Privatization of Power

Sector
Concerns and Prospects
By
R K Krishna Vazarpu- 0409005
Pankaj-0409008
 Introduction
• India is the world's sixth largest consumer of energy and
has formulated plans and strategies for major energy
infrastructure developments in order to keep up with the
increasing energy demand as the country becomes more
industrialized and the economy expands.
• Privatization is the incidence or process of transferring
ownership of a business, enterprise, agency or public
service from the public sector (government) to the
private sector (business).
•
 Scenario Of Power Sector Before Liberalization

• After 1947, all new power generation, transmission and

distribution , came under State Electricity Boards
(SEBs).
• The Ministry of Power in the Central government
formulates the policies for the power sector.
• As per government guidelines, all power projects above a
certain capacity have to obtain techno-economic
clearance from CEA before they can be implemented.
• National Thermal Power Corporation (NTPC), National
Hydro-electric Power Corporation (NHPC) and Power
Grid Corporation Limited (PGCL) were formed by the
government to assist in meeting the increasing demand
for electricity throughout the country.
 Scenario of power Sector After
Liberalization
• A new policy of opening electricity generation to private
participation was announced by the Central government
in October 1991
•
• Private party participation was invited.
•
 •
Electricity Act • This act is likely to benefit the
2003 Industrial Consumers ,IPP, private
utilities and power equipment
providers.
• The Act creates a liberal and
transparent framework for
power
• Entry barriers removed / reduced
• Generation de-licensed
• Freedom to captive generation,
including group generation
• Recognizing Trading as an
independent activity
•

•
• Open access in Transmission
• Multiple licenses in Distribution
• The act allows direct selling of power to industrial
consumers.
• The power producers need not sell to the bankrupt (SEB’s)
rather than sell it to a worthy customer
• 100% FDI generation, transmission and distribution is
allowed
 Reasons for Disinvestment in Power Sector

• To promote increased
efficiency
• To raise revenues for the
state (and thereby to
bridge fiscal deficits).
• To reduce government
interference in the
economy and promote
greater private intiative.
•
 Problems faced by private Sector
• Problems mentioned by private producers
Litigation/renegotiation leading to delays .
• Financing problems
• Risk sharing
• Fuel-supply risk
•
 Benefits Of Privatization
• Stops loss-making SEB’s from adding to government debt.
• Depoliticizes SEB, remove governmental pressures for
over-manning and the sub-optimal use of resources.
• Gives new owners a strong incentive to turn around failing
SEB into successful businesses.
• Gives new businesses access to investment capital that
government cannot provide.
• Raises more money for government through taxing former
SEB.
• Expands an enterprise and an industry, in the long run
creating more jobs and generating wealth for the
country.
•
Major power Company in India
Major Govt Power Houses