Power Sector

As the Indian economy continues to surge ahead, its power sector has been expanding
concurrently to support the growth rate. The demand for power is growing exponentially and the
scope for the growth of this sector is immense. The overall power generation in the country has
increased from 723.793 billion unit (BU) during 2008-09 to 771.551 BU during the year 2009-
10.

The Indian power sector has the fifth largest electricity generation capacity in the world and the
world's third largest transmission and distribution network.

According to the Ministry of Power, India's total installed capacity as on October 31, 2010 is
1,67,278.36 mega watt (MW). Thermal power plants account for 108,602.98 MW, followed by
hydro power plants with a capacity of 37,328.40 MW. Renewable energy sources provide
16,786.98 MW of power and the remaining 4,560 MW comes from nuclear energy.

Within the thermal power plants, coal-based power plants have an installed capacity of 89,778.38
MW, gas-based have a capacity of 17,624.85 MW and oil-based have a capacity of 1,199.75
MW.

According to the Central Electricity Authority (CEA), a total of 34 projects were commissioned
during 2009-10 with a total capacity of 9,585 MW. These include 31 thermal power plants with a
total capacity of 9,106 MW, one hydro power plant with a capacity 39 MW, and two nuclear
power plants with a combined capacity of 440 MW.

As on October 31, 2010, a total of 30 projects were commissioned during 2010-11, with a total
capacity of 7,020 MW. These include 22 thermal power plants with the total capacity of 6,569
MW and eight hydro power plants with a capacity of 451 MW.

According to the Seventh Schedule of the India’s Constitution, “Electricity” is a concurrent

subject thereby implying that both the Parliament of India and the State Legislatures are
empowered to make laws on the subject of “Electricity” Thus, with Independence, the principle
that both the Central Government and the States should be able to legislate on power was
embodied in the Constitution.

Shortly after this, legislative authority was more formally divided in the Electricity Supply Act
of 1948. The Act provided for the establishment of the Central Electricity Authority (CEA) and
of State Electricity Boards (SEBs) which were to become the main agencies for supplying power
throughout India. The SEBs were autonomous bodies responsible for the development and
operation of generation, transmission and distribution in the “most economical and efficient
way”. The mandate for the CEA was spelt out clearly in the Act: to develop national plans and
help formulate national power policy, to report the progress of the electricity supply industry, to
provide technical assistance, to advise Central Government/ State
Government/Boards/generating company, act as arbitrator between State or Board or licensees,
to train personnel in the sector, to promote research and, in general, to facilitate efficient power
supply. Its role, however, was essentially advisory rather than executive. The Industrial Policy
Resolution of 1956 reserved the generation and distribution of electricity almost exclusively for
the states, letting existing private licensees, however, to continue. This led to the gradual
domination of the electricity sector by government enterprises. Amendment in 1976 enabled
generation companies to be set up by the central and state governments resulting in the
establishment of National Thermal Power Corporation Ltd. (NTPC Ltd.), National Hydro Power
Corporation Ltd. (NHPC), North Eastern Electric Power Corporation Ltd. (NEEPCO), Mysore
(now Karnataka) Power Corporation and Water & Power Consultancy Services (a consulting
firm), etc.

For the past two decade or so, there have been several efforts to reform the Indian power sector
with an important option under consideration being ‘privatization’ of the distribution process.
One may note that the power sector can broadly be classified into three functional sub-sectors,
namely a. Generation b. Transmission and c. Distribution. Due to the stand-alone, low-risk
nature of the generation business, fiscal incentives by the Government and the introduction of
regulatory amendments in the Electricity Act of 2003, private players have made a notable entry
in this sector. On the other hand, transmission is a complex, capital intensive and monopolistic
sector. State Electricity Boards and the intra and inter-state transmission and there are hardly any
instances of private transmission investment in the country. The distribution sector however,
holds great promise for private players and has been touted to be the driver of the reform process
in the power sector. Private players are known to bring in technological improvements and
efficient revenue collection systems thereby resulting in a more profitable distribution business.
Orissa and New Delhi are the only two states in India which have entirely privatized their power
distribution system.

Reforms in Power Sector

Year
Major Developments

1991 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
1992
& Japan

8 projects given "fast-track" status.

sovereign guarantees from Central Government.
Seven reached financial closure
1992-97 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 
1995-96   SEB unbundled into Orissa Power Generating
Company (OPGC),    Orissa Hydel Power
Corporation (OHPC) and Grid Corporation of
Orissa (GRIDCO)
  Distribution privatized
1996 Chief Ministers Conference: Common Minimum
Action Plan for Power:Recommend policy to create
CERC and SERCs
  Licencing, 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 facilitate the implementation of tariff
rationalisation 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
1997
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
1998
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.
1999 - 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
Centres (RBC) for five identified zones.
2000 Power Ministers' Conference and Electricity Bill 2000
(draft):
Functional disaggregation of generation,
transmission   and distribution with a view to creating
independent profit centers and accountability;
Reorganization and restructuring of the State
Electricity Boards   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.

The Electricity Act, 2003

Recognizing the need for the Reform process covering the entire facets of the electricity sector
comprising generation, transmission and distribution to the consumers, a comprehensive
Electricity Bill was drafted in2000 following a wide consultative process. After a number of
amendments, the bill finally sailed through the legislative process and was enacted on 10 June,
2003. It replaces the three existing legislations governing the power sector, namely Indian
Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory
Commissions Act, 1998. The Electricity Act, 2003 mandates that Regulatory Commissions shall
regulate tariff and issue of licenses and that State Electricity Boards (SEBs) will no longer exist
in the existing form and will be restructured into separate generation, transmission and
distribution entities. Regulatory function has been taken away from the purview of the
government. The Electricity Act, 2003 mandates licensee-free thermal generation ,non-
discriminatory open access of the transmission system and gradual implementation of open
access in the distribution system which will pave way for creation of power market in India. The
main provisions of the act are:

 De-licensing of thermal generation and captive generation.

 Open access in distribution to be introduced in phases
 Provision for license-free generation and distribution in rural areas and provision for
management of rural distribution by Panchayats, Cooperative Societies, non-government
organizations, franchisees, etc.
 Non-discriminatory open access in transmission.
 Multiple licensing in distribution.
 Mandatory metering of all electricity supplies.
 Adoption of multi-year tariff principles.
 Provision for cross-subsidy surcharge on direct sale to consumers.
 Power Trading recognized as a distinct activity with ceilings on trading margins to be
fixed by the
 Regulatory Commissions.
 Upfront payment of subsidies by the States.

Per capita consumption of electricity in India increased from 178 kWh in 1985-86 to 338 kWh in
1996-97 (GOI,2002b) and to 665 kWh in 2005-06.
As per the Economic Survey 2009-10, the 11th Five Year Plan envisaged an additional capacity
of 78,700 MW of which 19.9 per cent was hydro, 75.8 per cent thermal and the rest was nuclear.
The Centre has targeted capacity addition of 100,000 MW each in the 12th Five Year Plan
(2012-17) and 13th Five Year Plan (2017-22).India has launched its ambitious solar energy
mission which aims to generate 20,000 MW of solar power by 2022.

India expects investments of up to US$ 55 billion by 2015 in the renewable energy sector, which
would generate 35,000 MW of power.According to the Department of Industrial Policy and
Promotion (DIPP), the power sector has attracted foreign direct investment (FDI) worth US$ 677
million during April to August 2010. The cumulative FDI received by the power sector between
April 2000 and August 2010 was US$ 5.30 billion.

Indian Power Industry Current scenario

Generation

India has the fifth largest generation capacity in the world with an installed capacity of 152 GW
as on 30 September 2010, which is about 4 percent of global power generation. The top four
countries, viz., US, Japan, China and Russia together consume about 49 percent of the total
power generated globally. The average per capita consumption of electricity in India is estimated
to be 704 kWh during 2008-09. However, this is fairly low when compared to that of some of the
developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The world
average stands at 2,300 kWh The Indian government has set ambitious goals in the 11th plan for
power sector owing to which the power sector is poised for significant expansion. In order to
provide availability of over 1000 units of per capita electricity by year 2012, it has been
estimated that need-based capacity addition of more than 100,000 MW would be required. This
has resulted in massive addition plans being proposed in the sub-sectors of Generation
Transmission and Distribution.

Transmission

The current installed transmission capacity is only 13 percent of the total installed generation
capacity3 With focus on increasing generation capacity over the next 8-10 years, the
corresponding investments in the transmission sector is also expected to augment. The Ministry
of Power plans to establish an integrated National Power Grid in the country by 2012 with close
to 200,000 MW generation capacities and 37,700 MW of inter-regional power transfer capacity.
Considering that the current inter-regional power transfer capacity of 20,750 MW4, this is indeed
an ambitious objective for the country.
Distribution

While some progress has been made at reducing the Transmission and Distribution (T&D)
losses, these still remain substantially higher than the global benchmarks, at approximately 33
percent. In order to address some of the issues in this segment, reforms have been undertaken
through unbundling the State Electricity Boards into separate Generation, Transmission and
Distribution units and privatization of power distribution has been initiated either through the
outright privatization or the franchisee route; results of these initiatives have been somewhat
mixed. While there has been a slow and gradual improvement in metering, billing and collection
efficiency, the current loss levels still pose a significant challenge for distribution companies
going forward.

Central and State Utilities Dominate the Industry

The entire value chain of the power sector is dominated by the central and state sector utilities.
For instance, in the generation space, out of the overall capacity of 152 GW, the share of central
and state utilities stands at 49.8 GW and 76.6 GW, respectively; and that of private sector stands
at 25.8 GW. Even, of the 78.7 GW planned capacity additions during the 11th five-year-plan,
central and state utilities together are estimated to add nearly 63.7 GW.

The story remains pretty much the same in power transmission and distribution space. The
central and the state utilities own nearly 40 percent and 60 percent, respectively of the total
transmission lines of 2.7 million circuit kilometers (ckm). Power Grid Corporation of India Ltd
(PGCIL), the central transmission utility (CTU), is the largest transmission company in India
Similarly, in distribution, the SEBs own nearly 95 percent of the distribution network.

Regulations are evolving and paving the for greater private sector
participation
Being a highly regulated sector, not surprisingly policies and regulations are playing a pivotal
role in the development of this sector. Over the years, the government has realized the
importance of the private sector participation. The Electricity Act, 2003 was a turning point in
the reforms process which removed the need for license for generation projects, encouraged
competition through international competitive bidding, identified transmission as a separate
activity and invited a wider public and private sector participation among other things. Some of
the other major reforms that have been implemented over the years include: unbundling of SEBs,
tax benefits, Accelerated Power Development and Reform Program (APDRP) for distribution,
permission for trading of power, etc Furthermore, the National Tariff Policy of 2006 .
encouraged private investment in the transmission sector through competitive bidding. In
addition, the allocation of captive coal blocks to private companies was one of the many
noteworthy reforms, increasing the fuel security for the end use project.

Aided by the ambitious plan to add around 78.7 GW of additional generation capacity in the 11th
plan by the year 2012, according to CRISIL Research estimates, about INR 7,50,000 crore is
likely to be invested in the power sector over the next five years by 2013-14. Of this, INR
4,80,000 crore is expected to be invested in the power generation space. Nearly half of the
investments in the power generation space is likely to be made by the private sector Along with
generation this has opened up opportunities in the transmission sector as well. In order to
encourage private sectors in transmission line business, Government of India issued guidelines
for private sector participation.

These developments have given rise to new opportunities for the private sector especially in the
power generation space. As a result, there have been a plethora of new projects announced by the
private sector companies many of whom are negligible or have no prior experience in this sector.
This has given birth to the adage of Plans vs. Plants by clearly distinguishing between growth
and value utilities. The new entrants in this sector face a number of challenges relating to the
project execution, fuel security, power equipment capacities, infrastructure constraints, etc. The
purpose of this dossier is to present a high level overview of the key challenges and the risk
factors.

Generation

Grand Total Installed Capacity (as on 30-09-2010) is 164,835.80 MW.

Thermal Power
Current installed capacity of Thermal Power (as of 30-11-2010) is 108362.98MW which is
64.6% of total installed capacity.

 Current installed base of Coal Based Thermal Power is 89,778.38 MW which comes to

53.3% of total installed base.
 Current installed base of Gas Based Thermal Power is 17,374.85 MW which is 10.5% of
total installed capacity.
 Current installed base of Oil Based Thermal Power is 1,199.75 MW which is 0.9% of
total installed capacity.
The state of Maharashtra is the largest producer of thermal power in the country.
Indira Sagar Dam partially completed in 2008

Hydro Power
Hydroelectric power in India

India was one of the pioneering countries in establishing hydro-electric power plants. The power
plants at Darjeelingand Shimsha (Shivanasamudra) were established in 1898 and 1902
respectively and are among the first in Asia.

The installed capacity as of 30-9-2010 was approximately 37,328.40 MW.[25] The public sector

has a predominant share of 97% in this sector.[26]
Nuclear Power
Currently, twenty nuclear power reactors produce 4,780 MW

Major Player in Generation

NTPC- Presently, NTPC generates power from Coal and Gas. With an installed capacity of
33,194 MW, NTPC is the largest power generating major in the country. It has also diversified
into hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power
trading & distribution. With an increasing presence in the power value chain, NTPC is well on its
way to becoming an “Integrated Power Major.”

Nuclear Power Corporation of India Limited is a Public Sector Enterprise Under the
administrative control of the Department of Atomic Energy (DAE), Government of India. The
Company was registered as a Public Limited Company under the Companies Act, 1956 in
September 1987 with the objective of operating the atomic power stations and implementing the
atomic power projects for generation of electricity in pursuance of the schemes and programmes
of the Government of India under the Atomic Energy Act, 1962.

NPCIL generated about 90 billion units of electricity in the X plan (2002-2007) exceeding the set
target by about 10%, and added 1180 MWe capacity against the target of 1300 MWe capacity,
thus realizing 91% of the target capacity addition. In the year 2009-10 RAPP-5&6 (2x220 MWe
capacity) commenced commercial operation. Also, RAPS-2 (200 MWe capacity) was
synchronized to grid after successfully carrying out EMFR works.
National Hydroelectric Power Corporation

At present, NHPC is a schedule 'A' Enterprise of the Govt. of India with an authorized share
capital of Rs. 1,50,000 Million . With an investment base of over Rs. 2,20,000 million Approx.
In 2009-2010 NHPC made a profit after tax of Rs2090 crores . A increase of 94% than the
previous year profit of 1050 crores. NHPC is among the top ten companies in India in terms of
investment. Department of Public Enterprise, Govt. of India recently conferred prestigious
Miniratna status to NHPC.

Initially, on incorporation, NHPC took over the execution of Salal Stage-I, Bairasiul and Loktak
Hydro-electric Projects from Central Hydroelectric Projects Control Board. Since then, it has
executed 14 projects with an installed capacity of 5295 MW on ownership basis including
projects taken up in joint venture. NHPC has also executed 5 projects with an installed capacity
of 89.35 MW on turnkey basis. Two of these projects have been commissioned in neighbouring
countries i.e. Nepal and Bhutan at a capacity of 14.1 &60 MW.

North Eastern Electric Power Corporation Limited

North Eastern Electric Power Corporation Limited (NEEPCO) , a Schedule "A" Government of
India Enterprise under the Ministry of Power was set up on the 2nd of April, 1976 to plan,
investigate, design, construct, generate, operate and maintain power stations in the North Eastern
Region of the country. NEEPCO has an installed capacity of 1130 MW which is 49% of the total
installed capacity of the N.E Region. NEEPCO's authorised share capital is Rs 5000 Crores  at
present and its net worth as on 31st March 2009 is Rs 4182.31 Crores.

With its headquarters in the charming town of Shillong, the capital of Meghalaya, NEEPCO is
a power sector enterprise with projects located in the various states of the North East.

SWOT of Power Sector

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:

 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

Future Outlook

 Proposed Capacity Additions during 11th Plan (2007-12):The 11th Plan recommends
generation planning based on an estimated 9.5% growth in required energy each year. As
a result, a capacity addition of 78,577 MW is recommended in the 11th Plan as given
below:

 Sector  Hydro  Thermal  Nuclear  Total (%)

 Central  9,685  26,800  2,658  39,865 

(50.7%)

 State  3,605  24,347  -  27,952 

(35.6%)

 Private  3,263  7,497  -  10,760

(13.7%)

 All India  16,553  58,644  3,380  78,577

 (100%)

Source: Working Group on Power-11th Plan (2007-12)

Required capacity additions foreseen by the 12th Plan:

The requirement of installed capacity and capacity addition to meet the generation
requirement during the 12th Plan period is given in table below:
Capacity addition required during 12th plan (2012-17):

 GDP  GDP  Electricity  Peak  Installed  Capacity

Grow / Generatio Dema Capacity Addition
th Electr n nd (MW) Required
icity Required (MW During
Elasti (BU) ) 12th
city Plan
(MW)

8% 215,7
0.8 1,415 00 280,300 70,800
0.9 1,470 224,6 291,700 82,200
00

9% 224,6
0.8 1,470 00 291,700 82,200
0.9 1,532 233,3 303,800 94,300
00

10% 232,3
0.8 1,525 00 302,300 92,800
0.9 1,597 244,0 317,000 107,500
00

Source: Working Group on Power-11th Plan (2007-12)

Under various growth scenarios, the capacity addition required during 12th plan would be
in the range of 70,800 - 107,500 MW, based on normative parameters. The 11th Plan
Working Group recommends a capacity addition of 82,200 MW for the 12th Plan based
on the scenario of 9% GDP growth rate and an elasticity of 0.8%.

Long term demand of power

The Ministry of Power has set a goal - Mission 2012: Power for All. Based on the 17th
EPS, the total energy requirement in India will increase to 968,659 GWh by fiscal year
2012, 1,392,066 GWh by fiscal year 2017 and to 1,914,508 GWh by fiscal year 2022.
This would lead to an annual electric peak load of 152,746 MW in fiscal year 2012,
218,209 MW in fiscal year 2017 and 298,253 MW in fiscal year 2022. The northern
region is expected to contribute 30.1% and the western region contributes 28.4% of the
overall annual electric peak load in fiscal year 2022. The Government has estimated the
total investment potential of the sector at Rs. 9,000 billion for a specified period up to
fiscal year 2011. This represents a significant opportunity for capacity expansion and
growth opportunity for power generation companies, both in the public and the private
sector
Current outlook of generation capacity addition

In line with the aggressive targets set by the government, a comprehensive Blueprint for
Power Sector development has been prepared encompassing an integrated strategy with
following objectives.
o Sufficient power to achieve GDP growth rate of 8%;
o Reliability of power
o Improved quality of power
o Optimum power cost to ensure availability at affordable prices; and Commercial
viability of power industry to make it attractive for private sector participation.
The Government, through the Ministry of Power, has laid out the following broad
strategies to achieve the objectives:
o Power Generation Strategy: focusing on low cost generation, optimization of
capacity utilization, controlling input costs, optimisation of fuel mix, technology
upgrades and utilization of non conventional energy sources;
o Transmission Strategy: focusing on developing the National Grid, including
interstate connections, Technology upgrades and optimization of transmission
cost;
o Distribution Strategy: achieving distribution reforms by focusing on system
upgrades, loss reduction, theft control, consumer service orientation, quality
power supply commercialization, decentralized distributed and supply for rural
areas
o Regulation Strategy: protecting consumer interests and making the sector
commercially viable;
o Financing Strategy: to generate resources for required growth of the power sector;
o Conservation Strategy: to optimise the utilization of electricity with a focus on
demand side management, load management and technology upgrades to provide
 energy efficient equipment; and Communication Strategy: forming political
consensus with the media support to enhance public awareness.
Key risks in the sector

Power sector is a highly capital intensive business with long gestation periods before
commencement of revenue streams (construction periods of 4-5 years) and an even
longer operating period (over 25 years). Since most of the projects have such a long time
frame, there are some inherent risks in both the internal and external environment. We
monitor the external environment and manage our internal environment to mitigate the
concerns on a continuous basis. Some of the key concerns being faced by the sector
currently are.

Coal Supply Position:

More than 50 percent of India’s generation capacity is coal based. According to the
Integrated Energy Policy, by FY31-32, India requires 2,040 million tonnes of coal for
power generation, more than 5 times its current consumption levels. The shortage of coal
is so acute that most of the power generation companies are looking at imported coal as a
viable alternative to domestic coal.

Coal Requirement Of Power Sector

Target CAGR 8%

Increasing importance of the private sector

India has emerged as one of the fastest growing economies in the world. Its current
economic performance reflects a healthy trend based on increased consumption,
investment and exports. Over the next five years, this growth is expected to continue. A
key risk to the continued growth of the Indian economy is inadequate infrastructure.
Infrastructure investment in India is on the rise, but growth may be constrained without
further improvements. The Government of India has identified the power sector as a key
sector of focus to promote sustained industrial growth. It has embarked on an aggressive
mission –“Power for All by 2012”– and has undertaken multiple reforms to make the
power sector more attractive to private sector investment.