CHAPTER 1 OVERVIEW OF POWER SECTOR

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1.1. INTRODUCTION
An economys growth, development, ability to handle global competition is all dependent on the availability, reliability and quality of the power sector. As the Indian economy continues to surge ahead, electrification and electricity services have been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope of growth of this sector is immense. Existing generation suffers from several recurrent problems. The efficiency and the availability of the coal power plants are low by international standards. A majority of the plants use low-heat-content and high-ash unwashed coal. This leads to a high number of airborne pollutants per unit of power produced. Moreover, past investments have skewed generation toward coal-fired power plants at the expense of peak-load capacity. In the context of fast-growing demand, large T&D losses and poor pooling of loads at the national level exacerbate the lack of generating capacity. India is one of the main manufacturers and users of energy. Globally, India is presently positioned as the 11th largest manufacturers of energy. It is also the worlds 6th largest energy users. In spite of its extensive yearly energy output, Indian power sector is a regular importer of energy because of huge disparity. Global and Indian economy have decelerated, but power is one of the few commodities in short supply in India. So, despite the sluggishness in production and demand for manufactured products, India remains power hungry, both in terms of normal and peak power demand. Power is derived from various sources in India. These include thermal power, hydropower or hydroelectricity, solar power, biogas energy, wind power etc. The distribution of the power generated is undertaken by Rural Electrification Corporation for electricity power supply.

1.2. GLOBAL OVERVIEW

The energy required to support our economies and lifestyles provides tremendous convenience and benefits. Energy consumption is reportedly higher in countries where less
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than 5 % of the population lives below the poverty line than it is in countries where most people live in poverty -- four times higher. For example, Americans make up less than 5 % of the worlds population yet consume 26 % of the worlds energy. World electricity generation rose at an average annual rate of 3.7% from 1971 to 2004, greater than the 2.1% growth in total primary energy supply. This increase was largely due to more electrical appliances, development of electrical heating in several developed countries and rural electrification programmes in developing countries. De-regulation in areas of the global energy markets has led to fierce competition. Now more than ever electricity has to be produced at a lower cost with many countries imposing ever tightening environmental legislation to reduce the impact power generation has on the environment. The enormous challenges are recognised in providing electricity as efficiently as possible and strive to develop technology to meet your needs. Collectively, developing countries use 30% of the world's energy, but with projected population and economic growth in those markets, energy demands are expected to rise 95 %. Overall global consumption is expected to rise 50 % from 2005 to 2030. World energy consumption is projected to expand by 50% from 2005 to 2030 in the IEO2008 reference case projection. Although high prices for oil and natural gas, which are expected to continue throughout the period, are likely to slow the growth of energy demand in the long term, world energy consumption is projected to continue increasing strongly as a result of robust economic growth and expanding populations in the worlds developing countries. Energy demand in the OECD economies is expected to grow slowly over the projection period, at an average annual rate of 0.7%, whereas energy consumption in the emerging economies of non-OECD countries is expected to expand by an average of 2.5 % per year. China and Indiathe fastest growing non-OECD economieswill be key contributors to world energy consumption in the future. Over the past decades, their energy consumption as a share of total world energy use has increased significantly. In 1980, China and India together accounted for less than 8 % of the worlds total energy consumption. In 2005 their share had grown to 18 %. Even stronger growth is projected over the next 25 years, with their combined energy use more than doubling and their share increasing to one-quarter of world energy consumption in 2030 in the IEO2008 reference case. In contrast, the U.S. share of total world energy consumption is projected to contract from 22 % in 2005 to about 17 % in 2030. Energy consumption in other non-OECD regions also is expected to grow strongly from 2005
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to 2030, with increases of around 60 % projected for the Middle East, Africa, and Central and South America. A smaller increase, about 36 %, is expected for non-OECD Europe and Eurasia (including Russia and the other former Soviet Republics), as substantial gains in energy efficiency result from the replacement of inefficient Soviet-era capital stock and population growth rates decline. Fig .1: World Marketed Energy Consumption, 1980 - 2030

Source: EIA International Energy Annual 2005(June-October 2007)

Oil for power generation has been displaced in particular by dramatic growth in nuclear electricity generation, which rose from 2.1% in 1971 to 15.7% in 2004. The share of coal remained stable, at 40% while that of natural gas increased from 13.3% to 19.6%. The share of hydro-electricity decreased from 23.0% to 16.1%. Due to large programmes to develop wind and solar energy in several OECD countries, the share of new and renewable energies, such as solar, wind, geothermal, biomass and waste increased. However, these energy forms remain limited: in 2004, they accounted for only 2.1% of total electricity production. The share of electricity production from fossil fuels has gradually fallen, from just under 75% in 1971 to 66% in 2004. This decrease was due to a progressive move away from oil, which fell from 20.9% to 6.7%.

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Table 1: OECD Multinational Electricity Companies Company Activity Assets Countries Active
AES EDF Tractebel Enron Intergen Mirant Transalta IP CDC Generation Generation Generation supply Generation Generation Generation Generation Generation Generation & 1666MW 1684MW 848MW 204MW 1830MW 2261MW 280MW 3817MW 810MW China, India, Pakistan, Sri Lanka China, Laos, Vietnam China, Thailand, Laos Philippines, Guam China, Australia Philippines Australia Australia, Pakistan, Thailand, Malaysia Bangladesh Philippines, Singapore,

As per the recent survery, the global electrical & electronics market is worth $1,038.8 billion, which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If electrical & electronics production statistics are considered, the industry accounted for $1,025.8 billion in 2006, which is forcasted to reach $1,051.5 billion in future.

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Fig.2:

Comparative

Per

Capita

Consumption

Of

Electricity

(Kwh)

The per capita consumption is seen to be far behind from the world average and very less when compared to other countries. So there is a need to improve it. Though India has achieved many milestones in generation still the there is a wide gap between demand and supply of power. This is the most important issue to be concerned.

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CHAPTER 2 LITERATURE REVIEW

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2.1 REVIEW OF LITERATURE

Sreekumar (2008) reviews the market-oriented power sector reforms initiated in India in the early 1990s. It brings out a public interest oriented critique of the three phases of the reforms firstly, privatization of generation, secondly, state sector restructuring and finally, the ongoing reforms since the passage of the Electricity Act 2003. Reforms were taken up as a response to the crisis in the sector. The article questions the success of the process in solving the crisis. While acknowledging positive elements like increase in transparency and participation, it criticizes the process for neglect of development issues like rural electrification and energy efficiency. The article concludes with some thoughts on developing an alternate reform approach.

Remes (2007) talks about Russia fourth largest user of electricity in the world, he talks about RAO UES which controls all the transmission, distribution and supply of electricity, it controls everything except nuclear power. Anatoly Chubais, The very core of the reform has been to separate competitive businesses from natural monopolies, both legally, functionally and regulatory. Consequently, competitive parts generation companies, supply/sales companies and service companies have been separated into legally different companies from natural monopolies from Transmission Company, distribution companies and system Operator Company. It is of utmost importance for the future, to prevent the creation of any monopoly structures on the markets. UES is suggesting a change in the law allowing the Antimonopoly Agency to interfere immediately when the share of any company in any regional free-flow markets. Finally, concluding it can be said that Russia is ahead of the EU in the reform of the power sector and power sector monopolies. Russia has been able to create very sophisticated markets, with new elements, and with rational elements to the regulations.
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Singh (2006) address the Power sector reforms in India. Reforms were initiated at a juncture when the sector was plagued with commercial losses and burgeoning subsidy burden. Investment in the sector was not able to keep pace with growing demand for electricity. This paper takes stock of pre-reform situation in Indian power sector and identifies key concerns that led to initiation of the process of reform. The paper discusses major policy and regulatory changes undertaken since the early 1990s. The paper also illustrates changes in the market structure as we move along the reform process. It also discuss some of the major provisions of the recently enacted Electricity Act 2003 that aims to replace the prevailing acts which govern the functioning of the power sector in the country. In this context, it discuss two issues arising out of it, namely open access and multi-year tariff that we think would have a significant bearing on the performance of the sector in the near future. The paper also evaluates the reform process in the light of some of the regulatory changes undertaken. Finally, the paper briefly discusses the issues involved in introduction of competition in the power sector primarily through development of a market for bulk power. Swain, Singh and Kumar (2004) ,describes there were many inhibitors to growth in power sector but the main problem in the growth was Government Policy, which made it difficult for a private player to enter. This further created the problem that Indian entrepreneurs didnt have enough knowledge and experience in developing power projects. A whole new system was evolved where private players were invited to be an active participant. The system demanded financial, political and other major requirement in roads and communication. Some of the bold steps taken in the Act were moving generation and distribution out of License Raj, opening access to national grid and demolishing the Single Buyer model. The failure of the large structure and the changing global scenario has forced Government to think of ways to revive this fundamental infrastructure sector. Two ways that government can count on for future growth of this sector are Small Power Plants and Clean Development Mechanism.

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CHAPTER 3 POWER SECTOR IN INDIA

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3.1. POWER SECTOR IN INDIA

The process of electrification commenced in India almost with the developed world, in the 1880s, with the establishment of a small hydroelectric power station in Darjeeling. However, commercial production and distribution started in 1889, in Calcutta (now Kolkata). In the year 1947, the country had a power generating capacity of 1,362 MW. Generation and distribution of electrical power was carried out primarily by private utility companies such as Calcutta Electric. Power was available only in a few urban centers; rural areas and villages did not have electricity. After 1947, all new power generation, transmission and distribution in the rural sector and the urban centers (which was not served by private utilities) came under the purview of State and Central government agencies. State Electricity Boards (SEBs) were formed in all the states. Legal provisions to support and regulate the sector were put in place through the Indian Electricity Act, 1910. Shortly after independence, a second Act - The Electricity (Supply) Act, 1948 was formulated, paving the way for establishing Electricity Boards in the states of the Union. In 1960s and 70s, enormous impetus was given for the expansion of distribution of electricity in rural areas. It was thought by policy makers that as the private players were small and did not have required resources for the massive expansion drive, the production of power was reserved for the public sector in the Industrial Policy Resolution of 1956. Since then, almost

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all new investment in power generation, transmission and distribution has been made in the public sector. Most of the private players were bought out by state electricity boards. From the installed capacity of only 1,362mw in 1947, has increased to 97000 MW as on March 2000 which has since crossed 100,000 MW mark India has become sixth largest producer and consumer of electricity in the world equaling the capacities of UK and France combined. The number of consumers connected to the Indian power grid exceeds is 75 million. India's power system today with its extensive regional grids maturing in to an integrated national grid, has millions of kilometers of T & D lines criss-crossing diverse topography of the country. However, the achievements of India's power sector growth looks phony on the face of huge gaps in supply and demand on one side and antediluvian generation and distribution system on the verge of collapse having plagued by inefficiencies, mismanagement, political interference and corruption for decades, on the other. Indian power sector is at the cross road today. A paradigm shift is in escapable- for better or may be for worse.

3.1.1. EMERGENCE OF REGIONAL POWER SYSTEMS

In order to optimally utilise the dispersed sources for power generation it was decided right at the beginning of the 1960s that the country would be divided into 5 regions and the planning process would aim at achieving regional self sufficiency. The planning was so far based on a region as a unit for planning and accordingly the power systems have been developed and operated on regional basis. Today, strong integrated grids exist in all the five regions of the country and the energy resources developed are widely utilised within the regional grids. Presently, the Eastern & North-Eastern Regions are operating in parallel. With the proposed inter-regional links being developed it is envisaged that it would be possible for power to flow any where in the country with the concept of National Grid becoming a reality during 12th Plan Period.

GENERATION

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India has installed power generation capacity of 1,41,079.84 MW as on January 31, 2008, which is about 100 times the installed capacity of 1362 MW in the year 1947. Power generation has showcased a robust growth rate which is steadily improving year after year. There has been significant improvement in the growth in actual generation over the last few years. As compared to annual growth rate of about 3.1% at the end of 9th Plan and initial years of 10th Plan, the growth in generation during 2006-07 and 2007-08 was of the order of 7.3% and 6.33% respectively. The electricity generation target for the year 2008-09 has been fixed at 744.344 BU comprising of 631.270 BU thermal; 118.450 BU hydro; 19.000 BU nuclear; and 5.624 BU import from Bhutan. Abbreviation:

SHP BG BP

= = =

Small Hydro Project Biomas Gasfier Biomass Power Urban & Industrial Water Power Renewable Sources.

U&I = RES =

Table.2: Gap Between Demand And Supply Of Power

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The table shows the average shortage of electricity in India every year to be approximately between 7-8%.

3.1.1.1. STRATEGIES
The various strategies followed to achieve the goal in power sector are, Power Generation Strategy with focus on low cost generation, optimization of capacity utilization, controlling the input cost, optimization of fuel mix, Technology up gradation and utilization of Nonconventional energy sources Transmission Strategy with focus on development of National Grid including Interstate connections, Technology up gradation & optimization of transmission cost.
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Distribution strategy to achieve Distribution Reforms with focus on System up gradation, loss reduction, theft control, consumer service orientation, quality power supply commercialization, Decentralized distributed generation and supply for rural areas. Regulation Strategy aimed at protecting Consumer interests and making the sector commercially viable. Financing Strategy is to generate resources for required growth of the power sector. Conservation Strategy to optimize the utilization of electricity with focus on Demand Side management, Load management and Technology up gradation to provide energy efficient equipment gadgets. Communication Strategy for political consensus with media support to enhance the general public awareness. To achieve the above objectives National Electric Policy has been designed. To fulfill the objectives of the NEP, a capacity addition of 78,577 MW has been proposed for the 11 th plan. This capacity addition is expected to provide a growth of 9.5 % to the power sector. The Tenth Plan for fiscal years 2002 to 2007 targeted a capacity addition of 41,110 MW, which was subsequently revised to 30,641 MW; however at the end of the Tenth Plan period, only 21,180 MW of capacity was added. This shows that India is not upto the mark in achieving the targets of generation. Our planning is perfect but our path to achieve the target is not perfect.

3.1.1.2. INVESTMENTS IN GENERATION

The total fund requirement for generation projects, during the Eleventh Plan period is estimated at Rs. 4,108,960 million, with Rs. 2,020,670 million being required for the central sector, Rs. 1,237,920 million being required for the state sector and Rs. 850,370 million being required for the private sector. The total fund requirement includes the fund requirement
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estimated at Rs. 1,891,950 million for start-up generation projects benefiting in the Twelfth Plan.

TRANSMISSION
Transmission of electricity is defined as bulk transfer of power over a long distance at high voltage, generally of 132 kV. In India bulk transmission has increased from 3708 ckm in 1950 to more than 256,000 ckm today. The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This mission would require that our installed generation capacity should be at least 2, 00,000 MW by 2012 from the present level of 1, 14,000 MW. To be able to reach this power to the entire country an expansion of the regional transmission network and inter regional capacity to transmit power would be essential. The latter is required because resources are unevenly distributed in the country and power needs to be carried great distances to areas where load centres exist. Ability of the power system to safely withstand a contingency without generation rescheduling or load-shedding was the main criteria for planning the transmission system. However, due to various reasons such as spatial development of load in the network, noncommissioning of load centre generating units originally planned and deficit in reactive compensation, certain pockets in the power system could not safely operate even under normal conditions. This had necessitated backing down of generation and operating at a lower load generation balance in the past. Transmission planning has therefore moved away from the earlier generation evacuation system planning to integrated system planning. While the predominant technology for electricity transmission and distribution has been Alternating Current (AC) technology, High Voltage Direct Current (HVDC) technology has also been used for interconnection of all regional grids across the country and for bulk transmission of power over long distances. Certain provisions in the Electricity Act 2003 such as open access to the transmission and distribution network, recognition of power trading as a distinct activity, the liberal definition of a captive generating plant and provision for supply in rural areas are expected to introduce
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and encourage competition in the electricity sector. It is expected that all the above measures on the generation, transmission and distribution front would result in formation of a robust electricity grid in the country.

GROWTH OF TRANSMISSION

Table.3: CUMLATIVE GROWTH IN TRANSMISSION SECTOR & PROGRAMME FOR 11th PLAN At the end of At the end of At the end of At the end of VIII Plan ie IX Plan ie X Plan ie XI Plan ie March 1997 March 2002 March 2007 March 2012

Unit

TRANSMISSION LINES 765 kV HVDC +/- 500kV HVDC 200kV Monopole 400kV 230kV/220Kv Total Transmission Line SUBSTATIONS HVDC BTB HVDC Bipole+Monopole Total-HVDC Terminal Capacity 765kV 400Kv 230/220Kv Total-AC Subtation Capacity ckm ckm ckm ckm ckm ckm VIII Plan 409 3138 0 36142 79601 119290 IX Plan 971 3138 162 49378 96993 150642 X Plan 1704 58728 162 75772 114629 198089 XI Plan 7132 11078 162 125000 150000 293372

MW MW MW

VIII Plan 1500 1500 3000

IX Plan 2000 3200 5200 0 60380 116363 176743

X Plan 3000 5200 8200 2000 92942 156497 251439

XI Plan 3000 11200 14200 53000 145000 230000 428000

MVA 0 MVA 40865 MVA 84177 MVA 125042

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3.1.1.3. TRANSMISSION NETWORK

Table.4: Details of Existing Lines and Sub-Stations Region Details of Existing Lines and Sub-Stations Region HVDC 1 Northern Region J&K HP Delhi Haryana Punjab Rajasthan UP Total NR 2 Western Region MP Maharashtra Gujarat Total WR 3 Southern Region AP Karnataka 2762 965 3150 NIL 5791 1127 1195 8113 852 852 0 945 NIL 630 1575 817 817 300 572 397 1789 1170 791 2933 7952 687 192 66 401 1032 870 3248 0 1260 1575 2025 1130 630 6620 400KV 220KV 132KV (MVA)

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Kerala Tamil Nadu Total SR 4 Eastern Region Bihar Orissa West Bengal DVC Total ER 5 N.E.Region Assam Maghalaya Nagaland Manipur Mizoram Tripura Arunachal Pradesh Total NER Total All India

260 1647 5634

156 64 220

630 1575 5355

1057 1034 1287 344 3722

82 872 952

333 333

1860 2520 2025 630 7035

817

1978 333 2311 27732

171 320 491 5763

79 67 189 443 178 147 42 1145 1478

1015 100 6.3 5 1126 21711

According to this table about 2.5% of Indian villages still remain unelectrified. In addition to state boards Power Grid Corporation of India Limited has a major role in transmission

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Power Grid Corporation of India limited (POWERGRID) was incorporated on October 23, 1989 with an authorized share capital of Rs. 5,000 Crore as a public limited company, wholly owned by the Government of India. POWERGRID started functioning on management basis with effect from August, 1991 and it took over transmission assets from NTPC, NHPC, NEEPCO and other Central/Joint Sector Organizations during 1992-93 in a phased manner. In addition to this, it also took over the operation of existing Regional Load Dispatch Centers from CEA, in a phased manner, which has been upgraded with State of-the-art Unified Load Dispatch and Communication (ULDC) schemes. According to its mandate, the Corporation, apart from providing transmission system for evacuation of central sector power, is also responsible for Establishment and Operation of Regional and National Power Grids to facilitate transfer of power within and across the Regions with Reliability, Security and Economy on sound commercial principles. Based on its performance POWERGRID was recognized as a Mini-ratna company by the Government of India in October 1998.

POWERGRID, notified as the Central Transmission Utility of the country, is playing a major role in Indian Power Sector and is also providing Open Access on its inter-State transmission system.

3.1.2. FUTURE PLANS FOR POWER FOR ALL BY 2012

The countrys transmission perspective plan for eleventh plan focuses on the strengthening of National Power Grid through addition of over 60,000 ckm of Transmission Network by 2012. Such an integrated grid shall carry 60% of the power generated in the country. The existing inter-regional power transfer capacity is 17,000 MW, which is to be further enhanced to 37,000 MW by 2012 through creation of Transmission Super Highways. Based on the expected generation capacity addition in XI plan, an investment of about 75,000 Crore is envisaged in Central Sector and Rs. 65,000 Crore is envisaged in the State Sector. POWERGRID is working towards achieving its mission of Establishment and Operation of Regional and National Power Grids to facilitate transfer of power within and across the regions with reliability, security and economy, on sound commercial principles".
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The exploitable energy resources in our country are unevenly distributed, like Coal resources are abundant in Bihar/Jharkhand, Orissa, West Bengal and Hydro Resources are mainly concentrated in Northern and North-Eastern Regions. As a result, some regions do not have adequate natural resources for setting power plants to meet their future requirements whereas others have abundant natural resources. Demand for power continues to grow unabated. This calls for optimal utilization of generating resources for sustainable development. Thus, formation of National Power Grid is an effective tool to achieve this as various countries have adopted the model of interconnecting power grid not only at national level but also at international level. Further, acquiring Right of Way (ROW) for constructing transmission lines is getting increasingly difficult, especially in eco-sensitive areas like North-Eastern Region, Chicken neck area, hilly areas in Jammu & Kashmir and Himachal Pradesh. At the same time, these areas are also endowed with major hydro potential of the country. This necessitates creation of Transmission Super Highways, so that in future, constraints in ROW do not cause bottleneck in harnessing generating resources. Inter-connection of these highways from different part of the country would ultimately lead to formation of a high capacity National Power Grid. Thus, developments in power sector emphasize the need for accelerated implementation of National Power Grid on priority to enable scheduled/unscheduled exchange of power as well as for providing open access to encourage competition in power market. Formation of such a National Power Grid has been envisaged in a phased manner. Initially, considering wide variations in electrical parameters in the regional grids, primarily HVDC interconnections were established between the regions. This was completed in the year 2002, thereby achieving inter-regional power transfer capacity of 5000 MW. In the next phase, inter-regional connectivity is planned to be strengthened with hybrid system consisting of high capacity EHV/UHV AC and HVDC links. Such a National Power Grid is envisaged to disperse power not only from Mega sized generation projects but also to enable transfer of bulk power from one part of the country to another in different operational scenarios say, in varying climatic conditions across the country: Summer, Winter, Monsoon etc. Commissioning of links under this phase has already begun with the commissioning of 2000 MW Talcher-II HVDC Bipole, Raipur Rourkela 400kV D/C AC transmission line
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having Series Compensation, augmentation of Gazuwaka HVDC (500MW) back to back link and Tala transmission system. The inter-regional transfer capacity of 16,200 MW is available as on date. Further strengthening of National Power Grid is envisaged through high capacity AC EHV lines, 765 kV UHV AC lines/ HVDC lines. This phase is planned to be implemented by 2012 when inter-regional power transfer capacity will be enhanced to about 37,700 MW by the end of XI Plan, depending upon planned growth of generation capacity.

3.1.3. DISTRIBUTION
The total installed generating capacity in the country is over 1, 35,000 MW and the total number of consumers is over 144 million. A vast network of sub transmission in distribution system has also come up for the utilization of power by the ultimate consumer. However, due to lack of adequate investment on T&D works, the T&D losses have been consistently on higher side, and reached to the level of 32.86% in the year 2000-01.The reduction of these losses was essential to bring economic viability to the State Utilities. As the T&D loss was not able to capture all the losses in the net work, concept of Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system. High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support. The commercial losses are mainly due to low metering efficiency, theft & pilferages. This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel feeder managers may help considerably in reduction of AT&C loss. With the initiative of the Government of India and of the States, the Accelerated Power Development & Reform Programme (APDRP) was launched in 2001, for the strengthening of Sub Transmission and Distribution network and reduction in AT&C losses. The main objective of the programme was to bring Aggregate Technical & Commercial (AT&C) losses below 15% in five years in urban and in high-density areas. The programme,
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along with other initiatives of the Government of India and of the States, has led to reduction in the overall AT&C loss from 38.86% in 2001-02 to 34.54% in 2005-06. The commercial loss of the State Power Utilities reduced significantly during this period from Rs. 29331 Crore to Rs. 19546 Crore. The loss as %age of turnover was reduced from 33% in 2000-01 to 16.60% in 2005-06. The APDRP programme is being restructured by the Government of India, so that the desired level of 15% AT&C loss could be achieved by the end of 11th plan. Since incentive financing is proposed to be integrated with the existing investment program to achieve commercial viability of SEBs / Utilities and link it to the reform process, the original APDP was rechristened to Accelerated Power Development & Reforms Programme (APDRP) during 2002-03 for 10th five year plan. The objectives of APDRP are: Improving financial viability of State Power Utilities Reduction of AT & C losses Improving customer satisfaction Increasing reliability &quality of power supply The scheme has two components as below:
a. Investment component Government of India provides Additional Central

Assistance for strengthening and up gradation of sub-transmission and distribution network. 25% of the project cost is provided as Additional central plan assistance in form of Grant to the state utilities. To begin with the Govt. also provided loan to the tune of 25% of the project cost. However in accordance with the recommendation of 12th finance commission, the loan component has been discontinued from FY 200506. Now utilities have to arrange remaining 75% of the project cost from FIs like PFC/REC or their resources. Special category state (like NE states, J&K, H.P, Uttaranchal and Sikkim) are entitled for 90% assistance in form of grant and balance 10% fund.

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b. Incentive component - An incentive equivalent to 50% of the actual cash loss

reduction by SEBs/ Utilities, is provided as grant. The year 2000-01 is the base year for the calculation of loss reduction, in subsequent years. The cash losses are calculated net of subsidy and receivables.

Funds Released: Table.5: The details of the cash loss reduction and incentives released to various states under APDRP (As on 31 March 2008) Sl. No. 1 2 3 4 5 6 7 8 9 Total Claim Year 2002-03 2001-02 2002-03 2003-04 2004-05 2001-02 2002-03 2004-05 2002-03 2001-02 2001-02 2002-03 2003-04 2004-05 2005-06 2003-04 Incentive Amount Amount Released by Recommended for MoF released to MoF 265.11 236.38 148.08 366.82 288.03 105.49 64.94 82.99 297.61 137.89 137.71 73 302.76 5.88 115.1 251.94 2879.63 265.11 236.38 148.08 366.82 288.03 105.49 64.94 82.99 297.61 137.89 137.71 73 302.76 5.88 115.1 251.94 2879.63

State Andhra Pradesh Gujarat Haryana Kerala Madhya Pradesh Maharashtra Rajasthan West Bengal Punjab

Schemes undertaken under APDRP are for renovation and modernization of sub-stations, transmission lines & distribution transformers, augmentation of feeders & transformers, feeder and consumer meters, high voltage distribution system (HVDS), consumer indexing, SCADA, computerized billing etc.

1. Project Formulation
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The State utilities to prepare for each of the high-density areas in order of priority, Detail Project Reports (DPRs), based on the Technical Manual prepared by the Expert Committee on Distribution, constituted by the Ministry of Power. These DPRs are to be vetted by NTPC or PGCIL and put up to MOP for sanction. The different project components shall include: 2. Energy meters on Feeders Static meters on 11 kV out-going feeders and HT consumers have been contemplated. Though the Chief Ministers conference held in March 2001 decided to complete the implementation of the feeder meters by December 2002, due to various reasons their procurement and installation is yet to be completed. Since these feeders provide the metering at the points of bulk deliveries in the distribution system, these are of paramount importance for carrying out energy audits. Actions for procurement & installation of these are being pursued vigorously. It is also necessary that the meters be provided with on-line communication facility so that reliable, continuous data from all the substations are made available without manual intervention. 3. Energy meters on DTs & Consumers and energy accounting In many areas it has been planned to install suitable energy meters at distribution transformers to facilitate detailed accounting of energy flows and these have to be planned with suitable data transmission / collection facilities convenient to the utilities. Such meters can also help in keeping track of the distribution transformer loading and thereby reduce their outages apart from providing useful information on consumption patterns for demand side management. 4. 11 kV Feeder as Profit Centre Administrative measures are considered a powerful tool in our overall reform strategy because of the tremendous benefits it can provide in a short time span and with least burden to the SEB's. Recently, Andhra Pradesh has planned to entrust the distribution in selected 11 kV feeders and below levels to selected agencies with the requisite capabilities and have invited tenders for such tasks. Karnataka has come out with the program of Grama Vidyut Pradhinidhis for distribution in selected 11kv feeder areas. Success of such endeavors would go a long way in finding a solution to the issues of the Indian power sector.

5. Technical Loss reduction measures

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Measures for technical loss reduction include Installation of capacitors at all levels;

Re-conductoring of over loaded sections Re-configuration of feeder lines & distribution transformers so as to reduce the length of LT lines

Make the system less LT oriented by installation of smaller size energy efficient distribution transformers so that each transformer supplies power to 10 to 15 households only

Development of digital mapping of the entire assets of distribution system Computerized load flow studies so that investments could be undertaken for longterm strengthening of the distribution system.

6. Improving customer satisfaction Customer satisfaction can be improved through providing better quality power in terms of voltage fluctuations and reliability by reducing outages. These necessarily call for technical intervention in firstly ensuring that the assets already created are maintained in proper working condition and secondly through augmenting the system. Further, customer complaint redressal mechanisms are to be made more responsive and proactive through building transparent and reliable system with the help of computerization. The system should be capable enough to meet the growing demand of information conscious customers. 7. Computerization Creation of comprehensive, up to date consumer index and system databases on computerized platforms are essential for creation of platforms for efficient commercial and technical operation and management of any distribution system. The APDRP program has laid emphasis on this basic need and actions are on in many areas for creation of such databases. The energy accounting, billing and revenue management platforms are also planned under the APDRP program for realizing the objectives outlined above and provide better services to the customers. Implementations for these are under various stages in different areas. In addition provisions of computerized automatic data acquisition at the substations are planned. Based on the needs these would be hooked up to suitable Supervisory Control and Data Acquisition systems.

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8. Turnkey Implementation The schemes proposed under APDRP have to be implemented in a very short time frame so that benefits of the investments are perceived and confidence is generated in the FIs that investments in the distribution sector can be bankable. Execution of the scheme adopting conventional arrangement of ordering each of the components separately would be time consuming and delay in arranging any one component could lead to overall time delays. With the present day manpower position in most of the SEBs it would also not be practical to coordinate the efforts of multiple agencies. By awarding the works under a turnkey contract the scheduling of equipment would be the responsibility of the contractor and shall keep in adhering to the time schedules. Hence turnkey packaging concept would be adopted for execution of works preferably through empanelled turnkey contractors to expedite project implementation schedule. Performance Guarantee Mechanism having adopted a turnkey concept for execution it would be possible to bind the contractor in terms of - Work completion schedule - Overall costs - Equipment performance. A scheme of incentives for early completion and penalties for delays or failure to meet performance guarantees can also be worked out in the turnkey contracts. If required performance guarantee contract mechanisms will be introduced whereby the turnkey companies would implement projects with guaranteed AT&C loss reduction with their own investments. The returns are expected from the guaranteed incremental loss reduction. Implementation of various activities / interventions will be prioritized to ensure quick improvements in reliability and quality of power supply, reduction in AT&C losses, increase in revenues and reduction in outages. The focus will be on 11 KV feeders, Distribution transformers and the Consumers. Therefore, the SEBs/State Utilities shall be urged to implement projects sanctioned under this programme on turnkey basis through pre-qualified turnkey contractors selected on a competitive basis to ensure quality and expeditious implementation.

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9. Technical Specification & Standardization The Expert Committee has also recommended standardization of technical specifications of equipment used in the distribution sector. Specifications are being drawn up for energy efficient and standardized equipments like electronic and static meters, transformers, capacitors, conductors, insulators etc., with the assistance of the Indian Electrical and Equipment Manufacturing Association, the Confederation of Indian Industry and the Bureau of Indian Standards etc. Appropriate Expert Committees have been set up for this purpose. NTPC and PGCIL have also prepared model bidding documents which are available for use by the utilities. 10. Accreditation Project formulation for up gradation of distribution network is a highly specialized job that involves detailed energy balancing and network reconfiguration necessary for a high voltage or low voltage distribution system. The SEBs may or may not have adequate skills in the area and, therefore, may like to acquire the expertise and skills on an outsourcing basis. In order to cover a large number of urban & industrial areas in the country, within the next 4 to 5 years, it is essential to make available a number of accredited specialized agencies for the purposes of energy audit & accounting, project formulation, turnkey implementation, project monitoring and project evaluation. SEBs / Utilities, if they so desire, would be able to outsource the implementation to accredited agencies for quick formulation of quality projects and their implementation. A Committee with members from NTPC, PGCIL, PFC, CEA, SEBs /Utilities, credit rating agencies, FIs etc. will be constituted to accredit reputed agencies for the above purpose. This would require engagement of agencies that are specialists in the fields of work given below in assisting the states which lack internal capabilities or manpower, and oversee the proposals & implementation by the states who are well equipped:
Engineering Agencies: To formulate and appraise the DPRs for augmentation of sub-

transmission and distribution system and oversee implementation including quality checks.
Project Monitoring Agencies: To review the physical and financial progress of the

project and bring out concern areas to the notice of the MOP for immediate resolution to avoid time and cost over - runs.

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 Turnkey Contractors: To undertake design, manufacture, supply, erection, testing &

commissioning and provide maintenance facilities and performance warranty for the various components involved in the sub-transmission and distribution system. Project Evaluators: To conduct concurrent and post execution evaluation of the anticipated and actual benefits accrued consequent upon execution of the project.
Energy Accounting & Audit Agencies: The key success of distribution sector lies in

bridging the gap between the energy drawn from the system and the metered energy supplied to the customers. The MOU with the States has a provision for conducting energy audit on each feeder. But the results of the audit have shown that a fair amount of energy accounted for as supplied is based on assessment. For success of the program and improving revenue realization it is essential that all energy transactions are adequately metered and properly accounted. Just as any business would have to get its accounts audited it is necessary that this energy accounting is audited by eminent third parties so that the programme can sustain on its own strength in the coming years. For carrying out the detailed activities at field level agencies with sufficient experience in the respective areas of work are proposed to be identified and accredited. Any SEB can invite quotations from the accredited parties for the specific work and immediately place an award thereby saving considerable time and effort. This would facilitate in reduction of bidding time, bring in uniformity of terms of reference and work content. For the other activities especially those involving HR initiatives at SEB level and DSM and distributed generation concepts, discussions are being held with international financing agencies to support the programme. 11. Application of Information Technology Information technology and computer aided tools for revenue increase, outage reduction, monitoring and control, play a vital role in distribution management. It is, therefore, proposed to have a technology mission for customizing / development of cost effective and relevant solutions for consumer and control point data communications, remote monitoring, operation and control, etc. for the distribution network. Involvement of IT industries in this effort is envisaged. IT applications will be used in such processes in the distribution sector to ensure higher revenues as a result of segregation of T&D losses, and controlling commercial losses, especially for metering, meter reading, billing, collection and outage reduction.

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12. Management Information System (MIS) Operational efficiency improvement and customer servicing also need to be addressed at various levels in the organization. In this regard, an effective Management Information System (MIS) is required to ensure effective flow of information to facilitate quick decisionmaking at various levels of organization and to improve the operation and management of the distribution system. This is proposed to be achieved through computerization and networking. Management Information System for the SEBs/ Utilities should provide relevant information at each level of the organization in timely and accurate manner. The timeliness and accuracy of information improves decision-making. For MIS, information flow is required from lower level to higher levels with some information in real time and some in batch mode. For real time information flow, networking within the organization is needed. In addition to this, information management required for monitoring and decision-making will be different at various levels in hierarchy. MIS should be able to take care of different needs at various levels. Otherwise huge data generated from MIS will not be of any significant use. The structure of MIS should be SEB specific because of difference in their organizational structures and responsibilities at various levels across the organization. A generalized framework of MIS is presented which may be tailored to suit the needs of a specific SEB/utilities. 13. Capacity Building within SEBs/Utilities Even though SEBs have expertise in different fields, strengthening of sub-transmission & distribution network on a scientific basis using computer aided tools requires an integrated knowledge. Most 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 was considered necessary to promote capacity building exercise in the SEBs/State Power Utilities to enable SEB personnel to prepare detailed project reports for each of the districts/ circles and implement the project using APDRP funds at a later stage. Capacity building exercise is to cover: Training the manpower Energy audit & accounting studies

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

identified circle. Analysis of the data using computer tools to prepare feeder wise computer aided least

cost project report. Supervision of implementation

Several training programmes were organized by the training institutions such as Power Management Institute (NTPC), National Power Training Institute, PGCIL etc., and several working level officers from the various SEBs benefited from such programmes. It is planned to further strengthen our efforts in imparting quality training to bring about changes in business perspective crucial to the success of our power reform programme. It is proposed to provide extensive training to the staff of SEBs / Utilities at all levels to so as enable them to develop bankable project reports covering techno-commercial activities for each circle and manage electricity distribution with a commercial orientation. Capacity building is envisaged as a continuous exercise to ensure that the latest developments are internalized. Distribution reforms require a structural change in the existing set up of the SEBs. In order to enable them to manage distribution on a profit centre approach and to improve their performance on the basis of certain benchmarks, funds under APDRP will be provided only to those State Govts. /SEBs which agree to certain precedent conditions through an Agreement The SEBs / State Distribution Utilities will execute a SEB/Utilityspecific Memorandum of Agreement [MOA] with the Ministry of Power. The Ministry of Power will also monitor implementation of the precedent conditions before releasing funds. The efficiency gains on account of APDRP investments shall be intimated to the regulatory commission to ensure that the benefits and reliefs are passed on to the customer by the private utilities.

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CHAPTER 4 SEGMENTS IN POWER GENERATION

SEGMENTS IN POWER GENERATION 4.1. THERMAL

Current installed capacity of Thermal Power (as of 12/2008) is 93392.64 MW which is 63.3% of total installed capacity.
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 Current installed base of coal based thermal power is 77458.88MW which comes to 53.3% of total installed base. Current installed base of gas based thermal power is 14734.01MW which is 10.5% of total installed base. Current installed base of oil based thermal power is 1199.75 which is .09% of total installed base. Maharashtra is the largest producer of thermal power in the country. Fig. 3: Comparison of Energy Intensity

4.2. HYDRO POWER

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India is blessed with a rich hydro power potential. In the exploitable potential terms, India ranks fifth in the world. Less than 25% of the potential has been developed as of now. A large hydro has four main advantages. It is a source of green energy. It has low variable cost. It is grid friendly. It can also can sub serve other purposes by irrigation, flood control, etc.

India has 3 major rivers: the Indus, the Brahmaputra, and the Ganga. It also has three major river systems? Central Indian, west flowing rivers of south India, and east flowing rivers of south India with a total of 48 river basins. The total potential from these river basins is 600TWh (Terawatt Hours) of electricity. Hydroelectric projects can be classified on the basis of purpose, hydraulic features, capacity, head, constructional features, mode of operation, etc. The main types are

ROR (Run of River) There are not large reservoirs; a part of water flow is diverted to

the plant which is adjacent to the river. After generation the flow is diverted back to the main flow through the tail race. This type of hydro plants requires a diversion dam and has unregulated water flow.

Dam Storage In these types of hydro plants, large reservoirs are created by the

construction a sizeable dam across the river and the plants is situated at the toe of the dam. Here, water could be regulated to generate electricity depending upon the demand

Pumped Storage These types of plants have two reservoirs, one at the upstream of

the power plant and one at the downstream. When there is low peak demand, the water from the reservoir situated downstream is pumped0020back to the upstream reservoir. As of today, the total identified hydro potential is 1 48 701 MW (mega watt). According to the list of hydro electric projects in the country, a total of 29 572 MW,19.9% of the total? Has been harnessed and 13 286 MW is under construction. A total of 3 660 MW of pumped storage schemes have also been developed. Various initiatives for accelerated development have been taken up by the central government to harness the hydro potential in India. Some of these are
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Hydro Power Policy (1998) 50 000 MW initiative Preparation of viable models for private sector participation Ranking of projects R&M up gradation and life extension programmes Facilitation for trading and co-operation with other countries Execution of projects with interstate aspects by Central Public Sector Units

Fig.4: State wise Hydro-power generation

Source: http://www.marketresearch.com/product/display.asp?productid=1695991

4.3. NUCLEAR POWER GENERATION

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In India, out of total installed capacity of 126993.97 MW (as on 31 August 2006); the share of nuclear power is 3% at 3900 MW. From the electricity generation point of view, nuclear power plants contributed 17 238.89 GWh out of total electricity generation of 6 17 510.44 GWh during April 2005 - March 2006, amounting to 2.79% of total generation. However, with exponential growth in energy demand coupled with a finite availability of coal, oil, and gas; there is a renewed emphasis on nuclear energy. Moreover, nuclear energy is considered to be an environmentally benign source of energy. Department of Atomic Energy is carrying out nuclear energy programme in India. The Indian Nuclear Power Programme has the following three stages.

The first stage, already commercial now, comprised setting up of PHWRs (pressurised heavy water reactors) and associated fuel cycle facilities. PHWRs use natural uranium as fuel and heavy water as moderator and coolant. The design, construction, and operation of these reactors is undertaken by public sector undertaking the NPCIL (Nuclear Power Corporation of India Ltd). The company operates 16 reactors (2 Boiling Water Reactors and 14 PHWRs) with a total capacity of 3900 MWe. In the second stage, it was envisaged to set up FBRs (fast breeder reactors) along with reprocessing plants and plutonium-based fuel fabrication plants. Plutonium is produced by irradiation of Uranium-238. The Fast Breeder Programme is in the technology demonstration stage. Under this stage, the IGCAR (Indira Gandhi Centre for Atomic Research) has completed design of a 500 MWe PFBR (prototype fast breeder reactor) being implemented by BHAVINI (Bharatiya Nabhikiya Vidyut Nigam). The third stage of the Indian Nuclear Power Programme is based on the thoriumuranium-233 cycle. Uranium-233 is obtained by irradiation of thorium. Presently this stage is in technology development phase. The ongoing development of 300 MWe AHWR (advanced heavy water reactor) at BARC (Bhabha Atomic Research Centre) concerns thorium utilization and its demonstration.

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4.4. SOLAR India is endowed with rich solar energy resource. The average intensity of solar radiation received on India is 200 MW/km square (megawatt per kilometer square). With a geographical area of 3.287 million km square, this amounts to 657.4 million MW. However, 87.5% of the land is used for agriculture, forests, fallow lands, etc., 6.7% for housing, industry, etc., and 5.8% is either barren, snow bound, or generally inhabitable. Thus, only 12.5% of the land area amounting to 0.413 million km square can, in theory, be used for solar energy installations. Even if 10% of this area can be used, the available solar energy would be 8 million MW, which is equivalent to 5 909 mtoe (million tons of oil equivalent) per year.

However, solar energy is a dilute source. The energy collected by 1 m square of a solar collector in a day is approximately equal to that released by burning 1 kg of coal or 1/2 litre of kerosene. Thus, large areas are needed for collection. Besides, the efficiency of conversion of solar energy to useful energy is low. Therefore, the energy actually available would be order of magnitude lower than the aforementioned estimates. Nonetheless, it is obvious that solar energy can be a good source of meeting energy demands. On the applications side, the range of solar energy is very large. While at the high end there are megawatt level solar thermal power plants, at the lower end there are domestic appliances such as solar cooker, solar water heater, and PV lanterns. Then, in between, there are applications such as industrial process heat, desalination, refrigeration and air-conditioning, drying, large scale cooking, water pumping, domestic power systems, and passive solar architecture. Solar energy can be harnessed to supply thermal as well as electrical energy. Those technologies that use solar energy resource to generate energy are known as solar energy technologies. Solar energy technologies consists of
Solar thermal technologies, which utilize sun's thermal energy and Solar photovoltaic technology, which convert solar energy directly in to electricity.

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Solar energy resource: Since the accurate information about solar energy resource at a specific location is crucial for designing appropriate solar system. Solar energy resource assessment becomes an essential activity of any solar energy programme.

4.5. WIND
The suns energy falling on the earth produces large-scale motions of the atmosphere causing winds, which are also influenced by small scale flows caused by local conditions such as nature of terrain, buildings, water bodies, etc. Wind energy is extracted by turbines to convert the energy into electricity. A small-scale and large-scale wind industry exists globally. The small-scale wind industry caters for urban settings where a wind farm is not feasible and also where there is a need for household electricity generation. The large-scale industry is directed towards contributing to countrywide energy supply. 4.5.1. WIND RESOURCE IN INDIA The wind resource assessment in India estimates the total wind potential to be around 45 000 MW (mega watt). This potential is distributed mainly in the states of Tamil Nadu, Andhra Pradesh, Karnataka, Gujarat, Maharashtra, and Rajasthan. The technical potential that is based on the availability of infrastructure, for example the availability of grid, is estimated to be around 13 000 MW. In India, the wind resources fall in the low wind regime, the wind power density being in the range of 250 -450 W/m 2. It may be noted that this potential estimation is based on certain assumptions. With ongoing resource assessment efforts, extension of grid, improvement in the wind turbine technology, and sophisticated techniques for the wind farm designing, the gross as well as the technical potential would increase in the future. 4.5.2. STATUS Wind power has become one of the prominent power generation technologies amongst the renewable energy technologies. 4.5.3. TECHNOLOGY TRENDS
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Use of wind energy started long ago when it was used for grinding. The commercial use of wind energy for electrical power generation started in 1970s. Horizontal axis wind turbines are most commonly used for power generation, although some vertical axis wind turbine designs has been developed and tested. The vertical axis turbines have structural as well as aerodynamic limitations and, hence, are not commercially used. 4.5.4. WIND POWER IN INDIA Wind turbines offered in India range from 250 kW to 2 MW capacities. As of 31 March 2006, the total installed capacity in the country was 5340 MW, which is 46% of the total capacity of renewable resources based power generation. There are 7 manufacturers of wind turbine generators in India.

4.6. SMALL HYDRO

The word hydro comes from a Greek word meaning water. The energy from water has been harnessed to produce electricity since long. It is the first renewable energy source to be tapped essentially to produce electricity Hydro power currently suffices one fifth of the global electricity supply, also improving the electrical system reliability and stability throughout the world. It also substantially avoids the green house gas emissions, thus complimenting the measures taken towards the climate change issues. Hydro projects below a specified capacity are known as small hydro. The definition of small hydro differs from country to country, depending on the resources available and the prevalent national perspective. The small hydro atlas shows that the largest of the projects (30 MW) is in US and Canada. Small hydro power has emerged as one of the least cost options of harnessing green energy amongst all the renewable energy technologies.

According to the power generated, small hydro power is classified into small, mini/micro and Mico hydro.

In India, it is being classified as follows. Small hydro - 2 MW - 30 MW Mini - 100 kW - 2 MW

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Micro - 10 kW - 100 kW Mico hydro - 1 kW - 10 kW

CHAPTER 5 REFORMS IN POWER SECTOR

REFORMS IN THE POWER SECTOR

5.1.1. PRE REFORM STAGE Confronted with unprecedented economic crisis in 1991, Government of India embarked upon a massive cleanup exercise encompassing all policies having financial involvement of Governments- both at the level of Union and States. Since after Electricity (supply) Act 1948, the power sector was mainly under the government control which owned 95 % of distribution and around 98% of generation through states' and central government utilities, the power sector was chiefly funded by support from government budgets in the form of long term, concessional interest loans. These utilities were made to carry forward the political agenda of the ruling parties of the day and the crossPage | 40

subsidization i.e. charging industrial and commercial consumers above the cost of supply and to charge agricultural and domestic consumers below cost of supply was an integral part of the functioning of the utilities. Table.6: POWER SECTOR REFORMS YEAR 1991 MAJOR DEVELOPMENTS The Electricity Laws (Amendment) Act, 1991--Notification. Amends the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 by Private Sector allowed to establish generation projects of all types (except nuclear) 100% foreign investment & ownership allowed New pricing structure for sales to SEBs. 5 Year Tax holiday; import duties slashed on power projects Intensive wooing of foreign investors in US, Europe & Japan 8 projects given "fast-track" status. Sovereign guarantees from Central Government. Seven reached financial closure Dabhol (Enron), Bhadravati (Ispat), Jegurupadu (GVK), Vishakapatnam (Hinduja), Ib Valley (AES), Neyveli (CMS),Mangalore (Cogentrix) World Bank Reform Model - First Test Case Orissa Orissa Electricity Reform Act passed Establishment of Orissa Electricity Regulatory Commission SEB unbundled into Orissa Power Generating Company (OPGC), Orissa Hydel Power Corporation (OHPC) and Grid Corporation of Orissa (GRIDCO) Distribution privatized Chief Ministers Conference: Common Minimum Action Plan for Power: Recommend policy to create CERC and SERCs Licensing, planning and other related functions to be delegated to SERCs. Appeals against orders of SERCs to be in respective High Courts SERC to determine retail tariffs, including wheeling charges etc., which will ensure a minimum overall 3% rate of return. Cross -subsidization between categories of consumers may be allowed by SERCs, but no sector to pay less than 50% of the average cost of supply ( cost of generation plus transmission and distribution). Tariffs for agricultural sector not to be less than Rs.0.50 Kwh and to be brought to 50% of the average costing not more than three years. Recommendations of SERCs to be mandatory, but financial implications any deviations made by State/UT Government, to be provide for the explicitly in the State budget. Fuel Adjustment Charges (FCA) to be automatically incorporated in the tariff. Package of incentives and disincentives to encourage and
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1992 1992-97

1995-96

1996

1997 1998

1999

2000

facilitate the implementation of tariff rationalization by the States. States to allow maximum possible autonomy to the SEBs, which are to be restructured and corporatized and run on commercial basis. SEBs to professionalize their technical inventory manpower and project management practices. CEA Clearance exempted for projects under 1000MW but State Government environment clearance required up to 250-500 MW Liquid fuel policy -- naphtha allocations to IPPs Mega-Power Policy: special incentives for the construction and operation of hydro-electric power plants of at least 500 MW and thermal plants of at least 1,000 MW. - The Electricity Laws (Amendment) Act, 1998 and Electricity Regulatory Commissions Ordinance -Notification. Creation of Central Transmission Utility STUs to be set up with government companies Establishment of CERC and SERCs Rationalization of electricity tariffs, Policies regarding subsidies Promotion of efficient and environmentally benign policies - Power Grid notified as Central Transmission Utility Haryana Electricity Reforms Act: HSEB unbundled into Haryana Vidyut Prasaran Nigam Ltd., a Trans Co. (HVPNL) and Haryana Power Corporation Ltd. Creation of HERC Two Government owned distribution companies viz. Uttar Haryana Bijli Vitaran Nigam Ltd. (UHBVNL) and Dakshin Haryana Bijli Vitaran Nigam (DHBVNL) have been established. DFID's technical co-operation grant of 15 million pounds available for reforms. Andhra Pradesh Electricity Reforms Act APSEB unbundled into Andhra Pradesh Generation Company Ltd. (APGENCO) and Andhra Pradesh Transmission Company Ltd. (APTRANSCO for transmission & distribution) Creation of APERC Other Developments: World Bank loan of US $ 210 million under the APL DFID's 28 million pounds as technical co-operation grant. CIDA technical assistance of Canadian $ 4 million. Karnataka Electricity Reforms Act KEB and KPCL transformed into new companies: Karnataka Power Transmission Corporation Ltd. (KPTCL) and Visvesvaraya Vidyut Nigama Ltd., a GENCO, (VVNL) Creation of KERC Other Developments: KPTCL has carved out five Regional Business Centers (RBC) for five identified zones. Power Ministers' Conference and Electricity Bill 2000 (draft): Functional disaggregation of generation, transmission and distribution with a view to creating independent profit centres and accountability; Re organization and restructuring of the State Electricity Boards
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in accordance with the model, phasing and sequencing to be determined by the respective State Governments States to determine the extent, nature and pace of privatization. (public sector entities may continue if the States find them sustainable); Transmission to be separated as an independent function for creation of transmission highways that would enable viable public and private investments; Amendments to the Indian Electricity Act, 1910 made in 1998 for facilitating private investment in transmission have been broadly retained except that the private transmission companies would be regulated by the Regulatory Commissions and Transmission Centers inst under the direction, supervision and control of the Central/State Transmission Utilities; Present entitlements of States to cheaper power from existing generating stations to remain undisturbed; Provision of compulsory metering for enhancing accountability and viability; Central and State Electricity Regulatory Commissions to continue broadly on the lines of the Electricity Regulatory Commissions Act, 1998; State Regulatory Commissions enjoined to recognize in their functioning the need for equitable supply of electricity to rural areas and to weaker sections; Stringent provisions to minimize theft and misuse. Source:
www.cea.nic.in/power_sec_reports/general_review/0405/index.pdf

5.1.2. ELECTRICITY ACT 2003

An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto. 5.1.2.1. GENERATION:

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Any Company, association or body of individuals (even unincorporated) can generate

electricity without requirement of techno-economic clearance of CEA, or approval of State Government or regulator, except in case of hydropower station for which written consent of Central Electricity Authority is required. A Generating Company can supply electricity directly to more than one consumer and Any entity, (company, co-operative society or association of persons) can establish a is vested with the duty to establish, operate and maintain sub-stations, tie lines etc. Captive Generation Plant (CGP) primarily for its own use without any entry barriers. Open access is to be provided to all CGPs. No cross-subsidy surcharge would be levied on the persons who have established CGP for carrying electricity to destination of his own use. 5.1.2.2. RURAL ELCTRIFICATION/GENERATION/DISTRIBUTION Government of India will have to formulate a National Policy after consulting State

Governments & CEA, to govern (i) rural electrification and local distribution through local bodies5, and (ii) rural off-grid supply including those based on renewable/nonconventional energy resources. Govt. No license is required for generating or distributing in rural areas notified by the State

5.1.2.3. LICENSING Trading has been recognized as a separate licensed activity along with transmission

and distribution. However, a license is not required in respect of (i) trading by a distribution licensee, (ii) transmission, distribution or trading by any Govt., as the Govt. would be deemed a licensee. Electricity Regulatory Commission (ERC), on the recommendation of Government, in accordance with the national electricity policy and public interest can exempt any of the local bodies6 from requiring license.
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5.1.2.4. TRADING AND CAPTIVE GENERATION Trading, i.e., purchase of electricity for resale, is a separate licensed activity, except

for distribution licensees who do not require a separate trading licence. Traders can enter into direct contracts with the consumers and determine its terms and conditions (including tariff). The Appropriate Commission may specify The entry barriers for traders technical requirements, capital adequacy

Requirement, and credit-worthiness; Policy. 5.1.2.5. OPEN ACCESS Open access means non-discriminatory use of transmission lines, distribution system Duties re. supply and trading in electricity to be discharged by a trader; and Fix trading margin in intra-state trading if considered necessary. ERCs have to develop trading market and have to be guided by National Tariff

and associated facilities by any licensee/consumer/Genco in accordance with ERC regulations. The licensees, consumers and Gencos have to pay transmission/wheeling charges for open access. Consumers has to also pay a surcharge (to be utilized to meet cross subsidy) determined by ERC, for open access. ERC may order any licensee owning intervening transmission facilities to provide use A State Transmission Utility is obliged to provide non-discriminatory open access to of facilities to any other licensee, to the extent of surplus capacity. its transmission system for use by a licensee or Genco forthwith, or by any consumer once distribution level open access has been provided. There is no statutory time limit for introduction of open access. ERC has to determine by June 10, 2004 the phases and conditions, subject to which open access would be introduced. 5.1.2.6. DISTRIBUTION
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The distribution licensee has a mandatory duty to supply on request of consumer in a

time bound manner if the consumer agrees to pay the applicable tariff. ERC is empowered to suspend or revoke license of a Discom for failure to maintain Uninterrupted supply. Distribution licensee is empowered to recover charges/expenses/security and disconnect supply for non-payment of dues. Discoms can enter into direct contracts with consumers. Discoms can engage in other businesses but have to share revenue to reduce wheeling ERCs may grant more than one distribution licenses can be issued in a given area,

charges, and maintains separate accounts for the same. permitting them to supply electricity through their own distribution system. To get a subsequent distribution license any person will have to comply with additional requirements prescribed by GoI regarding capital adequacy, creditworthiness, or Code of Conduct etc.. If an applicant meets such requirements, he shall not be denied grant of the license. ERCs may permit by regulations a consumer/class to receive supply of electricity from anyone other than the distribution licensee of the area of supply against payment of wheeling charge & surcharge in lieu of cross subsidy. Distribution licensee is free to undertake distribution for a specified area within his area of supply without need for a separate license. Provided that the distribution licensee shall remain liable for the supply. 5.1.2.7. TRANSMISSION To secure non-discriminatory open access, transmission has been segregated as a

wires function without any trading (buying and selling). Central transmission utility (CTU) and all State transmission utilities (STUs) are deemed licensee. CTU and STUs functions are (i) Transmission; (ii) planning & co-ordination of transmission system; (iii) development of efficient and economical transmission lines from generating stations to load centers; (iv) providing non-discriminatory open access to the system. RLDCs and SLDCs are empowered to issue directions, and exercise supervision & control to ensure stability, efficiency & economy of grid operation in the region and the State respectively. Licensees, generating companies and other persons connected with operation of power system shall comply. SLDC shall ensure compliance with RLDC directions.

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Pending creation of separate RLDCs & SLDCs, the CTU and the STU shall perform

the role. 5.1.2.8. TARIFF Government has been distanced from determination of tariff. This power has been

vested in the CERC/SERC. In determination of tariff CERC/SERC shall be guided by factors including National Electricity Policy, tariff policy (formulated by Central Government), CERCs principles and methodologies for setting tariff and principles rewarding efficiency and multiyear tariff. In case tariff is determined through transparent bidding as per Government of India To promote competition among distribution licensees, where there are 2 or more guidelines, the same shall be adopted by the ERCs. distribution licensees supplying in an area, the ERC may fix only maximum ceiling of tariff for retail sale. The PPAs/BSAs entered into before 10th June, 2003 have not been explicitly saved or granted a protection from regulatory intervention. 5.1.2.9. REGULATORY COMMISSIONS It is mandatory to establish SERCs within 6 months from 10th June, 2003. Joint

Commission can be constituted for two or more States or Union territories or both by mutual agreement. The new functions to be performed by CERC/ SERC include specifying Grid Code, Supply Code (only SERC), levy fees, fix trading margins in interstate trading.

In exercise of their functions, ERCs shall be guided by National Electricity Policy,

National Electricity Plan & Tariff Policy; directions of GoI/State Government concerned, in matters of policy involving public interest where such Governments decision shall be final as to whether the directions relates to a policy involving public interest. There is no express provision enabling ERCs to depart from such directions.

Provision for separate ERC funds (not consolidated funds) for finance of ERC

expenditures.
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5.1.2.10. POLICY ISSUES Central Government shall prepare, publish and revise National Electricity Policy and The implementation of the Act is largely dependent on the nature and scope of the

Tariff policy in consultation with State Governments and CEA9. diverse policy instruments to be issued by Government, and institutions like Special Courts, Appellate Electricity Tribunal, NLDC, RLDC, SLDC, SERCs and SEB successors to be constituted by Governments. It is noteworthy that these instruments will have a bearing are: Role and functioning of ERCs, Role and functioning of CEA, Market development, Governance of the sector regulation, grid operations, safety issues, and Enforcement.

5.1.2.11. CONSUMER INTERESTS Creation of a Consumer redressal forum (CRF) by Distribution licensee in a time Distribution licensee has to supply electricity within 1 month from the date of request

bound manner. The consumers aggrieved from CRF can approach to an ombudsman10. for supply, except where capital works are required for connectivity. Failure of distribution licensee to supply within said time period would attract penalty.

5.1.2.12. ENFORCEMENTS Suitable provisions for provisional assessments and recovery of compensatory fines Special Courts are to be established by Governments for speedy disposal of cases

may be able to address a long-standing vacuum in law. relating to theft of electricity.

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The scope of offences has been expanded and enhanced punishments have been Stronger powers (accompanied with better safeguards) have been provided for

prescribed for subsequent or continuing offences. conducting inspections/search/seizure. 5.1.2.13. DISPUTE RESOLUTION The appeal against all orders of ERC/adjudication officer would lie to an expert Appeal from appellate tribunal lies to Supreme Court. The appeal to Supreme Court is

Appellate Tribunal (an expert body), which shall dispose appeals within prescribed time. limited to substantial question of law.

5.1.3. ELECTRICITY (Amendment) ACT, 2007.

The Electricity (Amendment) Act, 2007, amending certain provisions of the Electricity Act, 2003, has been enacted on 29th May, 2007 and brought into force w.e.f. 15.06.2007. The main features of the amendment Act are: Central Government, jointly with State Governments, to endeavor to provide access to

electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households. No License required for sale from captive units. Deletions of the provisions for elimination of cross subsidies. The provisions for Definition of theft expanded to cover use of tampered meters and use for unauthorized

reduction of cross subsidies would continue. purpose. Theft made explicitly cognizable and non-bail able.

5.1.3.1. DEMAND SIDE MANAGEMENT Demand-side management is used to describe the actions of a utility, beyond the customer's meter, with the objective of altering the end-use of electricity - whether it be to increase demand, decrease it, shift it between high and low peak periods, or manage it when there are
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intermittent load demands - in the overall interests of reducing utility costs. In other words DSM is the implementation of those measures that help the customers to use electricity more efficiency and it doing so reduce the customers to use the utility costs. DSM can be achieved through.

Improving the efficiency of various end-uses through better housekeeping correcting energy leakages, system conversion losses, etc ; Developing and promoting energy efficient technologies, and Demand management through adopting soft options like higher prices during peak hours, concessional rates during off-peak hours seasonal tariffs, interruptible tariffs, etc.

DSM, in a wider definition, also includes options such as renewable energy systems, combined heat and power systems, independent power purchase, etc, that utility to meet the customer's demand at the lowest possible cost. Often the terms energy efficiency and DSM are used interchangeably. However, it is important to point out that DSM explicitly refers to all those activities that involve deliberate intervention by the utility in the marketplace so as to alter the consumer's load profile. Energy efficiency issued in an all encompassing sense and includes any activity that would directly or indirectly lead to an increase in energy efficiency. To make this distinction precise, a program that encourages customers to install energy efficient lighting systems through a rebate program would fall under DSM. On the other hand, customer purchases of energy efficient lighting as a reaction to the perceived need for conservation is not DSM but energy efficiency gains. There has been growing recognition of the importance of energy efficiency in India's electricity sectors. The Ministry of Power (MoP) is the nodal agency for energy conservation in the country. The Bureau of Energy Efficiency (BEE), an autonomous body under the MoP, was set up in 1989 to coordinate initiatives and activities on energy conservation. Several state electricity boards( SEBs) have also set up Energy Conservation Cells, some of which have been assisting industries in conducting energy audits. Several reports have been attempted to estimate the potential for energy conservation in various consuming sectors and have also identified various Energy Efficiency technologies (EETs) for important end-uses. The National Energy Efficiency Program (NEEP) of the Government of India(GOI) has targeted savings of about 5000 MW to be realized by the end of the Eighth plan through both demand (2750 MW) and supply side (2250 MW) efficiency improvements. In terms of
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Government policies, there are special equipment in the first year, subsidies for energy audits, reduced customs duty for selected control equipment for managing energy use, and so on. 5.1.3.2. Environmental Reform in the Electricity Sector: Enhanced economic activity and population growth have led to increasing energy demand that in turn has spurred electricity generation. But large-scale electricity generation and distribution have adverse environmental impacts, varying by the technologies employed and their locations. These need to be addressed so that energy services can be enhanced in harmony with the environment, within our ecological footprints. Due to the externalities of electricity generation, that is, the negative impacts not directly affecting or being restricted to those involved, the costs of impact mitigation are typically not included in electricity prices. Consideration for the environment has therefore to be forced into the reckoning, or preferably integrated into the system, hence the importance of environment policy in the context of the power sector. Focusing on environmental issues and policies applicable to the power sector in China and India. These countries generate 68% of the electricity generated in developing Asia, but with a total population of about 2.4 billion, have large unmet needs. In approaching the problem of environmental protection in the power sector in rapidly developing country, our analytical framework consists of identification of those state environmental policies and regulations that pertain to the power sector, both directly and indirectly, assessment of the barriers encountered, and finally recommendations of likely solutions to circumvent these problems. Let us consider the impacts of electricity generation on the environment. The focus is on to list the national environmental policies that affect these impacts, beginning with general direction, proceeding to specific rules and standards and then to alternatives to conventional electricity generation. This leads to the problems that beset effective policy implementation.

CHAPTER 6 STUDY OF SELECTED COMPANIES

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STUDY OF SELECTED COMPANIES

To study and analyze the power sector better, the comparative and analytical study of the Top 5 listed firms of power sector in India is done. The firms are chosen based on their sales turnover. The below are the firms selected by us for the study, TOP 5 NTPC Reliance Infra Tata Power Power Grid Torrent

6.1. NTPC Ltd.

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NTPC Limited is the largest power generating and Navratna status company of India; it was incorporated in the year 1975 as National Thermal Power Corporation Private Limited to accelerate power development in the country. As a wholly owned company of the Government of India, NTPC has emerged as a truly national power company, with power generating facilities in all the major regions of the country. NTPC's core business is engineering, construction and operation of power generating plants. NTPC as an integrated Power Major with presence in Hydro Power, Coal mining, Oil & Gas exploration, Power Distribution & Trading and also enter into Nuclear Power Development. It provides consultancy also in the area of power plant constructions and power generation to companies in India and abroad. It is providing power at the cheapest average tariff in the country. With its experience and expertise in the power sector, also NTPC is extending consultancy services to various organizations in the power business. The consulting Wing of NTPC is an ISO 9001:2000 accreditation. In the year of 1982, the company commissioned the first Singrauli unit. The Company's status was converted into a public limited in the year 1985 and the name was changed to National Thermal Power Corporation Limited. In the year 1989, the company commissioned first gas based combined cycle plant (88MW) at Anta, Rajasthan and its consultancy services division was commissioned during the same year. The Company had taken over the 2x210 Mw Feroze Gandhi Unchahar Thermal Power Station in the year 1991, which was owned by UP RajyaVidyut Utpadan Nigam of Uttar Pradesh. The first gas turbine was synchronized in 1991-92 and the Unit-I of the company was synchronized in March of the year 1992. Pursuant to legislation by Parliament of India, the transmission systems owned by the company was transferred to Power Grid Corporation of India Ltd during the year of 1992. The Company's three gas turbines and two steam turbines were commissioned in the 1992-93. A tripartite agreement was signed between NTPC, UPSEB and GAIL for direct power supply to GAIL during the year of 1994. NTPC had undertook the 4x60 MW + 2x110 MW Talcher Thermal Power Station during the year of 1995 from the Orissa State Electricity Board. MOUs had signed with M/s. Nagarjuna Litecrete Ltd. and M/s. Ria-Shelcon for setting up ash based products manufacturing units with ash from Ramagundam and Farakka Power Stations. In 1998, the company commissioned the first Naptha based plant at Kayamkulam with a capacity of 350MW. Maharashtra State Electricity Board has signed separate power purchase
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agreement with the company for the total power supply of 1,345 mw from Kawas-II, Gandhar-II, Vindhyachal -II and Siptat power stations in the year of 2000. NTPC has signed a memorandum of understanding with the Ministry of Power for generating 9,400 million units of electricity during the year. The Company forayed into wind power segment, started the preliminary work on two projects in Karnataka and Tamil Nadu each with a capacity of 20 MW. The Company has established a 2000MW gas-based power plant near Mangalore. The 4x110 MW of Tanda Thermal Power Station, which was taken by the company in the year 2000, the UP State Electricity Board formerly owned it. NTPC has launched a drive to recover arrears from the electricity boards of Maharashtra, Madhya Pradesh, Gujarat, Goa, Daman and Diu and Dadra Nagarhaveli. The Company has signed a memorandum of understanding with the government to generate 121,000 million units of electricity during 2001-2002. During the year 2002, the company incorporated three wholly owned subsidiary of the company viz. NTPC Electric Supply Company Limited, NTPC Hydro Limited and NTPC Vidyut Nigam Limited. Golden Peacock Award conferred to the company for Corporate Social Responsibility in14th November of the year 2003. Unit IV (500 MW) of Talcher Super Thermal Power Project - Stage II (TSTPP-II) of THE COMPANY has been successfully synchronized on 6th February 2005. The 500 MW Unit at Ramagundam Super Thermal Power Station has commenced commercial operation on 25th March 2005. In May of the year 2005, NTPC and Defence Metallurgical Research Laboratory (DMRL) have signed an MOU. NTPC has bagged IPMA International Project Management Award 2005 for its Simhadri Thermal Power project on 15th November 2005. NTPC established the medium Term Note ('MTN') Programme in February of the year 2006 to facilitate the raising of funds on a regular basis from the international debt capital markets and also signed an MOU with Delhi Transco Ltd., (DTL) on 10th February 2006 for expansion of one of its stations namely National Capital Power Station Stage-II at Dadri (U. P.). During the March of the year 2006, NTPC Ltd has entered into a Memorandum of Understanding with Petro net LNG Limited for arranging one MMTPA of LNG, which used to overcome shortage of gas at the existing gas power stations of NTPC. The Company had taken over the Badarpur Thermal Power Station with the capacity of 705MW in the year 2006 from Central Electricity Authority. The Company had signed a Memorandum of
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Understanding in 11th March of the year 2006 with the Energy and Resources Institute (TERI) for implementation of distributed generation projects in villages in India. A 500 MW unit of Vindhyachal Super Thermal Power Project - Stage III of NTPC Limited located in the state of Madhya Pradesh has been successfully synchronized on 27th July 2006. NTPC Limited and Singareni Collieries Company Limited have signed a Memorandum of Understanding during August of the year 2006, for creation of a Joint Venture Company to undertake various activities in coal and power sectors including acquisition of coalmines, development and operation of integrated coal based plants and providing consultancy services. The Company has signed a Memorandum of Agreement (MOA) in September 21st of the year 2006 with the Government of Arunachal Pradesh for implementation of the following two hydroelectric power projects in the States of Arunachal Pradesh. NTPC had formed a joint venture Company under the name and style of 'Aravali Power Company Pvt Ltd' on December 21, 2006 with Haryana Power Generation Corporation Ltd (A Government of Haryana Undertaking). The Company has signed a MoU in February 14th of the year 2007 with Bharat Earth Movers Limited (BEML) for collaborating and associating with NTPC for a long-term mutually beneficial business. A 500 MW unit of Vindhyachal Super Thermal Power Project, Stage III of NTPC Limited located in the state of Madhya Pradesh has been successfully (test) synchronized in the night of 8th March 2007. Signed a Memorandum of Understanding with Coal India Limited on 15.03.2007 for undertaking development, operation & maintenance of coal blocks and integrated coal based power plants. NTPC signed an agreement for a term loan of USD 100 million with KFW of Germany on March 23, 2007 at Frankfurt am Main. During the year 2007-08, the MOU was signed with ADB for establishment of power generation capacity of about 500 MW through Renewable Energy Sources. The JVA was signed between NTPC and BSEB for setting up 3x660 MW at Nabinagar, Bihar and also another one JVA was signed with UPRVUNL to set-up 2x660 MW power project at Meja Tehsil in Allahabad, UP. The Joint Venture Company (Subsidiary of NTPC) under the name of 'Bhartiya Rail Bijlee Company Limited' incorporated with Railways for setting up 1000 MW coal based power plant at Nabinagar, Bihar. Business Collaboration and Share Holder's Agreement signed with Govt. of Kerala and TELK to acquire around 44.6% stake of TELK. The MOU was signed with Bharat Forge Limited for setting up a new facility to take up
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manufacture of Balance of Plant equipments, castings, forgings, fittings etc. JVA signed with BHEL for taking up activities related to carrying out EPC and manufacturing of equipments in the period of 2007-08. The 500 MW Unit-I at Sipat Super Thermal Power Project, Stage-II has commenced commercial operation in June of the year 2008. NTPC has signed a Memorandum of Understanding (MOU) with Secretary (Power), Government of India for generating 2.09 billion units of Electricity during the financial year 2008-09. Developing and operating world-class power stations is NTPC's core competence. Its scale of operation, financial strength and large experience serve to provide an advantage over competitors. To meet the objective of making available reliable and quality power at competitive prices, NTPC would continue to speedily implement projects and introduce stateof-art technologies. Fig.5: Growth of NTPC

COMPANY PROFILE: Company name Address : : NTPC Ltd NTPC Bhawan Scope Complex,
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7-Institutional Area Lodi Road, New Delhi - 110003, New Delhi. Year of Establishment Chairman E-mail Website Production Capacity : : : : : 1975 Mr. R S Sharma info@ntpc.co.in http://www.ntpc.co.in 29,394 MW

6.2. RELIANCE INFRASTRUCTURE LTD

Reliance Energy Limited (REL), with its corporate lineage going back to 1929. At the time of incorporation REL was called as Bombay Suburban Electric Supply Limited (BSES). The company has been in the field of power distribution for nearly eight decades and with its emphasis on continuous improvements. REL is a fully integrated utility engaged in the generation, transmission and distribution of electricity. It ranks among India's top listed private companies on all major financial parameters, including assets, sales, profits and market capitalization. A key constituent of the Reliance - Anil Dhirubhai Ambani Group, India's third largest business house. Reliance Energy has emerged as one of the leading players in India in the Engineering, Procurement and Construction (EPC) segment of the power sector. Reliance Energy company currently pursue several gas, coal, wind and hydrobased power generation projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh and Uttaranchal with aggregate capacity of over 13,510 MW. Reliance Energy is also active in the trading and transmission of power sector and has forayed as an equity investor in to the infrastructure business, including in the prestigious Mumbai metro rail project and various road projects of the National Highways Authority of India. REL has also entered into the Internet service provider business in a big way by the name of powersurfer.net. REL (BSES) has several group companies - ST-BSES Coal Washery (Joint Venture), BSES Infrastructure Finance, Utility Powertech (Joint Venture), Ticapco, BSES Telecom, BSES Kerala Power,
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BSES Andhra Power and three new companies of Orissa. The company has a strategy of adding value by strategic alliances within the group. In March 2000 company has been operated "BSES Telecom" as an Internet service provider (ISP) in Mumbai and has a fiber optic network to support its last mile services and also exploring alliances for providing utility solutions. Dahanu Power Station achieved a plant load factor (PLF) of 82.68% during 2000-01. In 2001-02, the BSES Kerala Power Ltd had commissioned the power station in the Combined Cycle mode but due to various reasons the BKPL has suspended its operations from October, 2001. OFGW of 220 KW transmission line between Ghodbunder, Versova and Dahanu was successfully completed. RE L's Wind Energy has one of the highest PLF in the country in the wind farm segment. Contracts and EPC Division was instrumental in construction and erection works of 5,000 mw in Indian and other industrial and infrastructure projects. BSES Infrastructure Finance has tied up funds for various projects to the tune of over Rs 1,500 crore. Utility Powertech is a JV with National Thermal Power Corporation (NTPC) has 250 operational sites. During the year 2002-2003, the company has successfully commissioned 210 MW Gas Based Combined Cycle power plants for BSES Andhra Power and 24 MW Bagasse fired Power Plant for Godavari Sugar Mills Ltd and 20 MW for Suryachakra Power Corporation Ltd. In April 2003 Andhra Power Ltd and Reliance Salgocar Power Company Ltd were amalgamated with the company. During the year 2003-2004, the Company was renamed to Reliance Energy Ltd from its old name BSES. Reliance energy continues to receive prestigious awards and recognitions for its outstanding performance in various fields and through various sources. The Dahanu Power Station received the National Award for Excellence in Energy Management and National Award for Excellence in Water Management from the Confederation of Indian Industry and also company got the Maharashtra safety award-2004 from the Maharashtra Chapter of National Safety Council. Gold Shield for Meritorious Performance by the Central Electricity Authority (CEA) of the Government of India for its excellent performance amongst Indian thermal power plants in the year 2004-05, which was presented by the Honorable Prime Minister of India. The power station also obtained OSHAS 18001 certification from BVQI during the year of 2005-06. During the year 2006-07, Reliance Energy had received many awards such as Golden Peacock Award for its pursuit of excellence in corporate governance, International Quality Crown Award London 2006 in Gold category, Srishti Good Green Governance (G-Cube)
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Award and participated in the prestigious Ramakrishna Bajaj National Quality Awards, the company was awarded a commendation certificate for the same. In April 2007 REL planned to set up a 1,400 Mw gas-based power project in Delhi and also company has estimated that it would have to invest Rs 60,000 crore in next five years to add a capacity of 15,000 MW of power. As on September 2007 REL considered to hive off its engineering, procurement and construction (EPC) division into a new company. Reliance Energy distribute more than 28 billion units of electricity to cover 25 million consumers across different parts of the country including Mumbai and Delhi in an area that spans over 1,24,300 sq. kms. It generates 941 MW of electricity, through its power stations located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa. These projects are at various stages of development. Company wants to attain global best practices and become a world-class utility and to provide uninterrupted, affordable, quality, reliable and clean power to millions of customers. Future plan and action of the company is installation of third cooling tower cell to improve plant reliability and output. Energy savings by installation of energy efficient blades on cooling tower fans. ETP pump modification to reduce auxiliary power consumption. Auto - locking facility of energy meters at midnight to facilitate simultaneous logging of energy meter readings. The company has targeted to complete all activities under the six sigma project, ISO 27001 and OHSAS certifications during 2007-08, which will make Reliance Energy the first utility in the country to achieve these certifications. These initiatives are aimed to cater the market and at further promoting business excellence in all functional areas of the company. In 2008 company engaged in several mega projects under implementation and under consideration in different functional areas, in that the notable two big projects are engineering, procurement and construction (EPC) contract from Damodar Valley Corporation (DVC) to set up the 2 x 600 MW coal based power station at Raghunathpur in West Bengal worth of Rs 3,725 crore and Airport Metro Express Line, Delhi project on BOOT basis for a concession period of 30 years worth of Rs 2,500 crore. PROFILE: Company name Address : : Reliance Infrastructure Ltd Reliance Energy Centre, Santa Cruz (East),
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Mumbai - 400055, Maharashtra Year of Establishment Chairman E-mail Website Production Capacity : : : : : 1929 Anil D Ambani helpdesk@rel.co.in/rel.investor@relianceada.com http://www.rinfra.com 941 MW

6.3. TATA POWER COMPANY LTD

Tata Power Company Limited (TPC), India's largest integrated Electric Power Utility in private sector with a reputation for reliability, incorporated in the year 1919 at Mumbai. TPC pioneered the generation of electricity in India nine decades ago. The core business of Tata Power Company is to generate, transmit and distribute electricity. The Company operates in two business segments: Power and Other. The Power segment is engaged in generation, transmission and distribution of electricity. The other segment deals with electronic equipment, project consultancy. The Tata-Ebasco Consulting Engineering Services' was established based on partnership with Ebasco India, Ltd for consulting engineering together with its two associated companies in the year 1961. In the year 1969, a new company under the name Chemical Terminal Trombay Ltd was formed in participation with other Tata Companies and Elephanta India Private Ltd to installation of storage tanks on a part of the Company's ash disposal area at Trombay and the laying of a pipeline connecting the storage tanks with the Mumbai Port Trust's pier at Pir Pau. TPC sets up its new manufacturing facility at Bangalore during the year 1980, for commercial production of electronic items designed by its R&D laboratory. TPC has undertaken a 180 MW combined cycle plant at Trombay using gas turbines. In 1989, six new outlets for BEST at 33 KV from Carnac receiving stations were commissioned
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during the year. In the same year the company also associated with Siemens in the erection and commissioned the mechanical and electrical equipment for the 4 x 130 MW gas turbines and 2 x 150 MW steam turbines at NTPC's combined cycle power plant at Dadri in Uttar Pradesh. The second 500 MW units 6 at Trombay was trial synchronized with the grid on 23rd March 1990. The Company took up two major generation projects, viz., 150MW Pumped Storage Unit at Bhira and a gas-based 180 MW Combined Cycle Plant at Trombay Thermal Power Station in case of a major system disturbance and supply power to essential consumers, viz., Railways, BMC, BARC, etc. TPC started one new 110 KV substation at Versova during 1991, which comprised 2 x 90 MVA, 110/33 KV power transformers along with 33 KV indoor SF6switchgear and supervisory control and data acquisition system and also another one switching station was established in the same year, which comprised 3 x 250 MVA, 220/110/33 KV autotransformers, space saving 245 KV gas insulated switchgear and supervisory control and data acquisition system. The modern 22 KV indoor SF6switchgear was installed at Salsette and also the 60 MVAR new capacitor banks were installed during the year 1992 at Versova and Malad. Apart from these, replacement of 110 KV oil circuit breakers by modern SF6 breakers at Kalyan, Ambernath, Vikhroli and Salsette receiving stations and extension of fibre optic communication network were also carried out during the same year. In 1994, the Trombay Unit-7 steam turbine generator of the company was harmonized, which generated 650 MUS with PLF of 61.9%. During the year, the Company undertook the work of strengthening dams as per designs codes in respect of earthquakes. The Government of Maharashtra had accorded its permission for rebuilding a dam at Somwadi. A MoU was signed between TEC and the Tennesse Valley Authority of USA for renovation and modernisation of power plants. In the same year 1994, the Company issued 91,549 Global Depository Shares. The 150 MW Pumped storage unit was commissioned in the year 1995, based on the synchronous condenser mode and also the Company undertook the work of modernisation and renovation of old 12 MW hydro units at Bhivpuri and Khopoli Generating Stations. In the year 1996, the generating station five 25 MW units were refurbished by installation of new modern turbine runners of higher efficiency at Bhira. During same the year, the Company bagged the Multi-fuel based 80 MW power project from the Government of Karnataka. The thermal Units at Trombay operated by the company in the year 1997 based on-line availability of about 74% and utilization of about 64.3%. TPC
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entered into a Joint Venture Agreement with Total Gas and Power India in the year 1998 for establishment of LNG Terminal at Trombay. During 1999, the company acquired a generating station consisting of 37.5 MW Unit at Wadi, Karnataka and also in the year the Power Purchase Agreement for 81.3 MW Dieselbased Power Plant at Belgaum, Karnataka was signed with Karnataka Electricity Board. Tata Power Company has obtained A' licence as Internet service provider that enables it to operate throughout the country in the year 2000. The Andhra Valley Power Supply Company Ltd and Tata Hydro Electric Supply Company Ltd were merged with the company in the same year 2000. Tata Power Company Ltd on September of the year 2001, decided to sell its stake consisting of 45 lakh shares in Tata Liebert Ltd (TLL) considering of Rs 170 per share to Emerson Electric (Mauritius) Ltd. The Company signed an agreement with Power Grid Corporation of India Ltd for 'Tala Transmission Line' in the year 2002. The 120 MW Unit 3 at the Jojobera Power Plant of the Company situated in Jamshedpur was commenced its commercial production. TPC has signed the share acquisition agreement with Gvt of National Capital Territory of Delhi to acquire the North North-West Delhi Distribution Co. Ltd. (Discom-III), a distribution company belonging to the Delhi Vidyut Board (DVB), which supplies power to north and northwestern Delhi. The company ties up with the UK-based energy major British Petroleum to jointly work on 2,184 mw Dabhol power project during the year 2003. During the same year 2003, TPC awarded the contract for supply and construction of 180 KM long 400 KV Double Circuit Transmission Line from Palandur to Chandrapur (Maharashtra) By Power Grid Corporation of India Ltd. Tata Power infuses Rs 352 crore in the group's telecom businesses. Tata Power acquired 100% equity stake in Tata Power Trading Co. Pvt Ltd in the year 2004. The Christened Tata Power Trading Company was incorporated in the year as a subsidiary of the company. TPC has signed a Development Agreement with GAIL India Ltd & BP to jointly participate in evaluating the Dabhol gas and power opportunity. A MoU was signed with National Power Company of Al-Zamil Group, Kingdom of Saudi Arabia. The company bagged the 2nd Wartsila - Mantosh Sondhi Award for outstanding contribution to the Indian Power Sector in 2004. Tata Power signed a generation pact with DVC on Maithon Project in the year 2005 and entered into an agreement for sale of shares in Tata Power Broadband. The company received CII EXIM Bank Award 2005 for 'Certificate for Strong Commitment to Excel'. During the period of 2006, the company joined hands with Siemens. The company
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signed a joint venture agreement with Tata Steel to set up a Captive Power plants in Chattisgarh, Orissa and Jharkhand. The company received seven licenses from the Gvt of India, Ministry of Commerce and Industry, Dept of Industrial Policy & Promotion for its Strategic Electronics Division (Tata Power SED). In the year 2007, TPC has signed a MoU with the Government of Chhattisgarh for the setting up of a 1000 MW coal fired mega power plant in the State. The company has roped in Koreabased Doosan Heavy Industries and Construction Ltd for supercritical boilers for its Mundra ultra mega power project. The acquisition of Coastal Gujarat Power Ltd was med by the company and a Special Purpose Vehicle (SPV) formed for Mundra Ultra Mega Power Project (UMPP). TPC has signed an EPC contract for supply of five (5) 800 MW Steam Turbine Generators with Toshiba Corporation for the first 4000 MW Ultra Mega Power Project (UMPP) in India to be located at Mundra, Gujarat in August 2007. As on February 2008, The Tata Power Company Limited (Tata Power) and Damodar Valley Corporation (DVC) jointly completed its financing for the 1050 MW coal based thermal power project, being set up in Dhanbad District of Jharkhand State. Recognising the steady and stable performance in generating quality and reliable energy, the Central Electricity Authority has awarded Tata Power's Bhira Hydro generation facility with the Silver Shield award for the meritorious performance in March 2008. April of the year 2008, Tata Power completes the Signing of Financial Agreements for 4000 MW Ultra Mega Power Project, coming up at Mundra, Gujarat. The cost of the project is estimated at INR 17000 crores (USD 4.2 billion). Tata Power announced in September of the year 2008, it would acquire a 11.4 per cent stake in Geodynamics Ltd, an Australian company specialising in geothermal energy, for Rs 165 crore. Tata Power is surging ahead, lighting up lives through its activities from its inception. The challenge of fulfilling the ever growing needs of power have been met by Tata Power through efficient generation, transmission, distribution and constant upgradation of its technology in every aspects. PROFILE: Company name : Tata Power Company Ltd

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Address

Bombay House, 24 Homi Mody Street, Mumbai, 400001, Maharashtra

Year of Establishment Chairman E-mail Website Production Capacity

: : : : :

1919 Mr. R N Tata investorcomplaints@tatapower.com http://www.tatapower.com 2300MW

CHAPTER-7 ANALYSIS

7.1 SWOT ANALYSIS

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company's unique value chain. SWOT analysis groups key pieces of information into two main categories:

Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment to the organization

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SWOT analysis is a flexible concept that can be used in various scenarios from assessing projects or business ventures, making decisions, solving problems, evaluating candidates for a position to marketing strategy formulation.

Fig.6: SWOT Analysis

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in 5into an environmental scan:

Fig.7: SWOT Analysis Framework

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Environmental Scan / Internal Analysis /\ Strengths Weaknesses | SWOT Matrix \ External Analysis /\ Opportunities Threats

STRENGHTS AND OPPORTUNITIES OF POWER SECTOR: Well established and vast transmission and distribution network. Highly qualified engineering and technical personnel. Regulatory framework is further facilitated with enactment of Electricity Bill, 2003. The Electricity Bill, 2003 holds promises for the power sector and certainly for the consumer by way of competition reliability and rationalized tariff structure. Emergence of strong and globally comparable central utilities (NTPC, POWERGRID). India has substantial non-conventional energy resource base and technologies to meet growing power requirements by tapping this energy.

WEAKNESSES AND THREATS TO POWER SECTOR:

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Poor infrastructure has led to heavy T&D losses. Old and poor transmission and distribution network has led to frequent power outages and poor quality of power Lack of proper metering and theft has led to large scale losses. Only 51% of the power generated is billed and only 41% is realized

Moreover, Government provides power to agricultural sector at subsidized rates and also free of cost in some states. All these factors have resulted in financial disorder of the State Electricity Boards (SEBs). Restoration of SEBs financial health and improvement in their operating performance continues to be a critical issue. The Government of India has signed a Memorandum of Understanding (MOU) with various states reflecting the joint commitment of centre and states to undertake reforms in a time bound manner

Poor return to utilities, which affect their profitability and capacity to make further investments Increasing gap between unit cost of supply & revenue, approximately Rs 1.10/ unit Managerial and financial inefficiencies in state sector utilities have adversely affected capacity addition and systems improvement Non-availability of quality coal may hamper thermal plants efficiency in power generation Inability of SEBs to raise funds, as most of the SEBs is on the verge of bankruptcy due to poor operational performance. Adding to the problems, SEBs need huge money to measure up competition from efficient private players The major risk of privatizing a critical sector like power is the precedence of commercial over public interest. Some of these interests that will take a back seat include development of environment friendly generation and provision of electricity for rural areas. The new Electricity Act does not provide any specific financial incentives for private players to address public issues The SBEs which are right now holding 60% of total installed capacity, will be hit adversely by some provisions of the new electricity act such as delicensing of generation and open access for IPPs and CPPs, there by such units will take away the most lucrative customers (like industrial and commercial users) from the SEBs. This will not only affect SEBs but also the entire power sector for near term.

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CHAPTER 8 Issues and challenges

ISSUES AND CHALLENGES

8.1 While India has made impressive progress in the Power Sector since independence, it has not been sufficient. In terms of generation, while new capacity has been added, demand has far outstripped the supply leading to a widening gap. The primary reason of the widening gap lies in the distribution link in the value chain. The generation companies have not found it easy to recover their dues from their biggest buyers, mainly the State Electricity Boards (SEBs). SEBs suffer huge financial losses every year due to power theft and ineffective practices of billing and collection. Apparently, the losses have reached an alarming Rs. 26,000 crore. It is clear that the biggest fundamental issue hampering the viability of the Indian Power Sector is the sheer volume or level of Transmission and Distribution (T&D) losses that amount to 25%, a very high level by any standard. To make the matter worse, indirect calculations show T&D losses to be much higher in the range of 40-50%. In addition, the distribution system in India is often characterized by inefficiency, low productivity, frequent interruption in supply and poor voltage. 8.2 The power supply position is characterized by shortages both in terms of demand met during peak time and overall energy supply. The peaking shortage is much more in every region and it is about 12% on all India basis. The energy shortages on regional basis are varying in magnitude and overall shortage on all India basis is about 7%. To meet the
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growing demand and shortages encountered in various regions, generation capacity is required to be doubled in 10 years, so that the total demand both in terms of peak and energy can be met
8.3 With the advent of economic liberalization in 1991, the power sector was the focus of

attention for attracting private investment specially FDI in generation. Eight fast track projects were even offered counter guarantees for payment by the Central Government in addition to the guarantees of the State Governments. By 1995-96, 57,000 MW of projects were proposed by potential developers and 27,000MWhad received technoeconomic clearance from the Central Electricity Authority. These were all MOU based projects with negotiated costs and tariffs . In the absence of a transparent process of

8.4 bidding, many of these had high costs. Due to lack of adequate payment security mechanisms, combined in some cases with public perceptions of high cost in tariffs, most of these projects did not get implemented. Since 1990 till date only 9922MWof generation has come in the private sector. 8.5 The decade of the 1990s also saw the gradual deterioration of the financial health of State Electricity Boards. Towards the latter half of 1990s, it was apparent that the deterioration in the finances of the State Electricity Boards was becoming unsustainable. Restoration of the financial health of the State Electricity Boards / State Utilities was recognized as the most critical challenge facing the sector. In this context it becomes clear that the distribution sector needed urgent attention if the trend of deteriorating financial health had to be reversed. The reversal would need a combination of the following key measures:a. Control of theft of electricity b. Reduction in the cost of supply through reduction in technical losses. c. Better management and lowering the cost of generation d. Payment of user charge and Tariff rationalization

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CHAPTER 9 CONCLUSION & FINDINGS

9.CONCLUSION & FINDINGS:

Power is one of the prime movers of economic development. The basic responsibility of power supply industry is to provide adequate electricity at economic cost, while ensuring reliability and quality of supply. Significant impetus by successive Governments has resulted in increase in capacity from 1,300 MW during independence to more than 100,000 MW today. Along with the growth in installed generation capacity, there has also been a phenomenal increase in the transmission and distribution capacity. However, despite the significant progress in capacity addition, the demand for electricity continues to outstrip supply with the result that energy and peaking shortages continue to plaque the economy. The per capita consumption is among the lowest in the World at 408 kwh/year (as on 2001). With responsibility for electricity supply shared constitutionally between the central government and the states, the Government of India has placed increased emphasis on improving the efficiency of supply, consumption, and pricing of electricity. Significant reforms are being undertaken in power sector management and financing at the state level. With reforms in this sector gaining pace, many structural changes are taking place both at the policy and technical levels. With the passing of the Electricity Act 2003, generation, transmission and distribution sectors have been thrown open to competition along with the ushering in of a de-regulated regime. The Government proposes to enhance public funding for the sector as well as encourage the public sector undertakings to take up projects in joint
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ventures with private investors and state governments in the 10th and 11th Plan period. There is also a focus on initiating suitable policy measures to accelerate the pace of hydro power development as well as to make nuclear power generation as competitive as power generation from other fuels. The financial weakness of the SEBs has been one of the major stumbling blocks in achieving financial closure of Independent Power Producers (IPPs). The Government of India, with World Bank assistance, has been encouraging the states to undertake in depth power sector reforms. This involves distancing the state government from operation of the power sector, establishing an independent regulatory framework for the sector, progressively reducing subsidies and restoring the creditworthiness of the utilities through financial restructuring and cost-recovery based tariffs, and divesting existing distribution assets to private operators. The Indian power sector is undergoing a crucial phase of transition. Both the Central and State governments are actively engaged in finding viable solutions to achieve sustainable development of the power sector. As of now, regulation, rapid capacity addition, and SEBreform, with a specific focus on improving revenues from the distribution segment, are emerging as important areas of reforms in the sector. 8.6 MAJOR FINDINGS:

Most of the SEBs though are supported by state government, are running under loss. This is because of power theft, transmission losses, use of conventional methods for power generation and transmission and out dated management policies. Indian power sector has been witnessing a wide demand supply gap. Although electricity generation has increased substantially, it has not been able to meet the demand. India is going to build an additional capacity of 1 lakh MW by 2012 including private sector contribution. In a bid to bring structural transformations, necessary reform programs should be carried out in distribution and transmission process. India possesses a vast opportunity to grow in the field of power generation, transmission, and distribution. The target of over 150,000 MW of hydel power germination is yet to be
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achieved. By the year 2012, India requires an additional 100,000 MW of generation capacity. A huge capital investment is required to meet this target. This has welcomed numerous power generation, transmission, and distribution companies across the globe to establish their operations in the country under the famous PPP (public-private partnership) programmes. The power sector is still experiencing a large demand-supply gap. This has called for an effective consideration of some of strategic initiatives. There are strong opportunities in transmission network ventures - additional 60,000 circuit kilometers of transmission network is expected by 2012 with a total investment opportunity of about US$ 200 billion.

REFERENCE

WEBSITES:

www.Ibef.org www.india.gov.in www.teriin.org www.coreinternational.com www.energywatch.org.in

WEB PAGES:

http://www.indexmundi.com/India/electricity_consumption.html http://www.indexmundi.com/India/electricity_production.html http://www.cea.nic.in http://www.topnews.in/business-news/power-sector.html http://www.energywatch.org.in

LITERATURE REFERENCE:
Remes .M (2007), Russia forerunning EU in power sector forum, Journal of Baltic Rim Economies, Expert article 154, 21st December,2007, pp: 20-21 http://www.tse.fi/FI/yksikot/erillislaitokset/pei/Documents/bre/expert_article154_62007.pdf
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Singh. A (2006), Power sector reform in India: current issues and prospects, Elsevier in its journal Energy Policy, Vol: 34 (16) http://ideas.repec.org/s/eee/enepol.html Sreekumar. N (2008), Market-Oriented Power Sector Reforms: A Critique, Journal of Governance and Public Policy. http://ideas.repec.org/s/icf/icfjgp.html Swain. N, J P Singh and D. Kumar (2004) Analysis of Power Sector in India: A Structural Perspective. http://www.ieiglobal.org/ESDVol5No2/indianreform.pdf

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