TERM PAPER OF STRATEGIC MANAGEMENT ON

Topic: POWER SECTOR

SUBMITTED TO: Dr. Gopal Krishnan

SUBMITTED BY: Rajesh Chilwal RT1901-A18

1| Page

ACKNOWLEDGEMENT
Accomplishment of any task, howsoever small it may be, is Not possible without the blessings of the Almighty and without the active

Help of certain individuals.

My special thanks to Dr. Gopalkrishan Who motivated me to take up this Term paper. I’m highly grateful to him for guiding me so affectionately. And …… last, but not the least, I’m indebted to teachers

For their help, moral support. I hope and wish; I can repay their efforts half as much as they have effort for me.

Rajesh chilwal

2| Page

CONTENT

Executive summary Introduction Perspective plan Growth of power sector Fact and figure Major player Regulation Investment opportunity Review of literature SWOT analysis PESTLE analysis TOWS matrix IFE EFE Porters5 forces model SPACE Prediction and Recommendation Conclusion Bibioliography

3| Page

EXECUTIVE SUMMARY
 The electricity sector in India is predominantly controlled by Government of India's public sector undertakings (PSUs) but the private sector is also catching up fast.  India is world's 6th largest energy consumer, accounting for 3.4% of global energy consumption. Due to India's economic rise, the demand for energy has grown at an average of 3.6% per annum over the past 30 years. In March 2009, the installed power generation capacity of India stood at 147,000 MW while the per capita power consumption stood at 612 kWH. The country's annual power production increased from about 190 billion kWH in 1986 to more than 680 billion kWH in 2006.  India faces a serious shortfall in power generation. During the tenth plan, only 23,000 SAMW of capacity was added against the original target of 41,000 MW. During the 11th plan, a target of 78,000 MW has been set.  Anil Kakodkar, Chairman, Atomic Energy Commission, India had estimated that the per capita electricity generation would reach about 5300 kWh per year in the year 2052 and total about 8000 TWh.  The Government of India has an ambitious mission of „POWER FOR ALL‟ BY 2012. This mission would require that the installed generation capacity should be at least 200,000 MW by 2012 from the present level of 144,564.97 MW. Power requirement will double by 2020 to 400,000MW.  The ratio of energy generation and GDP growth should be 1:1. The growth in electricity consumption over the past decade has been slower than the GDP‟s growth. This could be due to high growth of the services sector or it could reflect improving efficiency of electricity use. Moreover, captive generation has also increased. However, as growth in the manufacturing sector picks up, the demand for power is also expected to increase at a faster rate.  A new era of power on power competition will emerge by 2014 that will bring in at least 8085 GW of new capacity - 80- 90% of them thermal units targeting high PLF of 80-95% reducing the base load deficit to a low of 1-2%. Accordingly, we expect pricing pressures in the generation space and a 40-50% decline in average short term/merchant prices by 2014-15.  Renewable sources of energy and nuclear energy which are clean sources of energy usage is on the upswing and would contribute heavily in the times to come.

4| Page

INDIAN POWER SECTOR
Power is one of the prime movers of economic development. The level of availability and accessibility of affordable and quality power is also one of the main determinants of the quality of life. In India the process of electrification commenced almost with the developed world, in the 1880, with the establishment of a small hydroelectric power station in Darjeeling. However, commercial production and distribution started in 1889, in 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 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. 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. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods. Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. Over the years the installed capacity of Power Plants has increased to 100,000 MW on March, 2000 from meagre 1362mw in 1947. Similarly, the electricity generation increased from about 5.1 billion units to 420 Billion units. The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98, which is about 23 times. In the field of Rural Electrification country has made a tremendous progress. About 85% of the villages have been electrified except far-flung areas in North Eastern states, where it is difficult to extend the grid supply. And now 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. 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.

5| Page

2500 Ckm of HVDC lines alongwith 5000 MW of station capacity is also programmed for tenth plan. expected to go up to 34.400 MW.00.PERSPECTIVE PLAN VISION FOR POWER DEVELOPMENT IN THE COUNTRY FUTURE POWER SCENARIO The National Electricity Policy of the Government stipulates that “reliable and quality power at affordable price is to be made available to all by the year 2012. 6| Page .000 MW hydro. 6 Transmission Development during Tenth Plan (2002-07) Keeping with the pace of growth during previous plans. As per the forecast made by 16th Electric Power Survey. It may be seen that with the capacity addition of over 1. 25.373 MW hydro. i. 34189 ckm of 400kV lines and 2559ckm of 800kV lines would be constructed during this period. Also.110 MW of generating capacity.000 MW (comprising of 12.7% and energy shortage of 5. by the end of 11th Plan.000 MW comprising of 21.165 MW thermal and 5915 MW nuclear has been planned for 11th Plan. a capacity addition of 67. The total inter-regional transmission capacity for exchange of power among various regions. 25. energy requirement at the end of 10th Plan. which is likely to increase to 975 MU. i. 35. In this regard.359 MW hydro.e. a target of addition of 41.e.500 MW thermal and 2500 MW nuclear) is likely to be added during the 10th Plan period.000 MW hydro. Development of National Power Grid A National Power Grid for India is also being visualized at this stage and is expected to materialize by 2007. March'07 is 720 million units (MU). In order to meet the target of making quality power available to all by the year 2012 (end of 11th Plan). This all India power grid is envisaged to be developed in a phased manner first by integrating a cluster of Regions and subsequently.6% by the end of 11th Plan. Similarly. 13785 MVA transformation capacities would be added at 220kV level and 32595 MVA at 400Kv level. an ambitious plan has been developed for the Tenth Plan (2002-07) also. the country could face a peaking shortage of about 12. comprising of 14. only the mission of providing power for all by 2012 is expected to be a reality. progressive integration of all the Regions fully by the year 2012.439 MW comprising of 23. Accordingly. However.417 MW thermal and 1300 of nuclear has been planned for the 10th Plan period (2002-07). the latest indications suggest that an addition of 61.000 MW thermal and 5000 MW nuclear could be feasible during 11th Plan period.000 MW during 10th and 11th Plan. However. 38. based on the latest status of monitoring. Even with this level of capacity addition. The strong power sector infrastructure thus will pave the way for overall economic growth and social development of the country. the projection of the demand of electricity is made by 16th Electricity Power Survey Committee. it is envisaged that a total 14968 ckm of 220kV line. Accordingly.500 MW from the existing capacity of 8. it is expected that about 40.

Structure of power supply industry In December 1950 about 63% of the installed capacity in the Utilities was in the private sector and about 37% was in the public sector. 1948. North-Eastern Electric Power Corporation (NEEPCO) was set up in 1976 to implement the regional power projects in the North-East. which is about 23 times. the Government of India got itself involved in a big way in the generation and bulk transmission of power to supplement the efforts at the State level and took upon itself the responsibility of setting up large power projects to develop the coal and hydroelectric resources in the country as a supplementary effort in meeting the country’s power requirements. As a result of 5 this Resolution and facilitated by the Electricity (Supply) Act. In the field of Rural Electrification and pump set energisation. The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98. 1948. Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. In addition the Electricity (Supply) Act also allowed from the beginning the private licensees to distribute and/or generate electricity in the specified areas designated by the concerned State Government/SEB. From.Growth of Indian power sector Power development is the key to the economic development. The Act envisaged creation of State Electricity Boards (SEBs) for planning and implementing the power development programmes in their respective States. About 85% of the villages have been electrified except farflung areas in North Eastern states. 1974-79. In the rest of the smaller States and UTs the power systems are managed and operated by the respective electricity departments. Tehri Hydro 7| Page . Most of the States have established State Electricity Boards. The Act also provided for creation of central generation companies for setting up and operating generating facilities in the Central Sector. the various States played a predominant role in the power development.1 billion units to 420 Billion units – 82 fold increase. Subsequently two more power generation corporations were set up in 1988 viz. The National thermal Power Corporation (NTPC) and National Hydro-electric Power Corporation (NHPC) were set up for these purposes in 1975.e. The Central Electricity Authority constituted under the Act is responsible for power planning at the national level. In a few States private licencees are also operating in certain urban areas. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods.98) from meagre 1713 MW in 1950. Similarly. transmission and distribution of power almost exclusively in the public sector. the Fifth Plan onwards i. The Electricity (Supply) Act. Over the years (since 1950) the installed capacity of Power Plants (Utilities) has increased to 89090 MW (31. provides an elaborate institutional frame work and financing norms of the performance of the electricity industry in the country. where it is difficult to extend the grid supply. During the post independence period. the electricity industry developed rapidly in the State Sector. In some of these States separate corporations have also been established to install and operate generation facilities. In the Constitution of India "Electricity" is a subject that falls within the concurrent jurisdiction of the Centre and the States. The Industrial Policy Resolution of 1956 envisaged the generation. country has made a tremendous progress. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950.3. the electricity generation increased from about 5. registering a 52d fold increase in 48 years.

Administrative & Legal environment modified to simplify the projects. Policy guidelines for private sector participation in the plants issued in 1995. operate and maintain the inter-State and interregional transmission systems the National Power Transmission Corporation (NPTC) was set up in 1989. GOI has promulgated Electricity Regulatory Commission Act. 1998 Regulatory bodies both at the Central level and at the State level viz. The Mega policy has since been refined and Power Trading Corporation (PTC) Projects. Liquid fuel linkages (Naphtha) were approved for about 12000 MW Power plant capacity. Financial Environment for private sector units modified to allow liberal capital structuring and attractive return on investment. The main functions of the SERC would be to determine the tariff for grid or retail. if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State to regulate the inter-state transmission of energy including tariff of the inter-state bulk sale of power and to aid & advise the Central Government in formulation of tariff policy provide for creation of hundred percent (100%) foreign equity participation can be procedures for clearances of the renovation & modernization of capacity 1000 MW or more and supplying power incorporated recently to promote and monitor the Mega Power liquid fuel policy permitting liquid fuel based power plants to achieve a non-traditional fuels like condensate and for setting up of Independent Central Electricity Regulatory (SERCs) at the Central and the State transmission utilities. efficiency and economy in the activities of the electricity industries etc. Considerable emphasis has been placed on attracting private investment and the major policy changes have been announced by the Government in this regard which are enumerated below: The Electricity (Supply) Act. In 1995 GOI came out with the quick capacity addition so as to avert a severe power crisis.7. to regulate 6 private an of power The CERC has been constituted on 24. to determine the tariff payable for use by the transmission facilities to regulate power purchase and procurement process of transmission utilities and distribution utilities. to promote competition. The corporation was renamed as POWER GRID in 1992. to regulate the tariff of generating companies. Up to permitted for projects set up by foreign private investors in the Indian Electricity Sector. The main function of the CERC are to regulate the tariff of generating companies owned or controlled by the Central Government. the policy for Mega power projects to more than one state introduced. The non orimulsion have also been permitted for power generation. 1948 was amended in 1991 to generating companies for setting up power generating facilities and selling the power in bulk to the grid or other persons. PTC would purchase power from the Mega Private Projects and sell it to the identified SEBs. other than those owned or controlled by the Central Government.Development Corporation (THDC) andNathpa Jhakri Power Corporation (NJPC). In 1995. To construct. Subsequently. The policy of liberalisation the Government of India announced in 1991 and consequent amendments in Electricity (Supply) Act have opened new vistas to involve private efforts and investments in electricity industry. other regulatory functions would also be assigned to SERCs. as and when each State Government notifies. The Commission (CERC) and the State Electricity Regulatory Commission levels respectively. The Mega projects to be set up in the regions having coal and hydel potential or in the coastal regions based on imported fuel. 8| Page .1998.

The Electricity Laws (Amendment) Act. 9| Page . 1998 provides for creation of Central and State Transmission utilities. On selection of the private company. The function of the State Transmission Utility through intra-state transmission system and discharge all functions of planning and coordination relating to intra-state transmission system generating companies etc. generating companies etc. Central Government. the CTU/STU would recommend to the CERC/SERC for issue of transmission licence to the private The Electricity Laws (Amendment) Act. The participation by private sector in the area of transmission is proposed to be limited to construction and maintenance of transmission lines for operation under the supervision and control of Central Transmission Utility (CTU)/State Transmission Utility (STU). The function of the of energy through inter-state transmission system a coordination relating to inter-state transmission system with State Transmission Utilities. State Governments. 1998 separate activity for inviting greater participation in investment from public and private sectors. Power Grid Corporation of India Limited will be Central Transmission Utility.

Indian civilised atomic sector has come under the governance of IAEA (International Atomic Energy Agency). Hydro-India was one of the pioneering states in establishing hydro-electric power plants.41 MW which is 7.7% of total installed base with the southern state of Tamil Nadu contributing nearly a third of it (4379.6%.8%. the power plant at Darjeeling and Shimsa (Shivanasamudra) were established in 1898 and 1902 respectively and is one of the first in Asia. 10% is power is produced using gas and 1% power is produced using diesel. The public sector has a predominant share of 97% in this sector. and urban and industrial waste. India has 17 nuclear power plants in operation generating 4. though marginally. hydro and renewable sources of electricity. military atomic sector and civilised atomic sector. However.[As of 2008. the country experienced an overall energy shortage of 9. tidal energy etc.Facts and Figures: Size and Composition. India can receive the required fuel to generate the power from nuclear power plant as well as nuclear reactors also from various countries.6% and peaking power shortage of 13.76 MW. Current installed base of Renewable energy is 13. Under this deal. solar energy. Nuclear. In 2007/08. biomass. Renewable.120 MW while 6 other are under construction and are expected to generate an additional 3. India has recently made a 123.242. SECTOR State Central Private Total 10 | P a g e MW 76036 48471 22246 146753 .160 MW. the percentage energy shortage further declined.In 2006/07.Renewable energy includes power from small hydro.Nuke deal with USA where Indian atomic sector is divided into two sectors. The installed capacity as of 2008 was approximately 367. wind energy. and was 9. Thermal— 53% of the power is produced by thermal production using coal.64 MW) largely through wind power. the percentage peaking deficit dipped sharply in 2007/08 to 16.9%. The following table shows the actual amount of the units of MW generated through various sectors.Nuclear power is the fourth-largest source of electricity in India after thermal. wind.

e. March 2012 7132 11078 162 125000 150000 293372 MW.Cumulative growth in transmission sectorTransmission lines 765 kV HVDC +/.e. March 2007 1704 58728 162 75772 114629 198089 At the end of 11th plan i. MVA-Mega Volt Ampere 11 | P a g e .500kV HVDC 200kV monopole 400 kV 230 kV/220 kV Total transmission lines Unit is ckm.Mega Watt.circuit km Substation capacity where the power is converted from high voltage to low voltage or vis-à-vis is shown below: Substations HVDC BTB HVDC Bipolemonopole Total HVDC terminal capacity 765 kV 400 kV 230 kV/220 kV Total AC substation capacity Unit MW MW MW MVA MVA MVA MVA Plan 10 3000 5200 8200 2000 92942 156497 251439 Plan 11 3000 11200 14200 53000 145000 230000 428000 At the end of 10th plan i.

12 | P a g e .

13 | P a g e .

14 | P a g e .

15 | P a g e .

1 2.Source: Fig based on 17th Electric Power Survey (EPS) Renewable energy(Wind Energy):Source.9 19.6 12.9 6.5 3.77 2008-09 77.40 2007-08 78.8 1.80 84.70 3.1 13.34 71.6 2.9 120798 MW New capacity-Top 10 countries 6.2 23.60 86.89 90.2 30.0 3.7 2.61 86.04 16 | P a g e .Powerline Magazine Sept 2009 Country India Italy France UK Denmark Portugal Rest of the World China Spain Germany US Canada Total Total installed capacity-Top 10 countries 8.1 2.3 5.9 27051 MW Coal Sector Central State Private Total 16470 Lignite 2500 Nuclear 3400 5539 7761 3400 Hydro 7034 19596 89634 20334 138634 Total 29404 14057 81873 124400 2500 Room for productivity improvement: The plant load factor of thermal plants has risen from 72% in 2003 to over 77% in 2010 Plant load factor Year All-India Central Sector State Sector Private Sector 2006-07 76.8 20.8 10.20 91.8 2.22 84.74 71.70 3.4 13.80 70.

NHPC NHPC Limited (Formerly known as National Hydroelectric Power Corporation Ltd. 1. With a current generating capacity of 30. The Company was registered as a Public Limited Company under the Companies Act. Presently NPCIL is operating seventeen nuclear power plants with total installed capacity of 4120 MW has five reactors under construction totalling 2660 MW capacity.50. of India Enterprise. 1962. 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. of India with an authorised share capital of Rs. Government of India. NPCIL has achieved more than 285 reactor years of safe nuclear 17 | P a g e . was incorporated in the year 1975 with an authorised capital of Rs. It has emerged as an ‘Integrated Power Major’. Nepal and Bhutan. promote and organise an integrated and efficient development of hydroelectric power in all aspects. Initially. Since then. India's largest power company was set up in 1975 to accelerate power development in India. 2000 million and with an objective to plan. NHPC is a Mini Ratna Category-I Enterprise of the Govt. NTPC is ranked 317th in the ‘Forbes Global 2000’ ranking of the World’s biggest companies.e. NTPC has embarked on plans to become a 75. At present.644 MW. NPCIL is a MOU signing Company with DAE.Major Players NTPC NTPC.000 Million Approx. With an investment base of over Rs.000 Million . A Govt. 3. it has executed 13 projects with an installed capacity of 5175 MW on ownership basis including projects taken up in joint venture. NPCIL-Nuclear Power Corporation of India Limited is a Public Sector Enterprise under the administrative control of the Department of Atomic Energy (DAE). 17. NHPC is among the TOP TEN companies in the country in terms of investment. 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. on incorporation. Later on NHPC expanded its objects to include development of power in all its aspects through conventional and non-conventional sources in India and abroad. with a significant presence in the entire value chain of power generation business.. Bairasiul and Loktak Hydro-electric Projects from Central Hydroelectric Project Construction and Control Board.000 MW company by 2017. NHPC took over the execution of Salal Stage-I.).

500 Circuit Km of Transmission network and 120 nos. of EHVAC & HVDC sub-stations with a total transformation capacity of 79. POWERGRID POWERGRID. is one of the largest transmission utilities in the world. and the Hydro Electric Power Stations at Bhira. one of the largest portfolios of power generation assets under development in India. Germany. Suzlon Conceived in 1995 with just 20 people. with the Mumbai power business. TATA power India’s largest private sector power utility. accounting for 1797 MW. which has a unique mix of Thermal and Hydro Power.3% thereby making Suzlon 3rd largest wind turbine manufacturing company in the world 18 | P a g e .500 MVA. India and The Netherlands. NPCIL operates plants with motto ‘Safety first and production Next’. Trombay. Suzlon is now a leading wind power company with over 14. Market leader in Asia and 3rd largest wind turbine manufacturer in the world. It is rich with sophisticated R&D capabilities in Denmark. It has got fully integrated supply chain with manufacturing facilities in three continents. The Company on its own and through subsidiaries is currently developing 16 large and medium sized power projects with a combined planned installed capacity of 35. POWERGRID wheels about 45% of the total power generated in the country on its transmission network.460 MW. Asia. a Navratna Public Sector Enterprise. construct and operate power projects domestically and internationally. Reliance Reliance Power Limited is part of the Reliance Anil Dhirubhai Ambani Group and is established to develop. Tata Power has an installed power generation capacity of above 2785 Mega Watts. Suzlon Market Share rose to 12. generated at the Thermal Power Station. NPCIL generated about 90 billion units of electricity in the X plan (2002-2007) exceeding the set target by about 10%.000 Km across the country.power plant operating experience. POWERGRID has a pan India presence with around 71.POWERGRID has also diversified into Telecom business and established a telecom network of more than 20. Bhivpuri and Khopoli. Australia and Europe. and added 1180 MW capacity against the target of 1300 MW capacity.000 people in 21 countries with operations across the Americas. thus realizing 91% of the target capacity addition. POWERGRID has consistently maintained the transmission system availability over 99% which is at par with the International Utilities.

The challenges and opportunities faced by Indian Power sector are: • Low per-capita consumption of electricity • Estimated demand growth of Power at 6-7% • Estimated investment of Rs. The Central Electricity Regulatory Commission (the “CERC”) is the regulatory body constituted under The Electricity Regulatory Commission Act. 8. 1998 (the “ERC ACT”) to bring into effect rationalization of electricity tariff and transparent policies regarding subsidies for regulation of interstate transmission of energy and promotion of efficiency and environmentally benign policies. giving considerable authority to the provincial governments. is the technical wing of the MOP assisting on technical and economic matters. constituted under the Electricity (Supply) Act. In 1948.000 crores in power sector over next 10 years • Privatization of SEBs • Rationalization of the tariff structure • Politically-sensitive issues such as subsidies Indian Power Sector has some of the major strengths such as abundant coal reserves to support 19 | P a g e . Mysore (now Karnataka) Power Corporation and the consulting firms WAPCOS. The ERC Act also provided for formation of State Electricity Regulatory Commission (“SERC”) in the respective states for the rationalization of electricity tariff and formulation of policy within each state. NHPC. It was a comprehensive piece of legislation to “regulate the generation. regulation and safety”. 1948 (the “Supply Act”). The Central Electricity Authority (the ‘CEA’). By amendment in 1991 generation was opened to private investment. Ministry of Power (MOP) is the apex body governing the power industry in the country. 1910. including foreign investment. Tariffs in cases of interregional movements and transmission charges were to be determined by the central government on the advice of the CEA. supply and use of electricity and dealt with licensing. Further amendments in 1998 opened transmission to private investment subject to the approval of the Central Transmission Utility (CTU) with a license to be issued by the CERC.00. 1948 was passed “to facilitate the establishment of the regional co-ordination in the development of electricity transcending the geographical limits of the local bodies”. the Electricity (Supply) Act. Amendments in 1976 enabled generation companies to be set up by the central and state governments resulting in the establishment of the NTPC. NEEPCO.Regulations and Policies The regulation of Indian Electricity Industry commenced from Indian Electricity Act.

a total amount of Rs 71. Legislative Initiatives. A national consensus evolved for improving the performance of the power sector in a time bound manner covering National Energy Policy. a total of 571 projects have been implemented under the APDRP in various states.24 billion has been released.funds to the less loss making State electricity boards As on 31 October 2007. Kerala. Nine states. The reform strategy adopted by Ministry of Power comprises of Power Generation Strategy. 1996 to discuss and deliberate upon the issues pertaining to the power sector. But at the same time Indian Power Sector has number of weaknesses/problems such as. Setting up of SERCs. Distribution and supply Strategy. The direct financial implications of most of the changes are not yet visible but as states progress further on reforms. • Inadequate power generation capacity • SEBs’ weak financial health • Lack of optimum utilization of existing generation capacity • Inadequate inter regional transmission links • Alarming level of Transmission and Distribution Losses • Abysmally low level of collection efficiency • Inadequate metering of consumers • Large-scale theft • Cross subsidization of Power and Skewed tariff structure • Energy shortage of about 7. that is. Power transmission Strategy. Regulation Strategy. Communication strategy. and a counterpart fund of Rs 48.thermal power generation. CERCs. Haryana.36 billion has been drawn under the investment component. Rationalisation of Tariffs. Conservation Strategy.5% • Low PLF of Generating stations The proposed reforms/restructuring is aimed at resolving these issues. 20 | P a g e . The Chief Ministers met on 16th October and 3rd December. and Distribution Privatization etc. with the total project cost estimated at Rs 170.3% and peaking demand shortage of 12.25% of the project cost to general states and 90% project cost to special states  Incentive based. Power reforms are happening though the pace is slower than desired. So far. huge potential for hydro-electricity generation and abundant engineering skills to commission and run large-scale projects and a large consumer base. the investment scenario would improve. Financing Strategy. The promotion and distribution of the power is done through two types of support from government:  Investment based. APDRP: Ministry of power launched accelerated power development and reforms program for the period of 10 years from 2002-2012.34 billion. which will improve sector health. Andhra Pradesh. Gujarat.

which aims at electrifying all unelectrified villages and providing access to electricity to all rural households over a period of four years (MoP 2008). The power sector in India has grown significantly and is an important part of infrastructure. Punjab. Rajiv Gandhi Vidyutikaran Yojana: The Government of India launched the RGGVY in April 2005. and West Bengal. Investment potential in power sector in India is huge due to the market size and returns on investment capital. have shown reduction in cash losses. and have received benefits to the tune of Rs 28.Opportunities of Foreign Direct Investment (FDI) in the Power Sector in • • • • • • • • Hydro Projects Captive Power Ultra Mega Power Projects Nuclear Power National Grid Program Rural Electrification Trading Renewables Important aspects of FDI in the power sector of India are 100 percent Foreign Direct Investment is allowed under automatic route in almost all the power sectors in India except the Atomic Energy • 21 | P a g e . Past few years have witnessed an outstanding growth in the power sector especially the sectors based on renewable sources of energy. Maharashtra. There are huge opportunities of FDI in power sector in India.53 billion. Opportunities of FDI in the Power Sector in India India exist in . FDI The huge size of the market in the power sector in India and high returns on investment are important factors in boosting FDI inflows to power. 100% FDI is permitted to this sector under automatic route in almost all the power sectors in India except the Atomic energy.76 billion under the incentive component from the Government of India (MoP 2008). amounting to Rs 57. Rajasthan.Madhya Pradesh.

Impact of Technology The MoP is promoting the use of information and technology. In India. or CPGRAMS: This is an online system for handling public grievances. The ministry is also implementing several measures for implementing e-governance for bringing in transparency and accountability in the functioning of the ministry.5 percent PLF • • The import of equipments will be entitled to 20 percent of import duty Power generating projects will have a five year tax holiday with five more years which will have a deduction of 30 percent taxable profits. It has been promoting the use of clean coal technologies for meeting future energy needs of the country. which are currently about 9% of the global emissions. This system has remote data updating facility and is presently being updated by hydro utilities and the CEA. trading in power is activated. and Centralized PGRAMS.  Public Grievances Redressal and Monitoring System. for achieving efficiency in transmission and distribution.  MIS (Management Information System) on power sector scenario: It is a webenabled application. The centralized version was launched in 2007. through several applications and e-governance initiatives. or PGRAMS. 22 | P a g e .Power projects involving generation and distribution tasks are allowed in all types and sizes • As per the Electricity Act 2003.  Use of clean coal technology: The Government of India is making concerted efforts to reduce the rising levels of CO2 emissions. • • • A duration of 30 years will given as a renewable license period Thermal power plants will get a return of 16 percent on equity and will get 68. Power trading inherently means a transaction where the price of power is negotiable and options exist about whom to trade with and for what quantum. power trading is in an evolving stage and the volumes of exchange are not huge. providing information on various activities undertaken by the MoP.  Hydropower net project It is a web-based application for monitoring of hydro projects by the MoP and sharing of data by hydro utilities and the CEA.

Strong supportive factors conducive to investment opportunity such a vibrant strong and stable economy. Such CCGT plants are increasingly becoming techno-economical viable with advancements in efficient gas turbine technologies and their environmental benefits. thus providing a free hand in setting up of a thermal generating plant. The largest unit size in the country at present is 500 MW and 600 MW super critical units are in the pipeline. The major thrust in thermal generation could be fructified through significant jump in unit size and steam parameters resulting in higher efficiencies and better economics. 23 | P a g e .INVESTMENT OPPURTUNITIES 9 INVESTMENT OPPORTUNITIES IN THERMAL POWER DEVELOPMENT 70% of the country's total installed capacity and more than 80% of the total electricity generation is contributed by thermal power. operate and maintain a thermal generating station without the need of a license.1000 MW with still higher super critical parameters which will have low cost of generation. presence of independent power producers and power sector reforms initiatives as confidence building measures for prospective investors.10000 crores. Coal continues to be the main source of for thermal generation. The projected future unit size is 800. The post Electricity Act 2003 scenario provides for the opportunity for any generating company to establish. low cost indigenous fuel. availability of skilled manpower. there is renewed thrust in gas based combined cycle plants. Thrust to R&M / life extension activities with large investment potential for improving the performance of old thermal power stations. indigenous power plant manufacturing capability. With the identification of new gas sources and availability in international market. The 10 Plan program envisages capacity addition of 14393 MW from hydel projects in the total capacity addition of 41110. The 10th Plan (2002-07) is targeted towards 57 units (14270 MW) for R&M works and 106 units (10413 MW) with anticipated total cost of more than Rs. higher efficiency and are environment friendly.

000 90.000 Total 1.INVESTMENT OPPORTUNITIES IN HYDRO POWER DEVELOPMENT Greater private investment through IPPs and joint ventures would be encouraged and conducive atmosphere created for attracting private sector funds. CPRI as the Member Secretary. TIFAC. forming the back bone of the National Power Grid would require an investment of the order of Rs.00. Simultaneously. 40.3.60. any private player can seek license from the Appropriate Commission to carry out business in transmission of electricity.000 1. The Committee has already identified the research projects to be taken up on short.000 crores of which about 50% would be needed during the Tenth Plan period and the balance during the Eleventh Plan period. CFRI.000 40. CEA and DG.000 90.70.40. CSIR. strengthening of the regional system for meeting the increased transmission needs on account of increased inter-regional transactions as well as for evacuation. Members are drawn from various concerned organizations in the Power Sector.00. Financial Requirements The high capacity inter-regional transmission links.00.000 Transmission System State's Transmission System 20. Generation of electricity was opened for private sector in 1991. R&D in Power Sector Government of India has set up a Standing Committee on Research in the Power Sector under the Chairmanship of Chairman. NPC & other.000 Sub-transmission and Distribution System 80. transmission and dispersal of power from generation resources within the regions would have to be continued and the transmission and distribution system in the State sector would also need to be strengthened.000 1. medium & long term basis. 24 | P a g e .000 3.000 Crores as per the following break-up: The Government made enabling provision for private sector participation in transmission sector way back in 1998 by amending the then existing Electricity Act INVESTMENT OPPORTUNITIES IN TRANSMISSION SCHEMES Opportunities for Private Sector Participation in transmission X Plan XI Plan Total National Grid System including Inter-regional and Regional 40.000 50. Action is being taken to initiate research in each of these areas on prioritized basis.000 20. q In the newly enacted Electricity Act 2003.000 MW of generation addition in the next ten years has been estimated to be of the order of Rs.000 1948. The requirement of funds for transmission and distribution system in the country corresponding to the programme of 1.

As a first project to be undertaken under the IPTC route. Karnataka. 2004.000 crores can be invested by the private sector by the end of Xth Five Year Plan.provides 100% fund mobilization by private entrepreneurs as IndependentPrivate Transmission Company. Kerala and Gujarat have taken number of initiative to curb the theft of power which have shown improvement in collection of revenue by the SEBs/Utilities. Uttar Pradesh. Andhra Pradesh. Madhya Pradesh. SEB/Utility level.9. · 100% Metering Programme: A programme of 100% metering has been taken up by States subsequent to Power Ministers/Chief Ministers conference held on 26. And JVC route -provides formulation of a Joint Venture Company (JVC) with CTU/STU by selecting a private investor as joint venture partner. Central Electricity Regulatory Commission granted transmission license on 13-112003 to M/s Powerlinks Transmission Limited. Distribution Circle level. damages or destroys meters etc. · Anti-Theft Measures: Several States viz. West Bengal. IPTC route . Under Section 135 of the Electricity Act. 2003. the Government has already identified the Bina. INVESTMENT OPPORTUNITIES IN DISTRIBUTION SCHEMES · Six Level Intervention Strategy: In order to achieve commercial viability Ministry of Power has formulated six level intervention strategy that encompasses initiatives at National level.Government of India envisages two routes for private sector participation in transmission ventures.2000. 95% and 87% metering have been achieved in respect of 11 kV feeders and consumer feeders respectively. Maharashtra.2. To start with. tampers. a joint venture company of the Power Grid Corporation of India Limited and Tata Power.Nagda-Dehgam 400kV Double Circuit transmission line of about 700 KM route length to be taken up for private sector participation. The Electricity Act. As on 30th September. Feeder level and the consumer level. This Joint Venture (JV) project is first of its kind in India and is being promoted by Government of India as a pilot project under its policy of encouraging private sector participation in transmission of electricity. shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. 2003 provides a legal framework for making theft of electricity a cognizable offence. State level. 25 | P a g e . · Consumer Care Centre: To address consumer grievances various States have taken initiatives by setting up consumer care centres and these centers are effectively operating at Hyderabad. Opportunity of massive investment in Transmission exists and it is envisaged that upto Rs. whoever dishonestly taps lines or cables or service wires.

Faridabad. Noida Power Company Ltd.00. CEA is making regulation on installation and operation of meters. Uttar Pradesh. Keeping this objective in view Central Electricity Authority (CEA) has started monitoring of reliability index. However the same has gone to Rs. (iii) Electronic/Static Meters: Almost all States are installing electronic / Static meters on feeders and at consumer premises to introduce energy accounting and auditing. 2003 the emphasis has been given on providing quality and interruption free supply to customers. distribution sector was identified as the key area for taking up the Research and Development (R&D) in this sector.crore as on today for the entire 10th Plan period (2002-07). West Bengal. Bangalore. selecting type of meters and their specification.Vadodara. Various State Electricity Regulatory Commissions (SERCs) are also in the process of making regulations for standard of performance in compliance to various provisions of the Electricity Act. 86357 crores was assessed by the Working Group on Power at the beginning of the Tenth Plan. are taking steps for implementing the consumer care centres for large towns of the States (i) Supervisory Control and Data Acquisition (SCADA) System: To improve reliability and quality of power Supervisory Control and Data Acquisition (SCADA) System has been introduced in Accelerated Power Development Reforms (APDRP) Schemes. etc. This will facilitate in uniformity of approach for location of meters. Regulation on Installation and Operation of Meters: In compliance to provision of Section 55 of the Electricity Act. (ii) High Voltage Distribution System (HVDS): HVDS has been introduced for arresting power pilferage and reduction of losses by Andhra Pradesh. 2003. new investment opportunities. Orissa have successfully introduced Meter reading 26 | P a g e . This will facilitate in bench marking various indices for the annual frequency and duration of tripping. The identified areas are: l High voltage distribution system (HVDS) l Demand side management l Custom power devices l Compact transformation devices l Distribution automation l Metering Quality of Power Supply and Customer Satisfaction: With the enactment of the Electricity Act. Research And Development (R&D) And New Technologies: According to the National Perspective Plan on R&D in Indian Power Sector up to 2015. average tripping per month in respect of 11 kV feeders in respect of towns having population of more than 8 lakhs. 2003. Andhra Pradesh. Delhi and almost all States An investment of Rs. Delhi. 1.000/.

roads. airports and sanitation–. both domestic and foreign.REVIEW OF LITERATURE The Development of the Power Sector in India: Issues and Prospects (ARI) Rajeev Anantaram Analysis: It is well accepted in Indian and international policy circles that bottlenecks in infrastructure in most subsectors –electric power. However. The UPA government. ports. there is multiparty agreement on the need for urgent reforms. which is projected to grow rapidly over the next two decades. The World Bank and the Indian Planning Commission have independently estimated that economic growth in India is on average between 1 and 3 percentage points lower than what it could have been if infrastructure bottlenecks were not as severe as they currently are Indeed. in the development of the power sector in India. especially the opportunities for private-sector participation. with the possible exception of telecommunications. 27 | P a g e . India seriously lags behind not just advanced OECD economies in infrastructure development. In particular. has prioritised the development of infrastructure in an aggressively drawn out plan stretching over the remainder of the Eleventh Five-Year Plan (2007-12) and the Twelfth Plan (2012-17). Indian private sector companies are also confident of competing with foreign companies in all sectors and hence the possibility of a return to autarchy under pressure from domestic lobbies is equally unlikely. sustained policy commitment is required over the next two decades to bring India’s infrastructure up to world class standards. which minimises the chances of political disruption. The issues previously discussed can be daunting. are acting as a serious impediment to rapid and sustained economic growth in India. this augurs remarkably well and players who are willing to cope with an evolving regulatory regime will reap rich rewards in the near to medium future. hereafter) to accede to a new policy framework that would dilute their unchallenged authority. currently in its second successive term. From a private investor’s standpoint. Conclusion: Recent legislation in the form of the Electricity Acts and amendments such as universalising open access have added a spirit of dynamism to the power sector in India. but even other developing countries of comparable size such as Brazil and China. but the regulatory regime is evolving and is being amended to induce greater transparency and a level playing field. it discusses policy developments in the sector. Above all else. This paper focuses on the electric power sector in India. especially since the passage of the landmark ‘new’ Electricity Act (2003). and the contours of future development. the sector-specific issues that still remain unresolved. It is hard to see this trend reversing. primarily due to a combination of a complex administrative structure and the reluctance of the State Electricity Boards (SEB. given the sheer size and diversity of the country and the extent of the catch-up.

Electricity supply at globally competitive rates would also make economic activity in the country competitive in the globalized environment. The power sector in India is dominated by the government. the power sector is a concurrent subject and is the joint responsibility of the State and Central Governments. The growth of the economy and its global competitiveness hinges on the availability of reliable and quality power at competitive rates. 28 | P a g e . The private sector has a small but growing presence in distribution and is making an entry into transmission. The bulk of the transmission and distribution functions are with State utilities. Power Sector which had been funded mainly through budgetary support and external borrowings was opened to private sector in 1991. India is endowed with a wealth of rich natural resources and sources of energy. It is the critical infrastructure on which the socio-economic development of the country depends. Resources for power generation are unevenly dispersed across the country. The State and Central Government sectors account for 58% and 32% of the generation capacity respectively while the private sector accounts for about 10%. today offers one of the highest growth opportunities for private developers.Analysis of Power Sector in India Project Report Power is an essential requirement for all facets of our life and has been recognized as a basic human need. Electricity is considered key driver for targeted 8 to 10% economic growth of India. This can be appropriately and optimally utilized to make available reliable supply of electricity to each and every household. The demand of power in India is enormous and is growing steadily. The vast Indian power market. As per the Indian Constitution.

One of the key factors behind any growing country is the energy requirement and supply in that country. The report highlights the opportunities present in Indian Power Sector for the global players as this sector holds great potential in the coming years reflected by the growth in the Indian economy.s data integration and analysis capabilities with our relevant findings.Power Sector In India: An Analysis . there are many issues that are creating barriers in capacity addition plan. With every capacity addition plan. To fulfill the energy demand. By combining SPSS Inc. With the growing demand in energy requirement. there is an increased requirement of power equipments. tables and 29 | P a g e . the government has not been able to meet energy requirement of the country leading to many opportunities for private players to enter in the market. the annual per capita energy consumption has grown significantly. Inspite of government initiatives in increasing energy supply in the country. As energy plays a very important role in industrial production and common mans life. The report deals with the growth in the energy generation in India along with the growth in the equipments being used in the power sector. including charts.Market Research Reports On Aarkstore Enterprise By: Aarkstore Enterprise India has been one of the fastest growing economies in emerging markets. Before deploying the regression model. the relationship between several independent or predictor variables and the dependent variable was analyzed using standard SPSS output. it has become extremely important to boost the growth in energy segment for the growth of the country. The report discusses such issues and challenges which are major reasons for the energy deficiency in India. we have predicted the future growth of the industry. Indian economy has posted more than 9% growth for three years consecutively and has seen a decade of more than 7% growth. Inspite of significant efforts. the government has worked out a plan for generation capacity addition in the country. The report analyzes the major challenges in front of the country related to the supply and requirement of power equipments. We employed various significant variables that have an impact on this industry and created regression models with SPSS Base to determine the future direction of the industry.

However. going forward. 30 | P a g e . the energy sector would benefit from the same. Strengths  Developing economy: Historically. we feel that there is a compelling reason for a SWOT analysis on the oil sector at the current juncture. the government took a series of steps starting mid-June including excise duty reduction and price increases. To put things in perspective.  Highly qualified engineering and technical personnel.SWOT ANALYSIS The energy sector has witnessed mixed news during the current fiscal so far. diesel sales grew by nearly 12% (which constitutes 40% of the entire petroproducts basket). Given this backdrop. While crude prices firmed up in the global market. Further. petrol sales by 9% and a double-digit growth in LPG (liquefied petroleum gas) in 1QFY05. the government's freeze on prices of petro-products affected margins of oil companies in 1QFY05.  Well established and vast transmission and distribution network. demand for petroleum products has traced the economic growth of the country. With GDP expected to grow at near 7% in the longterm. we expect the industry to witness a 4% growth in the entire product basket in FY05 and beyond.  Government decisions: The recent price increases and also the decision to allow oil companies to increase prices within a band of 10% augurs well for the industry. While this rate is not likely to sustain. This step is likely to reduce government interference and provide some autonomy to oil companies when it comes to increasing petrol and diesel prices in order to protect margins. the duty cuts are also likely to result in reduced under-recoveries by way of subsidies on LPG and kerosene. This was followed by another series of duty cuts (this time excise as well as custom duties).

Lack of freedom Although the government has decided to provide autonomy to oil companies to increase petrol and diesel prices within a 10% band. 2003 holds promises for the power sector and certainly for the consumer by way of competition reliability and rationalized tariff structure. retail prices may continue to lag the rise in input cost. other products such as LPG and kerosene continue to remain under the government controlled price mechanism. Given the political implications. Weakness Crude prices Nearly 70% of India's crude requirements are fulfilled by imports and this figure is likely to increase going forward. India is one of the most inefficient countries among developing nations as far as energy usage is concerned. Such high crude prices are likely to impact margins of oil marketing companies. Old and poor transmission and distribution network has led to frequent power outages and poor quality of power. select oil companies are being forced to absorb the losses.  Lack of proper metering and theft has led to large scale losses. While the government has managed to reduce its share in subsidies. Crude prices have breached the $45 barrier again and are likely to remain at around $40 per barrel range. the subsidies on LPG amount to Rs 90 per cylinder after factoring in duty cuts and that on kerosene is over Rs 6 per litre. 2003. Poor Infrastructure Poor infrastructure has led to heavy T&D losses. Regulatory framework is further facilitated with enactment of Electricity Bill. 31 | P a g e . Only 51% of the power generated is billed and only 41% is realized. As per IEA.  The Electricity Bill. As per the current estimates.

Natural Gas Natural gas has the potential to be the fuel of the future with demand outpacing supply by more than two times. which affect their profitability and capacity to make further investments. Poor return to utilities. Such high scarcity of natural gas provides a big opportunity for oil companies. To put things in perspective. POWERGRID). ONGC's wholly owned subsidiary. thereby giving an idea of the potential for growth. ONGC Videsh (OVL) has acquired stakes in over 9 countries in its quest to attain the 20 MMT (million metric tonnes) by 2020. This backward integration is an opportunity for IOC to secure at least 25% of its crude oil requirements for the refineries.  India has substantial non-conventional energy resource base and technologies to meet growing power requirements by tapping this energy.10/ unit. 2003 holds promises for the power sector and certainly for the consumer by way of competition reliability and rationalized tariff structure. The below mentioned table indicates the allocation to the various core sectors and the shortage faced by them.  Non-availability of quality coal may hamper thermal plants’ efficiency in power generation. approximately Rs 1.  Emergence of strong and globally comparable central utilities (NTPC. the future holds promise as Reliance Industries' Krishna Godavari Basin goes into commercial production in FY06 and Shell commences its terminal at Hazira.  Increasing gap between unit cost of supply & revenue. 32 | P a g e .  The Electricity Bill. At the same time. More exploration activities are in the pipeline and this could reduce the country's dependence on crude in the long term. Opportunities Equity Oil Major oil marketing companies are now venturing into upstream exploration and production activities so as to secure crude supply. IOC and OIL India are likely to jointly bid for oil fields aboard. Although Petronet LNG has now started importing natural gas.

we believe that any substantial entry of the private players would indirectly benefit the PSUs. PSU marketing companies have already stepped up their expansion plans and to that extent. fly ash and bottom ash. Although throughput per outlet (sales per outlet) is likely to decline in the future. However. add to environmental degradation problems through gaseous emissions. with entry of private players such as Reliance. Going forward. This affected margins of downstream players. have created significant entry barriers for private players. which is likely to discontinue. PSU marketing players are likely to suffer from lower throughput per outlet. Essar Oil and Shell (in the waiting). particulate matter. Continuing government interference During the first six months of the current fiscal year. The oil PSUs had hitherto developed a fortnightly pricing mechanism. if the government interference continues. in public sector as well as in private sector has further 33 | P a g e . Although we believe the industry is likely to witness increased competition. where poor quality of coal is used. as the government's pricing policy will not hold much water and the market forces would determine pricing. the initial retail rush by private sector players has slowed down.Threats Competition Until FY04. The price of petrol and diesel is artificially kept high so as to cross-subsidize LPG and kerosene. Growth of manufacturing industries. Since private players will not be bound to provide for these subsidies. oil-marketing companies will be at a disadvantage. oil-marketing companies had complete control over the downstream marketing business while private sector players were restricted to only refining. the sector is likely to witness increased competition going forward. the oil marketing companies were refrained from increasing product prices due to political reasons. Environmental impact of thermal power stations Thermal Power Stations in India.

NO2absorbs visible light and in high concentrations can contribute to a brownish discoloration of the atmosphere. In the later part Lead (Pb) was added to that list. In general. Nitrogen Oxide (NOx) Most of the NOx is emitted as NO which is oxidised to NO2 in the atmosphere. There is substantial evidence linking them to health effects at high concentrations. The fly ash generated in thermal power station causes many hazardous diseases like Asthma. Ozone (O3). suspended particulates and non-methane hydrocarbons (NMHC) now referred to as volatile organic compounds (VOC). Three of them namely O3. Formation of NOX may be due to thermal NOxwhich is the result of oxidation of nitrogen in the air due to fuel NOx which is due to nitrogen present in the fuel. SO2 and NO2 are also known phytotoxicants (toxic to vegetation). Air pollution Initially. About 97 to 99% of SOxemitted from combustion sources is in the form of Sulphur Di-oxide 34 | P a g e . it was the concern over long term/chronic effects that led to the identification of six criteria pollutants. In addition. Later. As content being in abundance in Indian coal. an essential ingredient of acid precipitation and fog.aggravated the situation by deteriorating the ambient air quality. All combustion processes are sources of NOx at the high temperature generated in the combustion process. These six criteria pollutants are sulphur di-oxide (SO2). Tuberculosis etc. Sulphur Oxide The combustion of sulphur containing fossil fuels. soiling of surfaces and smoke stacks. Some of NOx is oxidised to NO3. especially coal is the primary source of SOx. Carbon Mono-oxide (CO). higher the combustion temperature the higher NOx is produced. Nitrogen oxide (NO2). perceptions of objectionable effects of air pollutants were limited to those easily detected like odour. Some of NO2 will be converted to NO3 in the presence of 02. problem of fly ash and bottom ash disposal increase day by day.

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. 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). In addition. the remainder is mostly SO3. 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. which in the presence of atmospheric water is transformed into Sulphuric Acid at higher concentrations. 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  Inability of SEBs to raise funds.which is a criteria pollutant. as most of the SEBs is on the verge of bankruptcy due to poor operational performance. there by such units will take away the most lucrative 35 | P a g e . produce deleterious effects on the respiratory system. SO2 is phytotoxicant. Some of these interests that will take a back seat include development of environment friendly generation and provision of electricity for rural areas. Old and poor transmission and distribution network has led to frequent power outages and poor quality of power  Moreover.  Poor infrastructure has led to heavy T&D losses. Adding to the problems. will be hit adversely by some provisions of the new electricity act such as delicensing of generation and open access for IPPs and CPPs.  Restoration of SEBs financial health and improvement in their operating performance continues to be a critical issue.

075 0.02 0.075 0. of small contractors leading to price war.025 0. Early birds to learn faster and thus achieve repeat orders. Demand leading to industry operating at full & over capacity.15 .1 2 0. Increased tumkey contracts may effect business of loose sales and also expose manufactures to greater risk as EPC contractors.075 0.225 . This will not only affect SEB’s but also the entire power sector for near term.015 0. The overall process of liberalization of power sector is moving at a much faster pace than the other 36 | P a g e Weights 0. Healthier working environment and increased private sector participation in operation of distribution circles also.025 Rating 4 3 3 2 Weighted score 0.075 Rating 2 2 3 2 3 2 2 Weighted score 0. Increased external commercial borrowings or ACB/WB findings leading to better payment options Key External Factors Threats Purchase preference may be extended to distribution sector Increased in no.1 0. Emergence of new players in the market like Schneider etc.075 0.025 2 0.15 0.05 0.2 . External factor Evaluation Matrix Key External Factors Opportunities Huge investments leading to greater demand of goods and services. Formation of business groups and tie for joint bidding. Better price realizations.2 .075 0.05 Weights 0.2 0. Level playing field for private & public sector companies.customers (like industrial and commercial users) from the SEBs.025 0. Political pulls & pressures may jeopardize the whole process alarming it to be privatization and as anti people.1 2 .6 0.15 0.5 0.1 0.15 0.

contemporary countries.01 0. Low exposure to the needs & dynamics of distribution business.15 1 0.25 0. Strong & wide networks of manpower across India. Role clarity on the requirement of being an equipment supplier or a solution provider.05 0. This pace should not lead to a total breakage of the system Total 1 The ratings are as follows 1 the response is superior 2 the response is above average 3 the response is average 2 the response is poor.25 0.285 indicate that the equipment manufacturers are just above average in their efforts to pursue strategies that capitalize on external opportunities and avoid threats.1 .15 0. Weakness The procurement process in the companies is cumbersome and subject to auditing. 37 | P a g e Weights 0.15 0. Comments 2.05 0.1 0.1 0.2 0.05 Rating 3 4 4 3 4 1 1 2 2 Weighted score 0.025 0.2 0. Internal factor Evaluation Matrix Key internal Factors Strength Good corporate image Complete range of products for transmission & distribution.15 0. Establishment brand name Considered to be having technology & design ability.285 The score of 2.6 0. Acceptance of customer to execute low value high volume jobs.

 To offer design solution to the customer  Invest money in the process to have financial advantage over small contractors.  Present a better way of performing the job in true with the established brand name. TOWS SO strategy  Increase market share aggressively.  To have a dual role or organization structure to address the turnkey as well as loose equipment market.  Execute pilot project to gain experience and minimize risks.56 The score of 2.  To address the demand in all the parts of the nation to give wide spread experience and exploit the opportunities. ST strategy  To increase lobbying with the government to prevent extension of purchase preference and maintaining level playing field in the segment.56 indicates that the equipment manufacturers are above average in their overall internal strategic position. 38 | P a g e . However the different companies need to do the IFE separately. WO strategy  Improve procurement cycle and reduce the process difficulties.TOTAL The ratings as follows 1 a major weakness 2 a minor weakness 3 a minor strength 4 a major strength Comments 1 2.

the supply is far lesser than demand. Especially. 39 | P a g e . competitive strategy should base on and understanding of industry structures and the way they change. India needs to double its generation.  Increase the acceptability in small jobs despite the preference for small contractors and PSUS. WT strategy  Reduce cost to increase margins  To train manpower to counter the threats of enhanced competition and to execute the jobs efficiently.  To be caution in the event of change in government and the process of reforms falling off the track.  To check the emergence of new player and be well prepared to counter them. PORTER’S FIVE FORCE MODEL The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. Supply Many projects have been planned but due to slow regulatory environment. numerous economic studies have Affirmed that different industries can sustain different levels of profitability. India needs to double its generation capacity to meet the potential demand. However. part of this difference is explained by industry structure. the supply is far lesser than demand. Many projects have been planned but due to slow regulatory environment. Currently. Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Currently. To tie up with small contractors on business sharing arrangements to prevent price fall due to intense competition.

over the years. Barriers to Entry Barriers to entry are high. Competition Not high currently. PESTEL ANALYSIS Political Factors: BHEL being a public sector undertaking is greatly influenced by the political forces. and Heat Exchangers etc. 40 | P a g e . The other barriers are fuel linkages. encompassing almost the entire range of BHEL products and services. The Electricity Act. However. BHEL has. payment guarantees from State Governments. Bargaining Power of Customers Bargaining power of retail customers is low. thereby increasing competition. etc. Substation projects. However. Hydro and Gas-based turnkey power projects.Demand The long-term average demand growth rate is 6%. covering Thermal. as power is in short supply. Retail distribution licensed. The company does big business overseas and these projects are directly dependent on the incumbent ruler’s international trade policies. The business decisions are steered to a great extent based on the individual preferences of the new leadership. 2003 will encourage investments. besides a wide variety of products like: Transformers. established its references in more than 70 countries across the world. Government is a big buyer and payment by Government can be more erratic. There is a change in policies every time the government changes. Bargaining Power to Suppliers Not very high as Government controls tariff structure. this may change the future. Compressors. as entering this business requires heavy investment initially.

metallurgical. pumps. This is an eco-friendly. Businesses are dependent on each other for their survival and help themselves flourish mutually. which has always been a catalyst for BHEL’s sprinting growth. cement. mining. Turn key projects are the need of the hour and BHEL has proven turnkey capabilities for executing power projects from Concept-to Commissioning. the power sector was deregulated in 2003. paper. Lot of Industrialization has been brought about. heat exchangers. People have realized how important it is for the economy to develop for their own betterment. Power Generation is one of the primary indices of a country’s economic development. It developed the Automatic storage & retrieval system (ASRS) for storage and inventory management system of the Indian Army. which opened doors for the entry of private players in the market. to a number of industries like. When the economy does well all businesses ride up the rising wave. However. having said that BHEL should also ensure that the company’s 41 | P a g e . Moreover. gas turbines. clean coal technology.3. electrical machines etc. contributing 73% of the total power generated in the country. Being a PSU. Economic Factors: The economic boom in India particularly in the last one decade has played a significant role in charting the success of the company. light rail systems and metro systems.. Mass transport systems are a must for a growing economy. compressors. Promotion of the sector augers well for the organization as it can crack heavy deals with these companies. Now power companies are the major clients of BHEL. Levels of awareness have gone up drastically and people are much more open to industrial growth. power sector has seen a massive growth in the last few years and has been at the top of the political agenda. Social Factors: In India the whole country and its people are poised for a giant leap towards economic growth and prosperity. As of 31. Such entrants can also be potential customers for the company. etc. refineries & petro-chemicals. fertilizers.The government policies and regulations relating the company’s client industries can largely affect the future of its business with these customers.supplied sets accounted for nearly 64% of the total installed capacity in the country. For example. other than power utilities. industrial boilers. The growth of these industries has multiplied the turnover of the company leaps and bounds in the last few years. it is the preferred choice for the other state-run entities and also the defense services.2008. In the area of urban transportation. The Company has signed a MoU with APGENCO for setting up a 125 MW IGCC (Integrated Gasification Combined Cycle) technology plant at Vijayawada. BHEL manufactures and supplies major capital equipment and systems like captive power plants. BHEL. BHEL is geared up for turnkey execution of electric trolley bus systems.

pollution checking camps. each generating around 2500-4000 MW and has plans to come up with many more in the near future.is “Always in a state of Readiness” to meet the dynamic challenges posed by a fast changing environment. Companies that are sensitive to the needs and development of the society normally draw people’s attention and respect faster and can create a superior moral image in the minds of their partners and clients. Companies are taking more interest in corporate social responsibility these days and steps have been taken by BHEL too to further the same. its decisions are ethical and don’t encroach upon the rights of the society. Technological Factors: BHEL being an engineering and manufacturing giant is to a great degree driven by technological developments and innovations and has its earnest efforts directed towards improving its technological prowess to meet the changing requirements of a growing economy. schools for the underprivileged and handicapped children. Widow resettlement. The Company has proven expertise in Plant Performance Improvement through renovation and up-rating of a variety of power plant equipments to improve the performance of existing plants. It has also emerged as a major supplier of controls and instrumentation systems for various power plants and industries.actions do not come in the way of any of the stakeholders. irrigation using treated sewage. which forms a cornerstone of BHEL’s learning infrastructure. The government is setting up supercritical thermal power plants in the country. energy saving and conservation of natural resources through environmental management. The centre through various HRD efforts ensures that Human Capital . ban on child labor. This not only helps in achieving the organizational goals. disaster/natural calamity aid. the same showing more interest in working with an ethical and socially conscious group. else it will be knocked out by the competitors. BHEL has established the Human Resource Development Institute in Noida. Employment for Ex-serviceman. Employment for handicapped. free medical camps/charitable dispensaries. At the same time the company has to keep pace with the developments happening in its business areas. The company should not be negligent towards societal interests and rights. 42 | P a g e . Its contributions towards CSR till date include adoption of villages. plantation of millions of trees. BHEL has been a leader always and the fact that India’s first underground metro at Kolkata runs on drives and controls supplied by BHEL is a testimony to this. BHEL has developed the technology and capability to produce large capacity thermal sets with super critical parameters to gear up for this requirement. but it also serves as a platform to train aspiring and competent youth of the nation.

9001 certification for quality management and all its manufacturing units/divisions have been upgraded to the latest ISO-9001: 2000 version. Besides this. The company is also taking active interest in CDM (Clean Development Mechanism) Projects and activities. All the major units/divisions of BHEL have been awarded ISO -14001 certification for environmental 43 | P a g e . Global Compact is a partnership between the United Nations.For enhancing the power transfer capability and reducing transmission losses in 400 kV lines BHEL has indigenously developed a state-of-the-art 400 kV Controlled Shunt Reactor for reactive power management of long transmission lines. coolant besides installation of proper system for storage/handling of chemical waste. culture and day-to-day operations. the company has developed many eco-friendly technologies to serve the environment conscious.80% to the revenues in 2007-08. Wind Power and Concentrated Solar Power (CSP) projects in India and abroad. BHEL has been manufacturing and supplying a range of Renewable Energy products and systems. conservation of precious resources like energy. the business community. It has developed a technology for reduction of NOx gases from coal-based thermal power plant. The depleting water and energy resources are a cause of concern for all. BHEL has taken certain measures to conserve these precious resources. BHEL’s investment in R&D is among the highest in the corporate sector in India. water. fuel oil. Proper disposal of Chemical and other wastes is also a major concern for which the company has put up Chemical storage and disposal plants. international labor and NGOs and has a set of core values enshrined in its ten principles on human rights. labor standards. The company has made the principles of the Global Compact program of the United Nations a part of its strategy. Legal Factors: BHEL has attained ISO . Environmental Factors: BHEL is an environment friendly company in all its activities. Products developed in-house during the last five years contributed 13. R&D plays a big role in technological development and BHEL attaches a lot of importance to it all the same. All these projects helped in creating pollution free environment. products and services besides providing safe and healthy working environment to all its stakeholders. It has set up rainwater Harvesting Plants and Energy Conservation Projects utilizing efficient technologies. environment and anticorruption. BHEL is actively associated with the development and adoption of Hydel.

These days no company wants to be unethical in its activities and be on the wrong side of the law books. Sale of Goods Act etc. The SPACE Matrix is broken down into four quadrants as being aggressive. conservative. the Environmental Protection Act. defensive.management systems and OHSAS-18001 certification for occupational health and safety management systems. and competitive. particularly the Companies Act 1956. the SPACE Matrix analysis functions upon two internal strategic dimensions which are financial strength (FS) and competitive advantage (CA). The CA (values from -1 to -6) and IS (values from +1 to +6) are representing by the X-axis of the Cartesian graph whereas the FS (values from +1 to +6) and ES (values from -1 to -6) are representing by Y-axis. The company has to adhere to the scores of legal rules and regulations. SPACE matrix for Power sector: Internal strategic position Y-axis Financial Strength (FS) (score: +6 best. the acts. -6 worst) -2: Price or interest range of competing products -1: Inflation rates 44 | P a g e . It can also used to determine what sort of strategy the company should undertake. SPACE Matrix Strategic Position & Action Evaluation (SPACE) Matrix is another management tool used to help analyze a company. Additionally. as the media in India is very active and the smallest of irregularities noticed and reported by them can ruin the image of the company hugely. the SPACE Matrix methodology also studies two business’ external strategic dimensions such as environmental stability (ES) and industry strength (IS). The Factories Act. the overall strategic positioning of a company can be determined. +1 worst)] +6: Operative earnings per share increased +4: Liquidity slightly decreased External strategic position Environmental Stability (score: -1 best. Besides. After drawing these SPACE matrix graph.

00 -2.Total y-axis score: +5.25 + 4.80 = +3.00 -2: Technology Changes -3: Competitive Pressure -2: Demand Variability Average: -2. +1 worst) +6: Growth Potential +5: Profit Potential +5: Financial Stability +4: Resource Utilization +4: Technologies Know-how Average: +4.25 Power sector’s SPACE Matrix Graph 45 | P a g e . -6 worst) -1: Market share -2: Service Quality -1: Customer Loyalty & reputation -1: Management Experience Average: -1.80 X-axis Total x-axis score -1.00 Industry Strength (IS) (score: +6 best.00 +5: Revenues increased +5: Return on Equity increased +5: Efficiency ratio stable Average: +5.00 = +3.55 Competitive Advantage (CA) (score: -1 best.

As stated above. integration with other banks and also concentric diversification. 3.00. It needs to use its internal strengths to develop a market penetration and market development strategy.55. we noticed that Power sector’s falls into the aggressive quadrant of the SPACE Matrix. Other possible strategies include product development.00) -6 -5 -4 -3 -2 -1 -2 -4 -6 + 1 + 2 + 3 + 4 + 5 + 6 Defensive Competitive According to the graph above. It is located at the coordinates of 3.Conservativ e Aggressive + 6 + 4 + 2 (3. It shows that Power sector has a strong competitive position in the market with rapid growth. One of the strategies is market development.55 for x-component and a y – component of 3. It is also indicates that Power sector should adopt an aggressive strategy. Aggressive Position There are numerous tactics fall into the aggressive strategy category. we can note that Power sector is biggest bank in Malaysia 46 | P a g e .

This method would be hire high level employees from the competitors strong in those areas. Thus. it should try to expand their branches into new geographical areas or markets. May bank should focus on doing more market research. Moreover. market research can show the demand in different areas. Pakistan and middle-east. make full use of the resources to improve it. Therefore. the company will be success in every area by determining the demand boundaries. the Power sector can move forward to obtain bigger slice of investment banking. Then.and has 361 local branches and 88 branches in overseas. By doing this. In addition to that. May bank should carry out the market penetration strategy. Power sector should do research to investigate customers’ discontent. This objective can be attained through mergers and acquisitions (M&A). SPACE Matrix Conclusions • • • • • • • • Power sector high reputation helps in attracting customers’ loyalty Compete in an unstable environment Power sector should develop new market to various area of Malaysia as well as overseas They should expand its services and products such as helping corporations manage interest rate and currency risks Eliminate inefficiencies and improves services quality. Many clients are attracted to the company who is doing strong research. Besides. However. Other than that. Power sector should also aggressively find ways to grow its business overseas such as Thailand. Then. Besides. The management should aim on offering new services such as helping their customers or corporations manage interest rate and currency risks. Power sector is not located in every area of Malaysia. It can be done by doing market research to investigate unfavourable performance. Therefore. The management of May bank can think out the best way to sustain and compete in exist market as well as new market. Power sector need to implement a strategy on product development. Seek Integration Opportunities such as merger and acquiring other existing banks in different areas Hire potential employee either from competitors or from other sources to get bigger improvement Seek new and good management staffs to get a better company direction 47 | P a g e . the company can improve their service and product quality through customers’ suggestion.

Total investment opportunity of about US$ 150 billion over a 5 year. The fourth Ultra Mega Power Project (UMPP) at Tilaiya to be awarded shortly. As per recent budget. By end March 2008. the drive has not been particularly successful due to a lack of capital and fiscal incentives.000MW capacity additions.000 MW of generation capacity by 2012. Karnataka. and incentives have been given for such investments. 77 schemes have been identified with a total of 33.000 circuit km of Transmission network expected by 2012. Opportunities in Transmission network ventures . This situation could be altered by CDM revenues.Predictions India requires an additional 90.800 Crore for the Power Development and Reforms Project. India will achieve Commercial Operation Date (COD) on about 10. propose to create a national fund for transmission and distribution reform in order to improve the poor state of transmission and distribution (T&D) that has been a drag on the sector. Recommendations  More focus on CDM (Clean development Mechanism) The power sector has a predominant share in the CO2 emissions from India and there are significant opportunities to mitigate these emissions. The renovation and modernization of an old thermal power plant will help not only to improve efficiency but also the plant load factor. In Hydro projects. the uncertainty associated with their scope and continuity fails to enlist investors’ commitment for long-term projects.  Promote more power exchange with neighboring countries  Rural electrification  Stringent penalties for power theft  Research and Development  Addressing climate change through initiatives in the power sectorCONCLUSION 48 | P a g e . Govt to will provide Rs. Govt. Orissa and Tamilnadu. It also proffers a remedy in a power-starved situation.additional 60. marking the best first year in any Plan period. While R&M has been regarded as an important option by power planners.  Policy stability Despite central as well as state governments providing various fiscal and other incentives for private investment in the sector. in a shorter time frame compared to Greenfield projects. Possibility of bring up five more UMPPs in Chhattisgarh. Maharashtra.000 MW.

467 MW has already been commissioned. the Power & Energy Infrastructure sector in India is poised for a major take-off. which was introduced. the power supply industry has been under constant pressure to bridge the gap between supply and demand. In spite of the overall development that has taken place. The Indian Merchants Chamber. Liberalisation of the economy by itself would not produce the desired results in tandem with growing needs of the industrial and economic progress.3. and the transmission sector is witnessing increased private participation from both international and domestic companies with orders for transmission network strengthening worth USD$3 billion being placed on them in January to March 2009 alone. The government of India has taken various steps to enable the growth in capacity. As of March 2009.1 billion units to 420 Billion units – 82 fold increases. Now. Nuclear power development is at slower pace.98) from meager 1713 MW in 1950. deserves to be congratulated on organising a workshop on challenges and opportunities in the power sector in the post liberalisation period as a part of their 87th Annual General Meeting. About 85% of the villages have been electrified except far-flung areas in North Eastern states. in late sixties. In the field of Rural Electrification and pump set energization. which spearheaded the movement for economic emancipation of masses as a part of India's struggle for independence. where it is difficult to extend the grid supply. The concept of operating power systems on a regional basis crossing the political boundaries of states was introduced in the early sixties. The implementation of the government sponsored Restructured Accelerated Power Development and Reforms programmed (R-APDRP) for a power distribution utility is also currently underway. Similarly. which is about 23 times. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950. Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. no one is paying as much attention to the power sector as it deserves. country has made a tremendous progress. This growth is also accompanied by a growth in transmission capacity. the electricity generation increased from about 5. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods. a capacity 49 | P a g e . Power development is the key to the economic development. 12. Over the years (since 1950) the installed capacity of Power Plants (Utilities) has increased to 89090 MW (31. Power Sector While every party is intensely involved in the power game.2012) has seen an addition of around 22. The APDRP (Accelerated Power Development & Reforms Programme 2002 . The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98. The Planning Commission has set a target to add 78 GW of capacity in the five year plan for 2007–2012. registering a 52d fold increase in 48 years.CONCLUSION The power sector has registered significant progress since the process of planned development of the economy began in 1950.000 MW during last five years and during the next five years. Hydro -power and coal based thermal power have been the main sources of generating electricity.

• Focus on implementation (Outcomes are more important than Outlays) .000 MW has to be setup by 2012. as an Economic Global Powerhouse.600 MW of capacity additions per annum).8 .20. Dr. (FDI & Domestic Investment Combined) • Adequate Capacity Growth to Sustain GDP Growth at 8% plus. planners and industry experts. following milestones are critical: • Attract US $ 250 Billion Investment into the sector. The Market Potential to sustain the GDP Growth rate of India @ 8% plus per annum needs the power sector to grow at 1. This would mean a YOY capacity addition of 18. both in the Fuel & Technology terms.As espoused by the Indian Prime Minister. To achieve this goal. Manmohan Singh 50 | P a g e .000 MW to achieve this ambitious plan of moving India to a Developed Economy status. • Urgent need to develop the alternatives.000 .addition of over 78. • Increasing the Role of Hydel & Renewable Energy in the Energy Mix. • Reliable & Quality Power On 24 x 7 bases. at least in Urban & Industrialized areas. The Target Mission: ‘POWER for all by 2012’ would mean achieving the target of 1000 KH (Units) of per capita consumption of electricity by this period. • 100% Rural Electrification with Adequate & Qualitative Power for irrigation purpose. (A commitment of 15.2 times the GDP rate of growth as espoused by economists.

org www. Goldmann Sachs.wikipedia.cygnusindia. http://en.ac.in http://www. “Dreaming with BRICs: the path to 2050” Global Economics Paper No 99. 1st October 2003.edu http://www.com http://www.business-standard.ignou.com 51 | P a g e .Bibliography: Powerline Magazine September 09 http://www.indiaenergyportal.scribd.com Dominic Wilson and Roopa Purushothaman.org http://www.econ.ucsb.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.