Business Plan Summary for MGVCL FY 2011-16

BUSINESS PLAN
FOR MYT SECOND CONTROL PERIOD

FY 2011-12 TO 2015-16
Madhya Gujarat Vij Company

An ISO
Ltd. Vadodara, Gujarat 9001:2008
Company
Business Plan for MYT Control
period FY 2011-12 to 2015-16
MGVCL
EXECUTIVE SUMMARY
MGVCL is company registered under the Companies Act 1956, with the objectives of
distribution of electricity in the northern parts of the State of Gujarat. The
Commission is in the process of formulation of revised Multi Year Tariff Regulations
for the Control Period from FY 2011-12 to FY 2015-16, and as part of that process has
directed MGVCL to submit a Business Plan which would cover the Strategic and
Operational Plan for the Company.
MGVCL has prepared the Business Plan taking cognisance of the existing internal
factors and external business environment affecting the business. It is submitted
that the Business plan being a dynamic document may need to be updated at
periodic intervals taking into account the changes in the internal and external
environment and these changes would be intimated to the Hon’ble Commission
from time to time.
1. Introduction
The Business Plan is initiated based on a review of “what is” on the Company’s
current operations, operational performance and organisation structure. The
formulation of strategies is driven by the consideration of the vision, mission and
values that the Company holds and cherishes. The existing profile of the Company,
its strengths and weaknesses, its policies, and the emerging legal and business
environment plays an important role in the formulation of the plan.
The approach and methodology adopted for preparation of Business plan of MGVCL
is as follows:
The business plan is prepared for the projection period FY 2012 to FY 2016.
The assumptions like investment plan, load forecast, loss reduction plan, power
procurement plan etc. are maintained as provided in MYT petition for second
control period FY 2011-12 to 2015-16
2. Objective of Business Plan

As per the Forum of Regulators recommendation “Distribution licensees should
submit the business plan and power purchase plan, for approval of the Commission,
at least six months prior to submission of MYT petitions”. Also as directed by the
Hon'ble commission Business Plan for the second Control Period is to be filed along
with the MYT filings for the second Control Period. MGVCL has developed a
comprehensive business plan for the company for the period FY 2011-12 to FY 2015-
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16. The business plan in following sections intends to cover the above issues from
the strategic, competitive, financial, commercial and organisational perspectives.
3. Company Profile
Madhya Gujarat Vij Company Limited (MGVCL) is given the responsibility of
distribution of electricity in the Central parts of the State of Gujarat. MVCL operates
through the network spread over 24000 Sq Kms covering five full districts viz.,
Kheda, Panchmahal, Dahod, Anand and Vadodara.
MGVCL obtained its Certificate of Commencement of Business in the FY 2003-04;

however, the company could not commence its operations during the financial year
ended 31st March 2004 and 31st March, 2005. The Company has started commercial
function w.e.f. 1st April 2005.
4. Vision and Mission of MGVCL

Based on the changing environment, both internal and external, MGVCL has framed
its Vision and Mission and tried to align it with its future Business Plan. MGVCL hopes
to achieve its goals and take advantage of the opportunities available in the Power
sector.
MGVCL’s Vision is
“Customer satisfaction through service excellence”
MGVCL’s Mission is
To provide reliable and quality power at competitive cost
To reach global standards in reducing distribution losses
The Core Values of MGVCL being:

Customer satisfaction
Pride of belongingness
Excellence
Participative work culture
Being ethically and socially responsive
5. Category Wise Consumers and Sales

Following Table shows the category wise No of Consumers and Sales for the FY 2009-
10:
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MGVCL
Category wise Consumer & Sales (FY 2009-10)
Number of %age of %age of

Category Sales
Consumers Consumer Sales
Residential 2064337 85.84% 1428 24.81%

Commercial 232418 9.66% 508 8.83%
Industrial LT 25714 1.07% 472 8.20%
PWW 8112 0.34% 145 2.52%
Agriculture 66965 2.78% 909 15.79%
Street Light 6049 0.25% 59 1.03%
Industrial HT 1186 0.05% 1877 32.61%
Railway 6 0.00% 358 6.22%
Total 2404787 100.00% 5756 100.00%
MGVCL has a consumer base of 25 lacs, Residential category consists of the largest
consumer base followed by Commercial & then Agriculture. Both these categories
are subsidised and hence affect the revenue of the MGVCL. The industrial
consumption is around 40% which is beneficial for MGVCL and 16% is agriculture
consumption which can be considered as a cause of concern.
6. IT Initiatives
MGVCL has undertaken many initiatives to become the IT enable power Distribution
Company which is the need of the hour at present. The activities which have been
implemented are as follows:
E- Urja an ERP solution is being implemented as an end to end ERP solution

whereby several processes will be computerised.
E-Gram Panchayats, (E-GPs) whereby 2809 E-GPs under 5 districts has been
assigned as the agency for collection of energy bills.
SCADA, GIS, GPS, Consumer Indexing, IVRS Consumer Call Centre have been
implemented, showcasing MGVCL’s initiatives in latest technology.
There is also E-Payment facility from anywhere across the world.
7. Human Resource Department

The Company has taken series of proactive HR initiatives including need based
training and development programmes with special emphasis on developing
competencies of employees and thereby enhancing organizational effectiveness.
Currently, HR department consist of HR Department of AGM, DGM and P.O who
undertakes all the activities related to HR Function.
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MGVCL’s HR Management System in association with GETRI has organized many
need based training & development programs along with contribution in areas of
quality, customer relations (SAMPARK) and energy conservations. HR Department
has also taken lead as far as getting of ISO certification for MGVCL thereby
contributing towards quality improvement.
Having the total number of employees around 6208, around 58% of the employees
are technical.
8. Corporate Social Responsibility

Under Corporate Social Responsibility, MGVCL has adopted Chhota-udepur
Industrial Training Centre (ITI) for upgradation under Public private partnership
scheme of Central Government. MGVCL being responsible distribution utility aims to
fulfil its social responsibilities towards the citizens of the State of Gujarat.
9. Energy Conservation Measures

MGVCL has undertaken various Energy Conservation activities such as spreading
energy awareness amongst the consumers through publicity, celebrating energy
conservation week & Urja-Shakti Month, purchase of energy efficient transformers,
implementing energy audit programs & reduction of technical losses. MGVCL is also
planning to develop a solar park in Baroda.
10. Consumer Service

The basic objective of the Company is to serve the consumers and provide the
quality power supply. To achieve the objective, MGVCL has undertaken many
consumer service related activities which includes
• 24x7 customer care call centre which is an IVRS and leverages GIS data for better
consumer service.
• Any Time Payment (ATP) machine which is a touch screen multimedia based
system has been installed to facilitate consumers to pay their energy bills at any
time.
• Mobile Van has been started in some sub-division to collect energy bill from
consumer’s door step.
• Hand Held Equipments for meter reading & billing have been in use in some
areas.
• The company has launched the E-payment facility in June, 2010 so as to enable
the consumers to make payment through internet
11. Other Activities
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Other Activities carried out by MGVCL are: DRUM Project, RMU - concept of Ring
Distribution, RAPDRP, RGGVY, Rural Electrification schemes, Implementation of
remote access metering to HT consumers, Testing of High Quality Meters,
implementation of advanced technology – GIS, SCADA etc.
12. Major Achievement

In past five years, MGVCL has achieved many milestones and has been recognised all
over India as one of the efficient distribution company. Major Achievement of
MGVCL is to get award & recognition at national level for excellence in operations,
execution of projects, and innovation in designs & distribution in urban & rural areas.
MGVCL is the only Discom to receive NABL accreditation for Testing and Calibration
for its “High Tech Meter Testing Laboratory” at Vadodara. MGVCL is the 1st
Government owned Discom to be ISO Certified. MGVCL got the patent for “improved
single phase power system” popularly known as “Specially Designed Transformer
(SDT)”.
13. Operational Performance Analysis

A comparative analysis of the operational performance of past years in relation to
Sales, T&D Loss, Reliability indices, DTR failure rate, etc is discussed here.
In spite of the fact that MGVCL is inherited with an old distribution infrastructure
from the erstwhile GEB, MGVCL is making all out efforts to improve / sustain the
performance as well as to supply quality power to the consumers.
The Demand-Supply for electricity in MGVCL has increased manifold; despite

significant overall progress in the power sector, there had been a significant gap
between demand and supply. In FY 2009-10, the Peak deficit seemed to reduce
considerably to 8% from a level of 30% in FY 2007-08.
Various practices regarding distribution loss reduction adopted by the utility has
made it possible to achieve a low distribution loss level of around 13% in FY
2009-10 from distribution loss level of 21% in 2005-06 which is very efficient
compare to other State Utilities who have a distribution loss of around 30%. In FY
2009-10 the losses increased due to poor monsoons which lead to higher supply
to the agricultural category.
Past 5 Years’ Distribution Loss

FY 06-07 FY 07-08 FY 08-09 FY 09-10
Distribution Loss 14.85% 13.90% 12.98% 13.08%
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Power Purchase cost: The Power Purchase cost has been showing an increasing
trend in last five years, however there was a decrease in the power purchase cost
per unit in FY 09-10 due to reduction in gas prices which were too high in FY 08-
09.
Past 5 Years’ Power purchase cost

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10
Units Purchased (MUs) 5457 5612 6133 6678 7226
Value (Rs Crs) 134199 151593 171815 225354 228712
Per Unit Cost (Rs/Unit) 2.46 2.70 2.80 3.37 3.17
The total amount of agricultural subsidy released each year by GoG is capped at
Rs 1100 Cr. It is allocated to each Discom in proportion to its respective
percentage share in agricultural consumption to compensate for the revenue loss
due to subsidized category of consumers as well as for unmetered consumption.
The reliability of the distribution system on the basis of number and duration of
sustained interruptions in a year, using the indices such as SAIFI, SAIDI & MAIFI
indicates that during the FY 2009-10 due to poor monsoons & climatic conditions
the system’s reliability was effected.
Past 3 Years’ System Reliability Indices

Reliability Indices FY 2007-08 FY 2008-09 FY 2009-10
SAIFI 3.29 2.59 3.35
SAIDI 16 18.75 23.67
MAIFI 15.71 17.15 22.82
There is a significant reduction in the distribution transformer failure rate over

the last 5 years and it has reduced to 5.06% for the year 2009-10. This is mainly
due to vigorous transformer maintenance, providing breezer & lightning arrestor
& maintenance of LT lines.
Past 5 years’ DTR Failure Rate
Particulars 2006-07 2007-08 2008-09 2009-10*

Transformer Failure Rate 9.60% 9.68% 6.11% 5.06%
Employee expense is around 8.6% of the total revenue earned and is Rs 0.41/unit
sold. The high cost is due to the large number of employees who since
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restructuring are at MGVCL.
Revenue realized from sale of power is slowly coming closer to the average cost
of supply. For FY 2009-10, revenue realized from sale of power has increased to
95% of the average cost of supply from 91% in FY 2005-06.
Revenue realized Vs Average Cost of Supply

2005-06 2006-07 2007-08 2008-09 2009-10
Revenue Realized 3.48 3.79 3.87 4.57 4.51
Cost of Supply 3.82 4.10 4.26 4.83 4.76
Under Demand Side Management (DSM) measures MGVCL has taken

tremendous and remarkable steps to reduce energy consumption by increasing
end use efficiency. Sine 1-06-05 with the setting of ALDC, the pattern of load
demand is studied hourly, daily and on monthly basis to examine the type of load
and its effect on MGVCL system. MGVCL has replaced all tube lights in its all
offices from conventional choke tube light to T5 energy conservation tube lights.
MGVCL has also planned a pilot project of installing roof type solar powers in its
five sub-division offices, thereby reducing its own usage of electricity. Also, Co –
Incidental Peak Load has been reduced by providing different time slots to
Agricultural Consumption by doing regrouping. Power Factor Correction
measures have been undertaken which have reduced the current in the system &
hence reduced technical losses.
14. Financial Performance Analysis

After analysis of the revenue statement and the Balance Sheet of the MGVCL, it can
be analysed that the dependence on the government subsidy as well as the income
from other sources has been decreasing and revenue from tariff is increasing at a 5
year CAGR of 16%. Though there is a major increase in Employee expenses due to
sixth pay commission & also an increase in other miscellaneous expenses, there has
been a profit due to power purchase cost under control due to steps undertaken by
GUVNL.
The fixed Assets and CWIP has been increasing by 19% and 5% respectively due to
frequent augmentation and expansion of distribution system to cater the load
growth in the area. The CAPEX plan undertaken includes re-enforcement of the
system to provide quality, security and availability of power supply to the
consumers, to undertake system development to meet the load growth, achieving
the targeted reduction in system losses, undertake automation and other
improvement works to enhance customer service.
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Also, the debt : Equity ratio of 0.52 is considered to be in favourable position due to
low gearing ratio and therefore is having a sound financial position to get additional
fund to carry out their additional CAPEX. However, the Current Asset Ratio is lower
than 2:1 which is considered to be efficient industry standard ratio as such. This is
due to increase in current liabilities compare to current asset affecting the working
capital of the company. This indicates that liquidity position of the company needs to
be improved to meet the quick liquidity requirement to meet the operation of the
business.
Also the summary of the CAPEX planned by the Company for FY 2009-10 is as
outlined below:
Summary of CAPEX for FY 2009-10
Schemes FY 2009-10
Distribution Schemes 50
Rural Electrification Scheme 117
Non Plan Schemes 18
Others Schemes 7
New Innovative Schemes 59
Capital Expenditure Total 251
15. Power Sector Scenario

The Indian economy has been witnessing more than 9% growth rate in last three
years resulting in major dependent on power to carry out the activities related to
production and service affecting the economy. The developing economy has resulted
into increase in demand of power whereas the capacity available within the country
is not suffice enough to meet such demand resulting into peak and energy deficit.
The growth in demand of electricity and National plan to have a per capita
consumption of 1000 units, Indian government has set ambitious goals in the 11th
plan to add around 100,000 MW capacities.
However, the Western region accounts for ~32% of the total generation in the
country and also has the highest deficit in the country. The Western region is facing a
shortage of nearly 18% in FY 2009-10. The region wise demand supply scenario is
shown below:
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Region-wise Demand – Supply Gap in India
Energy Requirement
Regions (MU) % deficit Peak Demand (MW) % deficit
North 254231 12% 37159 15%
West 258528 14% 39609 18%
South 220576 6% 32178 10%
East 87927 4% 13220 6%
N. East 9332 11% 1760 18%
All India 830594 10% 123926 13%
Source: CEA report on Monthly power supply position
In the past, there has been a consistent gap in the peak demand and peak met as
well as in energy terms in the State. Considering the performance in past few years,
Gujarat Power Sector has improved a lot with no energy deficit within the State and
having a per capital consumption of more than 1000 units which is the target of
Indian Government to achieve it by 2012 for India as a whole. The following table
shows the actual power supply situation in the state for the past few years.
Power Supply situation FY 2003-10
Peak Peak Energy Energy

Deficit / Deficit / Deficit / Deficit /
Period Demand Met Requirement Availability
Surplus Surplus Surplus Surplus
(MW) (MW) (MW) (%) (MU) (MU) (MU) (%)
2002-03 8641 7336 -1305 -15.1 60175 53316 -6859 -11.4
2003-04 9820 7204 -2616 -26.6 57171 50292 -6879 -12
2004-05 10162 7578 -2584 -25.4 59681 52724 -6957 -11.7
2005-06 9783 7610 -2173 -22.2 57137 52436 -4701 -8.2
2006-07 11619 8110 -3509 -30.2 62464 54083 -8381 -13.4
2007-08 12119 8885 -3234 -26.7 68747 57614 -11133 -16.2
2008-09 11841 8960 -2881 -24.3 67516 60885 -6631 -9.8
2009-10 10,406 9,515 -891 -8.6 70,412 67,263 -3,149 -4.5
The negligible deficit in the State will be eliminated within the immediate future by
contracting the additional capacity for the Company by GUVNL.
16. Regulatory Framework

National Level:
The implementation of the Electricity Act, 2003 (EA 2003) has effected considerable
changes the electricity market. The major changes relevant to working of a
distribution company are as under:
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• Delicensing of generation;
• Thrust to complete the rural electrification and provide for management of rural
distribution by Panchayats, Cooperative Societies, non-Government
organizations, franchisees etc
• Provision for license free generation and distribution in the rural areas;
• Introduction of open access in transmission and distribution;
• Introduction of parallel license – exclusivity of distribution license removed;
• SERC is a mandatory requirement ;
• Provision for payment of subsidy through budget by State Government;
• Issues concerning theft and losses in the system;
The provisions of the EA2003 mentioned above, have far reaching implications for
the power sector. It is evident from the above provisions that the EA2003 intends to
create a competitive power sector in the long term and has left no choice for the
state utilities but to improve their performance to face the competition from other
players entering into the market.
Also, in line with Electricity Act 2003, the National Electricity Policy outlines a plan
for rural electrification, increased generation capacity, generation mix to be adopted
for clean environment, improvement in grid for better transmission and distribution
of power. India also seeks to create a more competitive energy sector to increase
private sector participation. Finally, the Policy emphasizes the need for conservation
and demand-side management including a national awareness campaign. In line with
the above policy, the distribution company has to undertake activities to be more
competitive as well as to abide by the policy guidelines. The policy aims at improving
efficiency, financial availability of the sector, availability of power and protection of
customer interest.
Also, the National Tariff Policy deals with various parameters with respect to the
fixation of tariffs, like providing adequate return on investment to the power
generator and supplier and ensuring reasonable user charges for the consumers. It
provides uniform guidelines to the SERC for the fixation of tariffs for their respective
entities. The policy states that the distribution licensee should, in future, procure
power solely through competitive bidding which as per the recent guidelines from
Ministry of Power will be in effect from 5 th January 2011.
At the National level, many initiatives have been considered by MoP, GoI and CERC
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with a view to develop the power sector. The initiatives described in the report are
as follows:
• Rural Electrification Policy, 2006
• R-APDRP (Restructured Accelerated Power Development & Reform Program)
• Renewable Purchase obligation with Renewable Energy Certificate Mechanism
• National Action Plan for Climate Change (NAPCC)
• National Solar Mission
• National Mission for Enhanced Energy Efficiency
State Level
The regulatory framework in the State of Gujarat is well established. The Gujarat
Electricity Regulatory Commission (GERC) has already defined most of the
regulations and is monitoring performance with a positive approach of improving
efficiency and overall development of the sector. Multi-year tariff principles have
already been implemented in the State. Benchmark-based performance monitoring
has become the practice. Current Regulations relevant to MGVCL are as follows:
• Terms and Conditions of Tariff Regulations, 2005
• Standards of Performance of Distribution Licensee Regulations, 2005
• Procurement of Energy from Renewable sources Regulation
• Power System Management Standards, 2005 – Distribution
• Intra-State ABT implementation
• Provisions of Intra – State Open access regulations
• Licensee’s Power to Recover Expenditure incurred in providing Supply and other
Miscellaneous Charges (First Amendment) Regulations, 2010
• Different Orders on determination of tariff for renewable sources of energy
• Designating State Nodal Agency for REC Regulations
17. Market Issues and Challenges

The power distribution business environment would throw up a number of market-
related issues and challenges which needs to be evaluated by MGVCL. Some of these
issues and challenges are as follows:
• Open Access Regulation – mandated to provide non-discriminatory open access
which may result in loss of subsidising consumers;
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• Parallel License – As per the Act, a parallel licensee is possible to be operated
whereby two licensees are supplying power in the same specified area.
Currently, due to recent clarification from MoP and Ministry of Commerce, SEZ
became the Distribution Licensee for the SEZ area whereby Discom is supplying
power. Also, other companies may get an approval of being a distribution
licensee to supply power in the specified area of MGVCL which is more prevalent
in urban areas due to low losses and are marked by the non-existence of
agriculture consumers.
• ABT implementation – UI at intra-state level due to deviation in schedule and
actual will make each DISCOM accountable. A proper planning and scheduling of
power alongwith implementation of SCADA is required to have efficient
distribution system;
• Regulatory provisions – Being into a regulated environment, have to follow the
regulatory framework and directions by the appropriate commission.
• Industry Risk and Competition – A competition from the other private sector
player due to opening of power sector will result into a risk of losing of subsiding
consumers.
• Renewable Power Purchase Obligation – SERC mandates the distribution
licensee to purchase of electricity from renewable sources, a percentage of the
total consumption of electricity in the area of a distribution licensee. This step is
considered to promote the generation from such renewable sources and can
have a minimum impact on the environment.
• Impact of DSM measures - Demand Side Management (DSM) is described as the
planning, implementation and monitoring of utilities activities designed to
encourage customers to amend their electricity consumption patterns, both with
respect to timing and level of electricity demand so as to help the customers to
use electricity more efficiently. Every Distribution Licensee has to implement the
DSM measures as an integral part of their day-to-day operations. Many SERCs
and Discoms have already introduced some DSM programs. Experience suggests
that the skills of discom staff, and the priority accorded to it by discom
management, are important for its success. DSM incentives need to be carefully
designed and targeted so that the appropriate load curve changes are realized.
• Universal Service Obligation – MGVCL is obliged to supply power to each
consumer under USO. New connections to remote areas are expensive and
maintaining reliable supply levels are difficult. These features tend to increase
technical losses and the costs of O&M.
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• Power Purchase Responsibility – To meet RPO and get a low cost power, MGVCL
may go for direct procurement of power from the generator.
• Market Penetration and Service Area - The widespread distribution network
and the retail reach of such infrastructure would be key discriminators of a
licensee’s market position.
• Cost to Serve against realisation – The tariff of the consumers needs to
progressively move towards the cost of supply of electricity and reduces the
cross subsidies within the category of consumers. This has to be achieved by all
the Distribution Utilities in India which is considered to be a major challenge for
SERC and Utilities.
• Rationalisation of Tariffs to retain HT and Large consumers – Currently, the
Tariff is calculated based on cost of the supply at consumer end, the capacity of
the consumer to pay and the socio economic policy of the government. The
rationalization of tariffs is required simplify the structure and introducing cost
reflective tariff by way of retaining the high end customers.
Understanding these core issues & risks of the power sector help in identifying the
opportunities that lie ahead
18. SWOT Analysis

Before outlining the Business Plan for any company, it is very important for the
organisation to introspect to identify its strength and weaknesses and assess the
external environment to outline opportunities and threats. Accordingly, it is very
important to evaluate the environment – both internal and external while charting
out its growth path and the same has been outlined below.
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SWOT Analysis
Helpful Harmful
In achieving the objective In achieving the objective
STRENGTHS WEAKNESSES
Experienced Manpower Commercial Arrangement
Attributes of the
Internal Origin
Organisation
Wide Spread Network Treatment of agricultural subsidy

Operation efficiency IrrationalTariff structure
DSM Measures Ageing Distribution Infrastructure
Novel Initiatives Ageing Employees
Uninterruptible quality power supply
Branding of MGVCL by MoP
OPPORTUNITIES THREATS
Attributes of the Environment
Distribution Franchisee in Rural Non Discriminatory Open Access

areas/ other states Regulatory Risk & inconsistencies
Contracting Power supply Deemed distribution licensee provision
External Origin
New business Opportunities to SEZ area

CDM benefits Parallel licensee
Ancillary Services Sensitivity to operational variations
Eliminating Peak Deficit Railway Consumer to tie up with NTPC
Joint Ventures Locked in long term PPA’s based on
Competitive Bidding market projections
Non-conventional energy
19. Risk Analysis

It is necessary to understand that how the risks are perceived by the business.
Virtually all organisations strive to survive. They strive to create value for their
stakeholders including State Government, SERC, Consumers, Financial institutions,
etc. The risk can be identified as a financial risk, regulatory risk, operating risk,
technology risk, etc.
Improve Efficiency: In order to be competitive on the distribution segment,

MGVCL has to improve operational efficiency. The efficiency can be achieved
through reduction of losses, quality power supply and upgradation of network.
Improvement in Consumer Services: Due to inclusion of Open Access and
Parallel License under the amended Electricity Act 2003, a consumer of MGVCL
will always have a choice to avail supply of electricity from any other Distribution
licences other than MGVCL in case of proper service, continuous power supply or
cheap power. Therefore, a constant improvement in Consumer service will be
required to avoid chances of losing the consumers.
Project Management and Execution: A key element of the implementation of
infrastructure plan is to execute project on a timely manner and is managed in a
judicious way. To meet the investment objectives & improving the existing
infrastructure of Distribution System, MGVCL needs to review the timely
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implementation and completion of Infrastructure plan.
Recovery of Arrears: Even though MGVCL has a collection efficiency of 100%, still
there are some arrears which need to be targeted and collected.
Regulatory awareness: Regulatory risks will have to proactively deal with to
minimise the impact on Company as well as Consumer Interest and therefore a
capacity building is required to provide training to the employees for creating
awareness related to regulatory provisions.
20. Future Business Opportunities

While the SWOT analysis has revealed a number of opportunities, MGVCL may be
targeting some of the opportunities in the near future. The key opportunities which
could be targeted are:
• Joint Ventures / Public Private Partnership
• Non Conventional Energy
• Providing Ancillary Services to other power sector players
• Distribution Franchisee route
• Technical Consultancy
To avail opportunities for the future, MGVCL has to rapidly ramp up its existing
technical staff to meet the objectives and gain advantage from the business
opportunities. The Discom is making arrangements for Training of the existing staff
to undertake future responsibilities as well. Organization Development &
Institutional Strengthening hence has to be the key focus areas. Apart from Human
Resources Development, MGVCL has to focus on the Environment related aspects to
adhere to pollution control norms. However, the key aspect would be being
operationally efficient to be able to match the efficiencies of private sector players.
Commercial efficiency would be the focus.
Thus, the short term outlook for MGVCL would be primarily to focus on
improvement of its operational performance and have a efficient consumer. With
the additional generation capacity being planned in the system, MGVCL can look at
fulfilling the ever growing demand for the State. Also, while MGVCL has started
looking at diversification by considering renewable energy, ancillary services, etc,
this could be looked at contributing in a significant manner in the future business of
the Discom.
MGVCL has prepared the Business / Operational Plan taking cognisance of the
existing internal factors and external business environment affecting the business.
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It is submitted that the Business plan being a dynamic document may need to be
updated at periodic intervals taking into account the changes in the internal and
external environment and these changes would be intimated to the Hon’ble
Commission from time to time.
21. OPERATIONAL PLAN

The operational plan includes the estimate of each cost of MGVCL for the second
control period (from FY 2011-12 to FY 2015-16) and is in line with the MYT petition.
The costs are estimated based on certain assumptions, past trend and extrapolated
for future period.
Sales Projections: It has been observed from past experience that the historical
trend method has proved to be a reasonably accurate and well accepted method
for estimating the load, number of consumers and energy consumption. In light
of the above, MGVCL has estimated the above for various customer categories
primarily based on the CAGR trends during past years. Following table shows the
5 year as well as 3 year CAGR for the category wise sales:
CAGR of Sales
5 years CAGR 3 years CAGR FY 10 over
Sales (MU)
FY 10 over 06 FY 10 over 08 FY 09
Low Tension Consumers
Residential 10.07% 9.78% 8.5%
Commercial 13.14% 11.72% 9.7%
Industrial LT 7.23% 4.53% 5.8%
Public Water Works 9.19% 10.39% 9.0%
Agriculture 5.17% 10.38% 11.3%
Street Light 6.42% 5.51% 3.5%
LT Total 8.60% 9.40% 8.9%
High Tension Consumers
Industrial HT 9.06% 7.71% 2.1%
Railway Traction 7.71% 8.34% 8.8%
HT Total 8.83% 7.81% 3.1%
TOTAL 8.69% 8.77% 6.6%
Considering the above growth rates annually the category wise sales have been
projected as shown on the following table:
April 2011 Page XVI

period FY 2011-12 to 2015-16
MGVCL
Sales Projection FY 2011-12 to 2015-16
Sales (MU) FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16
Residential 10.07% 10.07% 10.07% 10.07% 10.07% 10.07%
Commercial 13.14% 13.14% 13.14% 13.14% 13.14% 13.14%
Industrial LT 7.23% 7.23% 7.23% 7.23% 7.23% 7.23%
Public Water Works 9.19% 9.19% 9.19% 9.19% 9.19% 9.19%
Agriculture 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Agriculture - Metered
Street Light 6.42% 6.42% 6.42% 6.42% 6.42% 6.42%
LT Total 8.60% 8.60% 8.60% 8.60% 8.60% 8.60%
Industrial HT 9.06% 9.06% 9.06% 9.06% 9.06% 9.06%
Railway Traction 7.71% 7.71% 7.71% 7.71% 7.71% 7.71%
HT Total 8.83% 8.83% 8.83% 8.83% 8.83% 8.83%
TOTAL 8.69% 8.69% 8.69% 8.69% 8.69% 8.69%
Distribution Losses
The company has achieved a significant reduction in distribution losses, during
recent years. However, loss reduction is a slow process and becomes increasingly
difficult as the loss levels come down. Projection of distribution losses for second
control period FY 2011-12 to 2015-16 are as shown below:
Distribution Loss Level FY 2011-12 to 2015-16

FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Particulars
(Projected) (Projected) (Projected) (Projected) (Projected)
Distribution Loss 12.75% 12.50% 12.25% 12.00% 12.00%
Energy Balance
The energy requirement for MGVCL will be met by supply from GUVNL. Based on
the sales and distribution provided above, Energy Balance of MGVCL for the
second control period FY12-FY16 is as shown below:
Energy Balance FY 2011-12 to 2015-16

FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
S.No. Particulars Unit
1 Energy Sales MUs 7,235 7,885 8,592 9,363 10,204
MUs 1,057 1,126 1,200 1,277 1,391
2 Distribution Losses
% 12.75% 12.50% 12.25% 12.00% 12.00%
3 Energy Requirement MUs 8,292 9,011 9,792 10,640 11,595
MUs 386 415 445 478 521
4 Transmission Losses
% 4.45% 4.40% 4.35% 4.30% 4.30%
Total Energy to be input to
5 MUs 8,678 9,426 10,237 11,118 12,116
Transmission System
6 Pooled Losses in PGCIL System MUs 109 157 211 245 267
7 Total Energy Requirement MUs 8,787 9,583 10,448 11,363 12,383
April 2011 Page XVII

period FY 2011-12 to 2015-16
MGVCL
Total Power Purchase Cost
The total power purchase cost for GUVNL for the second control period FY 2011-
12 to 2015-16 comes to the power purchase cost through merit order
transmission charges, GUVNL charges and SLDC Fees & charges, as shown below:
Power Purchase Cost FY 2011-12 to 2015-16

Discom Discom Total Power Trading Profit & Total Trading
Trading Fixed Net Cost
Year Fixed Cost Variable Cost Purchase Cost Variable Cost Trading Margin Revenue (Rs
Cost (Rs Cr) (Rs Crs)
(Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) Crs)
FY 2011-12 8,125 11,348 19,473 798 1,115 600 2,513 18,075
FY 2012-13 11,126 11,793 22,919 1,203 1,275 700 3,177 21,016
FY 2013-14 12,473 13,233 25,705 1,451 1,540 800 3,791 23,454
FY 2014-15 13,902 13,850 27,752 1,713 1,706 900 4,319 25,139
FY 2015-16 18,356 13,702 32,059 2,358 1,760 1,000 5,119 28,700
Aggregate Revenue Requirement

The Aggregate Revenue Requirement for FY 2011-12 has been determined as Rs.
3,523 Crores. The Table below shows projection of Aggregate Revenue
Requirement by MGVCL under MYT second control period FY 2011-12 to 2015-
16.
ARR FY 2011-12 to 2015-16

Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Cost of Power Purchase 3,047 3,594 4,084 4,468 5,155
2 Operation & Maintenance Expenses 269 284 301 318 336
2.1 Empl oyee Cost 222 234 248 262 277
2.2 Repair & Mai ntenance 40 42 45 47 50
2.3 Admi nistration & General Charges 39 41 43 46 48
2.4 Other Debits 7 8 8 9 9
2.5 Extraordinary Items 0 0 0 0 0
2.6 Net Pri or Period Expenses / (Income) 15 16 17 18 19
2.7 Other Expenses Capitalised (54) (57) (61) (64) (68)
3 Depreciation 121 134 147 159 170
4 Interest & Finance Charges 51 44 35 24 10
5 Interest on Working Capital 40 47 53 57 65
6 Provi sion for Bad Debts 6 6 7 7 8
7 Sub-Total [1 to 6] 3,533 4,109 4,626 5,033 5,745
8 Return on Equi ty 71 74 78 81 83
9 Provi sion for Tax / Tax Paid 6 6 6 6 6
10 Total Expenditure (7 to 9) 3,610 4,189 4,709 5,120 5,834

11 Less: Non-Tariff Income 87 87 87 87 87
12 Aggregate Revenue Requirement (10 - 11) 3,523 4,102 4,623 5,033 5,747
April 2011 Page XVIII

period FY 2011-12 to 2015-16
MGVCL
INDEX
1. INTRODUCTION .............................................................................................................................................. 1
1.1 BACKGROUND ............................................................................................................................................ 1

1.2 BUSINESS ACTIVITIES ................................................................................................................................... 2
1.3 OBJECTIVE OF THE BUSINESS PLAN ................................................................................................................. 2
1.4 APPROACH TO THE BUSINESS PLAN ................................................................................................................. 3
2. MGVCL PROFILE.............................................................................................................................................. 6
2.1 BACKGROUND ............................................................................................................................................ 6

2.2 VISION AND MISSION OF MGVCL.................................................................................................................. 7
2.3 OPERATING STRUCTURE OF MGVCL .............................................................................................................. 8
2.4 CATEGORY WISE NUMBER OF CONSUMERS ..................................................................................................... 11
2.5 IT INITIATIVES........................................................................................................................................... 11
2.6 HUMAN RESOURCE MANAGEMENT .............................................................................................................. 12
2.7 CORPORATE SOCIAL RESPONSIBILITY............................................................................................................. 17
2.8 ENERGY CONSERVATION MEASURES ............................................................................................................. 17
2.9 ACTIVITIES RELATED TO CONSUMER SERVICE .................................................................................................. 19
2.10 OTHER ACTIVITIES CARRIED OUT BY MGVCL.................................................................................................. 21
2.11 MAJOR ACHIEVEMENTS OF MGVCL............................................................................................................. 24
3. OPERATIONAL PERFORMANCE ANALYSIS ................................................................................................... 26
3.1 BACKGROUND .......................................................................................................................................... 26

3.2 DEMAND SUPPLY SITUATION IN MGVCL ...................................................................................................... 26
3.3 SALE OF POWER........................................................................................................................................ 27
3.4 REDUCTION IN DISTRIBUTION LOSSES ............................................................................................................ 28
3.5 CONSUMER BASE ...................................................................................................................................... 31
3.6 POWER PURCHASE .................................................................................................................................... 32
3.7 SUPPORT FROM GOG IN PAST 5 YEARS.......................................................................................................... 33
3.8 OPERATING INDICES .................................................................................................................................. 33
3.9 DISTRIBUTION TRANSFORMER FAILURE RATE................................................................................................... 34
3.10 EMPLOYEE RATIONALIZATION ...................................................................................................................... 35
3.11 REVENUE REALIZED FROM SALE OF POWER VS AVERAGE COST OF SUPPLY ........................................................... 36
3.12 DEMAND SIDE MANAGEMENT ..................................................................................................................... 37
4. FINANCIAL PERFORMANCE ANALYSIS ......................................................................................................... 39
4.1 REVENUE STATEMENT ANALYSIS .................................................................................................................. 39

4.2 BALANCE SHEET ANALYSIS .......................................................................................................................... 42
4.3 RATIO ANALYSIS ....................................................................................................................................... 44
4.4 ANALYSIS OF CAPITAL EXPENDITURE ............................................................................................................. 45
5. POWER SECTOR OVERVIEW......................................................................................................................... 47
5.1 INDUSTRY OVERVIEW................................................................................................................................. 47

5.2 ALL INDIA INSTALLED CAPACITY ................................................................................................................... 47
5.3 ACTUAL POWER SUPPLY POSITION IN INDIA ................................................................................................... 49
5.4 POWER SECTOR IN GUJARAT ....................................................................................................................... 50
5.5 INSTALLED CAPACITY AVAILABLE TO GUJARAT ................................................................................................. 50
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period FY 2011-12 to 2015-16
MGVCL
5.6 POWER SUPPLY POSITION OF GUJARAT ......................................................................................................... 51
5.7 ALLOCATED CAPACITY TO MGVCL (AS ON 1/10/2010) ................................................................................. 52
5.8 POWER PURCHASE FOR MGVCL.................................................................................................................. 52
6. REGULATORY FRAMEWORK ........................................................................................................................ 54
6.1 BACKGROUND .......................................................................................................................................... 54

6.2 SALIENT FEATURES OF ELECTRICITY ACT, 03 ................................................................................................... 55
6.3 NATIONAL ELECTRICITY POLICY, 2005 .......................................................................................................... 59
6.4 NATIONAL ELECTRICITY PLAN ...................................................................................................................... 61
6.5 TARIFF POLICY .......................................................................................................................................... 69
6.6 TARIFF BASED COMPETITIVE BIDDING ........................................................................................................... 71
6.7 RURAL ELECTRIFICATION POLICY, 2006......................................................................................................... 71
6.8 R-APDRP (RESTRUCTURED ACCELERATED POWER DEVELOPMENT & REFORM PROGRAM) .................................... 72
6.9 RENEWABLE SOURCES ................................................................................................................................ 73
6.10 RENEWABLE ENERGY CERTIFICATE MECHANISM ............................................................................................. 74
6.11 NATIONAL ACTION PLAN FOR CLIMATE CHANGE (NAPCC)............................................................................... 75
6.12 STATE MARKET REGULATIONS ..................................................................................................................... 76
6.13 KEY PROVISIONS ....................................................................................................................................... 86
7. MARKET ISSUES AND CHALLENGES ............................................................................................................. 88
7.1 OPEN ACCESS REGULATION ........................................................................................................................ 88

7.2 ABT IMPLEMENTATION .............................................................................................................................. 89
7.3 UI IMPLICATION IN IMPLEMENTATION OF INTRA-STATE ABT ............................................................................. 89
7.4 PARALLEL LICENSE ..................................................................................................................................... 90
7.5 REGULATORY PROVISIONS .......................................................................................................................... 91
7.6 INDUSTRY RISK AND COMPETITION ............................................................................................................... 91
7.7 RENEWABLE PURCHASE OBLIGATION (RPO) .................................................................................................. 92
7.8 IMPACT OF DSM MEASURES ...................................................................................................................... 93
7.9 UNIVERSAL SERVICE OBLIGATION ................................................................................................................. 95
7.10 POWER PURCHASE RESPONSIBILITY .............................................................................................................. 95
7.11 MARKET PENETRATION AND SERVICE AREA .................................................................................................... 95
7.12 COST TO SERVE AGAINST AVERAGE REALIZATION ............................................................................................. 96
7.13 RATIONALIZATION OF TARIFFS TO RETAIN HT & LARGE CONSUMERS ................................................................... 97
7.14 STANDARDS OF PERFORMANCE (SOP’S) ....................................................................................................... 98
7.15 OPERATING NORMS – REGULATED BY SERC .................................................................................................. 98
7.16 FUTURE MARKET OPERATIONS AND FINANCIAL POSITIONS ................................................................................ 99
8. SWOT ANALYSIS ......................................................................................................................................... 100
8.1 BACKGROUND ........................................................................................................................................ 100

8.2 STRENGTHS ............................................................................................................................................ 100
8.3 WEAKNESSES ......................................................................................................................................... 103
8.4 OPPORTUNITIES ...................................................................................................................................... 105
8.5 THREATS ............................................................................................................................................... 107
8.6 SUMMARY OF SWOT .............................................................................................................................. 111
9. RISK ANALYSIS ............................................................................................................................................ 113
9.1 BACKGROUND ........................................................................................................................................ 113
April 2011 Page XX

period FY 2011-12 to 2015-16
MGVCL
9.2 RISK ASSESSMENT & MITIGATION PLANS .................................................................................................... 113
10. FUTURE BUSINESS OPPORTUNITIES...................................................................................................... 118
10.1 PUBLIC PRIVATE PARTNERSHIP................................................................................................................... 119

10.2 ANCILLARY SERVICES................................................................................................................................ 120
10.3 PROFESSIONAL METER TESTING FACILITY..................................................................................................... 120
10.4 NON CONVENTIONAL ENERGY ................................................................................................................... 121
10.5 DISTRIBUTION FRANCHISEE ROUTE ............................................................................................................. 121
10.6 FUTURE PLANS IN OTHER AREAS ................................................................................................................ 121
11. OPERATIONAL PLAN .............................................................................................................................. 123
11.1 SALES GROWTH ..................................................................................................................................... 124

11.2 DISTRIBUTION LOSSES .............................................................................................................................. 124
11.3 ENERGY BALANCE ................................................................................................................................... 125
11.4 POWER PROCUREMENT FROM VARIOUS SOURCES .......................................................................................... 125
11.5 POWER PURCHASE COST FOR FY 2011-12 TO 2015-16 ............................................................................... 127
11.6 CAPITAL EXPENDITURE ............................................................................................................................. 128
11.7 FUNDING OF CAPEX ............................................................................................................................... 129
11.8 OPERATION & MAINTENANCE EXPENSES ..................................................................................................... 130
11.9 PROVISION FOR BAD AND DOUBTFUL DEBTS................................................................................................. 130
11.10 DEPRECIATION ................................................................................................................................... 130
11.11 INTEREST ON LOAN ............................................................................................................................. 131
11.12 INTEREST ON WORKING CAPITAL ........................................................................................................... 132
11.13 RETURN ON EQUITY ............................................................................................................................ 132
11.14 TAXES ............................................................................................................................................... 133
11.15 REVENUE PROJECTIONS FOR NON-TARIFF INCOME ................................................................................... 133
11.16 ARR FOR FY 2011-12 TO 2015-16 UNDER MYT SECOND CONTROL PERIOD................................................ 133
April 2011 Page XXI

period FY 2011-12 to 2015-16
MGVCL
LIST OF TABLES
Table 1: Salient Features of MGVCL.............................................................................................. 10

Table 2: Man*Days Training Chart FY 2009-10 .............................................................................. 17
Table 3: Peak Deficit FY 2007-08 to 2009-10 ................................................................................. 26
Table 4: Past Years’ Sales Growth Rate ......................................................................................... 28
Table 5: Past Years' Consumer Growth Rate ................................................................................. 32
Table 6: Past 5 Years' Agriculture Subsidy Support provided .......................................................... 33
Table 7: Operating/ Reliability Indices .......................................................................................... 34
Table 8: Profit & Loss Statement FY 2005-06 to 2009-10................................................................ 39
Table 9: Balance Sheet FY 2005-06 to 2009-10 .............................................................................. 42
Table 10: Financial Ratio Analysis FY 2005-06 to 2009-10 .............................................................. 44
Table 11: Capital Expenditure FY 2009-10 ..................................................................................... 46
Table 12: Power Supply situation FY 2003-10 ................................................................................ 51
Table 13: Plant wise Allocated Capacity (As on 1/10/10)................................................................ 52
Table 14: MGVCL's Power Purchase Cost FY 2009-10..................................................................... 53
Table 15: Regulations issued by GERC .......................................................................................... 76
Table 16: RPO for Gujarat FY 2010-11 to 2012-13 ......................................................................... 81
Table 17: MGVCL's Realization as a % of CoS................................................................................. 98
Table 18: Projection of growth in Sales, Load & Consumer base for FY 2011-12 to 2015-16 ........... 124
Table 19: Distribution Loss trajectory FY 2011-12 to 2015-16....................................................... 125
Table 20: Energy Requirement Projection FY 2011-12 to 2015-16 ................................................ 125
Table 21: Availability from Existing Plants ................................................................................... 126
Table 22: Availability from New Plants ....................................................................................... 127
Table 23: Power Purchase Cost Projection FY 2012-16................................................................. 128
Table 24: CAPEX Projection FY 2011-12 to 2015-16 ..................................................................... 129
Table 25: Funding of CAPEX FY 2011-12 to 2015-16..................................................................... 130
Table 26: O&M Expenses Projection FY 2011-12 to 2015-16 ........................................................ 130
Table 27: Bad Debts Projection FY 2011-12 to 2015-16................................................................ 130
Table 28: Depreciation Projection FY 2011-12 to 2015-16............................................................ 131
Table 29: Interest & Finance Charges Projection FY 2011-12 to 2015-16 ....................................... 132
Table 30: Interest on Working Capital Projection FY 2011-12 to 2015-16 ...................................... 132
Table 31: Return on Equity Projection FY 2011-12 to 2015-16 ...................................................... 133
Table 32: Tax Amount Projection FY 2011-12 to 2015-16 ............................................................. 133
Table 33: Non-Tariff Income projection FY 2011-12 to 2015-16.................................................... 133
Table 34: ARR Projection FY 2011-12 to 2015-16 ......................................................................... 134
April 2011 Page XXII

period FY 2011-12 to 2015-16
MGVCL
LIST OF FIGURES
Figure 1: Area of MGVCL ............................................................................................................... 9

Figure 2: MGVCL's Products & Services......................................................................................... 10
Figure 3: Category Wise Consumer base FY 2009-10 ..................................................................... 11
Figure 4: Administrative Structure of MGVCL ................................................................................ 14
Figure 5: Organizational Structure of MGVCL ................................................................................ 14
Figure 6: Max Demand/Supply (MW) FY 2007-08 to 2009-10 ......................................................... 26
Figure 7: Past 5 years' Energy Sales .............................................................................................. 27
Figure 8: Reduction in Distribution Losses .................................................................................... 29
Figure 9: Past 5 Years’ Consumer Base ......................................................................................... 32
Figure 10: Past 5 Years' per unit Power Purchase Rate................................................................... 33
Figure 11: Reduction in DTR Failure rate....................................................................................... 35
Figure 12: Class- Category wise Employee Breakup ....................................................................... 35
Figure 13: Past Years' Employee's expenses per unit power sold .................................................... 36
Figure 14: State wise Comparison of Employee Expenses per Unit Power Sold................................ 36
Figure 15: Past 5 Years' Revenue realized Vs Average Cost of Supply.............................................. 37
Figure 16: All India Installed Capacity ........................................................................................... 47
Figure 17: Fuel wise breakup of generation capacity in India ......................................................... 48
Figure 18: All India past Years' Power deficit................................................................................. 49
Figure 19: Region wise Peak deficit in FY 2009-10 ......................................................................... 49
Figure 20: Installed Capacity in Gujarat......................................................................................... 51
Figure 21: State wise Average Cost of Supply Vs Realization .......................................................... 97
Figure 22: Sales breakup FY 2009-10 .......................................................................................... 104
Figure 23: Revenue breakup FY 2009-10 ..................................................................................... 110
Figure 24: MGVCL's SWOT Matrix .............................................................................................. 110
Figure 25: Risk Mitigation Plans ................................................................................................. 113
April 2011 Page XXIII

period FY 2011-12 to 2015-16
MGVCL
LIST OF ABBREVIATIONS
Sr. No Abbreviations Descriptions

1. ABT Availability Based Tariff
2. ALDC Area Load Dispatch Centre
3. AMR Automatic Meter Reading
4. ARR Aggregate Revenue Requirement
5. BPL Below Poverty Line
6. CAGR Compound Annual Growth Rate
7. CDM Clean Development Mechanism
8. CERC Central Electricity Regulatory Commission
9. CFL Compact Fluorescent Lamp
10. CGS Central Generating Station
11. CoS Cost of Supply/ Service
12. CPPs Captive Power Plants
13. DDG Decentralised Distributed Generation
14. DGVCL Dakshin Gujarat Vij Company Limited
15. Discoms Distribution Companies
16. DSM Demand Side Management
17. DTC Distribution Transformer
18. EA/The Act The Electricity Act 2003
19. ERP Enterprise Resource Planning
20. FOR Forum of Regulators
21. FY Financial Year
22. GEB Erstwhile Gujarat Electricity Board
23. GERC Gujarat Electricity Regulatory Commission
24. GETCO Gujarat Energy Transmission Corporation Limited
25. GETRI Gujarat Energy Training & Research Institute
26. GIS Gas Insulated Substations
27. GoG Government of Gujarat
28. GoI Government of India
29. GSECL Gujarat State Electricity Corporation Limited
30. GUVNL Gujarat Urja Vikas Nigam Limited
31. HP Horse Power
32. HT High Tension
33. IPP Independent Power Producers
34. KV Kilo Volt
35. kVA Kilo Volt Ampere
36. kVAh Kilo Volt Ampere Hour
37. kWh Kilo Watt Hour
38. LT Low Tension
April 2011 Page XXIV

period FY 2011-12 to 2015-16
MGVCL
Sr. No Abbreviations Descriptions
39. LTA Leave Travel Allowance
40. MGVCL Madhya Gujarat Vij Company Limited
41. MOD Merit Order Despatch
42. MoP Ministry of Power
43. MOU Memorandum of Understanding
44. MU Million Units (Million kWh)
45. MW Mega Watt
46. MYT Multi Year Tariff
47. NAPCC National Action Plan of Climate Change
48. NPC Nuclear Power Corporation
49. NEP National Electricity Policy
50. NTP National Tariff Policy
51. NTPC National Thermal Power Corporation
52. O&M Operation & Maintenance
53. PF Provident Fund
54. PGVCL Paschim Gujarat Vij Company Limited
55. PPPA Power Purchase Price Adjustment
56. R-APDRP Restructured Accelerated Power Development & Reform Programme
57. REC Renewable Energy Certificate
58. RGGVY Rajiv Gandhi Grameen Vidyutikaran Yojana
59. RMU Ring Main Unit
60. ROE Return on Equity
61. RPO Renewable Purchase Obligation
62. SCADA Supervisory Control and Data Acquisition
63. SEZ Special Economic Zone
64. SLDC State Load Dispatch Centre
65. SWOT Strength, Weakness, Opportunity and Threats
66. T&C GERC (Terms & Conditions of Tariff) Regulation, 2005
67. T&D Transmission and Distribution
68. TASP Tribal Area Sub Plan Scheme
69. UGVCL Uttar Gujarat Vij Company Limited
70. UI Unscheduled Interchange Charges
71. UMPP Ultra Mega Power Plant
72. UNCCC United Nations Framework Convention on Climate Change
73. WEG Wind Energy Generator
April 2011 Page XXV

period FY 2011-12 to 2015-16
MGVCL
1. Introduction
1.1 Background
1.1.1 The Government of Gujarat (hereinafter referred to as “GoG”) notified the Gujarat
Electricity Industry (Reorganization and Regulation) Act 2003 (herein after referred
to as the “Act”) in May 2003 for the reorganization of the entire power sector in the
State of Gujarat. Pursuant to the above, GoG in their letter vide GO / 19th August
2003 had directed Gujarat Electricity Board (herein after referred to as “GEB”) to
form four Distribution Companies (Discoms) based on geographical location of the
circles. Accordingly the four distribution companies had been incorporated with the
Registrar of Companies on September 15th, 2003.
1.1.2 MGVCL is one of the distribution companies engaged in distribution of electricity in

the central zone of Gujarat. MGVCL obtained its Certificate of Commencement of
Business on the 15th October, 2003. However, the company could not commence its
operations during the financial year ended 31st March 2004 and 31st March, 2005.
The Company has started commercial function w.e.f. 1st April 2005.
1.1.3 As a step further of deepening its enterprise capability and capitalizing growth
opportunities, the management of MGVCL has carved out big expansion plans which
will not only allow MGVCL to increase its volume of power distribution but also fresh
investment in increasing line network (including renovation, refurbishment and
system up gradation) will reduce the distribution losses and increase in productivity.
The exercise will also lead to a marked improvement in the Financials of the
company.
1.1.4 Organisational development and institutional strengthening are the supporting

factors that transform MGVCL into a commercially viable vibrant organisation.
Therefore, systemic improvements like business process re-engineering, best
practices, information technology initiatives, performance management system and
human resource development and involvement needs to be formulated and
implemented across the organisation in a standardised manner.
1.1.5 Apart from internal reforms – institutional strengthening and organisational

development – MGVCL also needs to gear up to the regulatory challenges, both in
terms of operational efficiency and commercial & financial implications of the same.
April 2011 Page 1

period FY 2011-12 to 2015-16
MGVCL
1.2 Business Activities
1.2.1 The Company is a Distribution Licensee within the meaning of Section 2(17) of
Electricity Act 2003. Further, Section 42 and 43 of the Electricity Act 2003 prescribes
the following duties of the Distribution Licensee:
• To develop and maintain an efficient, co-ordinated and economical distribution

system;
• To supply electricity on an application of the consumer in accordance with the
provisions specified in the Electricity Act 2003;
• To provide non-discriminatory open access to the consumers;
• To establish a forum for redressal of grievances of the consumers;
1.2.2 Since MGVCL has been vested with the function of distributing power by the State
Government of Gujarat, the Business Scope of the Company falls within the legal
framework as specified in the Act and can include:
• To develop the required distribution infrastructure within the State of Gujarat to

meet the demand of the consumers;
• To Operations efficiently the existing distribution infrastructure;
• Merchant Sale of Power in the event of availability of surplus power after
meeting the requirement of own consumers with whom the capacity is
contracted presently;
• Other associated business like providing Training, Research and Development
activities, Technical consultancy services and O&M related services;
• Contracts for outsourcing of distribution related activities, joint venture
participation in the market, etc.
1.3 Objective of the Business Plan

1.3.1 It is important that MGVCL has a complete re-look at its business in view of the
current environment to develop a holistic way forward for the organisation. The
Forum of Regulators (FOR) in its report on MYT framework has recommended as
under:
“6.1.1 Annual revision of performance norms and tariff might not be desirable.
During the first control period, which should not be more than three years, the
opening levels of performance parameters should be specified as close to the
April 2011 Page 2

period FY 2011-12 to 2015-16
MGVCL
actual level of performance as possible and a trajectory of improvement of norms
to desired level be provided with an incentive and disincentive mechanism to
share efficiency gains with consumers.”
1.3.2 The FOR Report recommends that the norms for the first Control Period to be
specified as close to actual level of performance as possible. FOR Report also
emphasises on specifying a trajectory to achieve desired levels of norms, which
entails fixing of performance trajectory on normative basis rather than at actual
levels for the second Control Period onwards.
“Distribution licensees should submit the business plan and power purchase plan,
for approval of the Commission, at least six months prior to submission of MYT
petitions”
1.3.3 This effectively requires the Utilities to submit their MYT Petitions on or before 30th
November of the previous year for which tariff has to be determined. The FOR
recommendations provides for submission of Business Plan six months prior to
submission of MYT Petition, i.e., 30th November. Hence, date for submission of
Business Plan would be 31st May. But in the present context, as the date has already
passed for the second Control Period, it would be difficult for Utilities to file a
Business Plan as per FOR recommended timelines.
1.3.4 Hence as directed by the Hon'ble commission Business Plan for the second Control
Period is to be filed along with the MYT filings for the second Control Period. Keeping
the above discussion in mind, MGVCL has developed a comprehensive business plan
for the company for the period FY 2011-12 to FY 2015-16. The business plan in
following sections intends to cover the above issues from the strategic, competitive,
financial, commercial and organisational perspectives.
1.3.5 MGVCL would submit petition for True Up for FY 2009-10, Annual Performance
Review for FY 2010-11 under the Multi Year Tariff regime (1st control period) and
petition for Multi Year Tariff for the second control period FY 2011-12 to FY 2015-16.
1.4 Approach to the Business plan
1.4.1 The Business Plan is initiated based on a review of “what is” on the company’s
current operations, operational performance and organisation structure. The
formulation of strategies is driven by the consideration of the vision, mission and
April 2011 Page 3

period FY 2011-12 to 2015-16
MGVCL
values that the Company holds and cherishes. The existing profile of the Company,
its strengths and weaknesses, its policies, and the emerging legal and business
environment plays an important role in the formulation of the plan. This stage also
captures its role in Gujarat power sector and its technical and commercial
relationships with the other utilities operating in the state.
1.4.2 The Business Plan has been developed keeping in view the current performance over
the previous year with a view to develop targets that are realistic and achievable and
that provide an impetus to improving performance.
1.4.3 It is important that MGVCL tries to meet the performance as per the projections.
There is therefore a need to ensure internalisation of these projections so that
targets can be identified at the working level to ensure compliance. That is to say
that there is a need to disaggregate the projections to lower levels so as to involve
the Circles in process and also to convey the direction in which the company is
headed.
1.4.4 The approach and methodology adopted for preparation of Business plan of MGVCL
is as follows.
The business plan is prepared for the projection period FY 2012 to FY 2016.
The assumptions like investment plan, load forecast, loss reduction plan, power
procurement plan etc. are maintained as provided in MYT petition for second
control period FY 2011-12 to 2015-16.
1.4.5 This Strategic Business Plan is intended to chart the Company’s way forward. It acts
as an “engine for change” and aims to consolidate the various ideas and proposed
course of action together with a common thread, to take the Company into the
future. The Plan will enable the Company to harness its resources so as to develop a
desired commercial orientation.
1.4.6 Accordingly, this business plan is developed for the Control period bearing in mind
the growth plan for the control period after considering the strength and weakness
of the company and evaluating its business environment. The business environment
has evolved considerably in a number of ways that affects MGVCL’s strategic
planning. The Business Plan is intended to give a comprehensive and up-to-date
representation of the company, its market, the impact of new regulations, and the
strategies that has been developed by MGVCL to achieve the company goals, to
carry out its mission and reach its vision. However, as mentioned above, there are
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number of internal and external factors which affect the planning of the company
and thus it makes this document a very dynamic document and which calls for
regular reviews of the plan with a view to introduce any mid-term corrections.
1.4.7 Due to changing business environment and the regulations governing the
distribution business, it is submitted that Hon’ble Commission should take
cognizance of the fact that the business plan is a dynamic document which may need
to be updated at various intervals to align the growth path of the company with the
external business environment and internal factors affecting the business /
operations of the company. Depending on the amount and complexity of the
content that needs to be updated, one could distinguish two levels of update. On a
lower level, there is detail and factual updates that require changes within the
business plan. Factual updates are relatively straight forward and mostly comprise
minor changes of specific data, such as numerical or other factual information. At
the higher level, there is the conceptual update. Conceptual updates may be
dictated by an market shifts, changes in the competitive environment, legislative
reforms, political influence and many other factors, and thus, require deeper
analysis, and more profound changes in the business plan. Thus, updation of the
Business Plan would be dependent on the management as they would have to
decide which events and changes are important and how they need to be reflected
in the business plan.
“Business Plan is a formal statement of a set of business goals, the

reasons why they are believed attainable, and the plan for reaching those
goals. It may also contain background information about the
organization or team attempting to reach those goals.”
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2. MGVCL Profile
2.1 Background
2.1.1 GEB was engaged in the business of Generation, transmission and supply of
Electricity under the provisions of the law prior to enactment of Electricity Act 2003
and have been re-organised under Section 131 and 133 of the Electricity Act 2003.
Therefore, the successor entities of GEB are considered as a Deemed Licensees
under the proviso (1) of the Section 14 of the Act and in line with the given
provisions, MGVCL is a deemed distribution licensee for supplying electricity in
central zone of Gujarat.
2.1.2 As a part of Power Reform Process, Gujarat Electricity Board (GEB), the promoting
body, has been un-bundled effective from 1st April, 2005, into separate seven
Companies with functional responsibilities with complete autonomous operation for
Generation
Transmission
Distribution
Trading
2.1.3 The distribution activities were transferred to four Discoms based on geographical
location of the circles, which are:
• Dakshin Gujarat Vij Company (South Zone)
• Uttar Gujarat Vij Company (North Zone)
• Madhya Gujarat Vij Company (Central Zone)
• Paschim Gujarat Vij Company (Rajkot and Bhavnagar Zone)
2.1.4 GEB was engaged in the business of Generation, transmission and supply of
Electricity under the provisions of the law prior to enactment of Electricity Act 2003
and have been re-organised under Section 131 and 133 of the Electricity Act 2003.
Therefore, the successor entities of GEB are considered as a Deemed Licensees
under the proviso (1) of the Section 14 of the Act and in line with the given
provisions, MGVCL is a deemed distribution licensee for supplying electricity in
Central zone of Gujarat.
2.1.5 The company has become operational effective from 1st April, 2005. Since the entire
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share capital of the Company is held by GUVNL which is a government Company, the
Company is also a Government Company pursuant to the provisions of Section 617
of the Companies Act, 1956.
2.2 Vision and Mission of MGVCL
Any organization's vision is all about what is possible, all about that potential. The
mission is what it takes to make that vision come true. The long term goals are set
keeping the vision statement in mind but mostly the short term targets are
influenced by the mission statement. All these inter woven together create an
identity for your company which gives a unique image to the company and develops
the company culture. Each and every team member contributes to the realization of
these goals, targets and the image carving of the company.
2.2.1 Vision
“Vision without action is merely a dream, Action without vision merely
passes time, Vision with action can only change the Organisation”.
The Vision should define what an organization will become at the end of the
strategic planning horizon. The Vision is a “future state” description of what we
aspire to become and what will be pursued. A Vision needs to identify strategic
objectives with wide appeal looking for shared values and ideals. A vision needs to
be linked with the core competencies of the business and its necessary to assess
continually and refine the vision to make it more appealing and credible.
MGVCL desires to achieve customer satisfaction through its excellent service which is
envisaged in its Vision statement as follows:
“Customer satisfaction through service excellence”
2.2.2 Mission
“A mission statement outlines what the company is now. It focuses on today; it

identifies the customer(s); it identifies the critical process(es); and it states the level
of performance.”
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The Mission Statements of the Organisation needs to specify the organizational
purposes and translate these purposes into objectives that can be assessed and
controlled. Developing a mission statement can help reveal and resolve divergent
views among the stake holders and their importance for the Company. They are
effective vehicles for communicating with important internal and external
stakeholders.
The Mission statement is as follows:

To provide reliable and quality power at competitive cost
To reach global standards in reducing distribution losses
2.2.3 Core Values
“The values are the whole aura engulfing each and every thought, word, deed and
action taking place in your organization”.
The value statement prescribes the principles that company will follow to achieve its
Vision and Mission. All organization follows a set of values that defines ethical and
moral benefits. Value statement is not explicitly stated but taken to be a part of
Vision and Mission statements. The Core Values of MGVCL are identified as given
below:
Customer satisfaction
Pride of belongingness
Excellence
Participative work culture
Being ethically and socially responsive
2.3 Operating Structure of MGVCL
2.3.1 Company operates through the network spread over 24000 Sq Kms covering five full
districts in Central region of Gujarat. The consumers' mix consisting of various
categories such as residential, commercial, industrial, agricultural and others
consisting of around 25 lacs consumers which are served by 4 circles. The business
affairs are managed/taken care of by Corporate Office presently headquartered at
Baroda.
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Figure 1: Area of MGVCL
2.3.2 The company distributes electricity in:

• 5 districts
• 49 talukas
• 4,426 villages
• Area Serviced: 23, 854 sq kms
• Population Serviced: 11.18 million
• No. Of Consumers: 2.59 million
The Company is responsible for reliable and affordable power distribution to

residential areas. Commercial complexes, street lights, water works, agriculture,
traction as well as industries.
2.3.3 As a distribution licensee, MGVCL is carrying out the retail supply of power to the
end users as well as also maintain the wire business for supply of such power. The
primary aim of a distribution licensee is to provide continuous and quality power
supply to the end consumers. In line with this, MGVCL is developing the distribution
infrastructure to meet the load growth and maintain the supply of power to the
consumers. MGVCL is also engaged in improving its technical and financial
performance with reference to national benchmarks by adopting the best available
practices and absorbing the best available technologies.
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2.3.4 The products and services of the company are:
MGVCL performs several functions related with distribution of electricity, network
connections, repair and maintenance and also commercial aspects too. The various
functions are categorized as below:
Figure 2: MGVCL's Products & Services
Network Electricity Information

• Construction • Sourcing • Processing Of
• Repair • Operation Applications
• Connections • Distribution Of • Customer Queries
Electricity • Customer Complaint
• Meter Reading
• Revenue Management
• Sales And Marketing
2.3.5 The salient features of the Company are as follows:

MGVCL serves a large number of consumers, has a high load connection and a
network spread across vast widespread areas. The brief profile of the company is as
follows:
Table 1: Salient Features of MGVCL
Particular Details (30.09.2010)

Vadodara-Kheda-Anand-
District Covered: Panchmahal-Dahod
Total Area in Sq.Km. 23,854 Sq KM
Total Consumers : 2593746 Nos.
No. of Towns 42 Nos.
No. of Villages 4,305 Nos.
Total Circles 4 Nos.
Total Division Offices 17 Nos.
Total O&M Sub-Division Offices 86 Nos.
Total Sub-Stations 121 Nos.
Total No of 11 kV Feeders(excl. SST) 1145 Nos.
Total Transformers (Nos.) 53453 Nos.
HT LINE (KM) 36077.10 KM
LT LINE (KM) 52548 KM
Total Cash Collection Rs. 1623.95 Crs
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2.4 Category wise number of Consumers
Given below is a graph depicting the category wise breakup of the consumers within
MGVCL. Residential category consists of the largest consumer base followed by
Commercial & then Agriculture.
Figure 3: Category Wise Consumer base FY 2009-10
Residential 8112, 66965, 6049, 1186,

0.34% 2.78% 0.25% 0.05% 6,
Commercial 25714, 0.00%
1.07%
Industrial LT
232418,
Public Water 9.66%
Works
Agriculture
Street Light 2064337,

85.84%
Industrial HT
Railway Traction
2.5 IT Initiatives
2.5.1 E-Urja implementation is being done within the organization & with which several
processes will become computerized. E-urja is an end to end ERP solution, it will help
in beter housekeeping, billing, efficiency, effective maintenance, asset management,
consumer relation management, inventory management, finance management, HR
management, etc. At present, all the sub-divisions, divisions & circles are connected
through e-urja & company envisages that in the current financial year 2010-11, ERP
solution shall be place in the system on end-to-end basis.
2.5.2 E-gram Panchayats: Government of Gujarat has designated various Gram Panchayats
as E- Gram Panchayats (E-GPs), who qualified as per eligibility criteria for e-
governance and modernization of various villages of Gujarat. In order to make such
E-GPs self sustained by increasing their income & also to facilitate the consumers of
the company for payment of energy bills in their villages itself, GOG has decided to
award the agency of collection of energy bills to such E-GPs. There are 2,809 E-GPs
under 5 districts of the company. The requisite agreements are executed with TDOs
in all the E-GPs/ villages and all these E_GPs have started bill collection work and
many villagers are utilizing this new facility of paying their electricity bills through E-
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GPs.
2.5.3 SCADA, GIS, GPS, Consumer Indexing, IVRS Call centre have also been implemented,
showcasing MGVCL’s initiatives in latest technology. There is also E-Payment facility
from anywhere across the world. Existing SCADA system in Vadodara City will be up
graded under projects approved under R_APDRP scheme. GIS is implemented and
commissioned in 10 nos. Of towns. The benefits of SCADA implementation are:
• DMS application such as Fault Detection, Isolation & Restoration , Loss

minimization via GIS / TCM applications
• Exchange of outage / restoration data with CCC for effective management of
distribution system
• Reduction in outage time resulting in additional revenue generation.
• Availability of real time data
• Reduction in distribution losses
• Optimal Utilization of substation equipment
• Balance loads
• Integration with MIS for better management & planning
2.6 Human Resource Management

2.6.1 Industrial Relations continue to be cordial. Many need based training & development
programs are organized with special emphases on fostering a culture of innovation
to develop competency of employees & thereby enhance organizational
effectiveness & productivity.
2.6.2 HR Department of MGVCL other than undertaking routine HR work has also
contributed in areas of quality, customer relations and energy conservations.
2.6.3 Currently, HR department consist of HR Department of AGM, DGM and P.O who
undertakes all the activities related to HR Function.
2.6.4 HR Department has taken lead as far as getting of ISO certification for MGVCL
thereby contributing towards quality improvement. HR department had conceived,
developed and implemented a project called SAMPARK thereby we proactively meet
the consumers at nonconventional places and at leisure of the consumers. HR Dept.
has also taken lead as far as taking steps of energy conservations, whether be it
educating the school children on steps and benefits of energy conservation or
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educating the house wives on their role on energy conservation.
2.6.5 MGVCL’s HR Dept. strongly believes in training for better development of employees
and thereby prepared structural need based training calendar for its employees from
Class IV to I.
2.6.6 Discipline is an important aspect for running an organization and the HR Department
believes in fare and timely actions as far as disciplinary actions for its employees.
2.6.7 The Appraisal system in the organization is done by confidential performance review
done by the reporting officer followed by the reviewing officer. The performance is
judged on several parameters and marked on a scale of five and accordingly
promotions are done within the organization.
2.6.8 A performance management system is also in place which is at the initial level of
organization-business management.
2.6.9 HR Department has also taken a lead as far as use of E-urja is concerned and its
major functions like confidential reports, employee’s traceability and all other
employees’ related reports are now on line.
2.6.10 Employee Details

The total number of employees in MGVCL as on 31st Mar, 2010 was 6208. Out of
which 3605 were technical & the rest 2603 were non technical staff.
2.6.11 Administrative Division of MGVCL

The consumers' mix consisting of various categories such as residential, commercial,
industrial, and agricultural and others is served by Sub Division who are headed by
Divisional Offices throughout its operational area. This Divisional Offices has to
report to their respective Circles. The business affairs are managed by Corporate
Office presently headquartered at Vadodara.
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Figure 4: Administrative Structure of MGVCL
2.6.12 Organisational Chart

The Organizational Structure of MGVCL is depicted here under:
Figure 5: Organizational Structure of MGVCL
2.6.12.1 Roles and Responsibility

Finance & Accounts (F&A):
Finance department does all the function related with cash, bank
reconciliation, overall fund management, raising loans from Financial
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institutions & banks, Working Capital management, passing bills, salary, PF &
pension of the employees
Account department deals with core corporate accounts, cost audit, taxation,
insurance, annual report & financial statement, internal audit, Government
audit, matters related to revenue, govt grants & subsidies
Account section also deals with tariff & ARR petition, PP analysis, ALDC & ABT
matters, corporate budget & planning, annual plan for planning commission,
business plan and its implementation.
Regulatory affairs & Commerce:

The regulatory activities related with SERC/SLDC/STU/Holding Co and Bulk
Power Management is done by the department. Also acts as interface
between the organizational & external agencies for regulatory related
matters & issues. Processing of HT Applications, Consumer Redressal Forum,
Matters related to Commerce & Commercial Circulars & ARR/ Tariff petition
filing are also handled by the R&C department.
Procurement
All matters related to procurement, functioning of all stores & inventory
control, vendor registration & factory inspection, approval of vehicle hiring
proposals, department/ implementation of E-Urja, any other work entrusted
by competent authority.
SD&P – System development & planning

Compilation of material requirement for all works/projects and submission to
procurement department and follow up thereof, allotment of
material/issuance of dispatch instruction, administrative approvals of
proposals under ND/SIS, MP/MLA and all other schemes, technical scrutiny of
tenders, development of material specification, material inspection, T&D
Loss, MIS, Franchise development, RE wing including RGGY schemes.
CC - Circle Coordination
Review of progress of all schemes/projects, regular monitoring of various
activities of S/Dn & Circle, Coordination of EC and Apex Committee meeting,
matter pertaining to RTI Act, transformer repairing, Civil wing 7 works related
to it, HT/LT maintenance program & work related to it, follow up & daily
activity report, disaster/accident management, preventions &
compensations.
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HR – Human Resource
Human Resource department does all the function related with screening,
recruitment, selection, training & development of the employees. It also does
appraisal, promotion along with performance management of the employees
Vigil
Look after the vigilance activities related to power distribution and I/C
programmes to facilitate effective supervision of vigilance activities.
2.6.13 Activities undertaken for Human Resource Development

• Training
The Human Resources being the most valuable asset the Company endeavors to
provide an environment that each employee is motivated to contribute his/her best
to achieve the Company’s Goals/Objectives. The Company has taken series of
proactive HR initiatives including need based training and development programmes
with special emphasis on developing competencies of employees and thereby
enhancing organizational effectiveness.
The Company has provided various training and development activities for its staff at
GETRI (The Training Centre of GUVNL at Baroda), Power Stations and even at
external places.
• Performance Appraisal
Performance appraisals of Employees are necessary to understand each employee’s
abilities, competencies and relative merit and worth for the organization.
Performance appraisal rates the employees in terms of their performance.
Performance appraisal is necessary to measure the performance of the employees
and the organization to check the progress towards the desired goals and aims.
The performance appraisal is done every calendar year. The company has category
wise performance form for all its employees. The performance appraisal in the
organization is done by confidential performance review system that is done by the
reporting officer and reviewed by the reviewing officer. The performance is judged
on several parameters and marked on a scale of five and accordingly promotions are
done within the organization.
In case of any adverse comment from immediate reporting authority, the Appraisee
can appeal against it to the HR Deptt. and sort out the matter.
• Promotion
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The promotions in the company are based on the Annual Performance Appraisal.
The company also follows the Seniority basis promotions. The seniority cum merit
and merit cum seniority both the points are taken into consideration while
promoting the Employee.
Table 2: Man*Days Training Chart FY 2009-10
Class Total 1/2 day 1 day 2 day 3 day

Employees
I 1463 25 965 838 116
II 1284 0 900 256 145
III 2831 0 1850 1390 398
IV 1748 0 913 510 265

Total 7326 25 4628 2994 924
2.7 Corporate Social Responsibility

2.7.1 MGVCL is a leading power distribution company in Central Gujarat with its Head
Quarter located in Vadodara and an ancient city, popularly known and recognized as
cultural capital of Gujarat. MGVCL being responsible distribution utility aims to fulfil
its social responsibilities towards the citizens of the State of Gujarat.
2.7.2 Adoption of Chhotaudepur ITI

MGVCL has adopted Chhotaudepur Industrial Training Centre for upgradation under
Public private partnership scheme of Central Government. This will benefit the
students of Chhotaudepur and surrounding area. MGVCL is taking active interest in
upgradation of the ITI’s infrastructure.
2.7.3 MGVCL as a long ranging aim to actively participate wherever possible and required
in the benefit of the citizens of Gujarat.
2.8 Energy Conservation Measures

2.8.1 Various Energy Conservation Measures have been taken up by MGVCL which are as
follows:
• MGVCL from time to time organize energy conservation camps thereby
distributing awareness materials to consumers and people for educating them on
energy conservation.
• MGVCL also recognize the children as the future generation and MGVCL has
planned the children solar park in heart of Baroda city to educate the future
generation on the benefit of use of solar energy and energy conservation.
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• High-loss feeders have been identified, close monitoring is being done up to the
Sub-division level to reduce the technical losses and meters are provided on TCs
for better control on systems to identify the weak pockets with high losses.
• Purchase of energy efficient transformers i.e Star Rated Transformers by Bureau
of Electrical Energy having low losses than current IS level & thereby reduction in
power consumption by the transformers which ultimately result in reduction of
distribution losses.
• Energy audit program implemented vigorously
• All the transformer centers of city area are provided with static meters. The TC
meter is taken on monthly basis along with the meter reading of consumer
connected as TC.
• Meters with low burden also significantly reduce distribution losses.
• Cables & Conductors with more cross sectional area are utilised to reduce
resistance which also reduces distribution losses.
• Regular and periodical maintenance of line and equipments.
• Pamphlets explaining energy saving measures and its efficient use along with
energy bills are circulated for public awareness. The seminar on energy
conservation was also arranged during the year with participation of all
categories of consumers. Mass awareness amongst consumers for energy
conservation.
• Under the publicity campaign, printing of pamphlets, posters, banners,
telecasting of short films on TV, cable network and on radio, advertisement in
print media, depicting hoardings containing Energy saving messages/ slogans etc.
have also been carried out during the celebration of “Energy Conservation
Week.”
• Under the “Swarnim Gujarat Mahotsav”, the month of August-2010 was
celebrated as “Urja Shakti Month – Aug-2010”, under which various programs
were organized by the Company for creating awareness of energy conservation
with active involvement of the employees and public at large.
2.8.2 Specific areas in which R&D carried out by the Company:

• Cable and Conductor measuring instruments are proposed for all four Circles of
the Company. Installation at Narol RSO under Sabarmati Circle is completed.
• Concept of single phase transformer of 5 KVA introduced for reduction of
technical and commercial losses.
• Utilisation of 2 core 4mm2 cable instead of conventional 2core 2.5mm2 cable for
single phase service line to reduce technical losses.
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2.8.3 Advantages of HVDS by 5 KVA single phase T/C over LVDS
• Reduction of line losses at optimum capital investment
• Reduction in voltage drop.
• Reduction in failure of DTC.
• Prevention of Theft of energy.
• Improvement in Reliability of supply.
2.9 Activities related to Consumer Service
2.9.1 24 X 7: Customer care centre for best services

Madhya Gujarat Vij Company Limited is a leading power distribution company in
Gujarat, which distributes electricity in the central area of Gujarat. And mission is to
provide uninterrupted supply. To offer best services to valuable customers, we are
providing 24 hour customer care centre working for 365 days. Following services
which we are rendering to customers:
• Handling individual power complaint
• Restoring power supply after repairing major faults
• Preventive maintenance is an important pro-active measure
• Maintaining electric network from consumer to substation
• Providing emergency service in monsoon season
• Providing services to resolve no-power complaints in area / society
• Emergency maintenance during burning of jumper, snapping of conductor,
tree falling etc.
Total 28 customer care centers are proving services in Anand and Kheda District
under Anand city circle office of MGVCL, while in Baroda city area 17 customer care
centre are providing service for 24 hours.
In case of Baroda district rural area, MGVCL has 19 customer care centers under
Baroda (O&M) circle and in Godhra district MGVCL has 15 customer care centers
under Godhra circle.
2.9.2 Salient features of Trouble call center

• The trouble call center to provide better service to customers by leveraging the
GIS data
• Dialing with multiple lines and Interactive Voice Response System (IVRS) to
ensure the calls are properly registered and attended
• Decision support system to identify the probable cause for loss of power supply
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by analysis of the calls received.
• Dispatching of crew to attend the fault considering the expertise of the crew, its
availability and mobility
• Monitoring identification of fault, detection of the fault, fault isolation and
restoration of power supply.
2.9.3 Any Time Payment

It can be operated by the customers 24/7. It accepts cash/cheque/DD/Payorder,
issues an acknowledgement on every payment made and is a touch screen and
multimedia-based system. When the customer places the voucher/bill in the
designated slot under the barcode scanner, the ATP will automatically get started.
Suitable prompts are provided for guidance.
22 fully computerized ATP Centre have been installed in MGVCL (Baroda City-15,
Anand-7) to facilitate consumers to pay their energy bills at any time.
2.9.4 Energy Bill Collection Mobile Van from consumer's door step.
The company has initiated various steps towards consumer care and consumer
satisfaction. In this direction one more facility of energy bill collection from
consumer's door step is introduced by company. Under the above initiative, a Mobile
Van for bill Collection will move in various areas of the sub-division and payment of
energy bill of the consumers will be collected at their door step and computerised
receipt will be issued. Initially the consumers of Alkapuri, Gotri & Fatehgunj sub-
divisions will have this facility and mode of payment through cheque.
2.9.5 Hand Held Equipment

A user-friendly, compact and low-cost Hand Held Terminal for field applications.
Typically suitable for meter reading applications of upto 2000 consumers. It features
a Robust & Handy Integrated printer version for direct connection to external
printer. Spot validation minimises billing errors Increases billing efficiency & reduces
revenue cycle Meter reading with date and time stamp. Applications development is
in HLL (C language). Monthly billing with hand held instruments is in place in Baroda
city, Nadiad, Anand, Godhara, Dahod & Dabhoi towns.
2.9.6 E-payment facility

The company has launched the e-payment facility in June, 2010, as a part of
providing better services to consumers. With the help of this facility, the consumers
shall be able to make the payment of their electricity bill through internet either by
using net banking or Credit/ debit card at their own convenience at any time from
anywhere within the due date of payment of electricity bill. The above arrangement
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has been made with more than 20 banks covering all major Public Sector Banks and
Private Sector Banks.
2.9.7 Explanation of the parameter mentioned in the bill is given on the website for
clearing consumer’s billing related doubts. The company’s website is regularly
updated to make it more informative & customer friendly.
2.10 Other Activities carried out by MGVCL
2.10.1 Drum Project

The United States Agency for International Development (USAID) in collaboration
with the Ministry of Power (MoP), Government of India conceived an innovative
program aimed at accelerating the pace of reform in India's electricity distribution
sector with a special focus on improving the nation's rural energy supply situation.
The goal of the Distribution Reform, Upgrades and Management (DRUM) Project is
to improve the quality of electricity services in India. While it will focus on the entire
distribution sector, DRUM views rural electrification as key to a sustainable solution
for India's electricity supply problems. A core focus area calls for the development of
a rural electrification strategy based on the successful experience in the US. A team
from the US Rural Utilities Service (RUS) will join with India's Rural Electrification
Corporation (REC) to advise on this and related matters.
Other major components of the DRUM initiative include pilot projects to create
centers of excellence. DRUM also has an ambitious training component with an
extensive array of specialized programs focused on electricity distribution. An allied
program will address unique aspects of the water-energy nexus.
Background and Perspective

DRUM Program the DRUM program assists MGVCL by helping MGVCL create a
center of excellence. The center serves as a model to be both scaled up and
replicated elsewhere in MGVCL (and other utilities). DRUM consists of technical
assistance (TA), training needs assessment (TNA), and funding. At Umreth sub
division DRUM project is being implemented. Advance technology Surge Arrestors
were installed on all the transformer centre.
Socio – Economic
Umreth Taluka comprises one main town (Umreth) with 35 numbers of surrounding
villages having a total of 226 square kilometers of service area.
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2.10.2 RMU - CONCEPT OF RING DISTRIBUTION:

The concept of Ring distribution was introduced to get the uninterrupted power
supply even in the event of faults in the Ring feeders.
The first step was to go for OIL based RMUs since the initial cost of the RMU could
be fitted well within the budgets. The RMUs were installed and commissioned for
important HT consumers and the concept of RING distribution was validated. This
proved to be a major success in the city and consumers were very satisfied on the
overall power situation. This was how the concept of RING MAIN DISTRIBUTION was
first time established in the city.
The power demand was growing and the no. of consumers was also growing with
the time. This growth became exponential within last one year and the electrical
network also became complex due to increased connections, size of the load
transformers, fault level etc. Within the fixed geographical size MGVCL needed to
cater to the increased demand with better efficiency. The right solution was to go
with the time and bring in the latest technology in the system. Some of the major
advantages achieved were:
• Space saving - Atleast 50% of the total space is reduced. The same is being
converted into office area, customer care center, billing section etc.
• Minimum maintenance in Oil RMUs & no maintenance in SF6 RMUs and
therefore effective utilization of staff.
• The protection is with circuit breaker along with a self-powered relay. This
combination gives the most reliable protection for transformers as well as
feeders.
• Minimum inventory in Oil & no inventory or maintenance of spares in SF6
RMUs is required since the unit itself is fully maintenance free for its life.
• Faster restoration of supply in the event of faults.
• Safe and easy to operate. No personnel hazards.
• Better aesthetic values given to substation leading to healthy and improved
working environment.
• RMUs are already ready for SCADA/ automation to be done in near future.
This was a major breakthrough achieved by MGVCL and have now found the right
product for the right application. MGVCL has taken these steps of modernization in
the direction towards customer satisfaction and excellence.
The thinking process and work is being extended further to look into the possibilities
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period FY 2011-12 to 2015-16
MGVCL
of underground network across the city with usage of Ring main technology.
2.10.3 GIS implementation

GIS is implemented & commissioned in 10 nos. of towns. GIS has been implemented
at Vadodara City Circle, Padra, Dabhoi, Karjan, Khambhat, Kapadwanj, Umreth,
Nadiad, Halol, Godhara, Dahod etc. The major features of GIS implementation are as
follows:
• Identification of all network components & every consumer with geographical
reference and their relationship are available at the click of mouse;
• Integration of heterogeneous information and connecting activities based on
geographic proximity.
• Developing IT enabled benchmark & scientific approach to maintenance activity
of the Network.
• Since MGVCL’s network is overhead & visible the approach was sufficient to
meet the requirements.
• Oracle database created for assets, consumers & GPS details
Custom built software to meet MGVCL’s functional requirements.
• A Rover with the base gives accurate location of poles, transformers etc.
Above details fed into a computer to generate the electrical distribution network
• Map is stored in digital form making it easy to maintain and update.
• Every consumer is identified as a distinct location on a feeder and every link from
the sub-station to the consumer including lines, transformer centers is available.
• Quick rectification of faults –Trouble Call Center.
• Identification of low voltage and high losses.
• Energy audit with system planning and analysis.
• A proper asset management due to such activity.
2.10.4 Testing of high quality meters

The Hi–Tech Laboratory for testing of high quality meters with accuracy confirming
to Indian Standards is set-up at Baroda whereby 20 numbers of testing positions
have been implemented. The MTE Make Fully Computerized meter testing bench
with CAMCAL Software is currently used in all over the world.
2.10.5 R-APDRP
Under part A of R-APDRP, projects for 17 towns of the company at an estimated cost
of Rs 93.75 Crs have been sanctioned. (It includes common data centre and disaster
recovery centre for all fellow distribution companies). The company has also
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MGVCL
appointed consultants & IT implementing agence for implementation of he said
projects.
Under part B, projects for 13 towns of the company at an estimated cost of Rs
103.03 Crores are sanctioned during the current year.
2.10.6 Implementation of remote access metering to HT consumers

The meters provided on consumer installation are augmented with an electronic
gadget, which provide the readings and other parameters directly. In this scheme,
GSM communication system is used for taking automatic meter reading without
visisting the sites of consumers. The complete metering data becomes available on
the main server & the syatem also provides signals for any tempering with meters or
meter data.
2.10.7 Implementation and use of advanced technology

• Use of SCADA system for better load management
• Office automation through e-urja programs
• Replacement of all old conventional meters by high precision meters to record
actual energy
2.11 Major Achievements of MGVCL

In past five years from the date of segregation of GEB, MGVCL has tried to perform
individually based on the characteristics that were awarded due to unbundling.
MGVCL has tried to overcome such stringent situation and has tried to conquer
through their best efforts and dedication to bring overall efficiency in the system.
MGVCL has been awarded ‘INDIA POWER AWARD-2010’ and Certificate by

Council of Power Utilities, New Delhi for Innovation in Design and Execution of
Projects for the year 2009-2010.
Awarded ‘BRONZE SHIELD’ and Certificate of appreciation by Ministry of Power,
Government of India for ‘MERITORIOUS PERFORMANCE’ for the year 2008-2009.
Recipient of ‘ENERTIA AWARD-2009’ award for best performing PSU utility
recipient of ‘ I.E.E.M.A. power awards -2008’ for excellence in power distribution
in urban and rural sector
Awarded ‘GOLD SHIELD’ and Certificate of appreciation by Ministry of Power,
Government of India for MERITORIOUS PERFORMANCE for the year 2006-2007.
Gujarat State Won 1st prize in “INDIA TECH EXCELLENCE AWARD” in November,
2007 MGVCL case study was considered for this award
MGVCL is the only DISCOM to receive NABL accreditation for Testing and
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period FY 2011-12 to 2015-16
MGVCL
Calibration for its “High Tech Meter Testing Laboratory” at Vadodara. MGVCL has
also set up the State of the Art testing facility for CT and PT
MGVCL is the 1st Government Owned Distribution company to be ISO Certified
MGVCL got the patent for “improved single phase power system” popularly
known as “Specially Designed Transformer (SDT)”. Its for the first time in history
that such a revolutionary technology breakthrough invented by a DISCOM has
received a patent for such invention.
The company was the highest amongst all fellow subsidiary distribution
Companies in obtaining the performance based incentive decided by Gujarat Urja
Vikas Nigam Limited (GUVNL), the holding Company.
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period FY 2011-12 to 2015-16
MGVCL
3. Operational Performance Analysis
3.1 Background
3.1.1 This section elucidates MGVCL overview of its business into operational performance
for the previous years. A comparative analysis of the operational performance for
various years in relation to Sales, T&D Loss, Reliability indices, Collection Efficiency,
etc is discussed here.
3.1.2 In spite of the fact that MGVCL is inherited with an old distribution infrastructure
from the erstwhile GEB, MGVCL is making all out efforts to improve / sustain the
performance as well as to supply quality power to the consumers.
3.2 Demand Supply Situation in MGVCL

3.2.1 The demand-supply for electricity has increased manifold; despite significant overall
progress in the power sector, there had been a significant gap between demand and
supply. In FY 2009-10, the gap seemed to reduce considerably to 8% as shown
below:
Table 3: Peak Deficit FY 2007-08 to 2009-10
FY 2007-08 FY 2008-09 FY 2009-10

Unrestricted Demand (Max MW) 1353 1318 1045
Restricted Demand (Max MW) 1338 1303 1040
Supply (Max MW) 938 970 959
Peak deficit (%) 30% 26% 8%
Figure 6: Max Demand/Supply (MW) FY 2007-08 to 2009-10
Restricted Demand (Max MW) Supply (Max MW)
1600 1338 1303

1400
1200 1040
DEFICIT AREA
1000 938 970 959
MW
800
600
400
200
0
FY 2007-08 FY 2008-09 FY 2009-10
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MGVCL
3.3 Sale of Power
3.3.1 Currently, MGVCL is serving around 25 Lacs of consumers of which around the
maximum consumption is from residential, agricultural and HT industrial consumers.
The factors affecting the actual consumption of electrical energy are numerous and
often beyond the control of the licensees (policy, economy, individual consumer’s
conditions, recession, etc.) or even the consumers (weather, variations in demand-
supply conditions of the consumer’s product, etc.).
3.3.2 Given below is a graph depicting the sale of power across different categories for the
year 2005-06 to 2009-10. Residential & Industrial category has the maximum energy
consumption.
Figure 7: Past 5 years' Energy Sales
2000
1800 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10
1600
1400
1200
MU's
1000
800
600
400
200
0
Residential Commercial Industrial LT PWW Agriculture Street Light Industrial HT Railway
FY05-06 973 310 357 102 743 46 1327 266
FY06-07 1078 348 388 107 723 50 1553 280
FY07-08 1185 407 432 119 746 53 1618 305
FY08-09 1316 463 446 133 817 57 1839 329
FY09-10 1428 508 472 145 909 59 1877 358
3.3.3 The growth in the sale of power for different categories over a period of 5 years i.e.
from FY 2005-06 to 2009-10 and over duration of one year i.e. from FY 2008-09 to
2009-10 is given below.
It is the Residential, Commercial & Agriculture categories which have shown an

increase in the consumption of Energy. Whereas for Industrial HT growth in energy
sales has been very low last year which is mainly due to introduction of competition
in the sector and recovery impact from recession.
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MGVCL
Table 4: Past Years’ Sales Growth Rate

Sales (MU)
Residential 10.07% 9.78% 8.5%
Commercial 13.14% 11.72% 9.7%
Agriculture 5.17% 10.38% 11.3%
Street Light 6.42% 5.51% 3.5%
LT Total 8.60% 9.40% 8.9%
HT Total 8.83% 7.81% 3.1%
TOTAL 8.69% 8.77% 6.6%
3.4 Reduction in distribution losses

3.4.1 Various practices regarding distribution loss reduction adopted by the utility has
made it possible to achieve a low distribution loss level of around 13% in FY 2009-10
from distribution loss level of 21% in 2005-06 which is very efficient compare to
other State Utilities who have a distribution loss of around 30%.
3.4.2 The state government bifurcated the rural supply and provided the domestic
consumers 24_hour power supply on a single phase, while the private tube wells
(PTW) were given 8-hour continuous supply for irrigation on a three-phase line.”
The three-phase line for irrigation helped save power too, as the high-current lines
tripped every time anyone attempted to hook on to them illegally.
3.4.3 Apart from bifurcating the rural supply, the Gujarat government went step further
and installed specially designed transformers which trip to draw electricity from a
three – phase line.
3.4.4 Given below is a graph depicting reduction in distribution losses over the last five
years. During FY 2009-10, due to poor monsoons the company had to provide more
hours of power supply to Agricultural feeders, and therefore the losses increased in
comparison to the year 2008-09.
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period FY 2011-12 to 2015-16
MGVCL
Figure 8: Reduction in Distribution Losses
25 21.33
20
Distribution Loss %
14.85 13.9
15 12.98 13.08
10
0
2005-06 2006-07 2007-08 2008-09 2009-10
%Dist Loss
3.4.5 Activities undertaken by MGVCL to control loss are as outlined below:
3.4.5.1 Technical Loss reduction Activities are planned as under:
a. Reconductoring of Overhead HT Line

The copper conductor as well as deteriorated conductor in coastal, chemically
polluted areas is replaced with appropriate size of new AAA conductor. The old
replaced conductor is re-cycled and re-used and converted into Aerial Bunch
cable.
The RABBIT/DOG conductor is used wherever the ampere loading of feeder is
more than 100 Amp, lengthy feeder % HT VR is high. This re-conductring has
considerably reduced the technical losses.
b. Bifurcation of Feeders
To reduce the technical losses as well as to maintain the tail-end voltage
regulation, the lengthy feeder and overloaded feeder having more than 150
Amp. Loading is further bifurcated. This has reduced the technical losses and
improved the voltage profile.
c. Load Balancing
Due to Jyoti Gram Yojana, the Mix feeder consisting of irrigation pump load and
lighting load is separated in two categories of feeders i.e Jyoti Gram feeder (3 x
24 hrs power supply) and Ag Dom feeder (8 hours 3 phase power supply and 16
hours 1 phase power supply). Because of that, most of the Transformers were
having un-balance lighting load i.e. on two phases. Therefore to reduce the
Technical losses, the Transformers are balanced by measuring peak hour loading.
All the distribution transformers in urban areas as well as on industrial feeders
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period FY 2011-12 to 2015-16
MGVCL
are provided with electronic meter, the load profile of each transformer is
studied and accordingly load balancing of each phase is done. This has reduced
the transformer failure as well as improved the voltage profile on each circuit,
which has led to reduction in technical losses.
d. Optimum size of Transformers
Each transformer load profile is studied and if the connected load on the
transformer is found less or more than the KVA capacity of the transformer, the
transformer is immediately either de-augmented or augmented. This has saved
the technical losses of the transformer and also improves voltage profile.
e. Low Loss Transformer
Since last 5 years, the low loss transformers of various capacities are also used by
company. For the small capacity transformers used in rural areas, as well as
where single phase power supply is given, the low loss transformers are used,
which has saved the no load losses.
f. High Voltage Distribution System (HVDS)
5430 HVDS is being implemented in MGVCL to reduce hooking in rural areas as
well as to reduce the LT line losses. In order to implement HVDS system, sum of
contracted load of feeders and sum of connected KVA of each TC is worked out
and if there is an exorbitant difference between these two, de-augmentation of
the transformer is recommended by way of providing appropriate capacity of
Transformer in accordance with contract load.
MGVCL has already installed about 1826 Nos. of 5 KVA single phase transformer
for Zupadpatti, Kutir Jyoti, suburbs and small clusters areas. The company has
also purchased 10 KVA, 16 KVA, 25 KVA Transformers for giving power supply to
individual agricultural connections under the Special Scheme, “KHUSHY” (Kisan
Heet Urja Shakti Yojana), i.e. HVDS. The implementation of KHUSHY (HVDS) will
not only reduce the Technical Loss but also the Commercial Loss by way of
reducing theft of power.
g. Use of 11 KV XLPE U.G. Cable
In view of following discrete advantages we have provided Under Ground HT
XLPE cable in city area.
• Reduction in interruptions and thereby increasing system reliability
• Reduction in accidents
• Increase in Customer Satisfaction
• Enhancing the aesthetic look
• Reduction in I2R loss due to low resistance
h. Automatic Power Factor Controller (APFC)
MGVCL has installed 7922 Nos of Automatic Power Factor Controller (APFC)
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period FY 2011-12 to 2015-16
MGVCL
panels of various capacities are installed on Distrubution Transformers covering
250 Nos. Of 11kV Feeders. APFC panels are used for improvement in Power
Factor, thereby reducing reactive Power. Auto Power Factor Controllers are
capable to switch ON and OFF the capacitors in stages and automatically
maintain the desired power factor. The APFC will improve the supply voltage to
the consumer as well as reduce the reactive component. This will lead to
reduction in line current, which in turn, will enhance the capacity of the feeder.
i. 11 kV Line Capacitor
Under the US-AID Drum Project, 25 Nos. of 600 KVAR line capacitors are
purchased and installed in urban as well as industrial feeders. The result before
and after installation of line capacitors is encouraging as considerable reduction
in line current is observed. This enabled us to accommodate additional number
of HT connections without enhancing the capacity of line or transformer at sub-
station end, which eventually generated additional revenue for the company.
The 11 KV line capacitors have also helped in maintaining power factor as
stipulated under GERC Regulations.
j. Feeder managers are appointed even at corporate level to achieve the results
within a set time frame to reduce losses
k. CRGO transformers are replaced by energy efficient amorphous transformers in
order to reduce technical losses on distribution side
l. Replacement of old/ deteriorated conductor by PVC coated conductors
m. Reduction of HT/LT ratio: LT line is reduced by providing low capacity
transformers in the identified areas i.e. to maintain technically acceptable level
of HT:LT ratio & to bring down technical losses.
3.5 Consumer base

3.5.1 Given below is a graph depicting the number of consumers across different
categories for the year 2005-06 to 2009-10. The majority of the consumers are in the
residential category followed by the commercial one.
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period FY 2011-12 to 2015-16
MGVCL
Figure 9: Past 5 Years’ Consumer Base
Residential Commercial Industrial LT PWW

Agriculture Street Light Industrial HT Railway
100%
95%
90%
85%
80%
75%
FY05-06 FY06-07 FY07-08 FY08-09 FY09-10
3.5.2 Underlying is a table depicting the growth rate of consumer categories for a period
of 5 year, 3 year & 1 year resp. There is a sharp growth in case of agricultural
consumers which shows that all new connections are released through metering
which will in turn ensure reasonable & accountable energy supply to agricultural
consumers.
Table 5: Past Years' Consumer Growth Rate

No. of Consumers
Residential 6.97% 4.26% 6.1%
Commercial 3.14% 1.44% 1.7%
Agriculture 3.96% 2.92% 7.5%
Street Light 7.76% 5.97% 20.5%
LT Total 6.44% 3.91% 5.7%
HT Total 7.85% 4.49% 6.7%
TOTAL 6.45% 3.91% 5.7%
3.6 Power Purchase

3.6.1 The following figure shows the per unit rate of power purchase for MGVCL during
the last 5 years. As can be seen from the figure, per unit rate has increased
significantly.
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period FY 2011-12 to 2015-16
MGVCL
Figure 10: Past 5 Years' per unit Power Purchase Rate
4.00 3.37 3.17

2.70 2.80
3.00 2.46
2.00 Cost per unit (Rs/

Unit)
1.00
0.00
2006 2007 2008 2009 2010
3.7 Support from GoG in past 5 years

3.7.1 GoG provides the agricultural subsidy to the four Discoms i.e. DGVCL, PGVCL, UGVCL
and MGVCL in proportion to their respective percentage share in agricultural
consumption to compensate for the revenue loss due to subsidized category of
consumers as well as for unmetered consumption. The total amount of subsidy
released each year is Rs 1100 Cr which is allocated as stated above.
Table 6: Past 5 Years' Agriculture Subsidy Support provided
Agricultural FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Subsidy (Rs Cr) 78.85 54.73 54.41 76.01 78.03
3.8 Operating Indices

3.8.1 As per GERC (Standard of Performance of Distribution Licensee) Regulations, issued
by the Hon’ble Commission on 31st March 2005, it has been directed that MGVCL
shall calculate the reliability of his distribution system on the basis of number and
duration of sustained interruptions in a year, using the following indices:-
A. System Average Interruption Frequency Index (SAIFI);

B. System Average Interruption Duration Index (SAIDI); and
C. Momentary Average Interruption Frequency Index (MAIFI)
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period FY 2011-12 to 2015-16
MGVCL
Table 7: Operating/ Reliability Indices
Reliability Indices FY 2007-08 FY 2008-09 FY 2009-10

SAIFI 3.29 2.59 3.35
SAIDI 16 18.75 23.67
MAIFI 15.71 17.15 22.82
3.8.2 System Average Interruption Frequency Index (SAIFI) is the average number of
times that a consumer is interrupted during a specified time period. It is determined
by dividing the total number of consumers interrupted in a time period by the
average number of consumers served. The resulting unit is "interruptions per
consumer".
As seen in the above table, the interruptions per consumers reduced in FY 2008-09
but again due to climatic conditions (poor monsoons) increased in FY 2009-10.
3.8.3 System Average Interruption Duration Index (SAIDI) measures the average duration
of interruptions for the average consumer. It is the ratio of the annual number of
interruptions to the number of consumers.
As seen in the above table, the duration of interruptions per consumer has
increased, mainly due to poor monsoons
3.8.4 Momentary Average Interruption event Frequency Index (MAIFI) measures the
average momentary interruption events per consumer. It is the ratio of the annual
number of momentary interruptions to the number of consumers.
As seen in the above table, the interruption per consumer has increased, mainly due
to poor monsoons.
3.9 Distribution transformer failure rate

3.9.1 The figure given below shows there is a significant reduction in the distribution
transformer failure rate over the last 5 years and it has reduced to 5.06% for the year
2009-10. The reason behind this is reduction in low voltage profile, conversion of
LVDC to HVDS, vigorous transformer maintenance, maintenance of LT Lines,
providing breezer and lighting arrestor, etc. Currently 121 transformers are covered
under DTC review.
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period FY 2011-12 to 2015-16
MGVCL
Figure 11: Reduction in DTR Failure rate
14 13.01
12
9.6 9.68
DTR failure rate %
10
8 6.11
5.06
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
%Distribution Transformer Failure failure
3.10 Employee Rationalization

3.10.1 The total number of employees in MGVCL as on 31st Mar, 2010 was 6208. Out of
which 3605 were technical & the rest 2603 were non technical staff.
Given below is a graph depicting Class wise break-up of the technical as well as the
non-technical staff.
Figure 12: Class- Category wise Employee Breakup
Tech 231 881 2201

292
I
II
III
Non Tech 33 88 2047 435 IV
0 1000 2000 3000 4000

No. of Employees
3.10.2 Employee Expenses per unit power sold

The figure given below shows the employee expenses per unit power sold for the
last 5 years. Employee expenses are quite high here due to a large workforce which
is at MGVCL from restructuring.
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period FY 2011-12 to 2015-16
MGVCL
Figure 13: Past Years' Employee's expenses per unit power sold
Employee Costs/Unit Sold
0.50 0.45
0.41
0.40 0.34 0.35
0.28
Rs/ Unit
0.30
0.20
0.10
0.00
FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10
3.10.3 The following figure compares the employee expenses per unit power sold across
various Discoms in India. Compared to other Discoms in Gujarat as well as some of
the Discoms in other states, the employee expenses for MGVCL are on a slightly
higher side. Approved Employee cost (Rs/Unit) for FY 2009-10 for states other than
Gujarat are taken from their Tariff Orders.
Figure 14: State wise Comparison of Employee Expenses per Unit Power Sold
0.45
0.40
0.43
0.41
0.40
0.35
0.33
0.30
0.30
0.25
0.26
0.26
0.26
0.20
0.22
0.22
0.20
0.19
0.15
0.17
0.10
0.05
0.00
PGVCL UGVCL DGVCL MGVCL MSEDCL JdVVNL JVVNL AVVNL DVVNL MVVNL PVVNL PooVVNL CSPDCL
3.11 Revenue Realized from sale of Power Vs Average Cost of supply

3.11.1 The figure given below shows the revenue realized per unit of electricity sold
(excluding government grant & subsidies & revenue from other income) in
comparison with the average cost of supply for the last 5 years.
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period FY 2011-12 to 2015-16
MGVCL
Figure 15: Past 5 Years' Revenue realized Vs Average Cost of Supply
Revenue Per unit
Average Cost of Supply
revenue realized as a % of CoS
6.00
5.00 4.26 4.574.83 4.514.76
3.82 4.10 3.87
3.79
4.00 3.48
Rs/Unit
3.00
2.00 91% 92% 91% 95% 95%
1.00
-
2005- 06 2006- 07 2007- 08 2008- 09 2009- 10
3.12 Demand Side Management

MGVCL is a leading power distribution company in Central Gujarat with varied
consumers like Agricultural, Domestic, Commercial and Industrial. Gujarat is mainly
dependent on Thermal Power i.e. Coal for its electricity power generation. MGVCL as
a power distribution utility has a long ranging aim to reduce its carbon foot printing.
MGVCL has taken tremendous and remarkable steps to reduce energy consumption
by increasing end use efficiency. Sine 1-06-05 with the setting of ALDC, the pattern
of load demand is studied hourly, daily and on monthly basis to examine the type of
load and its effect on MGVCL system. A brief summary of the steps undertaken to
manage the demand and reduce it as far as possible are as follows:
3.12.1 In its efforts to reduce the environmental carbon, MGVCL has replaced all tube lights
in its all offices from conventional choke tube light to T5 energy conservation tube
lights. Currently, no offices of MGVCL use incandescent bulbs.
3.12.2 MGVCL further planned to use solar energy for its own office. MGVCL has planned a
pilot project of installing roof type solar powers in its five sub-division offices,
thereby reducing its own usage of electricity.
3.12.3 Reducing Co-Incidental Peak Load

Providing different time slots to Agricultural Consumption by doing regrouping. For
this existing 4 groups of G1, G2, H1, H2 were bifurcated into 8 groups in such a way
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period FY 2011-12 to 2015-16
MGVCL
that no group had maximum load not more than 100 MW at any time of the day or
season. Further district wise regrouping was done by forming smaller group of 50
MW load in each group & further smaller groups of 20 MW each. Hence correct
assessment of actual agriculture demand has been done resulting in the formation of
a smooth and considerably flat load curve.
Correct assessment of Agricultural demand is done by creating pure Agriculture &
Agriculture dominant feeder.
3.12.4 Power Factor Correction

• Providing capacitor at the inductive load end and regular checking of installation
for the same.
• Power factor penalties for low PF of HT consumers are introduced.
• Automatic Power Factor Correction Panels: APFC Panels introduce capacitance in
the system as per the requirement of the system by switching on the capacitors.
This improves the power factor of the system & reduces the current in the
system. This is an effective measure for reducing technical losses
3.12.5 MGVCL has long range aim to reduce its own carbon foot printing as far as possible
without compromising on services rendered to its consumers.
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MGVCL
4. Financial Performance Analysis
In this section, the financial statement of MGVCL have been reviewed and evaluated
to understand the financial health of the company and to enable more effective
decision making.
4.1 Revenue Statement Analysis

Following is the Discom’s Profit & Loss statement for the last 5 years:
Table 8: Profit & Loss Statement FY 2005-06 to 2009-10
FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 CAGR %

Particulars
[Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % FY 06-10
INCOME
Revenue from Sale of Power 1,435 90.5% 1,716 91.1% 1,881 90.5% 2,469 94.4% 2,597 94.0% 16%
Revenue Subsidies and Grants 101 6.4% 58 3.1% 58 2.8% 76 2.9% 78 2.8% -6%
Other Income 50 3.1% 111 5.9% 139 6.7% 69 2.6% 87 3.1% 15%
TOTAL INCOME 1,587 100.0% 1,885 100.0% 2,077 100.0% 2,614 100.0% 2,762 100.0% 15%
EXPENDITURE
Purchase of Power 1,342 84.6% 1,516 80.4% 1,718 82.7% 2,254 86.2% 2,287 82.8% 14%
Repairs and Maintenance 34 2.2% 39 2.1% 38 1.8% 33 1.3% 36 1.3% 1%
Employee Costs 117 7.4% 204 10.8% 167 8.0% 188 7.2% 237 8.6% 19%
Administration and General Expenses 21 1.3% 31 1.6% 32 1.5% 34 1.3% 36 1.3% 15%
Other Miscellaneous Expenses 1 0.1% 1 0.1% 1 0.1% 11 0.4% 22 0.8% 116%
Depreciation 35 2.2% 48 2.5% 59 2.8% 70 2.7% 84 3.0% 25%
Interest and Finance Charges 67 4.2% 62 3.3% 65 3.1% 73 2.8% 80 2.9% 5%
Sub-Total 1,616 101.9% 1,901 100.9% 2,081 100.2% 2,662 101.8% 2,782 100.7% 15%
Less: Other Expenses Capitalised 43 2.7% 45 2.4% 41 2.0% 54 2.1% 50 1.8% 4%
Sub-Total 1,574 99.2% 1,856 98.5% 2,040 98.2% 2,607 99.7% 2,732 98.9% 15%
Extra-ordinary items 0 0.0% 0 0.0% 0 0.0% - 0.0% - 0.0% -100%
Net Prior Period Expenses / (Income) 0.0% 2 0.1% 33 1.6% 1 0.0% 7 0.3% 67%
TOTAL EXPENDITURE 1,574 99.2% 1,858 98.6% 2,074 99.8% 2,608 99.8% 2,739 99.2% 15%
PROFIT /(LOSS) BEFORE TAX 13 0.8% 27 1.4% 4 0.2% 6 0.2% 23 0.8% 16%
Tax Expenses / (Income) -4 -0.3% 10 0.5% 1 0.1% 1 0.1% 6 0.2% -16%
Net Profit / (Loss) after Tax available
17 1.1% 17 0.9% 2 0.1% 5 0.2% 17 0.6% -1%
for appropriation
Units Sold (Mus) 4,124 4,527 4865 5400 5,756 9%
Revenue Per unit 3.48 3.79 3.87 4.57 4.51 7%
Average Cost of Supply 3.82 4.10 4.26 4.83 4.76 6%
4.1.1 Sale of Power

• Units sold have increased by 9% over the last 5 years whereas the revenue has
increased by 16%. This is mainly due to increase in tariff & cost-plus mechanism
adopted by GERC whereby there is an increase in cost also.
• The major increase in sales was in FY09, as the demand was witnessing a boost
due to recovery phase from the global recession period faced by all the major
countries in the world
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MGVCL
4.1.2 Total Revenue
• The total revenue comprises of revenue from sale of power, subsidies & grants. It
has witnessed a CAGR of 15% wherein revenue from sale of power has witnessed
a CAGR of 16%.
• Revenue from sale of power is around 94% of the total revenue which shows that
the other income and revenue from grants doesn’t impact the profitability of the
company and only revenue from core sale of power to the consumers is affecting
the liquidity position.
• The % revenue from subsidy and grants in total revenue is declining and has
shown a negative CAGR of 6% because of the capping on subsidy of Rs 1100 Cr
from GoG.
• The total revenue has shown a CAGR of 15% whereas the net PAT has witnessed
a negative CAGR of 1%, hence the profitability of the company has been declining
over the past years
4.1.3 Power purchase expenses

• As common to all the distribution utility, Power Purchases expenses has the
major proportion in the total cost of the MGVCL. It almost contribute around
82% to 85% of the total income earned incurred by MGVCL.
• The power purchase cost has increased at a CAGR of 14% in last 5 years. The
increase in the Power purchase cost is more or less in proportion to the increase
in the total revenue which is around 15% which has offset the major impact of
the Revenue hike in the profit and loss statement. The market rate of power in
last year has witnessed a major increase in cost per unit which is in the range
from Rs. 5 per unit to Rs. 12 per unit on short term procurement basis.
• The power purchase cost has increased almost by 14% in last 5 years due to
increase in demand and the purchase of power from the open market at
available cost to meet the demand supply gap for the state and mitigate the load
shedding. However, the procurement of power is undertaken by GUVNL, the
allocation of power is as per the consumer mix of the region vis-a-vis availability
in the market. GUVNL is considered to have one of the best power procurement
plan with least cost impact on the DISCOMs.
4.1.4 Operation and Maintenance Expenses

• O&M expense is the second prime expenses after power purchase cost. The
O&M expense accounts for about 8 – 10% of the total income earned by MGVCL.
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MGVCL
• The proportion of Repair & Maintenance expenses and Administrative & General
Expenses is only about 2.6% of the total income earned whereas 8.6% is towards
employee expenses.
• R&M expenses are decreasing from FY 2008-09 due to efficient management of
distribution infrastructure system and have shown a CAGR of 1%.
• The increase in A&G costs are due to the increase in fees and subscription
charges, Expenses on Computer Billing & EDP Charges, security expenses.
• The major reason for the increase in O&M cost is the Employee Costs. The
employee cost has increased with a CAGR of 19% over the last 5 years due to
revisions in pay as per 6th pay Commission recommendations.
4.1.5 Other Miscellaneous Expenses

• Other Miscellaneous expenses consists of small & low value items written off,
written down value of assets scrapped, bad & doubtful debts written off,
miscellaneous losses, deferred revenue expenses written off.
• The expenses in this category have witnessed 116% CAGR over the last 5 years.
4.1.6 Depreciation
• Depreciation as an expenses are around 3% of the total income.
• The depreciation has been increasing from FY 2006-07 due to the commissioning
of major renovation and modernization expenses and new distribution
infrastructure carried out by MGVCL
4.1.7 Profit before Tax

• Though, the cost of supply is higher in comparison with the revenue realization
from sale of power. The difference is offset by way of subsidy and other income.
Hence making average rate of realisation higher than average cost of supply.
• In the FY 2009-10, the profit was around Rs. 23 Crs which was around 0.8% of the
total income.
4.1.8 Profit after Tax

• PAT for FY 2009-10 is Rs 17 Crs which is 0.6% of the total income. PAT has shown
a significant increase over the past years due to reduction in power purchase
cost i.e power purchase cost was 82% of total income in FY 2009-10.
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4.2 Balance Sheet Analysis
Given below is MGVCL’s Balance sheet for the last 5 years:
Table 9: Balance Sheet FY 2005-06 to 2009-10
FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 CAGR %

Particulars
[Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % [Rs in Crs.] % FY 06-10
SOURCES OF FUNDS
SHAREHOLDERS FUND
Share Capital 0.05 0.0% 0.05 0.0% 0.05 0.0% 212.64 15.4% 242.64 16.3% 734%
Share Application Money 267.90 28.7% 267.90 24.8% 267.90 24.3% 30.00 2.2% 0.00 0.0% -100%
Reserves & Surplus 17.41 1.9% 34.36 3.2% 36.78 3.3% 242.23 17.6% 259.29 17.5% 96%
Deferred Government Grants,
97.63 10.5% 252.05 23.3% 237.45 21.5% 353.70 25.7% 475.54 32.0%
Subsidies and Contributions 70%
LOAN FUNDS 0.00
Secured Loans 0.00 0.0% 23.39 2.2% 18.95 1.7% 204.60 14.8% 190.86 12.9% 101%
Unsecured Loans 549.81 58.9% 503.62 46.6% 543.07 49.2% 335.51 24.3% 315.75 21.3% -13%
TOTAL 932.81 100.0% 1081.37 100.0% 1104.20 100.0% 1378.68 100% 1484.08 100% 12%
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 968.47 103.8% 1189.70 110.0% 1391.52 126.0% 1679.13 121.8% 1913.92 129.0% 19%
Less : Accumulated
141.78 15.2% 190.82 17.6% 248.95 22.5% 319.48 23.2% 402.68 27.1% 30%
Depreciation.
Net Block 826.70 88.6% 998.88 92.4% 1142.57 103.5% 1359.65 98.6% 1511.24 101.8% 16%
Assets not in Use 0.06 0.0% 0.06 0.0% 0.07 0.0% 0.05 0.0% 0.39 0.0% 60%
Capital expenditure in progress. 59.74 6.4% 67.31 6.2% 72.86 6.6% 56.02 4.1% 72.41 4.9% 5%
TOTAL FIXED ASSETS 886.49 95.0% 1066.26 98.6% 1215.50 110.1% 1415.73 102.7% 1584.05 106.7% 16%
INVESTMENTS
CURRENT ASSETS, LOANS & ADVANCES
Inventories 85.59 9.2% 98.45 9.1% 107.06 9.7% 150.95 10.9% 180.08 12.1% 20%
Sundry Debtors 209.91 22.5% 257.73 23.8% 314.90 28.5% 331.84 24.1% 345.66 23.3% 13%
Cash & bank balances 54.57 5.9% 34.23 3.2% 28.24 2.6% 38.11 2.8% 28.79 1.9% -15%
Loans & Advances 15.28 1.6% 24.01 2.2% 28.55 2.6% 36.04 2.6% 25.68 1.7% 14%
Other current assets. 94.26 10.1% 222.30 20.6% 113.52 10.3% 245.30 17.8% 126.49 8.5% 8%
TOTAL CURRENT ASSETS 459.61 49.3% 636.72 58.9% 592.27 53.6% 802.24 58.2% 706.71 47.6% 11%
LESS :
Current Liabilities 403.65 43.3% 507.16 46.9% 562.56 50.9% 660.88 47.9% 661.28 44.6% 13%
Provisions 40.80 4.4% 115.68 10.7% 141.83 12.8% 17881.2% 13.0% 14539.8% 9.8% 37%
TOTAL CURRENT LIABILITIES &
444.45 47.6% 622.84 57.6% 704.39 63.8% 839.69 60.9% 806.68 54.4%
PROViSIONS 16%
NET CURRENT ASSETS 15.16 1.6% 13.88 1.3% -112.12 -10.2% -37.46 -2.7% -99.97 -6.7%
24.75 2.7% 0.00 0.00 0.0% 0.41 0.0% 0.00 0.0%
MISCELLANEOUS EXPENDITURE -100%
(To the extent not written off or
6.41 0.7% 1.23 0.1% 0.82 0.1% 0.00 0.0% 0.00 0.0%
adjusted) -100%
TOTAL 932.81 100.0% 1081.37 100.0% 1104 100.0% 1378.68 100.0% 1484.08 100.0% 12%
4.2.1 Fixed assets and Capital under Construction

• In the last 5 years, Net Fixed Assets have grown at a CAGR of 16% due to the
augmentation of distribution system carried out by MGVCL to cater the load growth
in the area to improve the quality of power supply.
• Overall the fixed assets including CWIP has witnessed a CAGR of around 16%
whereby only 5% of the total assets is CWIP which suggest that MGVCL is able to
execute and commission the distribution project on time.
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MGVCL
• The CAPEX plan undertaken includes re-enforcement of the system to provide
quality, security and availability of power supply to the consumers, to undertake
system development to meet the load growth, achieving the targeted reduction in
system losses, undertake automation and other improvement works to enhance
customer service.
• Some of the distribution schemes that are in progress in MGVCL are Kutir Jyoti,
Jyotigram, Nirmal Gujarat. Automatic p.f. control panel. Other new schemes include
Arial bunch conductor/ underground cables, Automatic meter reading, GIS.
Automation & computerization etc.
4.2.2 Net Current Assets

• Net Current Assets or the requirement of the working capital has shown a
tremendous decrease & the year-on-year growth rate has been negative recently
which is due to the expansion in the operation of the business, low credit period
available for payment against the power purchase, increase in the O&M cost, etc.
• The Net Current Assets have been negative past years due to decrease in other
current assets comprises of Income accrued but not due, Amt. recoverable from
employees/ex-employees, Interest Accrued & Due on Staff Loans & Advances.
Receivables from Government - Primary School, Other Misc. Receivable from Govt
Dept, Local Bodies, Deposits, Other receivables from Associate Companies including
GSECL, other Discoms, GETCO, GUVNL and GETRI. Also, current liabilities are
witnessing a CAGR of around 16% affecting the working capital requirement.
• The major portion in the current assets is the Sundry debtors (receivables against
supply of power) which have almost been around 50% of the Total Current Assets
and around 25% to 30% of Total Assets. Though the Sundry debtors are witnessing a
CAGR of around 13%, MGVCL has been able to control the default in collection due
to efficient collection management and have a collection efficiency of around 100%.
• The proportion of Current Liabilities to Total Assets has remained almost the same
i.e. 44% to 50%.
4.2.3 Equity in line with Debt

• To carry out the capacity expansion plant, Equity of the company has increased
subsequently.
• Due to such expansion plans, a Consumer contributions / grants / subsidies
increased by 32% last year whereas the Share Capital has witnessed a growth of
around 16.3%.
• GoG has issued a notification dated 12th December 2008 modifying the earlier
notification dated 3rd October 2006, whereby bifurcating the earlier notified entry
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MGVCL
share capital into equity share capital and share premium w.e.f 1st April 2008.
• As can be analysed, debt:equity ratio has been decreasing since FY 2008-09 when
share capital was infused and therefore the ratio is around 0.52 in FY 2009-10 which
is considered to be a low leverage and hence a financially sound company.
4.3 Ratio Analysis

The financial Ratio analysis of MGVCL is given below:
Table 10: Financial Ratio Analysis FY 2005-06 to 2009-10
Ratios Formula FY 06 FY 07 FY 08 FY 09 FY 10
Operating Cost to Sales (PP Cost + O&M)/ Sales 102.51% 101.71% 101.82% 99.40% 98.03%
(PP Cost + O&M)/ Total
Operating Cost to Total Revenue Revenue 93% 93% 92% 94% 92%
PBT to Sales PBT / Sales 1% 2% 0.2% 0.2% 1%
Return on Equity - (Pre-Tax) PBT / Equity 3% 5% 1% 1% 2%
Return on Capital Employed PBDIT/(Debt+Equity) 12.2% 12.6% 11.6% 10.8% 12.6%
Debt:Equity Debt / Equity 1.44 0.95 1.04 0.64 0.52
Current Assets / Current
Current Ratio Liabilities 1.14 1.26 1.05 1.21 1.07
Receivables / Total
Receivables in proportion to Total Revenue Revenue 13% 14% 15% 13% 13%
Payables in proportion to Total Cost Payables/ Total Cost 26% 27% 27% 25% 24%
Debtors/ Total Revenue *
Debtors Collection period 365 48.29 49.91 55.33 46.34 45.68
4.3.1 Operating Cost to Sales Ratio

Although the operation cost to sales is around 100%, revenue subsidies and other
income offsets the effect of higher operating cost which can be seen in the next ratio
of operating cost to total revenue. The operating cost to total revenue ratio has been
almost consistent around 92% to 94% throughout the period FY06 to FY 10. This
depicts the dependence of MGVCL on GoG for grant & subsidy and other income.
4.3.2 PBT to Sales Ratio

The PBT to Revenue ratio has decreased during the last 4 years period. The reasons
for the same are increased power purchase cost, increased employee costs and high
depreciation. But in FY 2009-10 it increased due to lower power purchase cost.
4.3.3 Return on Equity - (Pre-Tax) Ratio

As per the GERC (Terms & Conditions of Tariff) Regulations, 2005, the norm related
to return on Equity entitles the generating business the RoE of 14%. However, as the
actual performance is not matching upto the performance levels fixed by the
Commission, the Return on Equity (Pre-Tax) has been excessively low.
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MGVCL
4.3.4 Return on Capital Employed Ratio
The return on capital employed has been almost consistent in the range of 11% to
13% during last 5 years.
4.3.5 Debt Equity Ratio

Ideal debt equity is expected to be 2.33%. However in MGVCL case, the proportion
of equity is more than debt since last 3 years due to fusion of share capital. As the
debt: equity ratio is lower than generally accepted industry benchmark, the
company can leverage the existing balance & hence has greater ability to borrow
funds.
4.3.6 Current Ratio

The current ratio was higher in the initial period but has shown a decreasing trend
and for FY10 it reached to 1.07. This indicates that liquidity position of the company
needs to be improved to meet the quick liquidity requirement to meet the operation
of the business.
4.4 Analysis of Capital Expenditure

4.4.1 Capital expenditure incurred by the MGVCL in FY 2009-10 was Rs. 251 Crores. The
actual capital expenditure by MGVCL during the FY 2009-10 is Rs 63 Crores lower
than that approved by the Hon’ble Commission. The scheme-wise capital
expenditure incurred in FY 2009-10 against approved by the Hon’ble Commission is
as shown below.
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period FY 2011-12 to 2015-16
MGVCL
Table 11: Capital Expenditure FY 2009-10
Rs in Crores
FY 2009-10 FY 2009-10
Sr. No. Schemes Deviation
(Approved) (Actual)
A Distribution Schemes
Normal Development Scheme 37 40 (3)
System Improvement Scheme 9 5 4
Electricity of Hutments 21 1 20
Kutir Jyoti Scheme 11 4 7
Trible Villages - - -
Total 78 50 28
B Rural Electrification Schemes
TASP (Wells and Petapara) 62 95 (33)
Special Component plan 0 20 (20)
RE Normal Wells 30 2 28
Total 92 117 (25)
C Others
Energy Conservation 3 3 (0)
Sagar Khedu 2 2 0
Total 5 5 (0)
D Non Plan Schemes
SCADA 4 4
RAPDRP (Part A) 25 7 18
RAPDRP (Part B) - - -
RGGVY 12 4 7
DRUM 10 2 8
Total 51 18 32
E New Innovative Schemes
Line Capacitors 2 - 2
Aerial Bunch Conductors 20 17 3
HVDS in selected sub-division 21 17 3
Automatic meter reading 5 0 5
GIS in cities 1 - 1
Automation and Computerization 0 - 0
Customer Care Centre - - -
Under Ground Cables 17 5 12
Replacement of Conductors/TC 3 2 1
Misc. Civil + Electrical Works 14 13 0
Other New Schemes 4 4 (0)
Total 85 59 26
F Other Schemes
Urban Development 4 1 3
Govt. School Electrification (General) 0 1 (1)
Total 4 2 3
G Capital Expenditure Total 314 251 63
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MGVCL
5. Power Sector Overview
5.1 Industry Overview

5.1.1 India in the emerging markets has been one of the fastest growing economies. The
Indian economy has posted more than 9% growth for three years consecutively and
has seen a decade of more than 7% growth consistently. Energy requirement and
supply is a strategic input and one of a key mover for economic and social
development behind any growing country. As energy plays a very vital role in
industrial production and common man’s life, it has become extremely essential to
boost the growth in energy segment for the growth of the country.
5.1.2 With the growing demand in energy requirement, the annual per capita energy
consumption has grown significantly. The low per capita consumption of electric
power in India compared to the world average presents a significant potential for
sustainable growth in the demand for electric power in India. According to the 17th
Electric Power Survey (EPS), May 2007, India’s peak demand is expected to grow at a
CAGR of 7.6% over a period of 10 years (FY 2007 to FY 2017) and would require a
generating capacity of 300,000 MW by 2017. To cater to this demand compared to
an installed capacity of 159399 MW as on March 31, 2010.
5.2 All India Installed Capacity

5.2.1 The all India Region wise generating installed capacity (GW) of Power Utilities is
given hereunder:
Figure 16: All India Installed Capacity
5
2 2 Renewable
2 8 Nuclear
1 Thermal
Hydro
25 36 0.33
23
17
13 0.21
7 11 1.12 1.04
4
North - 42 GW West - 50 GW South - 43 GW East - 21 GW North East - 2.4 GW
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period FY 2011-12 to 2015-16
MGVCL
5.2.2 India has the fifth largest generation capacity in the world with an installed capacity
of 159 GW as on 31st March 2010, which is about 4 percent of global power
generation. The top four countries, viz., US, Japan, China and Russia together
consume about 49 percent of the total power generated globally. The average per
capita consumption of electricity in India is estimated to be 704 kWh during 2008-09.
However, this is fairly low when compared to that of some of the developed and
emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The Indian
government has set ambitious goals in the 11th plan for power sector owing to
which the power sector is poised for significant expansion. In order to provide
availability of over 1000 units of per capita electricity by year 2012, it has been
estimated that need-based capacity addition of more than 100,000 MW would be
required. This has resulted in massive addition plans being proposed in the sub-
sectors of Generation Transmission and Distribution.
5.2.3 The western region accounts for ~32% of the total installed capacity in the country
out of which Gujarat contributes around 35% of total available installed capacity of
Western Region. Installed capacity from coal, accounts for around 53% of the
country’s total installed capacity. The break-up of various fuels in the total
generation capacity of India is shown below:
Figure 17: Fuel wise breakup of generation capacity in India
10%
23% 53%
3% 1%
10%
Coal Gas Diesel Nuclear Hydro Renewables
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period FY 2011-12 to 2015-16
MGVCL
5.2.4 Historically, India has experienced shortages in energy and peak power
requirements. Peak deficit averaged 12.8% and energy deficit averaged 9.02% during
FY 2003 to FY 2010. The shortages in energy and peak power have been primarily
due to the slow pace of capacity addition and the growing demand.
Figure 18: All India past Years' Power deficit
Peak Deficit (%)
16.60% 12.00%
13.80% 13.30%
12.20% 11.70% 12.30%
11.20% 11.00%
9.60% 9.90% 10.10%
8.80% 8.40%
7.10% 7.30%
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
03
04
05
06
07
08
09
10
5.3 Actual Power Supply Position in India
5.3.1 The demand supply for electricity has increased manifold, despite significant overall
progress in the power sector, there has been a significant gap between demand and
supply. The Peak deficit and Energy Deficit for the FY 2009-10 is outlined in the figure
below:
Figure 19: Region wise Peak deficit in FY 2009-10

15%
14% 18%
13%
18%
12%
9%
11%
10%
8%
6%
5%
254 259 221 88 9 830

NR
WR
ER
NER
Indi
SR
Energy Demand (BU) Peak Deficit (%) Energy Deficit (%)
5.3.2 Western and Northern regions are the major contributors to deficit. Western Region
contributes about 18% of peak deficit and 14% of energy deficit in the country which
is highest in compare to other region. Rural electrification & economic growth has
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period FY 2011-12 to 2015-16
MGVCL
put power infrastructure under stress.
5.4 Power Sector in Gujarat

5.4.1 As per the enactment of the Electricity Act, 2003 and the Gujarat Electricity Industry
(Reorganization and Regulation) Act, 2003, Government of Gujarat transferred the
assets, liabilities, proceedings and personnel from Erstwhile Gujarat Electricity Board
(GEB), into six successor transferee Companies i.e. one Generation Corporation, one
Transmission Corporation and four Distribution Companies through various
Notifications, Government Resolutions and Transfer Schemes. These successor
transferee Companies are:
a. Gujarat State Electricity Corporation Limited (GSECL) - (A Generation Company)

b. Gujarat Energy Transmission Corporation Limited (GETCO) - (A Transmission
Company)
c. Four Distribution Companies:
o Dakshin Gujarat Vij Company Limited (DGVCL)
o Madhya Gujarat Vij Company Limited (MGVCL)
o Uttar Gujarat Vij Company Limited (UGVCL)
o Paschim Gujarat Vij Company Limited (PGVCL)
5.4.2 As per resolution of Government of Gujarat, a new company named Gujarat Urja
Vikas Nigam Ltd. (GUVNL) was incorporated in December, 2004 to carry out the
residual functions (including power trading) of the erstwhile GEB.
5.4.3 Apart from these there are two private distribution licensees in the state of Gujarat:
• Torrent Power Ltd. has license to distribute the power in Ahmadabad,
Gandhinagar and Surat. Torrent has a generation capacity of 1647.5 MW and
distributes power to more than 2 million customers annually in Ahmadabad,
Gandhinagar, Surat.
• Kandla Port Trust distributes the power in Kandla Port area. It purchases around
8 MUs from GUVNL at Bulk Supply tariff rates and supplies to consumers in
Kandla Port Area.
5.5 Installed Capacity available to Gujarat

The state has access to a total installed capacity of around 13,908 MW. The split up
of installed capacity in the state as on March 2010 is as per the fuel and owned by is
provided below:
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MGVCL
Figure 20: Installed Capacity in Gujarat
CENTRAL
PRIVATE
1509 State
1310
424
4190 2578
1626
772 893 17 559 30
Hydro Coal Gas Diesel Nuclear RES
5.5.1 Gujarat Urja Vikas Nigam Ltd. had signed power purchase agreements for about
1300 MW of solar energy, the highest in India's solar power sector.
After having successfully allotting 716 MW of solar power generation capacity to 34
national and international project developers in the first round, Gujarat government
has allotted another 565 MW capacity to various power project developers.
The government has initiated efforts to achieve 1,000 MW solar installations by the
end of the year 2012 and 3,000 MW in the subsequent five years. The Gujarat
Electricity Regulatory Commission (GERC) has fixed Rs.15/- per unit of power
produced from solar PV panels and Rs.11/- for solar thermal power generation for
the initial 12 years of power production.
5.6 Power Supply Position of Gujarat

5.6.1 In the past, there has been a consistent gap in the peak demand and peak met as
well as in energy terms in the state. The state has been unable to meet the ever-
growing demand due to industrial and economic growth of the state. Although the
state is still facing the peak deficit, after serving the off peak demand the GUVNL
remains with some surplus power. GUVNL sells the surplus power and earning good
amount of profit. The following table shows the actual power supply situation in the
state for the past few years.
Table 12: Power Supply situation FY 2003-10

Period Deficit / Deficit / Deficit / Deficit /
Demand Met Requirement Availability
Surplus Surplus Surplus Surplus
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period FY 2011-12 to 2015-16
MGVCL
(MW) (MW) (MW) (%) (MU) (MU) (MU) (%)
2002-03 8641 7336 -1305 -15.1 60175 53316 -6859 -11.4
2003-04 9820 7204 -2616 -26.6 57171 50292 -6879 -12
2004-05 10162 7578 -2584 -25.4 59681 52724 -6957 -11.7
2005-06 9783 7610 -2173 -22.2 57137 52436 -4701 -8.2
2006-07 11619 8110 -3509 -30.2 62464 54083 -8381 -13.4
2007-08 12119 8885 -3234 -26.7 68747 57614 -11133 -16.2
2008-09 11841 8960 -2881 -24.3 67516 60885 -6631 -9.8
2009-10 10,406 9,515 -891 -8.6 70,412 67,263 -3,149 -4.5
Source: Power Scenario at a Glance, April 2010, CEA
5.6.2 Before unbundling, it was facing heavy T&D losses, poor collection efficiency,
excessive load shedding, a deteriorating and overloaded distribution network and
inadequate consumer services. The disparity between demand and supply was
apparent and the lack of investment in the power sector has its role in hindering any
plans the company had.
5.7 Allocated Capacity to MGVCL (As on 1/10/2010)

5.7.1 There are various sources of generation from which GUVNL supplies power to the
Discoms in accordance to their allocated capacity. Given below are the capacities
from these generating plants which are allocated to MGVCL.
Table 13: Plant wise Allocated Capacity (As on 1/10/10)
GSECL PLANTS MGVCL

Gandhinagar I to IV 165
Wanakbori I to VI 315
Sikka TPS 96
Utran Gas Based 54
Utran Extension 94
ESSAR 120
GPEC 156
GIPCL - I (145) 25
NPC - Tarapur- 3&4 110
NTPC - KAWAS 75
NTPC - Kahalgaon 85
Wind Farms (3.37) 150
Aryan 100
Total 1,545
5.8 Power purchase for MGVCL

5.8.1 The company has been currently allocated share of generation capacities as per the
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period FY 2011-12 to 2015-16
MGVCL
scheme worked out by GUVNL. In order to minimize power purchase cost, GUVNL
adopts the Merit Order Despatch principles for despatching power from the
generating stations based on the demand and as this power gets allocated to
MGVCL.
5.8.2 During the year, based on requirement of power, the generation capacities have
been allocated to MGVCL. Based on this allocation, if there is surplus of power then
Distribution Company sells the power to other distribution company and if there is
deficit of power then power is bought from other distribution company or from
power exchange.
5.8.3 The actual power purchase from GUVNL is different from allocation because the
demand from MGVCL is not constant and it varies from time to time
5.8.4 The total power purchase cost for the company for the FY 2009-10 consists of the
basic power purchase cost, transmission charges payable to GETCO and PGCIL and
the Discom’s share of GUVNL cost. Based on the same, the comparison of the
approved and the actual cost of power purchase are as shown below:
Table 14: MGVCL's Power Purchase Cost FY 2009-10
Rs in Crores
FY 2009-10 FY 2009-10
Particulars
(Approved) (Actual)
Total Power Purchase Cost 2,386 2,287
5.8.5 The variation in the approved and the actual power purchase expenses is on account
of various reasons including, change in cost of power, change in quantum of power
purchased, consequent changes in the transmission charges payable and GUVNL cost
allocation.
5.8.6 The quantum of power purchase depends upon the sales during the year as well as
the losses in the system. The actual distribution losses in the MGVCL distribution
network are slightly higher than the approved level and hence, the quantum of
power purchased was slightly higher than the power required to be bought at the
approved distribution loss level. Thus there was be an extra cost implication on
account of this factor.
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6. Regulatory Framework
6.1 Background
6.1.1 As per the Constitution, the power sector in India was the combined responsibility of
Central and State Government. Over the years, reforms in Indian power sector have
been driven by the Union Government in an endeavour to achieve sustainable
growth & improvement in operational efficiencies. One of the hallmarks of this
reform Agenda is the Electricity Act, 2003 (hereinafter referred as EA, 2003 or simply
the “Act” unless specified otherwise).
6.1.2 The power sector in the country had been guided by the Electricity Supply Act, 1948
and various rules set out there under. The entities involved in the power sector were
the State Electricity Boards (SEB), electricity departments, generating companies and
licensees. The SEB were integrated utilities responsible for generation, transmission
and distribution of power for each of the states in the country. The generating
companies were the Central Generating companies responsible for supplying power
to the grid without any specific responsibility for retail distribution, for e.g. NTPC,
NHPC and NPCIL. The licensees were private-sector utilities licensed by a State
Government for power generation, distribution, or both within a specified area for
e.g. Gujarat Industrial Power Corporation Limited (GIPCL), Bombay Suburban Electric
Supply Limited (BSES) and Tata Electric Company (TEC), etc.
6.1.3 The sector over the years has grown under the aegis of State Electricity Boards,
which have assumed a monolithic structure with the responsibility of generation,
transmission and distribution. The sector had very limited pockets of private sector
investments (specifically in generation after liberalization and opening up of
generation sector to private investment and certain urban areas of distribution). The
SEB’s were operating under a monopolistic environment. While the SEBs, over the
years has contributed to the accelerated growth in the sector, the performance of
the SEB required significant improvement.
6.1.4 However, by the 1990s, the SEBs were found to be beset with unsustainable
inefficiencies, unviable tariffs, high T&D losses, mounting subsidies, sub-optimal
performance, wasteful practices and lackadaisical financial management. All these
factors led to financial fragility of the entire sector. Due to the uninspiring financial
position of the vertically integrated monolithic SEBs, the power sector was failing to
attract the much-needed investments for its development. Power sector reforms
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were necessary to further the economic liberalization going on in the country.
Certain policies were introduced like the Private Power Policy, Policy for setting up
Mega Power Projects in Private Sector, enactment of Electricity Regulatory
Commission Act, 1998. These Policies still did not have the desired impact of
increasing Private generation and bringing the desired investment in the Power
sector. While certain states have adopted reforms in the sector, through enactment
of necessary legislation, there was a need to provide a uniform approach for the
reforms and provide necessary impetus for sound, sustainable commercial growth in
the sector. In order to enable the same, the Government of India has enacted
Electricity Act 2003, which has paved the way for accelerated reforms, growth in the
sector, and introduction of competition and efficiency in various functions.
6.2 Salient features of Electricity Act, 03

The Government of India notified The Electricity Act, 2003 with effect from 10th
June 2003 requires the State Governments to initiate major changes in the Industry
Structure and Operations of the state power sector. The broad objectives of the
Electricity Act, 2003 as incorporated in its preamble is to consolidate the laws
relating to generation, transmission, distribution, trading and use of electricity and
generally for taking measures conducive to development of electricity industry
through way of reforms and restructuring, promoting competition therein,
protecting interest of consumers and supply of electricity to all areas, rationalisation
of electricity tariff, ensuring transparent policies regarding subsidies, promotion of
efficient and environmentally benign policies, constitution of Central Electricity
Authority, Regulatory Commissions and establishment of Appellate Tribunal and for
matters connected therewith or incidental thereto.
The major provisions of the electricity Act 2003 were:

• Thrust to complete the rural electrification and provide for management of rural
distribution by Panchayats, Cooperative Societies, non-Government
organizations, franchisees etc. (Sections 4, 5 & 6);
• Delicensing of generation and promotion of captive generation (Sections 7 & 9);
• Provision for license free generation and distribution in the rural areas (Section
14);
• Introduction of open access in transmission and distribution (Section 38(d) and
42(2) of EA 2003).
• The State Electricity Regulatory Commission is a mandatory requirement (Section
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82);
• Gradual phasing out of cross subsidy (Section 61g of EA 2003);
• Power procurement through competitive bidding (Section 63 of EA 2003).
• Provision for payment of subsidy through budget (Section 65);
• Trading, a distinct activity is being recognized with the safeguard of the
Regulatory Commissions being authorized to fix ceilings on trading margins, if
necessary. (Sections 12, 79 & 86);
• Reorganization of SEBs. (Sections 131);
• Metering of all electricity supplied made mandatory. (Section 55);
• Constitution of an Appellate Tribunal to hear appeals against the decision of the
CERC and SERCs. (Section 111);
• More stringent provisions relating to theft of electricity (Section 135-150);
• Provisions safeguarding consumer interests. (Sections 57-59, 166), Ombudsman
scheme (Section 42) for consumer’s grievance redressal.
Thus, the Electricity Act, 2003 is a historic legislation which not only integrates
the previous Act, but also goes beyond by creating a competitive environment
and facilitating investment in the sector and at the same time giving due
importance to consumers.
6.2.1 Features of Electricity Act, 03 providing a significant impact

Among the many features in EA 2003, some are expected to have significant impact
on the structure of the sector as follows:
a. Generation is delicensed: The Act has delicensed and freed generation capacity
addition. However hydro projects would need the approval of the state
government and clearance from the Central Electricity Authority. Generators
only need to meet technical standards with respect to connectivity to the grid. It
is believed that this will attract interest from private sector companies, especially
in case of captive power plants (definition of the Captive Power Plan includes a
wide range of investors and with open access provisions, is expected to provide
power at competitive rates to the captive users). Further, the nature of
arrangement for sale of power contemplated under the Act provides direct
access of revenues of the consumers to the generators, thereby enhancing
bankability of the projects for increased investments.
b. Distributed Generation: Further, under the Act no license would be required for
generation and distribution in rural areas as notified by the State Government.
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While the provision encourages rural investment in the sector, the same may
need to be structured, given the characteristics of rural supplies.
c. Open access to transmission lines: Open access of transmission facilities, owned

by Central as well as State transmission companies, will be provided to the users,
on enactment of the Act, subject to the availability of transmission capacity. The
open access to the users will be provided, at specified transmission / wheeling
charges. In addition, open access will be provided on levy of surcharge (which is
not applicable for captive users and licensees), to meet the cross subsidy
requirements in the sector. The surcharge is expected to gradually decrease
within the period stipulated by SERC, with rationalization of consumer tariffs.
While the open access provision is expected to enable efficiencies in generation
to keep generation tariffs at competitive levels for the consumers (distribution
licensees, traders and bulk consumers), efficient operation of open access would
depend upon a number of factors, which would include capacity in the network,
infrastructure for tracking the trades initiated through open access, system
controls, balancing mechanism, etc. Further, it provides scope for release of
stranded generation capacities (captives) and integration of generation and
distribution business.
d. Open access in distribution to be allowed in a phased manner: Akin to the open

access in transmission, open access in distribution would also be provided, in a
phased manner, as decided by the Regulator. While the open access in
distribution is subject to surcharge and additional surcharge (fixed charge for
service obligation), the provision is expected to bring in competition in the
distribution business.
e. Trading of Power: Trading in power, hitherto limited to PTC, traders and some
SEBs is expected to be a major activity in future. Further, the trading activity is
also required to be outside the Transco / SEB and would be a regulated business.
Along with the new trading outfits, the distribution business (as the license
provides trading activity) could compete for the trading business. The trading
function is likely to bring in competition and efficiency in supply of power to
licensees as well as consumers through balancing of various contracts. The
trading function is also expected to provide impetus for development of power
markets in India.
f. Exclusivity of distribution license removed: The distribution licensee will no
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longer have exclusive rights for the licensed area. Any company with technical
and financial capability can seek license in an already licensed area and
undertake distribution of electricity by way of parallel licensing. This would
enable competition for the distribution business. However, the provision may
lead to “cherry picking” of the areas for licensing, resulting in a potential threat
for the existing license holders.
g. State Electricity Regulatory Commission is a mandatory requirement: With

establishment of SERCs, necessary regulatory framework for the power sector
would be put in place. The Regulatory Commission could be mandated to provide
necessary directives for development of the sector, keeping in view the concerns
of all the stakeholders, to meet the overall objectives.
h. Provision for payment of subsidy through Budget: The provision of payment of

subsidy to the utilities in a timely manner would improve the liquidity in the
sector, where subsidized structure of tariffs is in place. The state government
henceforth needs to make necessary budgetary provisions for the subsidy
payment to keep up the desired level of socio-economic obligations.
i. Issues concerning theft and losses in the system: Metering of all electricity
supplied has been made mandatory, thereby bringing in necessary energy audit
and accounting systems into the sector. Further the anti-theft provisions would
enable the Discoms to plug pilferage of power and enforce the penalties, to
improve their operational efficiencies.
j. Rural electrification: Rural electricity involves supply of energy for various

production oriented activities like minor irrigation, rural industries etc. as well as
for electrification of villages. A village is declared to be electrified if:-
• basic infrastructure such as Distribution Transformer and Distribution lines
are provided in the inhabited locality within the revenue boundary of the
village, including atleast one Dalit Basti/ hamlet as applicable;
• electricity is provided on demand to public places like schools, panchayat
office, health centres, dispensaries, community centers, etc;
• the ratings of distribution transformer and LT lines to be provided in the
village would be finalized as per the anticipated number of connections
decided in consultation with the Panchayat / Zila Parishad / District
Administration who will also issue the necessary certificate of village
electrification on completion of the works; and
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• the number of households electrified are at least 10% of the total number of
households in the village.
'Rural Electrification' has been regarded as a vital programme for socioeconomic

development of rural areas. It aims to trigger economic growth and generate
employment by providing electricity as an input for productive uses in agriculture
and rural industries. Accordingly, both the Central Government and the State
Governments are making all efforts to secure electricity access to all rural
households and to ensure that it reaches poor and marginal sections of the society
at reasonable rates. Several programmes has been launched, from time to time, for
electrification of rural areas. Some of them are:-
i. Pradhan Mantri Gramodya Yojana (PMGY)

ii. Kutir Jyoti Scheme
iii. Accelerated Rural Electrification Programme
iv. Accelerated Electrification of One lakh Villages and One Crore Households
v. Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
As is observed, the provisions of the EA2003 mentioned above, have far reaching
implications for the power sector and there are clear directions in the Act for
reorganizing the power sector and establishing commercial relationships among
themselves. It is evident from the above provisions that the EA2003 intends to
create a competitive power sector in the long term and has left no choice for the
state utilities but to improve their performance to face the competition from other
players entering into the market. However, the Act has provided certain timelines
with the Regulators subject to the national level guidelines on various issues such as
Tariff Policy.
6.3 National Electricity Policy, 2005

6.3.1 Recognizing that electricity is one of the key drivers for rapid economic growth and
poverty alleviation, the nation has set itself the target of providing access to all
households in next five years. As per Census 2001, about 44% of the households do
not have access to electricity. Hence meeting the target of providing universal access
is a daunting task requiring significant addition to generation capacity and expansion
of the transmission and distribution network.
6.3.2 Indian Power sector is witnessing major changes. Growth of Power Sector in India
since its Independence has been noteworthy. However, the demand for power has
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been outstripping the growth of availability. Substantial peak and energy shortages
prevail in the country. This is due to inadequacies in generation, transmission &
distribution as well as inefficient use of electricity. Very high level of technical and
commercial losses and lack of commercial approach in management of utilities has
led to unsustainable financial operations. Cross-subsidies have risen to unsustainable
levels. Inadequacies in distribution networks have been one of the major reasons for
poor quality of supply.
6.3.3 Electricity industry is capital-intensive having long gestation period. Resources of

power generation are unevenly dispersed across the country. Electricity is a
commodity that cannot be stored in the grid where demand and supply have to be
continuously balanced. The widely distributed and rapidly increasing demand
requirements of the country need to be met in an optimum manner.
6.3.4 Electricity Act, 2003 provides an enabling framework for accelerated and more
efficient development of the power sector. The Act seeks to encourage competition
with appropriate regulatory intervention. Competition is expected to yield efficiency
gains and in turn result in availability of quality supply of electricity to consumers at
competitive rates.
6.3.5 Section 3 (1) of the Electricity Act 2003 requires the Central Government to
formulate, inter alia, the National Electricity Policy in consultation with Central
Electricity Authority (CEA) and State Governments. The provision is quoted below:
"The Central Government shall, from time to time, prepare the National
Electricity Policy and tariff policy, in consultation with the State
Governments and the Authority for development of the power system
based on optimal utilization of resources such as coal, natural gas,
nuclear substances or materials, hydro and renewable sources of
energy".
6.3.6 Section 3 (3) of the Act enables the Central Government to review or revise the
National Electricity Policy from time to time. The Ministry of Power in compliance to
the section 3 of the Electricity Act 2003 notified the National Electricity Policy in
February 2005 through which the legislative provisions of the EA 2003 were to be
administered and implemented.
6.3.7 The National Electricity Policy outlines a plan for rural electrification and increased
generation capacity. The policy states that “maximum emphasis” would be put on
the development of hydro power. Use of thermal power could be made cleaner by
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using low-ash coal, improving lignite mining, and increased use of natural gas and
nuclear power. The policy also sets recommendations for improving the power grid
with better transmission and distribution of power. It also calls for the use of the
most efficient technologies and more funding for R&D. India also seeks to create a
more competitive energy sector to increase private sector participation. Finally, the
Policy emphasizes the need for conservation and demand-side management
including a national awareness campaign.
6.3.8 The main aim of the policy was:

• Access of power - available for all households by year 2009;
• Availability of Power – Eliminating power shortages by year 2012 and Energy and
peaking shortages to be overcome and adequate spinning reserve to be
available;
• Supply of reliable and quality power of specified standards in an efficient manner
and at reasonable rates;
• Per capita availability of electricity to be increased to over 1000 units by 2012;
• Minimum lifeline consumption of 1 unit/household/day as a merit good by 2012;
• Financial turnaround and commercial viability of electricity sector;
• Protection of consumers’ interests;
6.4 National Electricity Plan

Assessment of demand is an important pre-requisite for planning capacity addition.
Section 3 (4) of the Act requires the Central Electricity Authority (CEA) to frame a
National Electricity Plan once in five years and revise the same from time to time in
accordance with the National Electricity Policy. Also, section 73 (a) provides that
formulation of short-term and perspective plans for development of the electricity
system and coordinating the activities of various planning agencies for the optimal
utilization of resources to sub serve the interests of the national economy shall be
one of the functions of the CEA. The Plan prepared by CEA and approved by the
Central Government can be used by prospective generating companies, transmission
utilities and transmission/distribution licensees as reference document.
6.4.1 Distribution
Distribution is the most critical segment of the electricity business chain. The real
challenge of reforms in the power sector lies in efficient management of the
distribution sector. The Act provides for a robust regulatory framework for
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distribution licensees to safeguard consumer interests. It also creates a competitive
framework for the distribution business, offering options to consumers, through the
concepts of open access and multiple licensees in the same area of supply.
For achieving efficiency gains proper restructuring of distribution utilities is essential.
Adequate transition financing support would also be necessary for these utilities.
Such support should be arranged linked to attainment of predetermined efficiency
improvements and reduction in cash losses and putting in place appropriate
governance structure for insulating the service providers from extraneous
interference while at the same time ensuring transparency and accountability. For
ensuring financial viability and sustainability, State Governments would need to
restructure the liabilities of the State Electricity Boards to ensure that the successor
companies are not burdened with past liabilities. The Central Government would
also assist the States, which develop a clear roadmap for turnaround, in arranging
transition financing from various sources which shall be linked to predetermined
improvements and efficiency gains aimed at attaining financial viability and also
putting in place appropriate governance structures. Conducive business environment
in terms of adequate returns and suitable transitional model with predetermined
improvements in efficiency parameters in distribution business would be necessary
for facilitating funding and attracting investments in distribution.
• Multi-Year Tariff (MYT) framework is an important structural incentive to

minimize risks for utilities and consumers, promote efficiency and rapid
reduction of system losses. It would serve public interest through economic
efficiency and improved service quality. It would also bring greater predictability
to consumer tariffs by restricting tariff adjustments to known indicators such as
power purchase prices and inflation indices.
• The Electricity Act 2003 enables competing generating companies and trading
licensees, besides the area distribution licensees, to sell electricity to consumers
when open access in distribution is introduced by the State Electricity Regulatory
Commissions. As required by the Act, the SERCs shall notify regulations by June
2005 that would enable open access to distribution networks in terms of sub-
section 2 of section 42 which stipulates that such open access would be allowed,
not later than five years from 27th January 2004 to consumers who require a
supply of electricity where the maximum power to be made available at any time
exceeds one mega watt. Section 49 of the Act provides that such consumers who
have been allowed open access under section 42 may enter into agreement with
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any person for supply of electricity on such terms and conditions, including tariff,
as may be agreed upon by them. While making regulations for open access in
distribution, the SERCs will also determine wheeling charges and cross-subsidy
surcharge as required under section 42 of the Act.
• A time-bound programme should be drawn up by the State Electricity Regulatory

Commissions (SERC) for segregation of technical and commercial losses through
energy audits. Energy accounting and declaration of its results in each defined
unit, as determined by SERCs, should be mandatory not later than March 2007.
An action plan for reduction of the losses with adequate investments and
suitable improvements in governance should be drawn up. Standards for
reliability and quality of supply as well as for loss levels shall also be specified,
from time to time, so as to bring these in line with international practices by year
2012.
• Private sector participation in distribution needs to be encouraged for achieving

the requisite reduction in transmission and distribution losses and improving the
quality of service to the consumers.
• One of the key provisions of the Act on competition in distribution is the

concept of multiple licensees in the same area of supply through their
independent distribution systems. State Governments have full flexibility in
carving out distribution zones while restructuring the Government utilities. For
grant of second and subsequent distribution licence within the area of an
incumbent distribution licensee, a revenue district, a Municipal Council for a
smaller urban area or a Municipal Corporation for a larger urban area as defined
in the Article 243(Q) of Constitution of India (74th Amendment) may be
considered as the minimum area. The Government of India would notify within
three months, the requirements for compliance by applicant for second and
subsequent distribution licence as envisaged in Section 14 of the Act. With a view
to provide benefits of competition to all section of consumers, the second and
subsequent licensee for distribution in the same area shall have obligation to
supply to all consumers in accordance with provisions of section 43 of the
Electricity Act 2003. The SERCs are required to regulate the tariff including
connection charges to be recovered by a distribution licensee under the
provisions of the Act. This will ensure that second distribution licensee does not
resort to cherry picking by demanding unreasonable connection charges from
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consumers.
• The Act mandates supply of electricity through a correct meter within a

stipulated period. The Authority should develop regulations as required under
Section 55 of the Act within three months. The Act requires all consumers to be
metered within two years. The SERCs may obtain from the Distribution Licensees
their metering plans, approve these, and monitor the same. The SERCs should
encourage use of pre-paid meters. In the first instance, TOD meters for large
consumers with a minimum load of one MVA are also to be encouraged. The
SERCs should also put in place independent third-party meter testing
arrangements.
• Modern information technology systems may be implemented by the utilities on

a priority basis, after considering cost and benefits, to facilitate creation of
network information and customer data base which will help in management of
load, improvement in quality, detection of theft and tampering, customer
information and prompt and correct billing and collection. Special emphasis
should be placed on consumer indexing and mapping in a time bound manner.
Support is being provided for information technology based systems under the
Accelerated Power Development and Reforms Programme (APDRP).
• High Voltage Distribution System is an effective method for reduction of

technical losses, prevention of theft, improved voltage profile and better
consumer service. It should be promoted to reduce LT/HT ratio keeping in view
the techno economic considerations.
• SCADA and data management systems are useful for efficient working of
Distribution Systems. A time bound programme for implementation of SCADA
and data management system should be obtained from Distribution Licensees
and approved by the SERCs keeping in view the techno economic considerations.
Efforts should be made to install substation automation equipment in a phased
manner.
• The Act has provided for stringent measures against theft of electricity. The
States and distribution utilities should ensure effective implementation of these
provisions. The State Governments may set up Special Courts as envisaged in
Section 153 of the Act.
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6.4.2 Recovery of Cost of Services & Targeted Subsidies
There is an urgent need for ensuring recovery of cost of service from consumers to
make the power sector sustainable. A minimum level of support may be required to
make the electricity affordable for consumers of very poor category. Consumers
below poverty line who consume below a specified level, say 30 units per month,
may receive special support in terms of tariff which are cross-subsidized. Tariffs for
such designated group of consumers will be at least 50 % of the average (overall)
cost of supply. This provision will be further re-examined after five years. Over the
last few decades cross-subsidies have increased to unsustainable levels. Cross-
subsidies hide inefficiencies and losses in operations. There is urgent need to correct
this imbalance without giving tariff shock to consumers. The existing cross-subsidies
for other categories of consumers would need to be reduced progressively and
gradually. The State Governments may give advance subsidy to the extent they
consider appropriate in terms of section 65 of the Act in which case necessary
budget provision would be required to be made in advance so that the utility does
not suffer financial problems that may affect its operations. Efforts would be made
to ensure that the subsidies reach the targeted beneficiaries in the most transparent
and efficient way.
6.4.3 Competition Aimed At Consumer Benefits

The competition for the distribution companies is expected to emanate from the
following provisions in EA 2003:
(i) “Open access” to consumers for contracting power from any supplier
(generator or other distribution licensee), subject to levy of transmission /
wheeling charges, surcharge (on account of cross-subsidy to be reduced over a
period of time) and additional surcharge.
The competition is further strengthened on account of freedom allowed for
captive generation,
(ii) “Competition in distribution” where in multiple licensing can be allowed
within the same designated area.
As the power markets develop, it would be feasible to finance projects with

competitive generation costs outside the long-term power purchase agreement
framework. In the coming years, a significant portion of the installed capacity of new
generating stations could participate in competitive power markets. This will
increase the depth of the power markets and provide alternatives for both
generators and licensees/consumers and in long run would lead to reduction in
tariff. For achieving this, the policy underscores the following:-
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• It is the function of the CERC to issue license for inter-state trading which would
include authorization for trading throughout the country.
• The ABT regime introduced by CERC at the national level has had a positive
impact. It has also enabled a credible settlement mechanism for intra-day power
transfers from licenses with surpluses to licenses experiencing deficits. SERCs are
advised to introduce the ABT regime at the State level within one year. Gujarat is
one of the state who has implemented intra-state ABT.
• Captive generating plants should be permitted to sell electricity to licensees and
consumers when they are allowed open access by SERCs under section 42 of the
Act.
• Development of power market would need to be undertaken by the Appropriate
Commission in consultation with all concerned.
• The Central Commission and the State Commissions are empowered to make
regulations under section 178 and section 181 of the Act respectively. These
regulations will ensure implementation of various provisions of the Act regarding
encouragement to competition and also consumer protection. The Regulatory
Commissions are advised to notify various regulations expeditiously.
• Enabling regulations for inter and intra State trading and also regulations on
power exchange shall be notified by the appropriate Commissions within six
months.
6.4.4 Transmission & Distribution Losses
It would have to be clearly recognized that Power Sector will remain unviable until
T&D losses are brought down significantly and rapidly. A large number of States have
been reporting losses of over 40% in the recent years. By any standards, these are
unsustainable and imply a steady decline of power sector operations. Continuation
of the present level of losses would not only pose a threat to the power sector
operations but also jeopardize the growth prospects of the economy as a whole. No
reforms can succeed in the midst of such large pilferages on a continuing basis.
The State Governments would prepare a Plan to bring down these losses
expeditiously. Community participation, effective enforcement, incentives for
entities, staff and consumers, and technological upgradation should form part of
campaign efforts for reducing these losses. The Central Government will provide
incentive based assistance to States that are able to reduce losses as per agreed
programmes.
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MGVCL is one of the successful utility to curb losses and has been in the range of
around 15% to 18% in last 3 years. This has been result due to the commitment by
the employees of MGVCL and effective decision by the top management.
6.4.5 Energy Conservation

There is a significant potential of energy savings through energy efficiency and
demand side management measures. In order to minimize the overall requirement,
energy conservation and demand side management (DSM) is being accorded high
priority. The Energy Conservation Act has been enacted and the Bureau of Energy
Efficiency has been setup. The potential number of installations where demand side
management and energy conservation measures are to be carried out is very large.
Bureau of Energy Efficiency (BEE) shall initiate action in this regard. BEE would also
make available the estimated conservation and DSM potential, its staged
implementation along with cost estimates for consideration in the planning process
for National Electricity Plan.
• Periodic energy audits have been made compulsory for power intensive
industries under the Energy Conservation Act. Other industries may also be
encouraged to adopt energy audits and energy conservation measures.
• Energy conservation measures shall be adopted in all Government buildings for
which saving potential has been estimated to be about 30% energy. Solar water
heating systems and solar passive architecture can contribute significantly to this
effort. In the field of energy conservation initial approach would be voluntary
and self-regulating with emphasis on labelling of appliances. Gradually as
awareness increases, a more regulatory approach of setting standards would be
followed.
• In the agriculture sector, the pump sets and the water delivery system
engineered for high efficiency would be promoted. In the industrial sector,
energy efficient technologies should be used and energy audits carried out to
indicate scope for energy conservation measures. Motors and drive system are
the major source of high consumption in Agricultural and Industrial Sector. These
need to be addressed. Energy efficient lighting technologies should also be
adopted in industries, commercial and domestic establishments.
• In order to reduce the requirements for capacity additions, the difference
between electrical power demand during peak periods and off-peak periods
would have to be reduced. Suitable load management techniques should be
adopted for this purpose. Differential tariff structure for peak and off peak
supply and metering arrangements (Time of Day metering) should be conducive
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to load management objectives.
• Regulatory Commissions should ensure adherence to energy efficiency standards
by utilities.
• For effective implementation of energy conservation measures, role of Energy
Service Companies would be enlarged. Steps would be taken to encourage and
incentivise emergence of such companies.
• A national campaign for bringing about awareness about energy conservation
would be essential to achieve efficient consumption of electricity.
• A National Action Plan has been developed. Progress on all the proposed
measures will be monitored with reference to the specific plans of action.
6.4.6 Training And Human Resource Development

In the new reforms framework ushered by Electricity Act 2003, it is particularly
important that the electricity industry has access to properly trained human
resource. Therefore, concerted action would be taken for augmenting training
infrastructure so that adequate well-trained human resource is made available as
per the need of the industry. Special attention would need to be paid by the industry
for establishing training infrastructure in the field of electricity distribution,
regulation, trading and power markets. Efforts should be made so that personnel of
electricity supply industry both in the private and public sector become more cost-
conscious and consumer-friendly.
6.4.7 Co-generation and Non-Conventional Energy Sources

Non-conventional sources of energy being the most environment friendly there is an
urgent need to promote generation of electricity based on such sources of energy.
For this purpose, efforts need to be made to reduce the capital cost of projects
based on non-conventional and renewable sources of energy. Cost of energy can
also be reduced by promoting competition within such projects. At the same time,
adequate promotional measures would also have to be taken for development of
technologies and a sustained growth of these sources.
The Electricity Act 2003 provides that co-generation and generation of electricity
from non-conventional sources would be promoted by the SERCs by providing
suitable measures for connectivity with grid and sale of electricity to any person and
also by specifying, for purchase of electricity from such sources, a percentage of the
total consumption of electricity in the area of a distribution licensee. Such
percentage for purchase of power from non-conventional sources should be made
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applicable for the tariffs to be determined by the SERCs at the earliest. Progressively
the share of electricity from non-conventional sources would need to be increased
as prescribed by State Electricity Regulatory Commissions. Such purchase by
distribution companies shall be through competitive bidding process. Considering
the fact that it will take some time before non-conventional technologies compete,
in terms of cost, with conventional sources, the Commission may determine an
appropriate differential in prices to promote these technologies.
Industries in which both process heat and electricity are needed are well suited for
cogeneration of electricity. A significant potential for cogeneration exists in the
country, particularly in the sugar industry. SERCs may promote arrangements
between the co-generator and the concerned distribution licensee for purchase of
surplus power from such plants. Cogeneration system also needs to be encouraged
in the overall interest of energy efficiency and also grid stability.
6.4.8 Protection of Consumer Interests And Quality Standards

Appropriate Commission should regulate utilities based on pre-determined indices
on quality of power supply. Parameters should include, amongst others, frequency
and duration of interruption, voltage parameters, harmonics, transformer failure
rates, waiting time for restoration of supply, percentage defective meters and
waiting list of new connections. The Appropriate Commissions would specify
expected standards of performance.
• Reliability Index (RI) of supply of power to consumers should be indicated by the
distribution licensee. A road map for declaration of RI for all cities and towns up
to the District Headquarter towns as also for rural areas, should be drawn by up
SERCs. The data of RI should be compiled and published by CEA.
• It is advised that all State Commissions should formulate the guidelines regarding
setting up of grievance redressal forum by the licensees as also the regulations
regarding the Ombudsman and also appoint/designate the Ombudsman within
six months.
• The Central Government, the State Governments and Electricity Regulatory
Commissions should facilitate capacity building of consumer groups and their
effective representation before the Regulatory Commissions. This will enhance
the efficacy of regulatory process.
6.5 Tariff Policy
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On January 6, 2006, the Central government notified the National Tariff Policy (NTP)
for the power sector in compliance with Section 3 of the Electricity Act and in
continuation of the National Electricity Policy passed on February 12, 2005. It
basically deals with various parameters with respect to the fixation of tariffs, like
providing adequate return on investment to the power generator and supplier and
ensuring reasonable user charges for the consumers. It provides uniform guidelines
to the state electricity regulatory commissions (SERCs) for the fixation of tariffs for
their respective entities (as there are independent SERCs for each state) as well as
CERC. It addresses some important issues like method of calculation of cross subsidy
under open access and the competitive bidding route for procurement of power.
6.5.1 The objective of this Policy is to:

• Ensure availability of electricity to consumers at reasonable and competitive
rates;
• Ensure financial viability of the sector and attract investments;
• Promote transparency, consistency and predictability in regulatory approaches
across jurisdictions and minimise perceptions of regulatory risks;
• Promote competition, efficiency in operations and improvement in quality of
supply.
The NTP deals with the general approach to tariffs, wherein it talks about issues such
as return on investment and equity norms to be abided by project developers. It
discusses various other norms for charging depreciation and cost of debt. It lays
down certain operating norms to be followed in order to improve efficiency. Besides,
it revisits various parameters like renovation and modernisation costs, and multi-
year tariffs (MYT) and talks about promoting captive and renewable energy. The
policy states the MYT must be adopted for determination of any tariffs from April 1,
2006. On an overall basis, the policy tries to clarify various issues to improve
efficiency and transparency in the power sector. It also emphasises the need for
sharing the efficiency gains, as it specifies that a part of the gains should be passed
on to the consumer.
The policy states that the distribution licensee should, in future, procure power
solely through competitive bidding. But this norm does not apply in the case of
expansion of existing projects. Further, Central generating units and state
controlled/owned units are exempted from competitive bidding. However, the
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expansion of generating capacity by the private developers for this purpose would
be restricted to a one-time addition of not more than 50 per cent of the existing
capacity. The tariff for all new generating and transmission projects by the public
sector would be decided through the competitive bidding route after a period of 5
years or when the regulatory commission thinks the situation is ripe for such
competition. The Electricity Act had provided the much-needed impetus to the
power sector by opening it up to private investment.
6.6 Tariff Based Competitive Bidding

An important policy instrument adopted by the Government was the comprehensive
guidelines on competitive bidding for power project development. The Central
Government issued detailed guidelines for tariff based bidding process for
procurement of electricity by distribution licensees for medium or long-term period
vide notification in January, 2005. The main objective of these guidelines was to see
that the distribution companies get electricity at best possible price and thereby
consumers get electricity at optimal tariff. This also aims at a transparent process of
selection of project developer. Similar dispensation in Transmission segment was
also extended and comprehensive guidelines were issued in May 2006.
It is to be noted that India's power sector regulator has already considered a stand
that from January 2011, all thermal power projects and transmission systems will be
awarded on competitive tariff bidding. This will be open a market for Generators and
Transmission facilities developers to evacuate the power from the generating plan to
the State Periphery of the Utilities through the transmission line across India.
However it also provides a limitation for distribution utilities whereby they can
procure power only through competitive bidding process even from State
Generating units with some exception as specified in National Tariff plan.
6.7 Rural Electrification Policy, 2006

The Ministry of Power issued the Rural Electrification Policy in August 2006 with a
view of undertaking socio-economic development of the rural areas. The scheme for
Rural electricity infrastructure and household electrification include the Rajiv Gandhi
Grameen Vidhyutikaran Yojana (RGGVY). Under the scheme, projects could be
financed with 90% capital subsidy for provision of –
• Rural Electricity Distribution Backbone (REDB) - Provision of 33/11 KV (or 66/11

KV) sub-stations of adequate capacity and lines in blocks where these do not
exist.
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• Creation of Village Electrification Infrastructure (VEI) which includes
electrification of un-electrified villages, electrification of un-electrified
habitations and Provision of distribution transformers of appropriate capacity in
electrified villages / habitation(s).
• Decentralised Distributed Generation (DDG) and Supply: Decentralised
generation cum distribution from conventional sources for villages where grid
connectivity is either not feasible or not cost effective provided it is not covered
under the programme of Ministry of Non-conventional Energy Sources for
providing electricity from non-conventional energy sources under their remote
village electrification programme.
• REDB, VEI and DDG would also cater to the requirement of agriculture and other
activities including irrigation pumpsets, Small and medium industries and Khadi
and village industries, cold chains, healthcare, education and IT.
• Rural Household Electrification of Below Poverty Line Households: Electrification
of un-electrified Below Poverty Line (BPL) households would be financed with
100% capital subsidy as per norms of Kutir Jyoti Programme in all rural
habitations. Households above poverty line would be paying for their
connections at prescribed connection charges and no subsidy would be available
for this purpose
6.8 R-APDRP (Restructured Accelerated Power Development & Reform Program)

6.8.1 The APDRP was launched in 2001 as an initiative by the Government of India and the
States for the strengthening of Transmission and Distribution network and reduction
in AT&C losses. APDRP was aimed to renovate and modernize the old sub stations,
strengthen the distribution network, undertake energy accounting, reduce technical
and commercial losses and improve consumer services.
6.8.2 The restructured APDRP (R-APDRP) was launched by Mop, Gol in July 2008 as a
central sector scheme for the Eleventh Plan. The scheme comprises of two parts -
Part-A & Part-B.
6.8.3 The Part-A of the scheme is being dedicated to establishment of IT enabled system
for achieving reliable and verifiable baseline data system. A 100% loan is provided
under R-APDRP for Part-A projects & shall be converted to grant on completion and
verification of same by Third Party independent evaluating agencies (TPIEA) being
appointed by MoP. The Ministry of Power, Government of India has earmarked Rs.
10,000 Crores for R-APDRP under Part-A.
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6.8.4 Part-B of the scheme deals with Transmission & Distribution system strengthening &
upgradation projects. The focus for Part-B is on AT&C loss reduction on sustainable
basis. 25% loan is provided under Part-B projects and upto 50% of scheme cost is
convertible to grant depending on extent of maintaining AT&C loss level at 15% level
for five years. The Ministry of Power, Government of India has earmarked
sanctioning of schemes upto Rs. 40,000 Crores under R-APDRP Part-B, of which, upto
Rs. 20,000 Crores would be converted to grant depending on extent to which utilities
reduce AT&C losses in project areas.
6.8.5 The R-APDRP scheme also has a provision for Capacity Building of Utility personnel
and development of franchises through Part-C of the scheme. Few pilot projects
adopting innovations are also envisaged under Part-C.
6.8.6 Thus, it can be observed that a number of path breaking initiatives have been taken
in the recent past in terms of policy pronouncements to revamp the power system.
From the distribution perspective, there has been introduction of theft control
measures which would enable the utility to reduce losses on account of theft. The
recognition of trading as an independent activity will help the utility in the
procurement process. The introduction of open access in transmission and phasing
of open access in distribution is the right step in providing a competitive
environment in the power sector.
6.9 Renewable sources

6.9.1 There are a number of initiatives from the Ministry of New and Renewable Energy
(MNRE) for matters relating to renewable energy such as solar, wind, biomass, small
hydro, hydrogen, geothermal etc. The endeavor of the Ministry is to promote
renewable energy technologies and increase the contribution of renewable energy in
the total energy mix in the years to come.
6.9.2 The Ministry has a wide range of programs on research and development,
demonstration and promotion of renewable energy for rural, urban, commercial and
industrial applications as well as for grid-interactive power generation. A three-fold
strategy is being followed:
• Providing budgetary support for research, development and demonstration of
technologies;
• Facilitating institutional finance through various financial institutions; and
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• Promoting private investment through fiscal incentives, tax holidays,
depreciation allowance and remunerative returns for power fed into the grid.
6.9.3 The Government of India has approved of a new policy on the development of Solar
energy through the Jawaharlal Nehru National Solar Mission. This will constitute a
major contribution by India to the global effort to meet the challenges of climate
change.
The objectives of the Solar Mission are:
• To create an enabling policy framework for the deployment of 20,000 MW of
solar power by 2022.
• To ramp up capacity of grid-connected solar power generation to 1000 MW
within three years – by 2013; an additional 3000 MW by 2017 through the
mandatory use of the renewable purchase obligation by utilities backed with a
preferential tariff.
• To create favourable conditions for solar manufacturing capability, particularly
solar thermal for indigenous production and market leadership.
6.10 Renewable Energy Certificate Mechanism

• CERC has issued the Terms and Conditions for recognition and issuance of
Renewable Energy Certificate for Renewable Energy Generation Regulations,
2010.
• Present installed capacity based on renewable is about 15 GW. This requires to
be increased to 65 GW in next five years if RPO level is to go up to 10%
nationally, as suggested in NAPCC. But a large part of untapped potential is
located in the States which have already achieved high levels of RPO. REC
mechanism is expected to overcome geographical constraints and provide
flexibility to achieve RPO compliance.
• Some of the Salient Features of REC Mechanism are:
o RE generators with capacity untied in PPA will have an option to sell
electricity and REC separately;
o REC will be issued to RE Generators ; 1 MWh Renewable Energy = 1 REC;
o Purchase of REC would be considered as purchase of RE for purpose of RPO
compliance;
o Grid Connected RE technology approved by MNRE would be eligible for REC
mechanism;
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o Separate category of Solar REC
o Provision of regulatory charge to enforce compliance of RPO.
o RECs are intra-country tradable certificates and are distinct from carbon
credits.
o It is proposed to make RECs eligible for compliance with energy saving
obligations.
o Accreditation would be done at State level by State Agency (SA) to be
designated by SERC.
o Registration by Central Agency
o Issuance of REC by Central Agency based on injection certificate.
o REC exchange through power exchanges approved by CERC.
o Certificates will be exchanged within floor (minimum) price and
forbearance (ceiling) price decided by CERC time to time.
o Monitoring Mechanisms: Appointment of Compliance Auditors by CERC for
post monitoring of the REC Transactions.
6.11 National Action Plan for Climate Change (NAPCC)

The country today is faced with a challenge of sustaining its rapid economic growth
while dealing with the growing threat of Climate change. The Government has
formulated the National Action Plan on Climate Change (NAPCC) outlining existing
and future policies and programs addressing climate mitigation and adaptation. For
achieving this, the Plan has identified eight National Missions which represent the
long term integrated strategies for combating the climate change issues. Of these
the National Mission in relation to energy relate to:
6.11.1 National Solar Mission: The NAPCC aims to promote the development and use of
solar energy for power generation and other uses with the ultimate objective of
making solar competitive with fossil-based energy options. The mission includes
specific goals for increasing use of solar thermal technologies in urban areas,
industry, and commercial establishments. Other objectives include the
establishment of a solar research centre, increased international collaboration on
technology development, strengthening of domestic manufacturing capacity, and
increased government funding and international support.
6.11.2 National Mission for Enhanced Energy Efficiency: Building on the Energy
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Conservation Act 2001, the plan recommends:
• Mandating specific energy consumption decreases in large energy-consuming

industries, with a system for companies to trade energy-savings certificates;
• Energy incentives, including reduced taxes on energy-efficient appliances; and
• Financing for public-private partnerships to reduce energy consumption through
demand-side management programs in the municipal, buildings and agricultural
sectors.
6.11.3 Thus, it can be observed that a number of path breaking initiatives have been taken
in the recent past in terms of policy pronouncements to revamp the power system.
From the generation perspective, the de-licensing of generation would have a
significant impact in the market mainly on account of entry of other players in the
generation sector, especially IPP/ Merchant as well as Captive Power Producers,
thus increasing the competition in the market. The unleashing of the non-
discriminatory open access to the transmission system will have a positive impact on
wheeling of power from power surplus states to deficit areas. The generators are in a
position to sell their power anywhere in the grid now. On the threat of climate
change, there is a need to look at renewable energy as an option for generation on a
large scale. Thus the enablers for growth have been put in place to a large extent
which will enable growth of the sector in the coming time.
6.12 State Market Regulations

The above mentioned developments at the national level were followed up by
similar enabling environment at the state level also through intervention by State
Regulatory Commissions. Various regulations were enacted by the Regulatory
Commissions in compliance with the provisions of the EA 2003 and as guided by the
National Tariff Policy and National Electricity Policy. Some of the key regulations
which were enacted by the Gujarat Electricity Regulatory Commission as outlined
below:
Table 15: Regulations issued by GERC
Sr. No Name of the Regulations
1. Appointment of consultants Regulations
2. Open Access Regulations
3. Transmission License Regulations
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Sr. No Name of the Regulations
4. Trading License Regulations
5. Distribution License Regulations
6. SLDC Charges Regulations
7. Fees, Fines & Charges Regulations
8. Power System Management Standards Regulations
9. Standard of Performance of Distribution Licensee Regulations
10. Electricity Supply Code and Related Matters Regulations
11. Terms and Conditions of Tariff Regulations
12. Procedure for filing appeal before the Appellate Authority Regulations
13. Conduct of Business Regulations
14. Establishment of Ombudsman for Redressal of Grievances of Consumers Regulations
15. Establishment of Forum for Redressal of Grievances of Consumers Regulations

16. Grid Code
17. Distribution Code
18. Officers/Staff Service Regulations
19. MYT Regulations
20. Fixing of Trading Margin Regulations
21. Procurement of Energy from Renewable Sources Regulations
22. Designating State Nodal Agency for REC Regulations
6.12.1 The power sector in the state has been regulated based on the above outlined
regulations and the same has also brought in an element of regulatory certainty to
an extent in the way the sector functions. As mentioned previously, the above
mentioned enactments have had an impact on the sector at the national as well as
the state level.
6.12.2 Based on the Regulations by CERC / SERC, the impacts of the same are envisaged in a
point wise manner:
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A. National Level:
• Under the Act, no license is required for generation and distribution in rural
areas as notified by the State Government. This however does not have a major
impact as there would not be many big private companies presently interested in
these rural areas on account of low demand / revenue in these areas.
• The provision in the EA 2003 for non-discriminatory open access to the
transmission system removes the boundaries for competition. Enhanced role of
Trading in the Act further increase the options of consumers to decide source of
supply, which in turn makes market more competitive.
• The CERC has approved the setting up of Power exchanges which are operational
in the country. This provides a platform for trading of electricity which can be an
alternate source of supply of electricity.
• Recognizing the urgent need to address the issue of reducing losses and
improving the quality of power delivery, the Ministry of Power (MoP) has
focused on implementing distribution reforms and has introduced several
measures to further the process. The Act recognizes the need for a strategy that
distinguishes urban power distribution from rural electricity supply. It also
facilitates establishment of participatory models for rural distribution including
electric cooperatives, rural gram panchayats (local government), distribution
franchisees, etc. The other program focused on implementing distribution is the
Accelerated Power Development Reform Program (APDRP) to finance the
modernization of sub-transmission & distribution networks including a system of
local management and energy accounting through widespread metering in every
state utility’s distribution circles.
• The State owned generation companies are eligible to sell power from new
capacity added through MOU route till January 2011 as per the National Tariff
Policy. Post January 2011 or such time period as determined by the State
Commission, new capacity added shall compulsorily be sold to Distribution
Companies through competitive bidding process. MGVCL will also have to go
through bidding process to procure power from State Generating Station.
B. State Level:
C. The Commission in exercise of the powers has notified the GERC (Terms and
Conditions of Tariff) Regulations, 2005. The Commission has implemented the
Multi-year tariff in Gujarat and benchmark-based performance monitoring has
become the practice.
D. The GERC has issued the GERC (Standards of Performance of Distribution
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Licensees) Regulations, 2005 which provides the time limits for distribution
utilities for carrying out various activities, the quality of supply to be maintained,
compensation payable for non-maintenance of standard of performance.
E. GERC Issued Licensee’s Power to Recover Expenditure incurred in providing
supply and other Miscellaneous Charges Regulations, 2005. These give the
provisions for the duty of the distribution licensee to supply electricity on
request and recovery of expenditure for supplying the power. These also give the
various charges applicable including registration charges, (non refundable), Re-
estimate charges, Test Report charges, Testing of Installation Charges Change of
name and transfer of Agreement re-connection / Disconnection charges etc.
F. The GERC issued the Electricity Supply Code and Related Matters Regulations,
2005 applicable to all Licensees engaged in distribution of electricity and
electricity consumers in the State of Gujarat. These provide the system of supply
and classification of consumers, procedures for grant of supply, metering and
power supply charges (Bills), Restrictions regarding unauthorised use and theft
and General Provisions
G. The GERC issued (Gujarat Power System Management Standards) 2005 which
provide guidelines for the operation and management of power system including
power generation, power transmission and power distribution and will be
supplemental to Grid Code.
H. The GERC issued (Establishment of Forum for Redressal of Grievances of the
Consumers) Regulations, 2004.As per these, every Licensee has to establish a
Forum in accordance with the Electricity Act, 2003 to ensure prompt redressal of
Grievances within the timeframe specified in these Regulations and in
accordance with the guidelines laid under these Regulations.
I. GERC issued Procurement of Energy from Renewable Sources Regulations, 2010.
These provides the minimum purchase obligations to Distribution Licensees as
well as Captive and Open Access (s) users/consumers from renewable energy
sources
6.12.3 Current GERC Regulations Summary
6.12.3.1 Terms and Conditions of Tariff Regulations, 2005

The Commission has implemented the Multi-year tariff in Gujarat and
benchmark-based performance monitoring has become the practice.
6.12.3.2 Standards of Performance of Distribution Licensee Regulations, 2005
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• The Commission in exercise of the powers has notified the GERC (Terms and
Conditions of Tariff) Regulations, 2005. The Commission has implemented
the Multi-year tariff in Gujarat and benchmark-based performance
monitoring has become the practice.
• The GERC has issued the GERC (Standards of Performance of Distribution
Licensees) Regulations, 2005 which provides the time limits for distribution
utilities for carrying out various activities, the quality of supply to be
maintained, compensation payable for non-maintenance of standard of
performance
• Supply distribution licensee shall be the sole interface to the consumer and
therefore responsible for adherence to SoP relating to the period of giving
supply, quality of supply (voltage, harmonics), system of supply, restoration
of supply, restoration in burnt meter cases, reconnection on payment of
amounts due. In order to provide non-discriminatory access to the wires, the
wheeling distribution licensee should not discriminate between changed-over
consumers and its own consumers for provision of wheeling services.
6.12.3.3 Procurement of Energy from Renewable sources Regulation

• The Electricity Act, 2003, mandates the State Electricity Regulatory
Commissions to promote cogeneration and generation from renewable
energy sources by providing suitable measures for connectivity with the grid,
and also to specify for purchase of electricity from such sources, a percentage
of the total consumption of electricity in the area of a distribution licensee.
• The National Action Plan of Climate Change (NAPCC) has set the target of 5%
renewable energy purchase for FY 2009-10 which will increase by 1% for the
next 10 years. The NAPCC further recommends strong regulatory measures
to fulfil these targets.
• In this regard, the Gujarat Electricity Regulatory Commission has passed the
regulation for promoting the sale of power from renewable energy sources to
any person and for procurement of energy from renewable sources by
distribution licensee within the State of Gujarat.
• Further the regulations apply to the following:
Distribution licensee
Any other person consuming electricity
o Generated from conventional Captive Generating Plant having
capacity of 5 MW and above for his own use and / or
o Procured from conventional generation through open access and
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third-party sale
• Each distribution licensee shall purchase electricity (in kWh) from renewable
energy sources, at a defined minimum percentage of the total consumption
of its consumers including T&D losses during a year. Similarly, Captive and
Open Access user(s) / consumer(s) shall purchase electricity (in kWh) from
renewable energy sources, at a defined minimum percentage of his/her total
consumption during a year.
• The defined minimum percentages by GERC are given below:
Table 16: RPO for Gujarat FY 2010-11 to 2012-13
Renewable Purchase Obligation (RPO) (%)

Biomass/
Year Total Wind Solar
Bagasse
2010-11 5% 4.50% 0.25% 0.25%
2011-12 6% 5% 0.50% 0.50%
2012-13 7% 5.50% 1% 0.50%
6.12.3.4 Power System Management Standards, 2005 – Distribution

The Gujarat Power System Management Standards, herein after called Power
System Management Standards, provide guidelines for the operation and
management of power system including power generation, power transmission
and power distribution and will be supplemental to Grid Code.
Distribution System Management Standards formulates guidelines for

operational criteria covering following aspects:
Demand and Supply Scheduling
Load Monitoring
Load Balancing
Voltage Monitoring and Control
Data Logging
Load Management
Communication
Safety Co-ordination
Maintenance
6.12.3.5 Intra-State ABT implementation

• In exercise of the powers conferred on it by Section 181 read with Sections
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39(2)(d), 40(c), 42 (2)(3)(4), 86(1)(c) of the Electricity Act, 2003 (36 of 2003)
and Section 20 (3)(b) of the Gujarat Electricity Industry (Reorganisation and
Regulation) Act, 2003 (Gujarat Act No. 24 of 2003) and all other powers
enabling in this behalf, the Gujarat Electricity Regulatory Commission, made
“the Gujarat Electricity Regulatory Commission (Open Access in Intra-state
Transmission and Distribution) Regulations, 2005[Notification No. 13 of
2005].”
• The regulation came into force from the date of their publication in the
Official Gazette i.e. on 29.09.2005.
• GERC vide Order dated 11th August, 2006 [Order No. 3 of 2006] in the matter
of: “Bringing Generating Stations of Gujarat State, Distribution Licensees and
other persons under the purview of Intra-State Availability Based Tariff (Intra-
State ABT)”, the Commission resolved to implement the scheme of Intra
State Availability Based Tariff (Intra-State ABT). The tariff under the ABT
regime will have three components namely the capacity charge, the energy
charge and the Unscheduled Inter-change charge (UI Charge).
• Intra-state ABT shall be applicable to the following:
o All erstwhile GEB i.e. GSECL owned generating stations;
All generating stations owned or otherwise within the general ambit of
the State Government by virtue of their being public sector entities or
joint sector entities;
All other Generators (i.e. IPPs, CPPs etc.) in the Private Sector who have
contracted to supply power to Distribution Licensees/GUVNL.;
All Distribution Licensees
• The order paved the way for introduction of Intra-State ABT in the State for
the first time. As provided therein, intra-state ABT was to be operated
initially on trial run (as a mock exercise) for a period of three months i.e. up
to 30thNovember, 2006 and based on the feedback received from the mock
exercise, the Commission was to review the provisions of the order. During
this period all the Commercial settlement to be based on the existing
arrangement.
• GERC vide Order dated 01.04.2010 [Order No. 3 of 2010] issued Amendment
to Order No.3 of 2006 dated 11th August, 2006. This amendment order is to
clarify/streamline certain provisions of the earlier order and to decide the
date of its actual implementation. The Commission has directed that the
Intra-State ABT in the State of Gujarat shall be fully implemented with all its
commercial aspects w.e.f. 5th April 2010.
• The basic UI rate for intra-State entities in Gujarat shall be in line with the
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CERC notifications on the matter as amended from time to time.
• INTRA-STATE ABT has been implemented in GUJARAT w.e.f.05.04.2010 as per
GERC Order No. 3 of 2010. Various issues have been raised during initial
implementation period and majority of them have been resolved.
• The activities carried out by SLDC for the purpose of implementation of Intra
State ABT are briefly as under:
Round the clock Scheduling Activities
Data base configuration for scheduling and energy accounting
Preparation of Trial Accounting
Formulation of Energy Accounting Committee
Pool Account Settlement System
Establishment of Communication Media
Submission of Compliance
Action Plan for launching Commercial Implementation
6.12.3.6 Provisions of Intra – State Open access regulations:

• These regulations shall apply to open access for use of intra-State
transmission system and distribution systems in the State of Gujarat,
including when such system is used in conjunction with inter-State
transmission system.
• Subject to the provisions of these regulations, the licensees, generating
stations, captive generating plants and consumers shall be eligible for open
access to distribution system of a distribution licensee on payment of the
wheeling and other charges as may be determined by the Commission in
accordance with Chapter 5 of the these regulations.
• Subject to the provisions of these regulations, open access shall be
permissible to the consumers seeking open access for a capacity of 1 MW
and above.
• Provided that when a person, who has established a captive generating plant,
opts for open access for carrying the electricity to the destination of his own
use, the limitation of 1 MW shall not be applicable.
• Provided further that duties of the distribution licensee with respect to such
open access customers shall be of a common carrier providing non-
discriminatory open access as per section 42(3) of the Act.
6.12.3.7 Licensee’s Power to Recover Expenditure incurred in providing Supply and

other Miscellaneous Charges (First Amendment) Regulations, 2010
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• For extending supply to the applicants for Low Tension connection, the
licensee shall estimate the cost of electrical plant such as distribution
transformer (DTR) along with switch gear etc, as follows:
Cost of the works of erection of DTR including switchgear (in Rupees) = P
Rated capacity of DTR in KVA = Q
Cost per KVA (in Rupees) = P/Q
Contracted load in KVA of the applicant = K

Amount payable by applicant towards electrical plant (in Rupees)= K ×
(P/Q)
• On requirement of the augmentation of the capacity of an existing electrical
plant (such as DTR and switchgear etc.), the differential cost of existing and
new electrical plant will form the basis of calculation of pro-rata charges.
• Distribution licensee shall continue to estimate the amounts payable by
subsequent applicants as above till the full cost of transformer is recovered.
6.12.3.8 Different Orders on determination of tariff for renewable sources of energy

• Wind Power
Gujarat Electricity Regulatory Commission (the Commission) has determined
the price for procurement of power by Distribution Licensees in Gujarat from
wind energy projects.
The Commission has determined the tariff for generation from new wind
energy project at Rs.3.37 (constant) for its entire project life of 20 years
i.e. from the first year to the twentieth year.
This tariff rate shall be applicable for purchase of wind energy by
GUVNL/Distribution Licensees for complying with the purchase obligation
that may be specified by the Commission from time to time.
This tariff will be applicable to wind energy generators who commission
brand new wind energy plants and equipments after the date of this
order. Old/second hand equipment will not be accepted.
Those WEGs being set up exclusively for sale to distribution licensee will
be eligible for the tariff framed by this order from the date of this order
and in accordance with the Regulations.
However, the Commission will consider the question of enhancing the
percentage obligation from time to time. Those WEGs being set up for
self use and which have not opted for the benefits under the Wind Power
Generation Policy–2002 will be covered by the provisions of this order
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after 20th June 2007.
• Baggasse Based Co-generation

The Gujarat Electricity Regulatory Commission (the Commission) has
determined the price for procurement of power by Distribution Licensees in
Gujarat from bagasse based cogeneration projects.
The Commission has determined the tariff for generation from bagasse
based cogeneration project at Rs. 3.00 (constant) for its entire project life
of 20 years i.e. from the first year to the twentieth year.
This tariff rate shall be applicable for purchase of such energy by
• Biomass Gasification
The Gujarat Electricity Regulatory Commission (the Commission) has
determined the price for procurement of power by distribution licensees in
Gujarat from biomass gasification based generation projects.
The Commission has determined the tariff for procurement of power
from biomass gasification based generation project at Rs. 3.08 (constant)
for its entire project life of 20 years i.e. from the first year to the
twentieth year.
This tariff rate shall be applicable for purchase of such energy by
• Solar Energy
The Gujarat Electricity Regulatory Commission (hereinafter referred to as
“the Commission”) determines the tariff for procurement of power by
Distribution Licensees in Gujarat from Solar energy projects.
The levelised tariff including RoE of Solar PV power generation, using a
discounting rate of 10.19% works out to Rs. 12.54 per kWh and levelised
tariff using the same discounting factor for Solar Thermal Power
generation works out to Rs.9.29 per kWh.
However, the Commission felt that it would be appropriate to determine
tariff for two sub-periods: 12 years and 13 years instead of the same tariff
for 25 years.
Hence, the Commission determined the tariff for generation of electricity
from Solar PV Power project at Rs.15 per kWh for the initial 12 (twelve)
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years starting from the date of Commercial operation of the project and
Rs.5 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year.
The Commission also determined the tariff for generation of electricity
from Solar Thermal Power project at Rs.11 per kWh for the initial 12
(twelve) years starting from the date of Commercial operation of the
project and Rs.4.00 per kWh from the 13th (Thirteenth) year to 25th
(twenty fifth) year.
The above tariffs take into account the benefit of accelerated
depreciation under the Income Tax Act and Rules. For a project that does
not get such benefit, the Commission would, on a petition in that respect,
determine a separate tariff taking into account all the relevant facts.
This tariff rate shall be applicable for purchase of solar power generation
by Distribution Licensees and other entities for complying with the
renewable power purchase obligation specified in the relevant
Regulations of the Commission from time to time. This tariff will be
applicable to solar power generators, who will commission brand new
solar energy plants and equipments during the control period applicable
for this order.
6.12.3.9 Designating State Nodal Agency for REC Regulations

In exercise of the powers conferred under Regulation 6 (a) of the Gujarat
Electricity Regulatory Commission (Procurement of Energy From Renewable
Source) Regulations (Notification No 3 of 2010) the Gujarat Electricity Regulatory
Commission designated the Gujarat Energy Development Agency (GEDA) as the
State Agency for the purposes of the Procurement of Energy From Renewable
Sources Regulations (Notification No 3 of 2010).
State Nodal Agency will act as the agency for accreditation and recommending
the renewable energy projects for registration and to undertake such functions
as may be specified under the Electricity Act 2003.
State Nodal Agency shall be responsible for accreditation of RE generators,
certification of RE in consultation with SLDC for the purpose of issue of REC.
6.13 Key Provisions

The key provisions of the EA 2003 and other policy enablers which have thrown up
opportunities as well as challenges to MGVCL are:
• Parallel License
• Introduction of Open Access
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• Renewable Purchase Obligation
• Multi-year Tariff Regime
While there a number of enablers in the environment for growth opportunities,

there are also challenges that would need to be analysed, along with the inherent
strengths and weakness of MGVCL to consider the future outlook of the Company.
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7. Market Issues and Challenges
A number of market related issues and challenges are expected to create uncertainty
in the power distribution business environment and therefore require the
appropriate reactive measures. These issues and challenges are as follows:
7.1 Open Access Regulation

Allowing open-access in the distribution segment and ensuring options for the end
users are key strategies to develop a competitive power market in India. As per
Electricity Act 2003 and GERC Regulations, it has mandated to distribution licensee
to implement non-discriminatory Open Access resulting in loss of subsidising
category of consumers. The current class of HT consumers who intend to source
electricity under the Open Access route are the subsidizing consumers for the
licensee, as and when such consumer avails Open Access, the Distribution licensee
encounters an instantaneous revenue shortfall. However, by identifying cross
subsidy surcharge and additional surcharge, on account of laying a wire network and
related infrastructure to supply electricity to the consumer, the prospective OA
applicant would share the burden of cross subsidy that is built in his tariff.
In light of the EA 2003 provisions regarding non-discriminatory open access following
challenges will rise in front of a distribution licensee:
7.1.1 Generators and power traders who will try to win away HT and large consumers and
try to negotiate bilateral power supply or purchase contracts with them. These
generators could include GSECL, CGS, IPPs, Captive Generators and new entrants in
generation (merchant plants).
7.1.2 GUVNL on behalf of Distribution Companies in Gujarat have tied-up its future
requirement of power by entering into long term contracts with GSECL, CGS and
under the UMPP/Case-1 route. By tying-up long term PPAs, the Discoms are obliged
to pay the capacity charges for all such power and in case of shifting of any big HT
consumers through open access will result in fall in demand and have impact on
financial whereby DISCOM will have to pay for capacity charges without consuming
power.
7.1.3 The Discoms have heavy responsibility to meet the needs of agricultural consumers
and small domestic consumers at a lower rate than the average cost. Consumers
who are currently the HT consumers and commercial consumers paying a higher
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tariff are providing the means to do this. If such consumers walk away from Grid
supply, subsidy from Government will have to increase. The correct position would
depend on the situation regarding relative tariff of the different consumers, the
possible rates of growth of category wise consumption and the potential for
purchasing additional power at low rates in the future.
7.2 ABT implementation

With ABT implementation a three part tariff structure would be in place, consisting
of demand charges, energy charges and UI (Unscheduled Interchange) charges.
Following would be the benefits to a Discom with intra state ABT implementation:
Effective Power purchase cost may reduce by cheaper power purchase and
encouraging consumers to use power during off-peak/ night hours.
Demand Supply gap may reduce to some extent.
Trading of power becomes more practicable.
Optimum utilization of Power Stations.
Accounting of Non-conventional Energy becomes transparent.
Proper Energy Accounting is possible.
Grid Discipline will improve thereby reducing chances of system collapse.
Following are the issues faced by Discom with ABT Implementation

Lack of trained & sufficient staff in Load Dispatch Centers after quantum of
activities increased after implementation of ABT.
Proper SCADA System should be in place.
7.3 UI implication in implementation of Intra-State ABT

7.3.1 GUVNL submitted a petition to GERC the combined power system operations of four
subsidiary distribution licensees of GUVNL for the purpose of operational efficiency,
load management and applicability of UI charges. This will enable distribution
licensees to maintain uniformity in supply of power across the state, to ensure off
take of power at economical rates, following state level merit order discipline, to
reduce the UI implication on account of differential rates of UI on under drawl and
over drawl of power, to maintain uniform retail tariffs in the State and for better
compliance of ABT Orders and Regulations.
7.3.2 It was specified that the total capacity tied up by GUVNL for four distribution
licensees and allocation made by GUVNL to them are normally sufficient to meet
their combined power requirements. However, on account of variation in their
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individual / respective demand during the day period and changes in consumer mix,
load requirement, geographical condition etc., distribution licensees are facing
operational difficulties, whereby some distribution licensees are having surplus
power and others are facing shortage of power, although the total demand of four
distribution licensees may be less than or equal to the available generation at that
point of time.
7.3.3 In such situation some distribution licensees are required to pay higher UI charges
for over drawl, leading to uneconomical operation and procurement of electricity at
a higher rate. Some of the generating stations are required to back down their
operation of existing cheaper generation due to low demand of distribution
licensees who are purchasing electricity from such generating stations.
7.3.4 Due to steps undertaken by SLDC sometimes to back down generation plant, this
results in un-equal power supply amongst the four subsidiary distribution licensees,
which creates anomaly.
7.3.5 Therefore, a request was made to consider uniform entities for consideration of load
forecasting, scheduling and drawl of energy of distribution licensee of erstwhile GEB
for operational efficiency. The same was not maintainable by GERC and therefore,
distribution licensee will be considered as a separate independent legal entity for
ABT implementation.
7.3.6 Therefore, a proper planning and scheduling of power needs to be undertaken by

GUVNL / DISCOM to avoid any penalty under intra-state UI.
7.4 Parallel License

7.4.1 As per the Electricity Act 2003, a parallel licensee is possible to be operated whereby
two licensees are supplying power in the same specified area. In the case of MGVCL,
due to amendment in the Electricity Act 2003, SEZ became the Distribution Licensee
for the SEZ area whereby MGVCL is supplying power. It might also be possible that in
future, other distribution licensee may get an approval to supply power in MGVCL
area. In that case, there is a likelihood that the urban areas may witness competition
due to parallel distribution licensees as these areas witness relatively less
distribution losses and are marked by the non-existence of agriculture consumers
and a willingness to pay on the part of their regular consumers resulting in cherry
picking of area by such parallel licensee. The major issue is that the existing licensees
are already locked in long term power purchase contracts with fixed costs to be paid
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irrespective of off-take by these licensees. In view of this, the migration may lead to
a situation where in the average power purchase cost is pushed upward by the fixed
costs flowing from the PPAs and thereby further aggravating the situation with
respect to the consumer level tariffs of the existing licensees, leading to further
migration.
7.4.2 Already, Torrent and Kandla has a distribution license within the State. There is a risk
of them entering the MGVCL Distribution license area and apply for parallel license.
The existing case of parallel license is already there in Mumbai and Jamshedpur.
7.5 Regulatory Provisions

Risk Analysis of power distribution assets on behalf of a large power generation
company, including analysis of regulatory framework and regulatory risks,
performance benchmarks/ alternative performance based regulation, contractual
risk with respect to shareholder’s agreement, acquisition and the loan agreement
are part of statutory and regulatory risk. Also, Pricing of Open Access Surcharge,
wheeling charges and methodology for tariff determination, all of which will
determine the total cost of served power is also one of the Regulaotry risk for
distirbution utility.
7.6 Industry Risk and Competition

7.6.1 The industry risk assessment is driven by appreciation of the overall demand-supply
scenario of power and of the overall policy environment within which entities
operate. Weaker generation or transmission entities, may hinder smooth funcitoning
of the downstream license in a conventioal set-up.
7.6.2 The new Electricity Act has provided various opportunities and challenges to power
sector players to bring in greater competition. Distribution business is subject to
maximum competition in the short to medium term mainly for the bulk and HT
Customers.
7.6.3 In the future, new distribution licensees and retailers are likely to emerge, based on
overall “competitive pricing” and therefore, MGVCL would have to compete in the
market place.
7.6.4 The opening of sector reform and electricity markets has already lead to open access
where MGVCL could procure cheapest power if available as well as consumers can
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also avail the cheapest power from any other alternate sources. This will shift the
balance of power towards better performing distribution licensees, who generate a
higher quantum of cash from operations and are in a better position to service their
obligaitons towards the generation and transmission licensees.
7.6.5 MGVCL will face the challenge to retain its market share in the face of competition.
The flight of HT Consumers of MGVCL to Traders and other generators through open
access or parallel licensing could lead to reduced load of “subsidizing” consumers,
impacting the sector cash flows.
7.7 Renewable Purchase Obligation (RPO)

7.7.1 The Electricity Act, 2003, mandates the State Electricity Regulatory Commissions to
promote cogeneration and generation from renewable energy sources by providing
suitable measures for connectivity with the grid, and also to specify for purchase of
electricity from such sources, a percentage of the total consumption of electricity in
the area of a distribution licensee.
7.7.2 The National Action Plan of Climate Change (NAPCC) has set the target of 5%
renewable energy purchase for FY 2009-10 which will increase by 1% for the next 10
years. The NAPCC further recommends strong regulatory measures to fulfil these
targets.
7.7.3 GERC has already passed the regulation for promoting the sale of power from
renewable energy sources to any person and for procurement of energy from
renewable sources by distribution licensee within the State of Gujarat. This kind of
policy enforcement and regulation with penalty clauses as intended by GERC will
provide the much-needed impetus for the RPO market to flourish in India and
provide an incentive for RE power producers.
7.7.4 The states having high or moderate RE potential would drive the development of RE
power in coming years. However, considering Gujarat and its huge potential and
upcoming plans for wind and solar energy generation, there would be enough
installed capacity to meet the RPO norm mandated by the Hon’ble Commission.
7.7.5 Renewable Energy Certificate (REC) mechanism which could go a long way in
enabling states deficit in renewable potential to meet their obligations while
encouraging developers to set up generation facilities based on renewable sources in
most optimal locations.
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7.7.6 REC mechanism provides an excellent tool to ensure that all states contribute in the
development of RE based power & hence fulfil their RPO.
7.7.7 With the REC mechanism in place, a regional level forecasting of RE sources and
targets/transfer of RE power could be considered.
7.7.8 Other form of RE technologies like biomass based stations could provide stability and
increase the overall Capacity Utilization Factor (CUF) of RE technologies.
7.7.9 REC mechanism offers the potential to expand the market for renewable by
broadening the availability and scope of power products which are available to
customers.
7.7.10 If the Obligated Entity fails to comply with the RPO target as provided, it has to pay
RPO regulatory charges which are equivalent to the highest applicable preferential
tariff during the year.
7.7.11 Given that the RPO for 2012-13 will continue after that until the regulation is
modified, Torrent Power India has become the first power generator to invite
Expression of Interest to supply Renewable Energy.
7.8 Impact of DSM Measures

7.8.1 Every Distribution Licensee shall make DSM an integral part of their day-to-day
operations, and undertake planning, designing and implementation of appropriate
DSM programs on a sustained basis. Distribution Licensees may recover all justifiable
costs incurred by them in any DSM related activity, including planning, designing,
implementing, monitoring and evaluating DSM programs, by adding these costs to
their Annual Revenue Requirement to enable their funding through tariff or by
implementing programs at the Consumers’ premises that would attract appropriate
Return on Investment.
7.8.2 All such DSM related activity/ programs undertaken by the Distribution Licensees
needs to be ─
• Will need to be cost effective for the consumers’ of the Distribution Licensees as
well as to the Distribution Licensees themselves;
• Shall protect the interest of consumers and be implemented in an equitable
manner;
• Result in overall tariff reductions for all the consumers of the licensees;
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• The benefits which an utility will get are:
• Avoided power purchase cost;
• Sale of saved energy to industrial consumers;
7.8.3 There are 3 main categories of utility DSM programs viz-

Energy Conservation Program: This is intended to be achieved by using
equipment with improved efficiency, building and industrial processes.
Load management Programs: This is achieved by redistributing energy demand
to spread it more evenly i.e. load shifting program offering time of use tariff and
interruptible power tariff rates etc.
Strategic Load growth program: Programs that uncover cost effective electrical
technologies that operate primarily during periods of low electricity demand.
o In terms of saving of Million Units (MUs), the agricultural pump sets have the
highest potential
o Maximum leverage is possible in the Domestic sector i.e. by investment of
lowest capital as the maximum savings are possible in domestic lighting;
o Savings in domestic and agricultural sector shall not only avoid power
purchase cost but shall also reduce subsidy burden on state Government;
o Promotion of incentive schemes for agriculture consumers for implementing
energy efficiency/DSM through Kisan Melas & road shows;
o Develop proposals for sale of energy efficient pump sets & accessories at
discounted rates;
o Rebate in energy charges for agricultural consumers on installation of energy
saving devices including start labelled pumps;
7.8.4 Implementing Time of Day (TOD) Tariffs: All utilities should introduce TOD tariffs for
large industrial and commercial consumers to flatten the load curve.
7.8.5 Improving efficiency of Municipal Water pumping: Institute measures that

encourage adoption of efficient pumping systems and shifting of pumping load to
off-peak hours.
7.8.6 Activities to be carried out by the Distribution Licensees:

Load research & consumer survey;
Load forecasting at aggregate system level, segment level and end-use level;
Conduct of DSM and Demand Response Potential Studies, also including
relationship with Integrated resource planning (IRP) exercises;
Setting short- and long-term DSM targets (e.g., kWh, MW);
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DSM Programmes, Portfolio and Plans preparation, documentation, routine
monitoring and Regulatory reporting;
Preparation of Annual work-plan for DSM Programmes, Portfolio and Plans;
Preparation of annual DSM Budgets;
DSM programme level dispute resolution;
Development of DSM related centralised information system and database to aid
DSM planning, programme design and cost assumptions;
Inventory of DSM programmes, costs and achievements;
DSM measure wise estimation of deemed savings, costs and timing;
Avoided costs – generation, transmission and distribution;
Research and analysis in support of DSM plans;
Any other items that may be deemed important by the Commission to support
DSM activities in the State;
7.9 Universal Service Obligation

The Company is obliged to supply power to all. Gujarat Discoms have very large
distribution networks and cover large geographic areas. New connections to remote
areas are expensive and maintaining reliable supply levels are difficult. These
features tend to increase technical losses and the costs of operation and
maintenance.
Government of India should extend Universal Service Obligations criteria to the new
market entrants to prevent “cherry picking” of subsidizing customers.
7.10 Power Purchase Responsibility

The Company may require contracting power directly from generators to have direct
control over its cost of power purchase and to seek out low-cost power source as
well as to meet the RPO as specified by GERC.
7.11 Market Penetration and service area

The widespread distribution network of MGVCL and the retail reach of such
infrastructure would be key discriminators of a licensee’s market position. Usually a
distribution licensee used to operate in exclusive zones which however are now
allowed by any other distribution licensee or a franchisee. Although the mix of
customers within a service area and their purchasing power are important
considerations, the service quality and reliability offered by a distribution licensee
are important determinants of the sustainability of such a relationship. While the
market may be ready to offer a price premium for a more responsive and reliable
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licensee, the latter has to maintain this value proposition for the premium to be
sustainable.
The growth of a lower paying customer segment and shifts in better paying customer
segments are the trends that needs to be factored while undertaking the market
assessment.
7.12 Cost to serve against average Realization

With the advent of the Electricity Act 2003 and various policy initiatives thereof, it
has now become mandatory for the Electrical utilities to gradually reduce the cross
subsidy and move the tariffs in the State towards the “Cost of Supply”. Traditionally,
in the Indian context, tariffs for domestic and agricultural consumers have been
heavily subsidised either by the state through subsidies and subventions or through
cross subsidisation by other consumer categories, primarily the consumers using
electricity at high voltages.
As per Section 61 (g) of Electricity Act, 2003,
“the tariff progressively reflects the cost of supply of electricity and also,
reduces and eliminates cross-subsidies within the period to be specified by the
Appropriate Commission;”
7.12.1 Given below is a comparison of Gujarat Discoms with two other states with respect
to their Average Cost of Supply Vs Average realization per unit power sold. The other
two states are Andhra Pradesh and Delhi.
Delhi has private players into distribution viz. NDPL, BRPL, BYPL and it is analysed
that Andhra Pradesh has state owned distribution licensee in place & here the gap
between the cost of supply and realization is comparable with that of Gujarat
discoms.
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Figure 21: State wise Average Cost of Supply Vs Realization
6
Average CoS Average Realization (excluding subsidy)
5
5.08
4.88
4.82
4.75
4.72
4.62
4.51
4
4.35
4.28
4.26
4.05
Rs/Unit
3.75
3.73
3
3.47
3.40
3.34
3.19
3.12
2.88
2.84
2.80
2
1.93
0
APCPDCL APEPDCL APNPDCL APSPDCL BRPL BYPL NDPL UGVCL PGVCL MGVCL DGVCL
7.12.2 Above graph depicts the average cost of supply of several state owned utilities. The
cost to serve the agricultural comnsumers is the highest but in Gujarat UGVCL’s cost
of supply is lowest because of the allocation of lower cost power by GUVNL to
maintain the price parity.
7.13 Rationalization of tariffs to retain HT & large Consumers

7.13.1 It has been widely recognised that rational and economic pricing of electricity can be
one of the major tools for energy conservation and sustainable use of ground water
resources. In terms of the Section 61 (g) of the Act, the Appropriate Commission
shall be guided by the objective that the tariff progressively reflects the efficient and
prudent cost of supply of electricity.
7.13.2 So far the practice being followed in fixing the tariff rates for various categories of
consumers is based on cost of the supply at consumer end, the capacity of the
consumer to pay and the socio economic policy of the government. Hence the slab
rates are so designed that the affluent customers are paying more and economically
weaker consumers paying less for their consumption. Thus there is cross
subsidisation between various categories of consumers and within a particular
category of consumers itself.
7.13.3 Currently, a highly complex tariff structure is in operation and an imbalanced pricing
leading to cross subsidisation is in force. The rationalization of tariffs is required
simplify the structure and introducing cost reflective tariff by way of retaining the
high end customers. MGVCL has to move to a direction to align tariff to cost and
moving towards the reducing of cross subsidy prevailing in the system.
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Table 17: MGVCL's Realization as a % of CoS
Cost to Average Av Realzn

Particulars Serve Realisation as % of
(Rs/Kwh) (Rs/Kwh) COS
Low Tension
Domestic 5.37 3.80 71%
Commercial 4.78 5.63 118%
Industrial Low & Medium Voltage (Ind. LT) 5.32 5.47 103%
Street Light (Public Lighting) 4.95 4.09 83%
Irrigation Agricultural 5.42 2.45 45%
Public Water Works & Sewerage Pumps 4.02
(PWW) 3.44 86%
High Tension
Industrial High Voltage (Ind. HT) 4.45 5.46 123%
Railway Traction 3.76 5.77 153%
TOTAL 4.88 4.51 92%
7.13.4 Domestic and agricultural consumers typically require the highest per-unit cost of
service due to low load and remoteness, while HT and large consumers require least
cost per unit to serve. Furthermore, agricultural consumers, who have a low load
factor, tend to require higher peak capacity while total energy consumption remains
low.
7.14 Standards of Performance (SOP’s)

Supply distribution licensee shall be the sole interface to the consumer and
therefore responsible for adherence to SoP relating to the period of giving supply,
quality of supply (voltage, harmonics), system of supply, restoration of supply,
restoration in burnt meter cases, reconnection on payment of amounts due. In order
to provide non-discriminatory access to the wires, the wheeling distribution licensee
should not discriminate between changed-over consumers and its own consumers
for provision of wheeling services.
7.15 Operating norms – Regulated by SERC

Distribution Licensee have a direct interface with the customers and hence have to
develop necessary process, credit guidelines, billing systems and collection
mechanisms to ensure that the business is run efficiently. Operating efficiency will
impact the MBC cycle which would affect cash flows.
Also the actual cost of power (Procured through internal or external sources), within
approved tariff structure and allowed T&D Losses. Efforts are constantly required to
track energy flows in the system to ensure that all the energy being input in the T&D
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system is also billed after accounting for technical losses.
Man-power productivity parameters and other administrative expenses will also
need to be closely tracked and assessed in relation to regulatory forbearance.
7.16 Future Market Operations and financial positions

The future assessment is based on the aspects in the business environment including
the regulatory stance, changing market conditions, differential growth rates of
various consumers, tariff levels and growth orientation, all of which would translate
into the financial projections and performance.
While there a number of enablers in the environment for growth

opportunities, there are also challenges that would need to be analysed,
along with the inherent strengths and weakness of MGVCL to consider the
future outlook of the Company.
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8. SWOT Analysis
The strength and weakness of MGVCL aims at assessing the company’s performance
in vital areas such as Human resource management, operation efficiency, financial
management, MIS and IT. The opportunities and threats have been identified after
analyzing the business environment, potential competition and the issues and
challenges that face the company in a dynamic environment that is evolving rapidly
and will continue to do the same in the foreseeable future. The company’s business
environment has been analysed in terms of sector reform and regulations under EA
2003 and GERC regulations.
8.1 Background
8.1.1 As a part of the development of strategic plan for the business, it’s necessary to
understand the inherent competitive advantage of the company as well as the risk
surrounding the business environment. Like any other business, it is very important
for MGVCL to evaluate the environment – both internal and external while charting
out its growth path. The aim of any SWOT analysis would be to identify the key
internal and external factors that are important to achieving the objective of the
company. The SWOT analysis is a strategic planning technique used to assess the
internal and external environment in which the company operates and competes.
These come from within the company's unique value chain. The information being
used for the SWOT analysis is grouped 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;
8.2 Strengths
8.2.1 Experienced Manpower
The manpower of MGVCL is quite experienced and has about 3605 number of
technical workforce out of a total of 6208 which gives it an edge over the other
utilities around the nation. The workforce comprises of both the technical as well as
non-technical people. The workforce is quite efficient, senior management is quite
efficient & has paved the way in making MGVCL one of the best performing utilities
in India.
8.2.2 Wide spread network
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MGVCL has a wide spread network covering central region and connecting rural &
urban consumers. These wide spread networks are MGVCL’s one of the biggest
strengths, providing it a lot of leverage.
8.2.3 Operation efficiency

MGVCL is quiet efficient in maintaining and operating its network which is evident
from its low distribution loss level & high system reliability and availability. Company
has incurred Rs 44 Crores during the year for R&D under review for system
improvement, HVDS, ABC, Underground Cables. Conductor renovation of 1283 KM is
carried out under system improvement. Detailed analysis and in depth study is
carried out for feeders having high ampere loading & low tail end voltages and
accordingly such feeders are bifurcated as per system improvement (SI) norms. Total
such 45 feeders are bifurcated under System improvement.
8.2.4 Demand side management (DSM) measures

MGVCL has taken several energy efficiency measures in order to conserve
energy, they as follows:
High-loss feeders have been identified, close monitoring is being done up to
the Sub-division level to reduce the technical losses and meters are provided
on TCs for better control on systems to identify the weak pockets with high
losses.
Regular and periodical maintenance of line and equipments.
Pamphlets explaining energy saving measures and its efficient use along with
energy bills are circulated for public awareness. The seminar on energy
conservation was also arranged during the year with participation of all
categories of consumers. Mass awareness amongst consumers for energy
conservation.
Under the publicity campaign, printing of pamphlets, posters, banners,
telecasting of short films on TV, cable network and on radio, advertisement in
print media, depicting hoardings containing Energy saving messages/ slogans
etc. have also been carried out during the celebration of “Energy
Conservation Week.”
Under the “Swarnim Gujarat Mahotsav”, the month of August-2010 was
celebrated as “Urja Shakti Month – Aug-2010”, under which various
programs were organized by the Company for creating awareness of energy
conservation with active involvement of the employees and public at large.
Specific areas in which R&D carried out by the Company:
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Cable and Conductor measuring instruments are proposed for all four Circles
of the Company. Installation at Narol RSO under Sabarmati Circle is
completed.
Concept of single phase transformer of 5 KVA introduced for reduction of
technical and commercial losses.
Advantages of the above measures:

Reduction of line losses at optimum capital investment
Reduction in voltage drop.
Reduction in failure of DTC.
Prevention of Theft of energy.
Improvement in Reliability of supply
8.2.5 Novel Initiatives for performance improvement

MGVCL has tried to provide satisfactory services to such a large consumer base and
have initiated novel approaches which are highlighted as below:
• MGVCL got the patent for “improved single phase power system” popularly
known as “Specially Designed Transformer (SDT)”. It is for the first time in history
that such a revolutionary technology breakthrough invented by a DISCOM has
received a patent for such invention. SDT introduced for load shedding activity
on Agriculture dominant feeders.
• DRUM program implemented by MGVCL to create a centre of excellence. DRUM
consists of technical assistance (TA), training needs assessment (TNA), and
funding.
• Pilot project is initiated for installing roof type solar power system in 5
subdivision offices of the company.
• To offer best services to valuable customers, MGVCL are providing 24*7 hour
customer care centre working for 365 days.
• Concept of Ring Distribution has been implemented to get the uninterrupted
power supply even in the event of faults in the Ring feeders. MGVCL has taken
these steps of modernization in the direction towards customer satisfaction and
excellence. The thinking process and work is being extended further to look into
the possibilities of underground network across the city with usage of Ring main
technology.
• The Cable fault locating system has been implemented which focuses on
localization & pinpointing of cable faults with the required accuracy and within
economically justifiable time duration.
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• GIS has been implemented by MGVCL for identification of all customers on the
network as well as to rectify any error or fault within the system in less time.
• The Hi – Tech Laboratory for testing of high quality meters with accuracy
confirming to Indian Standards is set-up at Baroda.
8.2.6 Uninterrupted Quality Power Supply

Power Availability for FY 2009-10 improved to 99.49% (without load shedding).
Transformer failure rate is also quite low: 5.06 %. For strengthening of distribution
network and to improve system operations several initiatives are taken during the
year and has lead to uninterrupted quality power supply.
8.2.7 Branding by rewards from MoP

In past five years, MGVCL has achieved many milestones and has been recognised all
over India as one of the efficient distribution company. Major Achievement of
MGVCL is to get award & recognition at national level for excellence in operations,
execution of projects, and innovation in designs & distribution in urban & rural areas.
8.3 Weaknesses
8.3.1 Ageing distribution Infrastructure
The distribution network of MGVCL is quite old and there has not been regular
repairs and maintenance in the past due to paucity of funds. Most of the network in
the urban areas is overhead network which is susceptible to the onslaught of
environment. In the coastal areas and hilly areas the corrosion effect is very
prominent. Thus, an ageing infrastructure leads to issues increased breakdown,
frequent maintenance and increased expenses for repairs and maintenance.
8.3.2 Commercial arrangement

In the existing scenario, GUVNL allocates power & the power purchase cost among
the four Discoms based on the consumer mix of each utility. Also the tariffs for the
consumer categories across all the four Discoms are similar. The Discoms should be
given authority of purchasing power from outside in order to lower their respective
power purchase cost. In case the Discoms independently procure power from
generating stations, they would require flexibility to charge tariff’s from consumers
that reflect the power purchase cost of individual Discoms in order to maintain their
profitability in the business.
8.3.3 Treatment of Agricultural subsidy
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In the state of Gujarat, agriculture is highly subsidized category. To compensate for
the loss incurred by the utility, government of Gujarat releases agriculture subsidy.
Total subsidy is to be distributed among the four Discoms based on their share in
overall agriculture consumption. The subsidy paid by government has been capped
at Rs 1100 Crores since the year 2002.
Agriculture forms a reasonable 16% of energy sales in MGVCL’s area of operation.

With the increasing number of consumers in this category & low realization, the
subsidy requirement will further increase. Since the subsidy has been capped,
MGVCL will have to look forward to other categories to cross subsidize agriculture
category. But as already discussed, the tariff of HT & LT industries is already higher,
hence tariff rationalization has to be institutionalized very soon
8.3.4 Tariff Structure in line with Cost of Supply

In a competitive market scenario, the ability of a state to attract industries would
depend on its competitiveness in cost of power. Hence to rationalize the tariff, the
tariff of each category of consumer has to be brought closer to its cost of supply.
Figure 22: Sales breakup FY 2009-10
Residential
6% Commercial
25%
33% Industrial LT
9% Public Water Works
8% Agriculture
16% Street Light
1% Industrial HT
2%
Railway Traction
8.3.5 Ageing employees

MGVCL has an ageing employee profile with the average age of employees being
around 44.94 years, and 2153 employees i.e. around 34% of the total employees
being above 50 years of age. This is a worrisome factor with MGVCL looking for
major capital expenditure of its network and could lead to operational issues in the
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near future.
8.4 Opportunities
In light of the initiatives taken up by the government of Gujarat and various
upcoming and existing regulations at state as well as central level, the company faces
several business opportunities. The business opportunities that could be open up to
MGVCL are as follows:
8.4.1 Contracting Power Supply

The open access to transmission and competitive bidding implemented form January
2011, envisaged upon enactment of EA 2003, would enable the Company/ GUVNL to
negotiate power purchase contracts with suppliers who offer the best contractual
terms. The Company could purchase power from captive generators, central
generating stations, State Generating Station, IPPs and new generators. This aspect
is important, as the Company would have direct control over power purchase costs
and the possibility of meeting the demand that is not satisfied in its territory
8.4.2 Eliminating Peak deficit

The competition provisions for power generation and open access to transmission
under EA 2003 should encourage more power generation in order to meet any peak
deficit. This in turn should translate into extra revenues to the Company if it could be
competitive enough to satisfy power shortage in its territory through power
purchases.
8.4.3 New Business Opportunities

The Company could rent its network to other businesses, such as fibre optic and
communication providers, to have access to a large pool of customers present in a
large geographical area.
Furthermore, commercial entities could take advantage of the Company access to a
large number of customers to develop new businesses or improve existing
operations such as sales of products and services. For instance, the Company’s bills
could be used for publicity purposes.
8.4.4 Ancillary Services

MGVCL has lot of in-house capacity available which can be utilised for providing
ancillary services to other power sector players. These services can be in the field of
providing meter testing facilities, technical consultancy, training, etc. For this
purpose, the laboratories and training centres already exist which would be utilised
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for this purpose. A separate wing may be needed to be created with dedicated
manpower and with a focused business development team. The business
development team would be responsible for keeping a track of the market as well as
identifying new players who might need such services.
8.4.5 CDM benefits

The Clean Development Mechanism (CDM), defined in Article 12 of the Protocol,
allows a country with an emission-reduction or emission-limitation commitment
under the Kyoto Protocol to implement an emission-reduction project in developing
countries. Such projects can earn saleable certified emission reduction (CER) credits,
each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto
targets. The United Nation for Climate Change Convention (UNCCC), the apex body
of CDM projects, has developed two baseline and monitoring methodologies under
which the T&D Loss reductions projects can be applied for CDM. They are:
• AMS IIA: Supply side energy efficiency improvements transmission and
distribution;
• AM0067: Methodology for installation of energy efficient transformers in a
power distribution grid.
According to these methodologies, the implementation of Energy efficient measures

for T&D loss reduction can include:
• Up-grading the voltage on distribution system;
• Replacing the existing transformers with a more efficient transformers;
Also, other CDM project will include Energy Efficiency measures, implementation of
CFL, rural electrification project using solar panels, etc.
8.4.6 Joint Ventures

MGVCL could take advantage of the change in the market characteristics by
leveraging its substantial operational experience in forging new JVs and business
associations with private sector companies which will have the financial resources to
set up new Greenfield projects, Generation plant from Renewable Sources to meet
the Renewable Purchase obligation as well as to be a Partner with any local
authority, Panchayat Institution, users' association, co-operative societies, non-
governmental organisations who intends to generate and distribute electricity in a
rural area as specified in Section 13 and 14 of the Electricity Act 2003. MGVCL could
bring to the table the advantage of having the experience in Retail Supply and
Distribution of Power as well as the expertise of the technical people who have been
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working at MGVCL plants for many years. Some of the areas where the public private
participation can be attempted:
• Distribution Franchisee;
• O&M contracts;
• Metering, Billing and Collection (MBC);
• Distribution Infrastructure under Turnkey projects
8.4.7 Infrastructure upgradation

As envisaged in the Capex Plan, MGVCL has planned for upgradation and
strengthening of distribution network with viable funding plan. MGVCL planning to
have a distribution system to withstand future load, provide quality and reliable
supply and reduce system losses. This will result in increase in sales and decrease in
the cost resulting in high revenue.
8.4.8 Competitive bidding

Section 63 of the Electricity Act promotes the transparent process of bidding for
procurement of power by the Distribution Licensees and subsequently, bidding
guidelines have been issued by the Ministry of Power for long term procurement of
power. Also, MoP has specified that distribution licensee has to procure power
through bidding process from January 2011. MGVCL can through this process
identify bidders across the country to source long term power for its licensed areas.
8.4.9 Non-Conventional Energy

Considering the RPO issued by SERC / CERC and State Government initiative to
harness the green energy, many activities has been initiated at the State level to
develop the green project. Considering the importance of the renewable sector and
the necessity of such power for the system and economic development of the State,
MGVCL can tie up with the generator for commissioning of such plant and have a full
capacity tie-up or can on its own develop such project.
8.5 Threats
Emergence of Competition and new regulations could present serious threat to
MGVCL if not managed well. Hence an appropriate plan has to be made to manage
them well.
8.5.1 Regulatory risk

MGVCL as a distribution licensee is regulated by GERC and has to approve the
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regulatory norms to recover the cost from the consumers and directly affecting the
liquidity position of MGVCL. The tariff decision is under the purview of GERC
whereby the regulations provide for most cost to be on a pass through basis along
with a reasonable return on equity component, the regulatory risk emanates from
the fact that GERC impose stricter performance standards or disallow certain cost
components that have resulted from the distribution licensee’s inefficiencies. Also,
regulations such as Renewable Purchase obligation will result into the impact on the
revenue of MGVCL.
8.5.2 High Sensitivity to Operational Variations

In the regulated regime, MGVCL is only entitled to ROE and with a small equity base
it means that any operational swings can adversely affect the financial condition of
the company. Any disallowance by GERC will led to heavy borrowing for carrying out
the operations of the company. Also, disallowances of expenses by the Hon’ble
Commission have an impact on the profitability of the company and the company
does not have any other mechanism to recover these costs given the regulated
nature of the business.
8.5.3 Deemed license to SEZ areas

The Central Government have issued relevant policies such as SEZ Policy and
Guidelines for Power generation, transmission and distribution in SEZ, where in it
has stated that it is the prime responsibility of the developer to provide quality and
continuous power supply to the consumers in their area. As per the Ministry of
Commerce and Industry notification dated 3rd March 2010, it stipulates that a
developer of SEZ shall be deemed to be a distribution licensee under clause (b) of
Section 14 of EA 2003. These developments are a threat to MGVCL as SEZ areas are
areas of growth and revenue potential and to that extent would be out of bounds for
MGVCL.
8.5.4 Parallel license

As per the Electricity Act 2003, a parallel licensee is possible to be operated whereby
two licensees are supplying power in the same specified area. It might be possible
that in future, other distribution licensee may get an approval to supply power in
MGVCL area. In that case, there is a likelihood that the urban areas may witness
competition due to parallel distribution licensees as these areas witness relatively
less distribution losses and are marked by the non-existence of agriculture
consumers and a willingness to pay on the part of their regular consumers resulting
in cherry picking of area by such parallel licensee. The major issue is that the existing
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licensees are already locked in long term power purchase contracts with fixed costs
to be paid irrespective of off-take by these licensees. In view of this, the migration
may lead to a situation where in the average power purchase cost is pushed upward
by the fixed costs flowing from the PPAs and thereby further aggravating the
situation with respect to the consumer level tariffs of the existing licensees, leading
to further migration.
Maharashtra and Jharkhand are few states in the country where parallel license is
prevalent. Based on the judgement of the Supreme Court dated 8th July 2008 and
the interim issued by the Hon’ble Commission dated 15th October 2009, Tata Power
Company (TPC- D) is a distribution licensee in Mumbai area except Mira Bhyander,
which already has REL D and BEST as the distribution licensees. Similar arrangement
in Gujarat may be considered as a Threat for MGVCL. While, there are issues of
separation of wires and supply business, tariff related issues, operational issues etc,
there is an inherent threat to MGVCL where it could lead to cherry picking of its
urban areas.
8.5.5 Non Discriminatory Open Access

With the opening of the power sector and the option available for consumers to get
uninterrupted power through open access, there is a distinct possibility of the
consumers, especially industrial consumers who have paying capacity to opt for
other source of power. This could have an adverse impact on MGVCL as it will not
only directly impact the revenue, but also affect the ratio subsiding consumers to
subsidised consumers. This implies that the cross-subsidising consumers would
reduce and further burden will increase on the rest of the consumers. It can be
envisaged that there can be a direct power sale from generators to HT consumers in
MGVCL area through open access. The open access to transmission would enable
Generating Companies to sell directly to HT and large consumers eliminating middle
distributors. This will be a negative scenario for the Company if it happens because
close to half of its revenues are generated from HT and large consumers who are
subsidizing domestic and agriculture consumers. As can be seen from the figure
given below, nearly 41% of the revenue is from HT industrial hence open access is a
major threat to MGVCL.
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Figure 23: Revenue breakup FY 2009-10
Residential
8%
21% Commercial
Industrial LT
11% Public Water Works
41%
Agriculture
10%
Public Lighting
6%
Industrial HT
Railway Traction
1% 2%
8.5.6 Railway Consumers to tie up with NTPC

Railway provides 8% of the total revenue of MGVCL & there is a threat of this HT
category of consumer on the basis of open access provision to tie up with NTPC for
power. This is a major threat to the company which would lose a part of its revenue.
8.5.7 Locked in long term PPA’s based on market projections

MGVCL is locked in long term PPA’s based on projections (category wise number of
consumers, sales and connected load). But if these projections don’t prove to be
right may be due to competition in the sector or change in future market conditions,
then MGVCL faces a risk of being tied up with the unsold capacity and hence would
face loss on the fixed cost of power purchased.
Figure 24: MGVCL's SWOT Matrix
Helpful Harmful
In achieving the objective In achieving the objective
the
STRENGTHS WEAKNESSES
Experienced Manpower Commercial Arrangement
Wide Spread Network Treatment of agricultural subsidy
of
Operation efficiency Irrational Tariff structure

Internal Origin
DSM Measures Ageing Distribution

Organisation
Attributes
Novel Initiatives Infrastructure

Uninterrupted Quality Power Supply Ageing Employees
Branding by rewards from MoP
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OPPORTUNITIES THREATS
Distribution Franchisee in Rural Non Discriminatory Open Access
areas/ other states Regulatory Risk & inconsistencies
Contracting Power supply Deemed distribution licensee
Attributes of the Environment
New business Opportunities provision to SEZ area

CDM benefits Parallel licensee
Ancillary Services Sensitivity to operational
Eliminating Peak Deficit variations
External Origin
Joint Ventures Railway Consumers to tie up with

Competitive Bidding NTPC
Non-conventional energy Locked in long term PPA’s based
on market projections
8.6 Summary of SWOT

MGVCL has the advantage of having a large engineering base, experienced and
skilled workforce but at the same time there are also issues like the upgradation of
its existing network and updation on the technological front to cater to consumers
needs. The T&D losses have to be reduces to match the international standards or
atleast the standarand of the neighbouring Utiltites such AEC and SEC and theft of
electricity should be drastically curbed. In order to be economically viable, MGVCL
has to take effective measures to metered all the unmetered consumers and
rationalize the tariff structure closer to the cost of supply.
Regarding risks in the immediate future, introduction of competition would be the

greatest issue. With mandatory open access and the thrust on providing choice to
consumers through open access and parallel license becoming a reality, MGVCL will
need to critically examine its ability to compete with other private players in the
market.
Risk Analysis of power distribution assets on behalf of a large power generation

company, including analysis of regulatory framework and regulatory risks,
performance benchmarks/ alternative performance based regulation, contractual
risk with respect to shareholder’s agreement, acquisition and the loan agreement
are part of statutory and regulatory risk. Also, Pricing of Open Access charges, Cross
Subsidy Surcharge, wheeling charges and methodology for tariff determination, all of
which will determine the total cost of served power is also one of the Regulaotry risk
for distirbution utility.
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Going forward, MGVCL can target to improve its operations, lowering of O&M costs
and better service at competitive prices to its subsidizing category of consumers
The growth path for MGVCL would be the key take homes which have emerged from the
SWOT analysis. While, there would be opportunities galore on the horizon, it would be
only prudent on part of MGVCL to first target the short-comings and overcome them.
Simultaneously, it would also be necessary to start identifying areas which it intends to
target in the short to medium term and which areas it intends to target in the long term.
Targeting everything simultaneously would lead no-where.
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9. Risk Analysis
9.1 Background
It is necessary to understand that how risks are perceived by the business. Virtually
all organisations strive to survive. They strive to create value for their stakeholders
including State Government, SERC, Consumers, Financial institutions, etc. They have
the mechanism that allows them to respond their existing market environment and
to anticipate changes that they may face. The risk can be identified as a financial risk,
regulatory risk, operating risk, technology risk, etc.
9.2 Risk Assessment & Mitigation Plans

9.2.1 Improve efficiency:
The spirit of the EA 2003 was to introduce competition in the electricity sector and
therefore, in order to be competitive on the distribution segment, MGVCL has to
improve operational efficiency. The efficiency can be achieved through reduction of
losses, quality power supply and up gradation of network. There is also a need to
introduce technological initiatives to improve performance and give customer better
services both in terms of supply as well as cheaper power. To achieve such
efficiency, MGVCL has undertaken following activities:
Figure 25: Risk Mitigation Plans
Infrastructure
Plan
Regulatory
Reduce Losses
Awareness
Employee Distribution
Motivation Franchisee
Improvement
Recovery of
in Consumer
Arrears
Services
Project
Management
& Execution
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A. Infrastructure Plan:
The old and overloaded system often resulted in increase in distribution losses
and affected the quality of service to the consumers. The ideal vision of MGVCL is
to have a distribution system that runs smoothly: as system that could withstand
future load, provide quality, reliable energy supply and reduce losses.
MGVCL have also undertaken major technological initiatives whereby they are
planning to provide a quality service to the consumers by way of Implementation
of ERP, online customer care services. Various CAPEX schemes regarding
substations & network augmentation, repair and maintenance are in place.
RAPDRP scheme has been initiated & is providing system strengthening & actual
energy accounting by SCADA implementation.
B. Reduce losses:
• Total 136 Nos. Of 11 KV high losses feeders are selected for close monitoring for
reduction of commercial & technical losses.
• For reduction in technical losses:
LT line bifurcations, strengthening of LT lines, conversion of long single phase
lines & equal load distribution between phases, Load balancing on transformer,
11 KV feeder bifurcation, HVDS etc are planned
• For reduction in Commercial losses:
Replacement of faulty & old meters, shifting of meter outside the premises,
replacement of deteriorated service lines having joints, insulation of HT & LT line
crossing for Jyotigram & Agriculture dominant feeders, cross checking of meter
readers’ activities are planned.
C. Distribution Franchisee
Distribution Franchisee is a concept of business process outsourcing. It can range
from simple arrangements from billing and collection processes to complex
structure involving capital expenditure. Bhiwandi, a power loom city, also known
as the Manchester of India, had typical problems like rampant theft and non-
payment. MSEDCL has already opted for a input based franchisee model for
electricity distribution as envisaged in the Electricity Act–2003. It handed over
Bhiwandi circle to M/S Torrent Power on 26th January 2007. This experiment
proved to be very successful and a trend setter in power distribution sector of
the country.
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Based on this experience, MGVCL may decide to hand over some more loss
making areas to private franchisees.
D. Improvement in Consumer Services:

Due to inclusion of Open Access and Parallel License under the amended
Electricity Act 2003, a consumer of MGVCL will always have a choice to avail
supply of electricity from any other Distribution licences other than MGVCL in
case of proper service, continuous power supply or cheap power. This may result
in loss of revenue for MGVCL as well as loss of subsidising consumers.
As specified almost half (51%) of MGVCL’s revenue comes from the Industrial –
HT & LT category. And a shift in this category of consumers to a competitive
player would result in a huge loss to the Discom.
Therefore, MGVCL is planning and already initiated to undertake following

measures to mitigate the risk of losing consumers:
• 24 X 7: Customer care centre for best services;
• Any time payment by customers through cash / cheque / DD / pay-order
through multi-media based system.
• Energy Bill Collection Mobile Van from consumer's door step.
• Identification of Bill collection agencies.
• A user-friendly, compact and low-cost Hand Held Terminal for field
applications for meter reading results in spot billing.
• Explanation of each parameters in the bill on the website for clearance of any
doubt of consumers related to billing.
E. Project Management and Execution

A key element of the implementation of infrastructure plan is to execute project
on a timely manner and is managed in a judicious way. In order to meet the
above investment objectives & improving the existing infrastructure of
Distribution System, MGVCL needs to review the timely implementation and
completion of Infrastructure plan. It has to ensure the Quality Control, as well as
there should be a regular monitoring of the progress of the projects. MGVCL has
to undertake a comprehensive planning exercise to formulate plans and
strategies to achieve these commitments. Therefore, the same can be
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undertaken by following the outlined measures which will result in an quality
output and better infrastructure on a timely basis:
• Design, Development and implementation of an Integrated Project
Management Information System;
• Regular monitoring of the progress of the projects and establish a feedback
mechanism;
• Training of MGVCL Staff;
• Liasioning with REC/PFC or any financial institution for availing financial
assistance;
• Liasioning with GERC;
F. Recovery of Arrears
Even though MGVCL has a collection efficiency of 100%, still there are some
arrears which need to be targeted and collected. These dues of Rs 345.66 Crores
are from Governmental companies and large unrecovered agriculture dues.
Certain receivables are also on account of issues in metering, billing and
collection issues which are required to be tackled by MGVCL on a war footing.
Also additional drives to be planned to be undertaken by MGVCL are as follows:
• Implementation of pre-paid meters;
• Disconnection drive : Biggest tool available;
• RCI consumers in Arrears: List to be obtained from IT department;
• ABC analysis to be carried out e.g. there might be 20% consumers having 80
% arrears. Instead of disconnecting 80% consumers with 20% arrears, priority
to be for consumers with higher arrears.
G. Anti-Theft Measurement
• Continuous efforts are being made for prevention of theft of energy. The
vigilance team of the company carried out intensive inspection drives during
the year 2009-10. 3,17,889 connections were checked under the Installation
Checking drives and 7347 connections were detected for theft and
malpractice with total assessment of Rs 673 lacs and total recovery of Rs 516
lacs.
• Arial Bunch Conductor ABC in place of bare conductor in theft prone areas to
reduce pilferage of energy by direct hooking
• XLPE coated service line in zupadpatti/ low income areas to eliminate theft by
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tapping of service lines.
• Pole mounted metering system: in order to avoid power theft, meter is
mounted on the pole & display part installed at consumer premises.
H. Employee Motivation
There is an issue of existing employees leaving the organization, in view of the
opportunities available in power sector with the opening of the power sector as
well as Man-power planning. The Company is not in an advantageous position to
retain its professional/ technical staff given the budgetary constraints of
compensation that it can pay. Moreover it is also not able to attract the best
talent in the country for the same reasons. Hence a proper Human Resource
management system needs to be in place in order to have a transparent
screening, recruitment & selection procedure along with skill enhancement
drives for training & development of the employees
I. Regulatory awareness
In the previous sections MGVCL has cited its vulnerability to regulatory decision
making process as an area of concern and the risk related to it. However, it also
recognises that this is an area which it will have to proactively deal with to
minimise the kind of regulatory risk that it perceives. MGVCL feels that better co-
ordination and interaction between the Hon’ble Commission may be helpful in
alleviating the situation to a large extent. Further, while it would be the duty of
the company to meet the performance levels set by the Hon’ble Commission, it is
felt that a more realistic approach has to be adopted by the Hon’ble Commission
while fixing the performance parameters. MGVCL is ready to go all out to assist
the Hon’ble Commission in the matter as the same would be beneficial for both
the company and the consumers who have to finally bear the consequences of
the financial implication on the company.
In the rapidly changing power sector scenario and based on the opportunities
available in the market, going forward the company is considering to achieve their
Vision, Mission and Values as determined in earlier chapters.
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MGVCL
10. Future Business Opportunities
MGVCL being a deemed distribution licensee has an obligation to supply quality and
continuous power. In its endeavour to provide the quality power supply, MGVCL has
already initiated a plan to revamp the distribution infrastructure to meet the
growing needs of the State. Accordingly, GSEC and GUVNL (power allocated by
GUVNL to MGVCL), has also simultaneously taken up several capacity addition
projects in terms of expansion at existing locations as well as Greenfield projects and
some of the renovation and modernisation of its existing units with a view to bring in
energy efficiency and life extension.
Also, in relation to harnessing the green energy and to meet the RPO as directed by
the Hon’ble Commission, MGVCL has to contemplate to tie up the additional
capacity in the areas of New and Renewable Energy Sources particularly.
MGVCL has already undertaken the robust infrastructure plan and planning to
implement with a target to achieve efficiency in operation and to provide quality and
continuous power supply to the consumers.
To achieve this said objective, challenges in terms of financial and human resources,
drive the need for MGVCL to review and realign its strategy based on the availability
of the desired resources so as to be able to sustain the desired level of growth and
expansion in a competitive environment. It is submitted to the Hon’ble Commission
that usually the project funding is in the debt :equity ratio of 80:20 or 70:30 (which is
in line with the GERC Tariff Regulations, 2005) whereby the portion of equity used to
be contributed by State Government. However, it is necessary for MGVCL to look at
alternate sources instead of continued dependence on the support from GoG.
In order to raise resources, MGVCL can consider the following options:

• Equity Financing from Capital Market - Initial Public Offer (IPO);
• Public Private Partnership - Creation of Special Purpose Vehicles (SPVs) / Joint
Ventures;
Also, in terms of business opportunities that MGVCL could target in the future, the
SWOT analysis has helped identify the following:
• Public Private Partnership (PPP);
• Renewable Source Energy;
• Providing Ancillary Services to other power sector players;
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While, the above mentioned Business Opportunities have emerged, the first two related
to Public Private Partnership for expansion and Greenfield project, Generation tie-up by
focus on non-conventional energy sources and providing other ancillary services would
be the focus areas in the short to medium term. Therefore, the other opportunities
would be looked at in the long terms which are being detailed out in the following
paragraphs.
Also, the other areas where MGVCL has to focus on a serious note to target in future to
provide the services to the consumers as well as to be rational in collection of charges
are as follows:
• Proactive tariff rationalisation;

• Sustained political support;
• Commercial orientation;
• Autonomy of management;
• Commitment to customer service;
• Capacity development in organisations;
• Responsiveness to regulatory directions;
• Improving the data environment;
• Better metering and energy accounting;
• Employee accountability and recognition;
• Focus on efficiency;
10.1 Public Private Partnership

10.1.1 MGVCL has the option to get equity financing for new projects through the Public
Private Partnership (PPP) route by establishing a Joint Ventures (JVs) or by creation
of SPVs with suitable private sector partners. This will also leverage private sector
efficiencies for speedy and cost effective implementation of the projects. Also, the JV
partners would be able to bring in other resources, including the ability to obtain
statutory clearances expeditiously. The Joint Ventures will be formed with such
strategic partners who can bring in the relevant experience, capabilities and
expertise in the relevant areas.
10.1.2 The PPP models vary from short-term simple management contracts (with or
without investment requirements) to long-term and very complex BOT form, to
divestiture. These models vary mainly by:
• Ownership of capital assets
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MGVCL
• Responsibility for investment
• Assumption of risks, and
• Duration of contract
10.1.3 The desired synergy from the joint venture and suitable bidding parameters will be
evolved for the purpose of selecting the JV partner through bidding process. Some of
the areas where the public private participation can be attempted:
• Distribution Franchisee in high distribution loss area;
• O&M contracts;
• Distribution Infrastructure under Turnkey projects
10.2 Ancillary Services

10.2.1 MGVCL can in future look at other services relating to Operations & maintenance
activity, Testing facilities, Research & Development, Training, Technical consultancy,
etc. There is a need to introduce R&D activities relating to International Technology
trend, effect of use of advance technology in distribution, etc. This can be useful to
improve the overall efficiency of the operations as well as helpful for Training of
employees.
10.2.2 MGVCL can also undertake training programs at its training centres for other utilities
which can earn revenue for MGVCL. MGVCL in future can utilize the skills of their
experienced technical persons in providing consultancy services to third parties who
are interested or already involved in the Distribution segment of the power sector.
MGVCL has capable staff for handling O&M activities of a distribution project as well
as providing the project management assistance.
10.2.3 There are many new entrants in the power sector who would be interested in
distribution projects for the first time or companies that do not have the required
expertise to handle such activities on a large scale. MGVCL can undertake such O&M
activities and enhance its revenue earning potential. This can have a two-fold
advantage of helping MGVCL with an extra revenue stream as well as giving
exposure to newer technologies that might be adopted by private firms at new and
upcoming projects
10.3 Professional Meter Testing Facility

MGVCL has its Hi-Tech Meter Testing Laboratory at Baroda Circle with high tech
testing bench made in Germany. This facility can be utilised for providing meter
testing of other Utilities, Meter manufacturers and other bulk energy consumers.
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10.4 Non Conventional Energy
10.4.1 MGVCL in support with GUVNL has to initiate an activity on harnessing renewable
source of energy. Right now GUVNL is looking after the non conventional initiatives,
but to fructify the plans for significant expansion, a new department/ division under
MGVCL might be needed to be created with the aim of harnessing non conventional
energy.
10.4.2 However to meet the Renewable Purchase Obligation as directed by the Hon’ble
Commission, MGVCL may consider PPP model for commissioning of the Generation
Plant under such source of energy. The main characteristic of PPP is that there is a
creation of a Special Purpose Vehicle and the risks in the project are assigned to the
party that is best suited to handle the risk. This creates a ‘win-win’ situation for both
the participating parties, as the project is delivered on-time within the allocated
budget, in contrast to the delays and cost-over-runs in case only the Government
undertakes such project. Depending on the risk-allocation, PPP projects can be of
many types, a few of them are Build-Operate-Transfer (BOT), Build-Operate-Own-
Transfer (BOOT), Build-Operate-Lease-Transfer (BOLT).
10.4.3 Public Private Partnership can get easy and priority-financing by financial-bodies and
can address the major concern of financing of such projects. A PPP also has immunity
from changing government-policies, after a fixed policy framework is put in place. It
also takes the local community and land owners into confidence and hence avoids
running into trouble from their side. The unique characteristic of PPP project is its in-
time completion, which avoids cost-overruns. A Public Private Partnership will also
have an economically viable tariff plan through ‘Power Purchase Agreement’, thus
reducing the revenue-risk in the process. Considering these benefits associated with
Public Private Partnership, it is imperative that MGVCL is planning to go for the PPP
route in setting up of such renewable power projects.
10.5 Distribution Franchisee Route

MGVCL is one of the best utilities in the country and is independently handling all its
operations except power purchase. It can leverage its skilled man power &
experience in the field of distribution & acquire distribution franchisees in areas
other than that of Gujarat. It would help the utility to earn extra revenue by utilizing
its area of excellence.
10.6 Future Plans in Other areas

To achieve the plan of MGVCL as well as to follow the Vision and Mission in a way to
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period FY 2011-12 to 2015-16
MGVCL
achieve goals, there is a need to strengthen the working of the Organization in order
to enable it to implement its future Plans. Therefore, it is required to initiate the
development on the Organizational front, namely HR related and Information
Technology related.
10.6.1 Human Resources Development Plan

HR Department is preparing proposal on succession planning for the leadership
positions of the company & planning leadership development program for the key
officials of the company.
10.6.2 Future IT Initiatives

For office automation and intelligent analytical reports generation for efficient
resources & network management, Web based information system using business
intelligence and artificial intelligence tools having data warehousing and data mining
technologies are envisioned for future activities of the company.
The company has initiated various IT enabled projects, E- Urja project as ERP solution
and on line internet energy bill e-payment, centralized single window operational
Customer Care Centre (CCC) with Interactive Voice Response system (IVRS), web self
service and other state of the art technologies. Consumer Meter Reading through
GPRS enables bill calculation at central server in real time mode with precise and
prompt meter reading and billing, enhance consumer satisfaction and revenue flow.
The company is in process of procuring GPRS based Hand Held Equipment (HHE) for
meter readers covering all field offices. Baroda city circle is chosen as pilot site, and
to be expanded to all the circles of the company in phase.
10.6.3 Future Plan of Action (for System Improvement)

• Cable and Conductor measuring instruments are proposed for all four circles of
the company
• Total 136 Nos. of 11 KV high losses feeders are selected for close monitoring for
reduction of commercial 7 technical losses.
• SCADA system in Vadodara City will be upgraded.
• Pilot project is initiated for installing roof type solar power system in five sub
division offices of the Company.
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11. Operational Plan
MGCVL has prepared the Business / Operational Plan taking cognisance of the
existing internal factors and external business environment affecting the business of
MGVCL. It is submitted that the Business plan being a dynamic document may need
to be updated at periodic intervals taking into account the changes in the internal
and external environment and these changes would be intimated to the Hon’ble
Commission from time to time.
The operational plans include the estimates of each cost of MGVCL for the second
control period (from FY 2011-12 to FY 2015-16) and are in line with the MYT petition.
The costs are estimated based on certain assumptions, past trend and extrapolated
for future period.
Estimation of ARR for second control period FY 2011-12 to 2015-16

The components for the calculation of total expenses for the MYT petition under the
second control period FY 2011-12 to 2015-16 are as follow:
• Power Purchase Cost
• Operation & Maintenance Cost
• Interest on Loan and Financial Charges
• Interest on Working Capital
• Provision for Bad Debts
• Other Expenses Capitalized
• Return on Equity
• Provision for Tax
It has been observed from past experience that the historical trend method has
proved to be a reasonably accurate and well accepted method for estimating the
load, number of consumers and energy consumption. In light of the above, MGVCL
has estimated the above for various customer categories primarily based on the
CAGR trends during past years. Wherever the trend has seemed unreasonable or
unsustainable, the growth factors have been corrected by the company, to arrive at
more realistic projections
Approach for Calculation of Energy Balance

To arrive at the energy requirement, the total demand in MUs as projected above
has been considered. This has been grossed up by factoring in transmission and
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period FY 2011-12 to 2015-16
MGVCL
distribution losses to arrive at the gross demand for the company. It may be noted
that transmission losses are assumed as per the projection given by GETCO in its
MYT petition for second control period FY 2011-12 to 2015-16 and difference
between actual losses of GETCO & SLDC that is 0.49% for FY 2009-10. Once the gross
requirement is known, the purchase of units from each plant has been arrived at by
preparing a Merit Order for each year. Fixed cost & Variable cost for GSECL has been
taken as approved by the Hon’ble Commission for FY 2011-12 during GSECL MYT
order dated 11th April, 2011. For IPP and Central sector, fixed cost and variable cost
is taken as per actual of FY 2009-10.
11.1 Sales Growth

For projecting the sales, no. of consumers and connected load for FY 2011-12 to
2015-16, the base number of FY 2009-10 is considered. The table given below shows
the growth rate projected for sales, connected load and number of consumers for
various categories of consumers
Table 18: Projection of growth in Sales, Load & Consumer base for FY 2011-12 to 2015-16
N o. of Co n n ec te d
S a le s ( M U )
Co n su m e rs L o a d (M W )
Lo w T en sio n C o n su m e rs
R e s i d e n ti a l 1 0 .0 7 % 6 .9 7 % 8.7 3%
C o m m e rc i a l 1 3 .1 4 % 3 .1 4 % 9.4 3%
I n d u s t ri a l L T 7 .2 3 % 4 .0 0 % 6.5 6%
P u b l ic W a te r W o rk s 9 .1 9 % 6 .3 3 % 2.7 9%
A g ri c u l t u re - M e te r e d - - -
S tre e t L ig h t 6 .4 2 % 7 .7 6 % 7.0 0%
LT T o ta l 9 .0 8 % 6 .5 8 % 8 .08 %
H ig h T en sio n C o n su m e rs
I n d u s t ri a l H T 9 .0 6 % 7 .9 0 % 9.6 5%
R a ilw a y T ra c tio n 7 .7 1 % 0 .0 0 % 3.8 3%
H T To ta l 8 .8 7 % 7 .8 6 % 9 .08 %
TO T A L 9 .0 0 % 6 .5 8 % 8 .29 %
11.2 Distribution Losses

The company has achieved a significant reduction in distribution losses, during
recent years. These efforts shall continue and will be enhanced. However, loss
reduction is a slow process and becomes increasingly difficult as the loss levels come
down. In view of this, it is assumed that the distribution loss in FY 2011-12 to 2015-
16 will reduce but with rate. Projection of distribution losses for second control
period FY 2011-12 to 2015-16 are as shown below:
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MGVCL
Table 19: Distribution Loss trajectory FY 2011-12 to 2015-16
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Particulars
Distribution Loss 12.75% 12.50% 12.25% 12.00% 12.00%
11.3 Energy Balance

The energy requirement for Company will be met by supply from GUVNL. Based on
the information provided above, Energy Balance of the Company for the second
control period FY 2011-12 to 2015-16 is as shown below:
Table 20: Energy Requirement Projection FY 2011-12 to 2015-16
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

S.No. Particulars Unit
1 Energy Sales MUs 7,235 7,885 8,592 9,363 10,204
MUs 1,057 1,126 1,200 1,277 1,391
2 Dis tribution Losses
% 12.75% 12.50% 12.25% 12.00% 12.00%
3 Energy Requirement MUs 8,292 9,011 9,792 10,640 11,595
MUs 386 415 445 478 521
4 Transmission Losses
% 4.45% 4.40% 4.35% 4.30% 4.30%
Total Energy to be input to
5 MUs 8,678 9,426 10,237 11,118 12,116
Transmission System
6 Pooled Losses in PGCIL System MUs 109 157 211 245 267
7 Total Energy Requirement MUs 8,787 9,583 10,448 11,363 12,383
11.3.1 Bulk Supply Tariff

In order to envisage a uniform tariff across all the Discoms a Bulk Supply Tariff has
been envisaged for the state. In order to minimize the power purchase cost, a single
Merit Order Dispatch (MOD) is run for all the Discoms. The NPC power plants,
renewable plants & hydro power plants viz. SSNNL Hydro, NPC Tarapur and Ukai
Hydro have been considered as must-run power plants and so they have been
excluded from merit order calculations. The dispatch from individual generating
stations is worked out based on the merit order of the variable cost of each
generating unit. RLNG gas based plants are run at 30% availability for the FY 2011-12
& then at 5% for the rest of the control period.
11.4 Power procurement from various sources

Given below is the Power procurement from different sources of power generation
for MYT second control period i.e. from FY 2011-12 to 2015-16
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MGVCL
Table 21: Availability from Existing Plants
Rated
Capacity Auxillary Variable
Plant Load Fixed Cost
Sr. No Particulars Allocated to Consumpti Factor (%) Cost
(Rs Crs)
GUVNL on (%) (Rs/kWh)
(MW)
GSECL Plants:
1 Ukai TPS 850 9.00 75% 247 1.71
2 Ukai Hydro 305 0.70 13% 24 0.00
3 Gandhinagar I to I V 660 10.00 79% 266 2.38
4 Gandhinagar V 210 9.00 85% 97 2.13
5 Wanakbori I to VI 1,260 9.00 85% 366 2.11
6 Wanakbori VII 210 9.00 85% 95 2.02
7 Sikka TPS 240 11.00 68% 122 2.77
8 Kutch Ligni te I to I II 215 12.00 66% 222 1.18
9 Kutch Ligni te IV 75 12.00 75% 129 1.11
10 Dhuvaran oil - - 0% - -
11 Kadana Hydro 242 1.19 6% 61 0.00
12 Utran Gas Based 75 4.00 80% 29 2.37
13 Dhuvaran Gas Bas ed - Stage-I 91 3.00 80% 48 2.41
14 Dhuvaran Gas Bas ed - Stage-II 94 3.00 80% 57 2.39
15 Utran Extensi on 295 3.00 80% 229 2.07
IPPs:
1 ESSAR 242 3.00 70% 202 2.95
2 GPEC 391 2.90 70% 307 2.40
3 GIPCL II (160) 82 2.90 80% 27 1.95
4 GIPCL-SLPP 250 10.00 75% 158 1.14
5 GSEG 126 2.90 80% 101 1.77
6 GIPCL - I (145) 21 2.90 80% 11 2.15
7 GMDC - Akrimota 250 10.00 75% 203 0.74
8 GIPCL, Expans ion 250 10.00 80% 158 1.14
Central Sector:
1 NPC - Tarapur- 1&2 160 10.00 80% - 0.95
2 NPC - Kakrapar 125 12.50 80% - 2.19
3 NPC - Tarapur- 3&4 274 10.00 80% - 2.32
4 NTPC - KORBA 360 7.93 85% 74 0.76
5 NTPC - VINDHYACHAL - I 230 9.00 85% 58 1.27
6 NTPC - VINDHYACHAL - II 239 7.50 85% 98 1.23
7 NTPC - VINDHYACHAL - III 266 7.50 85% 165 1.21
8 NTPC - KAWAS 143 3.00 85% 58 2.32
9 NTPC - JHANOR 181 3.00 85% 101 2.14
11 SSNNL - Hydro 232 0.50 14% - 2.05
12 NTPC - Kahalgaon (New) 141 7.50 85% 172 1.78
13 NTPC - Si pat Stage-II 273 6.50 85% 192 0.88
14 NTPC - KORBA II 96 6.50 85% 102 0.72
Renewables:
1 Wind Farms (1.75) 22 - 23% - 1.75
2 Wind Farms (3.37) 782 - 23% - 3.37
3 Wind Farms (3.56) 229 - 23% - 3.56
4 Biomass 30 - 80% - 4.40
5 Hydro 9 - 70% - 3.52
RLNG Capacity @15%:
1 Shapoorji Pallonji 58 3.00 70% 49 5.21
2 ESSAR - 300 264 2.90 70% 208 5.77
3 GPEC - 655 60 4.00 80% 23 4.96
4 Utran Gas Based - 135 80 3.00 80% 62 5.26
5 Utran Extens ion - 375 16 3.00 80% 8 5.26
6 Dhuvran Gas Bas ed - Stage 1 - 107 18 3.00 80% 11 5.49
7 Dhuvran Gas Bas ed - Stage 2 - 112 83 2.90 80% 27 5.21
8 GIPCL II (160) - 165 30 2.90 80% 24 5.49
9 GSEG - 156 21 2.90 80% 12 5.59
10 GIPCL - I (145) - 42 44 3.00 85% 18 5.59
11 NTPC - JHANOR - 237 56 3.00 85% 31 -
Others:
1 Captive Power Plant (MU) 8 - 80% - 3.64
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period FY 2011-12 to 2015-16
MGVCL
Table 22: Availability from New Plants
Rated
Capacity Auxillary Plant Load Factor (%) Fixed Variable
Sr. No Particulars Allocated Consump Cost (Rs Cost
to GUVNL tion (%) FY 2011- FY 2 012- FY 2013- FY 2014- FY 2015- Crs) (Rs/kWh)
(MW) 12 13 14 15 16
GSECL Plants:
1 Wanakbori Expansion 800 9.00 0% 0% 0% 0% 85% 673 1.60
2 Ukai Expansion 6 500 8.50 0% 80% 80% 80% 80% 401 1.54
3 Sikka 3 & 4 500 8.50 0% 7% 80% 80% 80% 401 1.99
4 Dhuvara n CCPP Ext - 3 360 3.00 0% 0% 3% 63% 80% 329 3.39
IPPs:
1 GIPCL Addition 500 10.00 0% 0% 0% 7% 80% 315 1.14
2 BECL 500 11.00 0% 0% 7% 80% 80% 390 1.20
Central Sector:
1 NPC kakrapar addition 476 12.50 0% 0% 0% 0% 7% - 2.89
2 NTPC - Lara 140 8.50 0% 0% 0% 0% 7% 170 1.31
3 NTPC - Sipat Stage - I 540 7.50 47% 85% 85% 85% 85% 421 0.88
4 NTPC - Mauda STPS-I 240 6.50 4% 67% 85% 85% 85% 242 0.89
5 NTPC - Barh STPS-I 260 6.50 0% 0% 19% 73% 85% 169 0.81
6 NTPC - Vindhyachal STPS-IV 240 6.50 0% 7% 85% 85% 85% 287 0.87
7 NTPC - Barh STPS-II 174 6.50 0% 4% 67% 85% 85% 102 0.89
8 NTPC - Mauda STPS-II 240 6.50 0% 0% 0% 0% 7% 470 1.05
9 Mundra UMPP 1805 - 9% 16% 17% 48% 80% 1,448 0.91
10 Tilaiya UMPP 300 - 0% 0% 1% 35% 80% 143 0.95
Renewables:
1 Solar Photovoltic 944 - 2% 11% 20% 20% 20% - 15.00
2 Solar Thermal 25 - 5% 20% 20% 20% 20% - 11.00
Competitive Bidding:
1 APPL 2000 - 70% 80% 80% 80% 80% 1,634 1.43
2 Aryan 200 - 7% 80% 80% 80% 80% 226 0.55
3 Essar - 1 000 MW 1000 - 13% 73% 80% 80% 80% 820 1.27
4 Wardha Power - KSK Mahanadi Power Co 1010 - 0% 0% 0% 0% 73% 1,023 0.62
5 Essar - 8 00 MW 800 - 0% 0% 0% 0% 73% 798 1.38
Shapoor ji Pallonji 800 - 0% 0% 0% 0% 73% 798 1.38
RLNG Capacity @15%:
1 GSEG Ex pansion 351 3.50 7% 80% 80% 80% 80% 238 5.00
2 GSPC-Pi pavav 700 3.50 3% 63% 80% 80% 80% 473 5.00
11.5 Power Purchase cost for FY 2011-12 to 2015-16

11.5.1 Transmission Charges
The transmission charges of GETCO are calculated as per the approved charges from
GETCO Order for second control period FY 2011-12 to 2015-16, dated 31st Mar 2011.
PGCIL charges worked out based on actual of FY 2009-10 with escalation of 5% every
year.
11.5.2 GUVNL Cost

GUVNL is entrusted with the operation of supplying power to bulk licensees and the
overall coordination between its subsidiary companies. It also undertakes the
function of raising and managing the overall loan portfolio of GUNVL and its
subsidiaries. As a trading company, GUVNL is charging Rs. 0.04 for every transaction
of unit.
11.5.3 SLDC Fees & Charges

SLDC fees & charges are taken as per the approved from the SLDC Order for MYT
second control period FY 2012-16, dated 31st Mar, 2011.
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MGVCL
11.5.4 Trading
GUVNL has projected trading of surplus power based on its capacity to sell. For FY
2011-12, 6000 MUs have been considered which would be increased by 1000 MUs
each year. GUVNL charges Rs 1 for each unit transacted as a profit and trading
margin.
11.5.5 Total Power Purchase Cost

The total power purchase cost for GUVNL for the second control period FY 2011-12
to 2015-16 comes to the power purchase cost through merit order, transmission
charges, GUVNL charges and SLDC Fees & charges, as shown below:
Table 23: Power Purchase Cost Projection FY 2012-16
Discom Discom Total Power Trading Profit & Total Trading

Trading Fixed Net Cost
Year Fixed Cost Variable Cost Purchase Cost Variable Cost Trading Margin Revenue (Rs
Cost (Rs Cr) (Rs Crs)
(Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) Crs)
FY 2011-12 8,125 11,348 19,473 798 1,115 600 2,513 18,075
FY 2012-13 11,126 11,793 22,919 1,203 1,275 700 3,177 21,016
FY 2013-14 12,473 13,233 25,705 1,451 1,540 800 3,791 23,454
FY 2014-15 13,902 13,850 27,752 1,713 1,706 900 4,319 25,139
FY 2015-16 18,356 13,702 32,059 2,358 1,760 1,000 5,119 28,700
11.6 Capital Expenditure

11.6.1 The scheme-wise projected capital expenditure for the MYT petition under second
control period from FY 2011-12 to FY 2015-16 is as shown below:
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period FY 2011-12 to 2015-16
MGVCL
Table 24: CAPEX Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr No Schemes
A Distribution Schemes
Normal Devel opment Scheme 41 41 42 42 42
System Improvement Scheme 8 8 8 8 8
Electri ci ty of Hutments 20 20 20 20 20
Kutir Jyoti Scheme 2 2 2 2 2
Tri bl e Vi ll ages - - - - -
Total 71 71 72 72 72
B Rural Electrification Schemes
TASP (Wel ls and Petapara) 61 61 61 61 61
Special Component plan 1 1 1 1 1
RE Normal Well s 19 19 19 19 19
Total 80 80 80 80 80
C Others
Energy Conservation 3 3 3 3 3
Sagar Khedu 2 2 2 2 2
Total 5 5 5 5 5
D Non Plan Schemes
SCADA - - - - -
RAPDRP (Part A) 55 58 65 13 9
RAPDRP (Part B) - - - - -
RGGVY 6 - - - -
DRUM - - - - -
Total 61 58 65 13 9
E New Innovative Schemes
Line Capacitors - - - - -
Aerial Bunch Conductors 3 3 3 3 3
HVDS i n selected sub-divisi on 7 7 7 7 7
Automatic meter reading 1 1 1 1 1
GIS i n ci ti es - - - - -
Automation and Computeri zati on 0 0 0 0 0
Customer Care Centre - - - - -
Under Ground Cabl es 5 5 5 5 5
Repl acement of Conductors/TC 1 1 1 1 1
Mi sc. Ci vi l + Electri cal Works 4 3 3 3 3
Other New Schemes 9 10 10 11 11
Urban Devel opment 3 4 4 4 4
Govt. School Electri ficati on (General ) - - - - -
Total 33 34 34 35 35
G Capital Expenditure Total 250 248 255 204 200
11.7 Funding of CAPEX

11.7.1 The funding of above mentioned Capital Expenditure is envisaged through various
sources categorised under four headings namely: Consumer Contribution, Grants,
Equity and Debt. The grants have been considered based on the figures available
with the companies. The remaining expenditure is proposed to be funded through
debt and equity in the ratio of 70:30. The detailed breakup of funding of capital
expenditure during MYT for second control period FY 2011-12 to 2015-16 is
mentioned below.
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MGVCL
Table 25: Funding of CAPEX FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Sr. No. Particulars
1 Capi tal Expendi ture 250 248 255 204 200
2 Less : Consumer Contri bution 36 37 37 37 37
3 Grants 125 126 129 112 110
4 Balance CAPEX 88 85 89 55 53
5 Debt @ 70% 61 59 63 39 37
6 Equity @ 30% 26 25 27 17 16
11.8 Operation & Maintenance Expenses

11.8.1 The O&M expenses consist of Employee cost, Administration & General Expenses,
Repair and Maintenance expenses, Other Debits, Extraordinary Items, and Net Prior
Period Expenses and other expenses capitalized. The O&M expenses during MYT
second control period FY 2011-12 to 2015-16 are as below:
Table 26: O&M Expenses Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Employee Cost 222 234 248 262 277
2 Repai r & Maintenance 40 42 45 47 50
3 Adminis trati on & General Charges 39 41 43 46 48
4 Other Debits 7 8 8 9 9
5 Extraordinary I tems 0 0 0 0 0
6 Net Prior Period Expenses / (I ncome) 15 16 17 18 19
7 Other Expens es Capitalis ed (54) (57) (61) (64) (68)
8 Operation & Maintenance Expenses 269 284 301 318 336
11.9 Provision for bad and Doubtful Debts

11.9.1 Provision for bad & doubtful debts is considered at 0.20% of the revenue from sale
of power. It is a very legitimate expenditure which is associated with the business
risk and is a consumer related expense as the MGVCL is in a distribution business.
MGVCL accordingly, has projected Provision for Bad & Doubtful Debts for the MYT
second control period FY 2011-12 to 2015-16 as follows:
Table 27: Bad Debts Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Provision for Bad Debts 6 6 7 7 8
11.10 Depreciation
11.10.1 MGVCL has considered the Closing Gross Block of Fixed Assets of FY 2010-11.
April 2011 Page 130

period FY 2011-12 to 2015-16
MGVCL
The projected assets addition in FY 2011-12 has been considered to arrive at the
estimated Gross Block in the beginning of the FY 2012-13 and thereof. The addition
during the MYT second control period FY 2011-12 to 2015-16 has been projected
considering projected capital expenditure plan for the same for each year.
Depreciation has been calculated taking into consideration the opening balance of
assets in the beginning of the year and the projected capitalisation. The GERC
regulations specify that the CERC rates have to be used for computation of the
depreciation to be charged during the year. The projected depreciation for MYT for
second control period FY 2011-12 to 2015-16 is as shown below:
Table 28: Depreciation Projection FY 2011-12 to 2015-16
Rs i n Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Sr. No. Particulars
1 Gross Bl ock i n Beginning of the year 2,178 2,428 2,676 2,932 3,136
2 Addi ti ons duri ng the Year (Net) 250 248 255 204 200
3 Depreciation for the Year 121 134 147 159 170
4 Average Rate of Depreciation 5.25% 5.25% 5.25% 5.25% 5.25%
11.11 Interest on Loan

11.11.1 The interest expenditure on account of long-term loans depends on the
outstanding loan, repayments, and prevailing interest rates on the outstanding
loans. Further, the projected capital expenditure and the funding of the same also
have a major bearing on the long-term interest expenditure.
11.11.2 The interest on the opening loans has been computed considering the
weighted average rate of interest for the last year and @ 10.50% on the new loans
drawn during the year.
11.11.3 The figure of Guarantee has been taken at the same level as the projected
figures of FY 2010-11. MGVCL submits that it has been allocated some Govt. of
Gujarat Guarantees, where it is required to pay the guarantee charges. These are the
legacy loans which have come from the erstwhile GEB. These charges are, thus,
beyond control of MGVCL and hence require to be considered in the total financial
cost.
11.11.4 The Interest and Finance Charges for MYT second control period FY 2011-12
to 2015-16 is projected as tabulated below.
April 2011 Page 131

period FY 2011-12 to 2015-16
MGVCL
Table 29: Interest & Finance Charges Projection FY 2011-12 to 2015-16
Rs i n Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Opening Loans 303 243 169 84 (36)
2 Loan Additi ons duri ng the Year 61 59 63 39 37
3 Repayment duri ng the Year 121 134 147 159 170
4 Closi ng Loans 243 169 84 (36) (170)
5 Average Loans 273 206 126 24 (103)
6 Interes t on Loan 30 22 14 3 (11)

7 Interes t i n Security Depos it 20 20 20 20 20
7 Guarantee Charges 1 1 1 1 1
8 Total Interest & Financial Charges 51 44 35 24 10
11.12 Interest on Working Capital

11.12.1 The rate for calculation of interest on working capital has been considered as
per SBAR on 1st April 2011, which is 11.75%. MGVCL has used the same for
computing the interest on working capital for MYT second control period FY 2011-12
to FY 2015-16 as shown below:
Table 30: Interest on Working Capital Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 O & M expenses 24 27 30 33 37
2 Mai ntenance Spares 25 29 33 37 41
3 Receivables 294 342 385 419 479
4 Total Working Capital 342 397 448 489 557

5 Rate of Interest on Working Capital 11.75% 11.75% 11.75% 11.75% 11.75%
11.13 Return on Equity

11.13.1 The return on equity has been computed @ 14% on average equity based
upon the opening balance of equity and normative additions during the year, which
has been arrived at by considering 30% of the capital expenditure net of consumer
contribution and grants as funded from equity as already explained above.
Accordingly, the normative return on equity for MYT second control period FY 2011-
12 to 2015-16 is as shown below:
April 2011 Page 132

period FY 2011-12 to 2015-16
MGVCL
Table 31: Return on Equity Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Openi ng Equi ty Capital 491 517 543 570 586
2 Equity Addi tions duri ng the Year 26 25 27 17 16
3 Clos ing Equity 517 543 570 586 602
4 Average Equity 504 530 556 578 594

5 Rate of Return on the Equi ty 14% 14% 14% 14% 14%
6 Return on Equity 71 74 78 81 83
11.14 Taxes
11.14.1 MGVCL has projected Income Tax as per the actual for FY 2009-10. It is
requested to the Hon’ble Commission to pass on the impact of revised tax rates as
per approved budget by the Central Government
Table 32: Tax Amount Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Sr. No. Particulars
1 Normati ve ROE 71 74 78 81 83
2 Provisi on for Tax / Tax Expenses 6 6 6 6 6
11.15 Revenue Projections for Non-Tariff Income

11.15.1 The income in this category comprises of interest on loans & advances to
employees / contractors, income from investments with Banks, Delayed Payment
Surcharges from the Consumers etc. In the absence of any basis of projection,
MGVCL has considered the Non-Tariff Income for second control period FY 2011-12
to 2015-16 same as actual figures of FY 2009-10.
Table 33: Non-Tariff Income projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Interes t on Staff Loans and Advances 1 1 1 1 1
2 Interes t from Ba nks, I nves tments and Consumers - - - - -
3 Delay Payment Charges from Consumers 18 18 18 18 18
4 Income from Tra ding 1 1 1 1 1
5 Ga in on sal e of Fixed Assets 0 0 0 0 0
6 Penalti es received from Suppli ers - - - - -
7 APDRP incentives - - - - -
8 Miscel laneous Receipts. 10 10 10 10 10
9 Excess provision of Bad Debts written ba ck 53 53 53 53 53
10 Government Gra nt Write back/Cons umer Contribution - - - - -
11 Grant for Energy Cons erva tion 3 3 3 3 3
Total Non-Tariff Income 87 87 87 87 87
11.16 ARR for FY 2011-12 to 2015-16 under MYT second control period
April 2011 Page 133

period FY 2011-12 to 2015-16
MGVCL
11.16.1 The Table below shows projection of Aggregate Revenue Requirement by
MGVCL under MYT second control period FY 2011-12 to 2015-16.
Table 34: ARR Projection FY 2011-12 to 2015-16
Rs in Crores
FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Sr. No. Particulars
1 Cost of Power Purchase 3,047 3,594 4,084 4,468 5,155
2 Operation & Maintena nce Expenses 269 284 301 318 336
2.1 Employee Cos t 222 234 248 262 277
2.2 Repa ir & Maintenance 40 42 45 47 50
2.3 Administration & General Charges 39 41 43 46 48
2.4 Other Debits 7 8 8 9 9
2.5 Extra ordina ry Items 0 0 0 0 0
2.6 Net Prior Period Expens es / (Income) 15 16 17 18 19
2.7 Other Expenses Capitalised (54) (57) (61) (64) (68)
3 Deprecia tion 121 134 147 159 170
4 Interest & Fina nce Cha rges 51 44 35 24 10
6 Provision for Bad Debts 6 6 7 7 8
7 Sub-Total [1 to 6] 3,533 4,109 4,626 5,033 5,745
8 Return on Equity 71 74 78 81 83
9 Provision for Tax / Ta x Paid 6 6 6 6 6
10 Total Expenditure (7 to 9) 3,610 4,189 4,709 5,120 5,834

11 Less: Non-Tariff Income 87 87 87 87 87
12 Aggregate Revenue Requirement (10 - 11) 3,523 4,102 4,623 5,033 5,747
April 2011 Page 134

Business Plan Summary for MGVCL FY 2011-16

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Business Plan Summary for MGVCL FY 2011-16

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BUSINESS PLAN

FOR MYT SECOND CONTROL PERIOD

Madhya Gujarat Vij Company

2. Objective of Business Plan

April 2011 Page I

MGVCL obtained its Certificate of Commencement of Business in the FY 2003-04;

4. Vision and Mission of MGVCL

The Core Values of MGVCL being:

5. Category Wise Consumers and Sales

April 2011 Page II

Number of %age of %age of

Residential 2064337 85.84% 1428 24.81%

E- Urja an ERP solution is being implemented as an end to end ERP solution

7. Human Resource Department

April 2011 Page III

8. Corporate Social Responsibility

9. Energy Conservation Measures

10. Consumer Service

11. Other Activities

April 2011 Page IV

12. Major Achievement

13. Operational Performance Analysis

The Demand-Supply for electricity in MGVCL has increased manifold; despite

Past 5 Years’ Distribution Loss

April 2011 Page V

Past 5 Years’ Power purchase cost

Past 3 Years’ System Reliability Indices

There is a significant reduction in the distribution transformer failure rate over

Past 5 years’ DTR Failure Rate

Particulars 2006-07 2007-08 2008-09 2009-10*

April 2011 Page VI

Revenue realized Vs Average Cost of Supply

Under Demand Side Management (DSM) measures MGVCL has taken

14. Financial Performance Analysis

April 2011 Page VII

Summary of CAPEX for FY 2009-10

15. Power Sector Scenario

April 2011 Page VIII

Power Supply situation FY 2003-10

Peak Peak Energy Energy

16. Regulatory Framework

April 2011 Page IX

April 2011 Page X

17. Market Issues and Challenges

April 2011 Page XI

April 2011 Page XII

18. SWOT Analysis

April 2011 Page XIII

Wide Spread Network Treatment of agricultural subsidy

Distribution Franchisee in Rural Non Discriminatory Open Access

New business Opportunities to SEZ area

19. Risk Analysis

Improve Efficiency: In order to be competitive on the distribution segment,

April 2011 Page XIV

20. Future Business Opportunities

April 2011 Page XV

21. OPERATIONAL PLAN

April 2011 Page XVI

Distribution Loss Level FY 2011-12 to 2015-16

Energy Balance FY 2011-12 to 2015-16

April 2011 Page XVII

Power Purchase Cost FY 2011-12 to 2015-16

Aggregate Revenue Requirement