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http://stockcharts.

com/school/dokFundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.

General Steps to Fundamental Evaluation


Even though there is no one clear-cut method, a breakdown is presented below in the order an investor might proceed. This method employs a top-down approach that starts with the overall economy and then works down from industry groups to specific companies. As part of the analysis process, it is important to remember that all information is relative. Industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Verizon) would be compared to another telecom operator (SBC Corp), not to an oil company (ChevronTexaco). Once the industry group is chosen, an investor would need to narrow the list of companies before proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and the innovators within a group. The first task is to identify the current business and competitive environment within a group as well as the future trends. How do the companies rank according to market share, product position and competitive advantage? Who is the current leader and how will changes within the sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be it marketing, technology, market share or innovation. A comparative analysis of the competition within a sector will help identify those companies with an edge, and those most likely to keep it.

Company Analysis
With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials.
Business Plan

The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new business, the questions may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the market? Can the company maintain leadership?
Management u.php?id=chart_school:overview:fundamental_analysis

Fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and the track record of an analyst before jumping off the deep end. Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don't happen by accident; they are an important PR tool for companies. Investors should become skilled readers to weed out the important information and ignore the hype.

Strengths of Fundamental Analysis


Long-term Trends

Fundamental analysis is good for long-term investments based on long-term trends, very long-term. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies.
Value Spotting

Sound fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think long-term and value. Graham and Dodd, Warren Buffett and John Neff are seen as the champions of value investing. Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power.
Business Acumen

One of the most obvious, but less tangible, rewards of fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians will agree to that. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. A stock's price is heavily influenced by its industry group. By studying these groups, investors can better position themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high yield).
Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better position themselves to categorize stocks within their relevant industry group. Business can change rapidly and with it the revenue mix of a company. This happened to many of the pure Internet retailers, which were not really Internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can make a huge difference in relative valuations.

Weaknesses of Fundamental Analysis

Time Constraints

Fundamental analysis may offer excellent insights, but it can be extraordinarily timeconsuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on Wall Street. When this happens, the analyst basically claims that the whole street has got it wrong. This is not to say that there are not misunderstood companies out there, but it is quite brash to imply that the market price, and hence Wall Street, is wrong.
Industry/Company Specific

Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can get quite time-consuming, which can limit the amount of research that can be performed. A subscription-based model may work great for an Internet Service Provider (ISP), but is not likely to be the best model to value an oil company.
Market Capitalization and Weightage Company Name Mkt. Cap.* Rs. Mn. Reliance Industries 1777229.50 Ltd. Oil & Natural Gas 392964.87 Corporation Ltd. NTPC Ltd. 246802.02 Tata Power Co. Ltd. 216062.90 GAIL (India) Ltd. 208420.94 Cairn India Ltd. 152399.74 Power Grid 144259.89 Corporation of India Ltd. Indian Oil Corporation 80087.07 Ltd. Bharat Petroleum 79059.19 Corporation Ltd. Reliance Power Ltd. 71613.68 3368899.80 Total Weight (%) 52.75 11.66 7.33 6.41 6.19 4.52 4.28 2.38 2.35 2.13 100

Electricity sector in India


From Wikipedia(See original Wikipedia article ) Last modified on 2 June 2011, at 11:23 From Wikipedia

The electricity sector in India supplies the world's 6th largest energy consumer, accounting for 3.4% of global energy consumption by more than 17% of global population. the Energy policy of India is predominantly controlled by the Government of India's, Ministry of Power, Ministry of Coal and Ministry of New Renewable Energy and administered locally by Public Sector Undertakings (PSUs).

Ramagundam Thermal Power Station, Andhra Pradesh

About 64.75%[1] of the electricity consumed in India is generated by thermal power plants, 21.73%[2] by hydroelectric power plants, 2.78% by nuclear power plants.[3] and 10.73% by Renewable Energy Sources. More than 50% of India's commercial energy demand is met through the country's vast coal reserves.[4] The country has also invested heavily in recent years in renewable energy utilization, especially wind energy.[5] In 2010, India's installed wind generated electric capacity was 13,064 MW.[6] Additionally, India has committed massive amount of funds for the construction of various nuclear reactors which would generate at least 30,000 MW.[7] In July 2009, India unveiled a $19 billion plan to produce 20,000 MW of solar power by 2022.[8] Due to the fast-paced growth of India's economy, the country's energy demand has grown an average of 3.6% per annum over the past 30 years.[4] In December 2010, the installed power generation capacity of India stood at 165,000 MW[9] and per capita energy consumption stood at 612 kWh.[10] The country's annual energy production increased from about 190 billion kWh in 1986 to more than 680 billion kWh in 2006.[11] The Indian government has set a modest target to add approximately 78,000 MW of installed generation capacity by 2012 which it is likely to miss.[12][13] The total demand for electricity in India is expected to cross 950,000 MW by 2030.[14] According to a research report published by Citigroup Global Markets, India is expected to add up to 113 GW of installed capacity by 2017. Further, renewable capacity might increase from 15.5 GW to 36.0 GW. In the private sector, major capacity additions are planned in Reliance Power (35 GW) and CESC (7 GW).[15]

Table of Contents 1Administration 1. Technical 1 1. Funding

2 2Demand 3Generation 3. Thermal Power 1 3. Hydro Power 2 3. Nuclear Power 3 4Renewable Energy 5Solar power 6Wind Power 6. Strategies 1 6. Rural Electrification 2 6.2. Rajiv Gandhi Grameen Vidyutikaran 1 Yojana (RGGVY) 7See also 8Notes

Administration
The Ministry of Power is the apex body responsible for coordination administration of the electrical energy sector in India. This ministry started functioning independently from 2 July 1992; earlier, it was known as the Ministry of Energy. The Union Minister of Power at present is Sushilkumar Shinde of the Congress Party who took charge of the ministry on 28 May 2009.
Technical

Major PSUs involved in the generation of electricity include National Thermal Power Corporation (NTPC), Damodar Valley Corporation (DVC), National Hydroelectric Power Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level corporations, such as Tamil Nadu Electricity Board(TNEB) in Tamil Nadu, Maharashtra State Electricity Board(MSEB)in Maharashtra, Kerala State Electricity Board(KSEB) in Kerala, in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL four distribution Companies and one controlling body GUVNL, and one generation company GSECL and one transmission company GETCO), are also involved in the generation and intrastate distribution of electricity. The PowerGrid Corporation of India is responsible for the interstate transmission of electricity and the development of national grid.

Funding

The Ministry of Power provides funding to national schemes for power projects via Rural Electrification Corporation Limited (REC Ltd) and Power Finance Corporation Limited (PFC Ltd) These Central Public Sector Enterprises provide loans for both public sector and private sector companies/ projects involved in building power infrastructure.

Demand
Electricity losses in India during transmission and distribution are extremely high and vary between 30 to 45%.[16] In 2004-05, electricity demand outstripped supply by 7-11%.[17] Due to shortage of electricity, power cuts are common throughout India and this has adversely effected the country's economic growth.[18][19] Theft of electricity, common in most parts of urban India, amounts to 1.5% of India's GDP.[20][21] Despite an ambitious rural electrification program,[22] some 400 million Indians lose electricity access during blackouts.[23] While 80 percent of Indian villages have at least an electricity line, just 52.5% of rural households have access to electricity. In urban areas, the access to electricity is 93.1% in 2008. The overall electrification rate in India is 64.5% while 35.5% of the population still live without access to electricity.[24] According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.[25] Multi Commodity Exchange has sought permission to offer electricity future markets.[26]

Generation
Total Installed Capacity (as on 28-02-2011) is 171,926.40 MW[27].[28]
Thermal Power Main article: National Thermal Power Corporation

Current installed capacity of Thermal Power as of February 28, 2011 is 111,324.48 MW which is 64.75% [29]of total installed capacity.
Current installed base of Coal Based Thermal Power is 92,418.38 MW which comes to 53.75% of total installed base. Current installed base of Gas Based Thermal Power is 17,706.35 MW which is 10.3% of total installed capacity. Current installed base of Oil Based Thermal Power is 1,199.75 MW which is 0.9% of total installed capacity.

The state of Maharashtra is the largest producer of thermal power in the country.

Indira Sagar Dam partially completed in 2008

Indian nuclear power plants Hydro Power Main article: Hydroelectric power in India

India was one of the pioneering countries in establishing hydro-electric power plants. The power plants at Darjeeling and Shimsha (Shivanasamudra) were established in 1898 and 1902 respectively and are among the first in Asia. The installed capacity as of 28-2-2011 was approximately 37,367.4 MW.[30] The public sector has a predominant share of 97% in this sector.[31]
Nuclear Power Main article: Nuclear power in India

Currently, twenty nuclear power reactors produce 4,780 MW[32]

Wind turbiness in Tamil Nadu

Renewable Energy
Main article: Renewable energy in India

Renewable energy in India is a sector that is still undeveloped. India was the first country in the world to set up a ministry of non-conventional energy resources, in early 1980s. However its success has been very spotty. In recent years India has been lagging behind other nations in the use of renewable energy (RE). The share of RE in the energy sector is less than 8% of

India's total energy needs. Renewable energy in India comes under the purview of the Ministry of New and Renewable Energy.

Solar power
Main article: Solar power in India

The first Indian solar thermal power project (2X50MW) is in progress in Phalodi (Rajasthan), and is constructed by CORPORATE ISPAT ALLOY LTD. The solar thermal power plant has cost 4 times as much as the coal based steam thermal power plant, CIAL carried this 2x850 crore solar thermal project. It is the "pioneering of solar energy" in india. India is densely populated and has high solar insolation, an ideal combination for using solar power in India. Much of the country does not have an electrical grid, so one of the first applications of solar power has been for water pumping, to begin replacing India's four to five million diesel powered water pumps, each consuming about 3.5 kilowatts, and off-grid lighting. Some large projects have been proposed, and a 35,000 km area of the Thar Desert has been set aside for solar power projects, sufficient to generate 700 to 2,100 gigawatts. The Indian Solar Loan Programme, supported by the United Nations Environment Programme has won the prestigious Energy Globe World award for Sustainability for helping to establish a consumer financing program for solar home power systems. Over the span of three years more than 16,000 solar home systems have been financed through 2,000 bank branches, particularly in rural areas of South India where the electricity grid does not yet extend.[33][34] Launched in 2003, the Indian Solar Loan Programme was a four-year partnership between UNEP, the UNEP Risoe Centre, and two of India's largest banks, the Canara Bank and Syndicate Bank.[34] Announced in November 2009, the Government of India proposed to launch its Jawaharlal Nehru National Solar Mission under the National Action Plan on Climate Change with plans to generate 1,000 MW of power by 2013 and up to 20,000 MW grid-based solar power, 2,000 MW of off-grid solar power and cover 20 million sq metres with collectors by the end of the final phase of the mission in 2020.[35]

Wind Power
Main article: Wind power in India

The development of wind power in India began in the 1990s, and has significantly increased in the last few years. Although a relative newcomer to the wind industry compared with Denmark or the US, a combination of domestic policy support for wind power and the rise of Suzlon (a leading global wind turbine manufacturer) have led India to become the country with the fifth largest installed wind power capacity in the world.[36] As of June 2010 the installed capacity of wind power in India was 12009.14 MW, mainly spread across Tamil Nadu (4132.72 MW), Maharashtra (1837.85 MW), Karnataka (1184.45 MW), Rajasthan (670.97 MW), Gujarat (1432.71 MW), Andhra Pradesh (122.45 MW), Madhya Pradesh (187.69 MW), Kerala (23.00 MW), West Bengal (1.10 MW), other states (3.20 MW) [37] It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012.[38] Wind power accounts for 6% of India's total installed power capacity, and it generates 1.6% of the country's power.[39]
Strategies Power Generation Strategy with focus on low cost generation, optimization of capacity utilization, controlling the input cost, optimisation of fuel mix,

Technology upgradation and utilization of Non Conventional energy sources Transmission Strategy with focus on development of National Grid including Interstate connections, Technology upgradation & optimization of transmission cost. Distribution strategy to achieve Distribution Reforms with focus on System upgradation, loss reduction, theft control, consumer service orientation, quality power supply commercialization, Decentralized distributed generation and supply for rural areas. Regulation Strategy aimed at protecting Consumer interests and making the sector commercially viable. Financing Strategy to generate resources for required growth of the power sector. Conservation Strategy to optimise the utilization of electricity with focus on Demand Side management, Load management and Technology upgradation to provide energy efficient equipment / gadgets. Communication Strategy for political consensus with media support to enhance the general public awareness.,

Rural Electrification

Jharkhand, Bihar, Uttar Pradesh, Orissa, Uttranchal, and Madhya Pradesh are some of the states where significant number (more than 10%) of villages are yet to be electrified.
Number of Villages (1991 Census) - 593,732 Villages Electrified (30 May 2006) - 488,173 Village level Electrification % - 82.2%

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) Main article: Rural Electrification Corporation Limited

Ministry of Power (Government of India) has launched nation-wide scheme for development of rural and household electrification in 2005 towards the National Common Minimum Programme goal of providing access to electricity to all. REC Ltd is the nodal agency for the mega-scheme. Under the scheme, 90% capital subsidy is provided by Government of India for overall cost of projects. Cumulatively till FY10, works in 190,858 villages have been completed and free connections to over 10 million below poverty line (BPL) households have been released.

See also
Energy portal

Electricity industry in the Public Sector in India

Notes
1. indianpowersector.com 2. indianpowersector.com 3. Electricity Outlook India: 2008

4.

4.0 4.1

World Coal Institute - India

5. Winds of change come to country plagued by power blackouts 6. World Wind Energy Association (February 2009). "World Wind Energy Report 2008". Report. Retrieved 16-March-2009. 7. India commits Rs 180k cr to nuclear trade 8. India to unveil 20GW solar target under climate plan, Reuters, July 28, 2009 9. http://cea.nic.in/ 10. Key World Energy Statistics-2007 11. Energy Information Administration - India 12. India to miss power capacity addition targets 13. Power generation figures were unrealistic,scaled down 14. India envisages about 950,000 MW power requirement by 2030 15. Citigroup Power Report: India: 2010 16. Indian prime minister sets 2012 as deadline to end power shortage in the country 17. "Information on Indian Infrastructure & Core Sectors". India Core. Retrieved 2010-08-26. 18. Electricity and power shortage holding India back 19. India Faulted for Failure to Improve Power Supply 20. "India struggles with power theft". BBC. 15 March 2006. Retrieved 3 January 2010. 21. "Reforming the Power Sector: Controlling Electricity Theft and Improving Revenue" (PDF). The World Bank. 22. Rural electrification in India 23. Revkin, Andrew C. (9 April 2008). "Money for India's Ultra Mega' Coal Plants Approved". The New York Times. Retrieved 1 May 2010. 24. http://www.iea.org/weo/database_electricity/electricity_access_database.h tm 25. "Housing condition in India: Household amenities and other characteristics (July - September 2002)". Government of India. 26. "MCX move to launch electricity future faces legal hurdle". The Financial Express. 27. indianpowersector.com 28. Central Electric Authority, Ministry of Power 29. indianpowersector.com 30. "Highlights of Power Sector during month". Cea.nic.in. Retrieved 201008-26. 31. Hydropower Development in India: A Sector Assessment 32. Nuclear Capacity 33. Consumer financing program for solar home systems in southern India

34.

34.0 34.1

UNEP wins Energy Globe award

35. Sethi, Nitin (November 18, 2009). "India targets 1,000mw solar power in 2013". Times of India. 36. "World Wind Energy Report 2008" 37. http://www.windpowerindia.com/statstate.html 38. India to add 6,000 mw wind power by 2012; but below target 39. http://www.peopleandplanet.net/doc.php?id=3357 [show]v d Electricity

sector in Asia

[show]v d Nuclear

power in India
Categories: Energy in India | Electric power in India The content on this page originates from Wikipedia and is licensed under the GNU Free Document License or the Creative Commons CC-BY-SA license. Narrow Your Search Electricity Science Projects Static Electricity History of Electricity Electricity How It Works Electricity Experiments Basic Electricity Electricity Projects Using Batteries A Timeline of History of Electricity Good Conductors of Electricity 6 Sources of Electricity Expand Your Search Lightning Light Bulb Magnetism Related Names

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The Indian Power Sector: Rising Up the Curve The Indian power sector is going through an exciting growth phase relatively high GDP growth leading to increased electricity demand, capacity addition in generation, transmission and distribution, stable regulatory environment coupled with focus on rural electrification, nuclear and renewable sources of energy. Indias demand for power is expected to soar to a whopping 800 GW by 2032 implying a six fold of the current capacities in about 25 years. Theme: The power sector in India is projected to grow rapidly over the next two decades and to be increasingly open to private sector participation, both domestic and foreign. Summary: This ARI focuses on the electric power sector in India, which is projected to grow rapidly over the next two decades. In particular, it discusses policy developments in the sector, the sector-specific issues that still remain unresolved and its main prospects, stressing especially the opportunities for private sector participation, both domestic and foreign. Analysis: It is well accepted in Indian and international policy circles that bottlenecks in infrastructure in most subsectors electric power, roads, ports, airports and sanitation, with the possible exception of telecommunications, are acting as a serious impediment to rapid and sustained economic growth in India. The World Bank and the Indian Planning Commission have independently estimated that economic growth in India is on average between 1 and 3 percentage points lower than what it could have been if infrastructure bottlenecks were not as severe as they currently are.[1] Indeed, India seriously lags behind not just advanced OECD economies in infrastructure development, but even other developing countries of comparable size such as Brazil and China. The UPA government, currently in its second successive term, has prioritised the development of infrastructure in an aggressively drawn out plan stretching over the remainder of the Eleventh Five-Year Plan (2007-12) and the Twelfth Plan (2012-17). However, given the sheer size and diversity of the country and the extent of the catch-up, sustained policy commitment is required over the next two decades to bring Indias infrastructure up to world class standards. This paper focuses on the electric power sector in India, which is projected to grow rapidly over the next two decades. In particular, it discusses policy developments in the sector, especially since the passage of the landmark new Electricity Act (2003), the sector-specific issues that still remain unresolved, primarily due to a combination of a complex administrative structure and the reluctance of the State Electricity Boards (SEB, hereafter) to accede to a new policy framework that would dilute their unchallenged authority, and the contours of future development, especially the opportunities for private-sector participation, both domestic and foreign, in the development of the power sector in India. Overview The power sector was understandably underdeveloped at the time of Indias independence from theUK in 1947, both in terms of available capacity and per capita consumption. Development policy in India for nearly two decades after independence was inspired by the Soviet model of planned development, which had enabled the erstwhile Soviet Union to

leapfrog the development process and transform itself from a predominantly agrarian nation to an industrialised country within the span of a generation. Indias policy planners under the active stewardship of the first Prime Minister, Jawaharlal Nehru, shared a similar vision for India. The development model adopted as a consequence was centred on the development of heavy industry, which was perceived to generate far deeper forward and backward linkages with the rest of the economy. Agriculture and the development of light industry (especially consumer durables) were not given the importance they deserved until much later in the early 1960s, when the shortcomings of the existing model became apparent. The importance of power generation was not lost on Indian planners, resulting in a concerted effort to increase generation, distribution and transmission capacity to power the industrial development programme. The power generation programme sought to exploit Indias considerable endowments in coal and water resources.[2] Hydro power projects also served to irrigate vast stretches of farmland and assist in flood control, in addition to generating power. The ownership structure of the power sector in India was also influenced by Soviet models, which posited government control of the core sectors of the economy (commanding heights).[3] However, the administrative arrangement was decentralised in that power was decreed to be a concurrent subject with federal and provincial governments having a say in the formulation and implementation of policy.[4] The Electricity Act (1948) was formulated to give direction to the development of the electric power industry and resulted in the creation of the Central Electricity Authority (CEA) to oversee this development. The Electricity Act, notably its emphasis on state control over the industry continued unchallenged till the 1980s, due to a combination of an ideological commitment to socialism (reinforced during the Indira Gandhi Administration) and the emergence of interest groups, especially the beneficiaries of huge power subsidies, who were predominantly part of a politician-bureaucrat-industrialistrich farmer nexus. The first signs of change in the policy regime with regard to the power sector emerged in the early 1980s, ironically under the stewardship of Indira Gandhi. The result was the acceptance that private sector participation would have to be encouraged if India was to stave off a serious power crisis that not only dampened Indias growth prospects, but actually threatened to cripple the economy. This process of liberalisation gained further momentum in the mid 1980s under the leadership of Rajiv Gandhi, whose vision for Indias development was driven by rapid assimilation of modern technology, which required the dismantling of administrative controls over the economy, widely viewed as obsolete. It is not particularly well known that in India, reforms in the power sector were actually initiated before those in the telecom sector. If progress in the subsequent implementation of power sector reforms has not been as smooth as with telecom, it is largely for reasons discussed above. The most visible manifestation of the new liberalised environment during the 1980s was the invitation to foreign power producers (called Independent Power Producers IPP) to set up power plants in the country. The arrangement was for the IPPs to sell power to the State Electricity Boards (SEBs) at a unit price adjusted for cost of capital and exchange rate risks, especially since much of the fuel used was to be imported. The two companies most visibly involved in this effort were Cogentrix, a California based company and the now defunct Enron Corporation. Enron withdrew amidst accusations of price gouging and unfair practices to coerce the then state government of Maharashtra to accede to the unit price of power it was charging, which was calculated to be far above the global average.[5] The controversy that led to Enrons exit from India did retard Indias progress in attracting foreign investment to its power sector. Some of these misgivings still persist, especially for generation companies, despite the extensive liberalisation of the power sector that has been enacted by the most recent Electricity Act. The National Democratic Alliance (NDA) which

governed India between 1999 and 2004 can be credited with taking the first aggressive steps towards revamping the infrastructure sector in India, though it could be argued that the parlous state of Indias infrastructure makes it hard to see how any government could have acted differently. The NDA was a coalition of political parties from the extreme left to the extreme right and it is heartening to note that there is multi-partisan agreement that the development of world-class infrastructure across subsectors is a national priority.[6] A positive consequence of this convergence is an explosive growth in private sector interest (both domestic and foreign) in Indias power sector growth story. Recent Policy Changes and Implications: The Electricity Act (2003) As discussed in the preceding section, the power sector in India could best be described as characterised by policy stasis between 1947 and the mid 1980s. Even the decision to invite IPPs to set up power plants in India was done on an ad-hoc and case-by case basis and was not part of any comprehensive policy shift. Progress in opening up the power sector to private investment, especially Foreign Direct Investment (FDI), was also retarded by the Enron episode and the experience of other less-known IPPs during the early 1990s. Policy planners agreed that a legalised framework was needed to invigorate growth and investment in the power sector. The (new) Electricity Act (2003) was a landmark policy document in that it provided the first legislative framework to revamp the legal and regulatory framework governing the power sector. It signalled a new openness to reform and a desire to accelerate sector reform in an effort to harmonise the operations of various agencies in the sector. The legislation is incremental, given the enormity of the task at hand and hence remains a work in progress. However, its importance in laying the foundation for rapid growth of the power sector in India cannot be minimised. The salient features of the Electricity Act are as follows: Unbundling of the generation, distribution and transmission sector. Complete liberalisation of the generation sector to allow private sector participation. Removal of FDI limits on generating companies and capital equipment manufacturing companies, with the result that 100% equity participation is permitted. Permitting open access whereby consumers above 1 MW of power could choose their own suppliers and power producers were allowed to sell beyond provincial markets in an effort to create a nation-wide market for power. Permitting merchant sales whereby power producers could sell excess power over and above what was contracted to SEBs, at market determined rates. Regularising the supply chain, especially for coal, whereby thermal power producers could enter into binding long term arrangements with domestic coal producers. Import of fuel and feedstock were also liberalised as were foreign exchange regulations for domestic power producers seeking to augment supplies by purchasing coal mines or rights in oil and gas fields abroad.

Reactions to the Electricity Act have been mixed with critics arguing that the legislation did not go far enough, especially in enacting the radical reform that was needed to pull the Indian power sector out of its low growth rate trap that had hobbled it for the past five decades. On the other hand, its proponents argued that any reform in a sector as sensitive as the power sector in India can only be incremental and point to the tremendous obstacles that power sector reform has had to face, even 12 years after sweeping reforms were enacted in the rest of the economy. The Impact of the New Legislation and the Way Forward While the legislation enacted was certainly forward looking, responses from the private

sector have followed a wait-and-see approach, given Indias long autarchic tradition, characterised by a high level of government control over the economy and the recent experiences of IPPs in India during the 1990s. However, the green shoots of private sector participation (both Indian and foreign) are beginning to emerge, especially in the power equipment sector, where India is seen as being among the two most promising markets in the world, along with China. The Eleventh Plan (2007-12) called for the addition of 78,000 MW of power from all sources. It is unlikely that this target will be realised, though a late surge during the past few years has resulted in the rapid addition of generating capacity. It is envisioned that the final capacity addition at the end of the Eleventh Plan will be somewhere between 60,000 and 65,000 MW. The Twelfth Five-Year Plan (2012-17) is even more ambitious, calling for the addition of over 100,000 MW of power. Planners are confident of realising this target given that the policy reforms of the Electricity Act would have had time to play out, leading to greater private sector participation is concerned. It is undeniable that the liberalisation process initiated by the Electricity Act involving greater private sector participation cannot be reversed. Indeed, private sector participation in power generation is expected to increase from 10% during the Eleventh Plan to 34% during the Twelfth plan. Thus while the government is heavily investing in ramping up the capacities of the state-owned National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC), which until now were the predominant thermal and hydro power producers, respectively, power sector liberalisation has led to a rapid increase in the number of private-sector players and a resultant decrease in the share of power produced by stateowned enterprises. Another policy reform that has been recently enacted is the de-linking of NTPC and Bharat Heavy Electricals Limited (BHEL), where supply of power generating equipment is concerned. As a result, NTPC is not obliged to generate all its generating equipment from BHEL. Consequently, private sector power equipment manufacturers have a tremendous opportunity to sell equipment to Indias largest power generator. The same applies to NHPC, the countrys largest hydro power generator. This has led to several private-sector players, domestic and foreign, ramping up their production capacities in India and entering into joint ventures to competitively bid for supply of equipment for power projects.[7] Another interesting development that has taken place is Indias aggressive pursuit of regional power trading agreements with neighbouring countries. These agreements were earlier limited to Bhutan, whereby India financed the construction of hydropower plants in that country, in return for the export of excess power generated to India. Such agreements are being extended to Nepal and Bangladesh for the development of hydro and gas-based power plants, respectively. It is expected that by 2020 over 20,000 MW of power will be procured from external sources. While earlier agreements required capital equipment to be sourced from BHEL and the power to be generated by government entities, power equipment will hereafter be sourced through competitive bidding, while generation will largely be through structured finance arrangements underwritten on a case-by-case basis by the Indian government. Policy planners are very optimistic about the prospects of such agreements as it represents a win-win situation for both power exporters, who would benefit from the export revenue and power-hungry importers like India. Despite full liberalisation, foreign players have not entered the power-generation market with the same enthusiasm as power-equipment manufacturers, preferring to adopt a cautious approach. The first positive step in this direction is the decision by China Light and Power Company to set up a 200 MW coal-fired plant in the north-western state of Haryana. On the other hand, domestic power producers such as Reliance Power, Tata Power, Jindal Steel &

Power and several other companies have aggressively entered the generation space and have ambitious plans to expand existing capacities. Despite the positive intention displayed by successive governments in reforming the power sector, there are certain serious shortcomings within the power sector in India, both structural and administrative, which it is hoped will be addressed soon: Transmission capacity lags behind generation capacity, with the result that the power generated often cannot be evacuated. This has created considerable opportunities for the private sector and several domestic companies like Larsen and Toubro, Reliance Infrastructure and Kalpataru Transmission Systems, as well as foreign companies such as Areva T&D, are ramping up capacity for producing transmission equipment in India. Supplies of coal and gas to the private sector have yet to be completely streamlined, though the government has constituted a high-power committee to address this issue, which is expected to turn in its recommendations shortly. This is a relatively minor problem given that foreign firms can source fuel from abroad, subject to foreign exchange clearance. Land acquisition is a problem. It has been recommended that the CEA purchase land of suitable size, which generation companies could bid for. Progress on this count has been tardy. The problem of open access persists, as does the merchant power facility, both permitted by the Electricity Act. Given that power is a concurrent subject, states retain the authority to deny open access. For example, the two most industrialised states in India, Maharashtra and Gujarat, allow both open access and merchant sales, while Karnataka, a fairly advanced state and Indias Information Technology hub, does not. The Power Ministry in India has recently tabled a parliamentary note, mandating open access.[8] The granting of open access is expected to greatly enhance interest among private power-generating companies. The financial situation of most SEBs is still parlous and so generating companies are still anxious about recovering payments on power sales to these boards, though the federal government underwrites some of these sales. The present arrangement is that any financial bailouts of the SEBs is deducted from the allocations made to the respective states, thereby adding pressure on states to be more responsible in ensuring effective metering of supplies and minimal Transmission and Distribution (T&D) losses. A bigger problem to reform is the resistance of SEBs to unbundling, fearing that unbundling would make it easier to identify the source of financial losses. SEBs are also reluctant to part with exclusive rights to T&D, widely seen as the most lucrative businesses in the sector, despite the abolition of exclusive privilege by the Electricity Act. Private sector companies are aggressively petitioning the government to be allowed entry into T&D as well, so as to be able to provide end-to-end solutions to consumers. A resolution of this issue in favour of greater private sector participation in T&D is expected soon.

Conclusion: Recent legislation in the form of the Electricity Acts and amendments such as universalising open access have added a spirit of dynamism to the power sector in India. It is hard to see this trend reversing. Indian private sector companies are also confident of competing with foreign companies in all sectors and hence the possibility of a return to autarchy under pressure from domestic lobbies is equally unlikely. The issues previously discussed can be daunting, but the regulatory regime is evolving and is being amended to induce greater transparency and a level playing field. Above all else, there is multiparty

agreement on the need for urgent reforms, which minimises the chances of political disruption. From a private investors standpoint, this augurs remarkably well and players who are willing to cope with an evolving regulatory regime will reap rich rewards in the near to medium future.
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