around 571 projects of the cost of Rs 170.33 bn get investment benefits under the APDRP. The
Union government assistance is Rs 87.2 bn with Rs 64.45 bn in grants and Rs 22.74 bn as loans. The fund
released was Rs 72.1 bn while fund utilised was Rs 119 bn (as of 31/03/2008) which is 70% of the sanction
amount.

Incentive component - Incentive component is to reward the SEBs/utilities for cash loss reduction by
providing 50% of reduction as a grant. Under the incentive component, the government released an
incentive reward of Rs 28.79 bn (as on 31/03/08) for nine states.

Performance under APDRP APDRP has upgraded the entire distribution network by strengthening it.
The metering status has shown appreciable results as 11 KV feeder metering was raised from 81% (FY02)
to 98% (FY08) while the consumer metering reached 89% (FY08). States like Delhi, Himachal Pradesh, and
Kerala have achieved 100% consumer metering. As per the Ministry of Power (MOP) AT&C losses of APDRP
towns dropped below 20%. The Average Revenue Realisation (ARR) by many states like Maharashtra,
Gujarat, Punjab, Madhya Pradesh, Chhattisgarh, Himachal Pradesh, Orissa, Delhi, Manipur, West Bengal and
Nagaland increased.

Rajiv Gandhi Grameen Vidhyutikaran Yojana

The ministry of power launched the Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY) programe in Apr
2005, which aims at providing electricity to all villages and habitations in four years and to also provide
access to electricity to all rural households. The scheme envisaged a necessary infrastructural distribution
system to villages by setting up a 33/11 KV sub-station and a distribution transformer of appropriate
capacity in each village or hamlet.

The programme provides capital assistance of upto 90% and the assistance to Below Poverty Line (BPL)
households of upto 100%. The funds were released from the Rural Electrification Corporation (REC) which
is the nodal agency for the programme. To widen the scope of electrification, habitations of electrification
are now defined as having a population of 100 and above (earlier it was 300). Certain guidelines were
decided by the MOP for the RGGVY to disperse the electrification in rural areas.

Electrification Achieved

Rural electrification achieved during the 6th and the 7th plan periods was over 100,000. However, rural
electrification achieved during 8th and 9th plan periods was not significant as a result RGGVY was launched
in 2005 to remedy that. As of FY09 493,163 villages were electrified while 100,492 villages were left
unelectrified as on Jun 09.

Status of RGGVY

As per the 2001 census, the programe has a target of electrifying 582 districts, 6,337 block, 570 villages,
153,7943 habitations, 119,570 villages and 78,019,262 households. But the number of districts, blocks,
villages, habitations and households has increased over the years. Therefore in order to achieve the target,
electrification planning should be done keeping in mind the increased figures. As many as 588 projects
were sanctioned under RGGVY with coverage of 530 districts, 116,010 unelectrified villages, 349,853
electrified villages and 40,487,557 electrified households including BPL with a total project cost of Rs 256.8
bn.
Advantages amongst other schemes: The schemes which were launched prior to RGGVY like Minimum Need
Programme and Grameen Rozgar Yojana were given capital assistance through the state sector with
additional assistance from the central government. Hence it took a long time before the funds are released
while in the case of RGGVY funding is released directly from the central government. The programme has
to achieve its target on a priority basis and time frame which was given for rural electrification was the five
year plan period. The scheme was being supported by t CPSUs in execution and implementation of projects.

One aspect of the RGGVY scheme is the franchisee model. The model is being developed by the MOP
(Ministry of Power) for better management of electricity distribution in rural areas. The guide lines were
formulated by the REC and were issued to all states and CPSUs. The model is adopted by as many as 14
states and covers 87,666 villages. The approach adopted by different states were revenue collection-based
franchisee and input base franchisee.

Steps taken to Improve the Distribution Sector

In order to achieve commercial viability of SEBs, efficient performance by the distribution sector is
mandatory. For boosting up the performance of distribution sector GOI and MOP have taken several steps
which include: