BUSINESS POLICY AND STRATEGIC

ANALYSIS

TERM PAPER
ON
INDIAN POWER SECTOR

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 CONTENTS

Sr. no. particular page no.

1. Introduction 3
2. Power Sector In India 4
3. Future Of Power Sector In India 7
4. Strategies 8
5. Power Sector Entities 9
6. Porter’s Five Force Model 28
7. Swot Analysis 30
8. Issues And Challenges 34
9. Conclusion & Findings 36

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INTRODUCTION
An economy’s 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

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power, biogas energy, wind power etc. The distribution of the power generated is
undertaken by Rural Electrification Corporation for electricity power supply.

POWER SECTOR IN INDIA

TOTAL INSTALLED CAPACITY:

Sector
MW %age

State Sector
85,983.67 41.53

Central Sector
65,502.45 31.64

Private Sector
55,519.92 26.82

Total
2,07,006.04

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.

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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 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.

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GENERATION

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.

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Fuel
MW %age

Total Thermal
137936.18 66.63

Coal 117,833.38 56.92

Gas 18,903.05 9.13

Oil 1,199.75 0.57

Hydro (Renewable)
39,291.40 18.98

Nuclear
4,780.00 2.30

RES** (MNRE)
24,998.46 12.07

Total
2,07,006.04 100.00

FUTURE OF POWER SECTOR IN INDIA

Objectives

• Sufficient power to achieve GDP growth rate of 8%

• Reliable power

• Quality power

• Optimum power cost

• Commercial viability of power industry

• Power for all

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STRATEGIES
• Power Generation Strategy with focus on low cost generation, optimization
of capacity utilization, controlling the input cost, optimization of fuel mix,
Technology upgradation and utilization of Non Conventional energy
sources.
• Transmission Strategy with focus on development of National Grid
including Interstate connections, Technology upgradation & optimization
of transmission cost.
• Distribution strategy to achieve Distribution Reforms with focus on
System upgradation, 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 to generate resources for required growth of the power
sector.
• Conservation Strategy to optimise the utilization of electricity with focus
on Demand Side management, Load management and Technology
upgradation to provide energy efficient equipment / gadgets.
• Communication Strategy for political consensus with media support to
enhance the genera; public awareness.

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 POWER SECTOR ENTITIES

NATIONAL THERMAL POWER

CORPORATION LIMITED
Company Name : NTPC Ltd
Address : NTPC Bhawan Scope Complex 7-
Institutional Area Lodi Road,New Delhi -
110003, New Delhi.
Year of Establishment : 1975
Chairman : ARUP ROY CHOUDHURY
E-mail : info@ntpc.co.in
Website : http://www.ntpc.co.in
Production Capacity : 29,394 MW

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
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power sector, also NTPC is extending consultancy services to various
organisations 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.

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 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

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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.

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 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 state-of-art technologies.

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RELIANCE INFRASTRUCTURE LTD
Company Name : Reliance Infrastructure Ltd
Address : Reliance Energy Centre,
Santa Cruz (East),
Mumbai - 400055, Maharashtra
Year of Establishment : 1929
Chairman : Anil D Ambani
E-mail : helpdesk@rel.co.in/rel.investor@relianceada.com
Website : http://www.rinfra.com
Production Capacity : 941 MW

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 hydro based power generation projects in Maharashtra, Uttar
Pradesh, Arunachal Pradesh and Uttaranchal with aggregate capacity of over
13,510 MW.

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

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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.
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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) 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.

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.

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TATA POWER COMPANY LTD
Company Name : Tata Power Company Ltd
Address : Bombay House,
24 Homi Mody Street,
Mumbai, 400001, Maharashtra
Year of Establishment : 1919
Chairman : Mr. R N Tata
E-mail : investorcomplaints@tatapower.com
Website : http://www.tatapower.com
Production Capacity : 2300MW

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.

As on February 2008, The Tata Power Company Limited (Tata Power) and
Damodar Valley Corporation (DVC) jointly completed its financing for the 1050
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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.

POWER GRID CORPORATION OF INDIA

LTD
Company Name : Power Grid Corporation of India Ltd
Address : B-9 Qutab Institutional Area,
Katwaria Sarai,
New Delhi - 110016, New Delhi
Year of Establishment : 1989
Chairman : S K Chaturvedi
E-mail : investors@powergridindia.com
Website : http://www.powergridindia.com
Production Capacity : 77,217 MVA

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The Company was incorporated in October 23rd of the year 1989 as the National
Power Transmission Corporation Limited with the responsibility of planning,
executing, owning, operating and maintaining the high voltage transmission
systems in the country. Subsequently, the company name was changed to the
present name Power Grid Corporation of India Limited (PGCIL) with effect from
October 23rd of the year 1992. The company's operational area includes,
Development of Inter-State transmission Systems and Grid Management.
Development of Inter-State transmission Systems consists of Planning & Design,
Construction, Quality Assurance & Inspection and Operation & Maintenance.
Grid Management includes Establishment of modern Load Despatch Centres,
Real-time Grid Operation, Optimum scheduling & despatch and Energy
accounting including settlements. The Diversification consists of Broadband
Telecom Services, Sub-transmission, Distribution and Rural Electrification. The
company has certified as PAS 99:2006, which integrates the requirements of ISO
9001:2000 for quality, ISO 14001:2004 for environment management and
OHSAS 18000:1999 for health and safety management systems

During the year 1995, the company took over the management of the Eastern
Regional Load Despatch Centre and the North Eastern Load Despatch Centre.
Again in 1996, the company captured over the management of the remaining two
regional load despatch centres, namely, the Northern Regional Load Despatch
Centre and the Western Load Despatch Centre. In 1998, the Government of India
formally notified the PGCIL as a Central Transmission Utility and also in same
year PGCIL was declared as a Mini Ratna Category I public sector undertaking
by the Government of India. Department of Telecommunications, Government of
India has granted the Infrastructure Provider II license (IP II) to the company in
the year of 2001, for pursue leasing of bandwidth capacity to various customers

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on its telecommunications network. During the year 2002, the company
commissioned the unified load dispatch and communications schemes for the
northern and southern regions. The Sasaram HVDC back to back transmission
system developed by the PGCIL was commissioned leading to the completion of
the first phase of the construction of the National Grid and also the 2,000 MW
Talchar-Kolar bipolar HVDC link was commissioned, which also developed by
the company. The Company had entered into a joint venture arrangement with
Tata Power Company Limited during the period of 2003 for implementing a part
of the entire transmission system associated with Tala Hydro-Electric Project
which was the first public-private sector initiative in the transmission sector.
PGCIL had developed the 400 KV Raipur-Rourkela line transmission lines and it
was commissioned. Also in the same period of 2003, the Western region, Eastern
Region and North-Eastern Region begin operating in a synchronised manner with
a cumulative capacity of 50,000 MW. The Company secured its first international
consultancy contract from Bhutan Telecommunications. The unified load
dispatch and communications scheme for the eastern region was commissioned in
the year of 2005. After a year, in 2006, the unified load dispatch and
communications scheme for the western region was commissioned. In the same
year 2006, PGCIL had entered into an agreement with Rural Electrification
Corporation Limited and certain state governments and state utilities for
undertaking rural electrification works under the Rajiv Gandhi Grameen
Vidyutkaran Yojana in nine states.

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TORRENT POWER LTD
Company Name : Torrent Power Ltd
Address : Torrent House,
Off Ashram Road,
Ahmedabad - 380009, Gujarat
Year of Establishment : 2004
Chairman : Mr. Sudhir Mehta
E-mail : investorservice_ahd@torrentpower.com
Website : http://www.torrentpower.com
Production Capacity : 500 MW

Torrent Power Limited (TPL) is an integrated power company engaged in the

generation and distribution of electricity in the cities of Ahmedabad,
Gandhinagar and Surat in the state of Gujarat and Bhiwandi Franchise in
Maharashtra. TPL was incorporated in 29th April of the year 2004 as Torrent
Power Trading Private Limited. Torrent brought together three of its group
companies during the year 2004-05, Torrent Power AEC Limited, Torrent Power
SEC Limited and Torrent Power Generation Limited under a single, unified
brand as Torrent Power. Government of India conferred Gold shield for best
performance in power distribution for the years 2004-05 and also for 2005-06.
TPL and Siemens created a 50:50 JV to provide O&M services to its SUGEN
1147.5 MW CCPP in the year 2005-06. The Company had awarded EPC contract
for its SUGEN 1147.5 MW CCPP to a consortium of Siemens AG and Siemens
Ltd. India; commenced construction of its first power block. The Company had
entered into a Joint Venture with Power Grid Corporation of India Limited
(PGCIL) in the same year 2005-06 for setting up dedicated transmission lines of
440 KV for evacuation of power from 1100 MW SUGEN project to Ahmedabad
distribution area and to the National Grid through connectivity with PGCIL at

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Dehgam and Loop In Loop Out of Gandhar- Vapi line. The name of the company
was changed to Torrent Power Private Limited in 25th January of the year 2006.
Consequent to the conversion of the company into a Public Limited Company in
8th February of the year 2006, the company came to be called as Torrent Power
Limited. As at 20th December 2006, the company had signed a distribution
franchise agreement for a period of ten years for the Bhiwandi circle in
Maharashtra with Maharashtra State Electricity Distribution Company Limited
(MSEDCL). The Company had commenced Distribution Franchise Bhiwandi
circle of catering to 1.4 lakh customers with an unrestricted demand of about 700
MW in 26th January of the year 2007. TPL had signed a memorandum of
understanding (MoU) with Gujarat Power Corporation in May of the year 2007
for setting up over 1000-MW coal based power project at Pipavav, dist. Amreli in
Gujarat. TPL made tie up with Gujarat State Petronet Limited for the gas
transportation in line with project requirement. The Company had enhanced
power transformation capacity during the year 2007-08 about 371 MVA by
commissioned of two 220 kV substations at Surat and one 33 kV substation at
Ahmedabad. CRISIL had assigned AA- & P1+ ratings to the company's bank
facilities in March of the year 2008

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JP HYDROPOWER
Company Name : JP Hydropower
Address : JA Annexe 54,Basant Lok,
Vasant Vihar,
New Delhi-110 057.
Year of Establishment : 1994
Name of CEO : Mr. Gagan Banga
E-mail : mm.sibbal@jalindia.co.in
Production Capacity : 300MW

The Company was incorporated on December 21, 1994 with the object, interalia,
to set up hydro-electric or Thermal power projects and for the supply of general
electric power. The Certificate of Commencement of Business was granted on
January 9, 1995. Our registered office is in New Delhi. Jaiprakash Hydro-Power
Limited (JHPL), a part of the Jaypee Group owns and operates the 300 MW
Baspa-II Hydroelectric Project at District Kinnaur in Himachal Pradesh.
Financial Institutions approved the Project at an estimated project cost of Rs.11,
020 million in March of the year 1995 and signed PPA as one of the pre-
disbursement conditions. Executed the tripartite agreement between JHPL, JAL
and GoHP in the same year 1995 consenting the transfer of all assets, liabilities,
obligations, privileges and benefits arising out of MOU from JAL to JHPL.
During June of the year 1997, the company signed PPA with HPSEB pursuant to
Implementation Agreement with GoHP. In the same year, the financial
institutions reappraised the project with a revised cost of Rs.12, 630 million. In
January of the year 2008, JHPL made an amendment in the PPA to include
provisions for escrow mechanism and letter of credit for realisation of payment
from HPSEB. Accomplished the agreement with Siemens AG Consortium,
Germany and Alstom T & D, France in the year 1999 for import of

21
electromechanical equipment and GIS/GIB respectively. Again the financial
institutions reappraised project cost at Rs.13, 450 million in the year 2000 and
Rs. 16,120 million in the year 2002. The Baspa-II project - India's Largest Private
Sector Hydro-Power project has been fully commissioned in 8th June of the year
2003 at a project cost of Rs 1624.72 crores and has started generating power.
Jaiprakash hydropower filed prospectus with ROC, all decks cleared for IPO in
power sector in third week of March 2005.

ENERGY DEVELOP
Company Name : Energy Develop
Address : Harangi Hydroelectric Project
Village-Hulugunda, Kodagu, Karnataka-
571233
Chairman : Mr. Amar Singh
E-mail : edcl.investor@edclcal.com

Energy Development Company Limited was incorporated as a public limited

company as on the 19th January, 1995. The company took over execution of
Harangi Mini Hydro Electric Power project on BOT (Build Operate Transfer)
basis for a period of 40 years from the date of commissioning of the project. The
project was initially awarded to M/s. North East Energy Services ("NEES") USA,
by the Government of Karnataka. Accordingly an agreement was entered
between the Government of Karnataka and M/s. Public Power International Inc
("PPII") a group company of NEES acting on behalf of NEES. In accordance
with this agreement a new company was incorporated on the 19 th January, 1995
in the name of "Energy Development Company Limited" for executing the
project. During the year 1999, the company signed Power Purchase Agreement

22
with Karntaka Power Transmission Corporation Ltd (Formerly KEB) for sale of
entire energy generated, which would be valid for 20 years. The Harangi Hydro
Electric Project was finally commissioned and synchronised with the grid on 14th
July, 1999. Energy Development Company Ltd has signed a Power Purchase
Agreement with Hubli Electricity Supply Company Ltd (HESCOM) in respect of
its 6 Mw Harangi Phase – 2 Minihydel Project, which is subject to approval of
the Karnataka Electricity Regulatory Commission (KERC).Energy Development
Company Ltd has signed a Power Purchase Agreement (PPA) with Hubli
Electricity Supply Company Ltd (HESCOM) in respect of its 6 Mw Harangi
Phase - 2 Minihydel Project which is subject to approval of the Karnataka
Electricity Regulatory Commission (KERC). Energy Development Company Ltd
has signed a Memorandum of Understandings (MoU) with Government of
Arunachal Pradesh to develop 5 (Five) Hydro Electric Projects totaling to 210
MWs on BOOT basis.

KSK ENERGY
Company Name : KSK Energy
Address : KSK Energy Ventures Limited 8-2-
293/82/A/431/A
Road No:22, Jubilee Hills
Hyderabad 500033, INDIA.
Year of Establishment : 2001
Chairman : Mr. Sudhir Mehta
E-mail : info@ksk.co.i n
Production Capacity : 144MW

KSK Energy Ventures Limited (KSKEVL), a subsidiary company of KSK

Energy (Mauritius) was got birth on 14th February 2001 as a private limited

23
company under the name of KSK Energy Ventures Private Limited to capitalize
on the emerging opportunities in the Indian power sector and focus on
developing, operating and maintaining power projects. KSKEVL is a power
project development company in India, with track record of developing and
operating power plants, which supply power to a combination of industrial and
stateowned consumers in India. Business model of the company includes Power
Plant Development, Security Fuel Linkages, Project Management &
Development and Operation Management. The company has operational power
plants capable of generating 144 MW of power, and currently constructing,
developing or planning power projects capable of generating an aggregate of
8,993 MW of power. KSKEVL became a public company pursuant to a special
resolution of the shareholders of the company at an extraordinary general
meeting held on February 9, 2002, and the word 'private' was deleted from its
name. During the year 2004, the 'Small is Beautiful' Fund achieved financial
closure. After a year, in 2005, KSKEVL had signed a shareholders agreement
and a power purchase agreement with Lafarge India Private Limited to set up a
43 MW coal-based captive power plant in Arasmeta. In April of the same year
2005, the company had executed an agreement with India Cements Limited for
expansion of the power plant of Coromandel Electric Company Limited by 8.73
MW. In November 2005, a Joint venture agreement was signed with LB India
Holdings Mauritius I Limited to form KSK Electricity Financing India Private
Limited. As on January 2006, the Coromandel Electric Company Limited
commenced commercial operation of Phase 2 of the 8.73 MW gas engine based
captive power plant and in May of the same year 2006, the 43 MW coal based
captive power plant of Arasmeta Captive Power Company Private Limited
synchronized with the grid. KSK Power Ventur plc is a power project
development company listed on Alternate Investment Market (AIM) of the
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London Stock Exchange. KSK operates in India through its fully owned
subsidiary, KSK Energy Ventures Limited (KSKEVL). Its operations in the
Indian Power Sector are powered by the growth opportunities it realizes and
capitalizes on. An affiliate of Lehman Brothers of USA has 33.5% stake in
KSKEVL.

GVK POWER
Company Name : GVK Power
Address : GVK Industries Ltd. Paigah House,
156-159, SP Road,
Secunderabad 500003,
AP, India.
Year of Establishment : 1994
Chairman : Mr.G.V.krishna Reddy
E-mail : info@gvk.co m
Production Capacity : 684 MW

GVK Power & Infrastructure Limited (GVKPIL) is a listed public company

belonging to GVK, engaged in the business of owning, operating, and
maintaining power plants by itself and through its subsidiary/associate
companies. GVK is amongst India's largest infrastructure developers with
experience and expertise spanning areas including hospitality, manufacturing,
power, roads, airports, SEZs and urban infrastructure. The Company was
incorporated in 2nd December of the year 1994 as a private company with
unlimited liability under the name of Jegurupadu Operating & Maintenance
Company. GVK is amongst India's largest infrastructure developers with
experience and expertise spanning areas including hospitality, manufacturing,
power, roads, airports and urban infrastructure. Until date GVK has invested over
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Rs. 5,000 crore in its various business and has on hand projects in the pipeline of
over Rs. 12,000 crore. GVK is developing power projects that are based on coal,
gas and hydel resources. The projects are being developed across several States
in the country including Andhra Pradesh, Punjab and Uttarakhand. The Company
was converted to a company with limited liability and consequently the name was
changed to Jegurupadu Operating & Maintenance Company Private Limited in
20th April of the year 2005. Subsequently, it was converted from a private limited
company to a public limited company during 19th May of the year 2005 and
renamed as Jegurupadu Operating & Maintenance Company Limited. Thereafter,
the name of the company was changed to GVK Power & Infrastructure Limited
as at 13th July of the year 2005. In October of the year 2005, GVKPIL acquired
GVKPPL and Transoceanic Projects Limited's equity stake in GPL. Accordingly,
51% of the equity shares in GPL now held by GVKPIL continue to remain
pledged with PFC. In January 2006, the consortium led by GVK Group and
comprising Airports Company South Africa and Bidvest was awarded the
mandate to modernize India's busiest airport, the Chhatrapati Shivaji International
Airport (CSIA) at Mumbai.

INDOWIND ENERGY
Company Name : Indowind Energy
Address : Indowind Energy Ltd.
Kothari Buildings, 4th Floor,
114, M.G.Road, Nungambakkam,
Chennai-600034, Tamil Nadu, India.
Year of Establishment : 1995
Chairman : Mr. K.V.Bala
E-mail : contact@indowind.co m
Production Capacity : 17.915MW

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The Company was incorporated as Indowind Energy Private Limited' on July 19,
1995. TheCompany became a deemed public limited company on September 30,
1997 and was converted into a public limited company on December 29, 2000.
Mr. K.V. Bala and Subuthi Finance Limited have promoted the Company with
the main object of developing wind farms on a large scale for commercial
exploitation, generating energy from Wind Mills, Wind Turbines and other
Equipment and selling it to State Electric Boards and Corporate clients. The
Company commenced its commercial operation of generating power on
September, 1995 by setting up 225 KW Wind Electric Generator in Tamil Nadu.
The Company has been raising its generation capacity every year and the same
has since been increased to 16.825 MW. The Company has altered its main
object clause to include the activities of manufacturing equipments of windmills
under the purview of its business; a unit was set up in Pondicherry through which
the Company has provides total solution for installation, operation and
maintenance of windmills for third parties. Indowind, is an IPP in the renewable
energy field generating “Green Power ” through dedicated Wind farms & also
offers allied services in the Wind Energy sector with a mission to be a global
player in wind energy sector. Indowind, with proven capabilities in setting up
Wind farms, Operating & Maintaining them with optimum machine availability,
Green Power sale to Corporates & EB, for which we have acquired through a
decade on onsite experience possessing considerable

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PORTER’S FIVE FORCE MODEL
The model of pure competition implies that risk-adjusted rates of return should be
constant across firms and industries. However, numerous economic studies have
affirmed that different industries can sustain different levels of profitability; part
of this difference is explained by industry structure. Porter’s model is based on
the insight that a corporate strategy should meet the opportunities and threats in
the organizations external environment. Especially, competitive strategy should
base on and understanding of industry structures and the way they change.

Porter has identified five competitive forces that shape every industry and every
market. These forces determine the intensity of competition and hence the
profitability and attractiveness of an industry. The objective of corporate strategy
should be to modify these competitive forces in a way that improves the position

28
of the organization. Porter’s model supports analysis of the driving forces in an
industry. Based on the information derived from the Five Forces Analysis,
management can decide how to influence or to exploit particular characteristics
of their industry.

PORTER’S FIVE FORCES ANALYSIS -

POWER SECTOR IN INDIA

FIVE FORCES ANALYSIS

Supply Many projects have been planned but due to slow regulatory
environment, the supply is far lesser than demand. Currently,
India needs to double its generation. Many projects have been
planned but due to slow regulatory environment, the supply is
far lesser than demand. Currently, India needs to double its
generation capacity to meet the potential demand.
Demand The long-term average demand growth rate is 6%.
Barriers to Barriers to entry are high, as entering this business requires
Entry heavy investment initially. The other barriers are fuel
linkages, payment guarantees from State Governments, Retail
distribution licensed, etc.
Bargaining Not very high as Government controls tariff structure.
Power to However, this may change the future.

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Suppliers

Bargaining Bargaining power of retail customers is low, as power is in

Power of short supply. However, Government is a big buyer and
Customers payment by Government can be more erratic.
Competition Not high currently. The Electricity Act, 2003 will encourage
investments, thereby increasing competition.

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.

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 strategy formulation and selection. The following
diagram shows how a SWOT analysis fits into an environmental scan.

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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

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• 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

33
 • 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 SEB’s but also
the entire power sector for near term.

ISSUES AND CHALLENGES

The main challenge faced by the power industry is the high cost of power
production. This is due to the non-availability of fuel, partly caused by inefficient
control of mining facilities. Inefficient functioning of SEBs leads to inefficient
supply-demand management.

• 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

34
 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.

• 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 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

• 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 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

35
 implemented. Since 1990 till date only 9922MWof generation has come in
the private sector.

• 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

CONCLUSION & FINDINGS

The liberalization, privatization and globalization policy implemented in 1991 is
solely responsible for the revival and exponential rise of the Power Sector in
India. The Government has emphasized the importance of adequate power
resources in maintaining the targeted GDP growth of 7% through the recession.
This is reflected in the Budget 2009-10, which has increased the allocation under

36
Accelerated Power Development and Reform Program (APDRP) by 160% over
the previous year. The measures planned by the Government as part of its
POWER FOR ALL BY 2012 scheme, if implemented properly, will enable
explosive growth in all levels of the industrial sector. All these factors indicate
that the Power Sector of India is firmly set on its track to become one of the
“Sunrise Sectors” of future India.

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 achieved. By the year 2012, India requires an additional
100,000 MW of generation capacity. A huge capital investment is required to

37
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
· www.Ibef.org
· www.india.gov.in
· www.teriin.org
· www.coreinternational.com
· www.energywatch.org.in

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