Sector Analysis

Power

Power Sector Overview- 1/2

Overview

Challenges4

India is 3rd largest power produce in Asia, after China and Japan
Three Gorges Dam is the largest power producing station in the world
with a capacity of 22.5 GW1
The current installed generation capacity in India is 225793.1 MW or 225
GW as on 30-06-20132
The current installed transmission capacity is only 13% of the total
installed generation capacity in 2010 3
It is largely coal based
India has tough time matching the supply to the power demand

The power sector faced a slowdown in

2012-13 primarily due to fuel
constraints`(both coal and gas) and
challenging policy environment. The
growth in electricity generation fell to
just 4 per cent in 2012-13 compared to
8.1 per cent in 2011-12
A major impediment for the sector has
been the undue delay in getting
regulatory clearances due to lengthy
decision making process which involve
different ministries both at the Central
and State government levels. As a step
towards mitigating these problems, the
government has established the
Cabinet Committee on Investment
(CCI), in Jan2013, which aims to fast
track regulatory clearances and resolve
inter ministerial differences at the
Central Cabinet level
The financial health of electricity
distribution Companies (Discoms) is an
area of major concern threatening the
2
very viability of the power sector.

Source:
1. http://www.forbes.com/sites/williampentland/2013/08/26/worlds-39-largest-electric-power-plants/
2. http://www.powermin.nic.in/indian_electricity_scenario/introduction.htm
3. Power Sector in India, White paper on Implementation Challenges and Opportunities,For release at the Energy
Summit, Nagpur - January 2010

Power Sector Overview- 2/2

Installed Power
Generation
Capacity

Above fig. have been adopted from Reliance Power Annual Report FY12-13

Power Generation
FY12-13

1 Unit = 1KWh

Quick Facts
HVDC- High-Voltage, Direct Current
A HVDC electric power transmission system uses direct current for the
bulk transmission of electrical power, in contrast with the more common
alternating current systems.
For long-distance transmission and bulk power transmission, HVDC
systems may be less expensive and suffer lower electrical losses.
Als0, HVDC is a flexible option, especially because it enables the
switching of the direction of transmission depending on where demand is
For shorter distances, the higher cost of DC conversion equipment
compared to an AC system may still be warranted, due to other benefits
of direct current links.
Due to the high capital expenditure upon HVDC transmission, this market
is due for steady, incremental growth in the coming years
Asia dominates the HVDC transmission market
Global power equipment manufacturer Alstom expects the Indian highvoltage transmission market to be worth euro 2 billion by 2018*
Alstom is working on the 1,365-km Champa (Chattisgarh) to Kurukshetra
(Haryana) 800 kV-3,000 MW HVDC transmission line, on behalf of PGCIL
HVDC has emerged the key technology for inter-connecting regions and
countries for electricity transfer, as it helps transmit more power with less
infrastructure
Source:
*http://www.thehindu.com/business/Industry/alstom-bets-big-on-indian-high-voltage-transmission-market/article4902201.ece
HVDC improves quality, stability and reliability of electricity**

National Power Grid (NPG)

Northern, Eastern, Western and
North-Eastern (NEW grid) have
been integrated
Project (Rs. 2000 Cr.) to link
southern regional power grid with
that of other regions in the country
to help transmit excess power from
other regions to the south***
NPG will be operational from Jan14
This inter-State project envisages
linking Raichur and Solapur besides
Solapur and Pune through 750-kv
transmission lines as part of the
efforts to integrate the southern grid
with the NEW grid
that
Confuse
You!
Diff.Units
weather
pattern
across
India
Transmission
Ckt Km.
Diff. Power Networkrequirements
at diff.
Transmission
Capacity or Inter
times
Regional Transfer Capacity- MVA
Generation Capacity- GW or MW
Supply/Demand- Billion Units,
where 1 Unit = 1KWh

**http://www.thehindubusinessline.com/companies/india-has-2b-market-potential-for-highvoltage-transmission-lines-alstom/article4897821.ece#
***http://www.thehindu.com/news/national/karnataka/national-power-grid-to-be-operational-from-2014/article3994001.ece

Quick Facts
Transmission and Distribution Loss
Energy losses occur in the process of supplying electricity to consumers due to technical and commercial losses.
The technical losses are due to energy dissipated in the conductors and equipment used for transmission, transformation,
sub- transmission and distribution of power.
These technical losses are inherent in a system and can be reduced to an optimum level.
The losses can be further sub grouped depending upon the stage of power transformation & transmission system as
Transmission Losses (400kV/220kV/132kV/66kV), as Sub transmission losses (33kV /11kV) and Distribution losses
(11kV/0.4kv).

Aggregated technical and commercial Loss

In absence of feeder metering in the past, substantial portion of T&D loss, including theft of electricity was attributed to
agricultural consumption. While, agricultural consumption was around 20-25%, utilities were showing it as 35-40% and
correspondingly T&D losses were shown as 20-25%. Also, T&D loss was being computed by showing electricity bills issued to
consumers as accrued income, and not on the basis of actual collection. Therefore, T&D loss figures did not capture the
major gap between the billing and the collection, over and above large scale of theft. To get over this problem, the concept
of Aggregate Technical & Commercial (ATC) loss was introduced.
It has been targeted to reduce the T&D loss by 3% from the current loss level of about 40%. 1
One per cent ATC loss is equivalent to Rs 85 cr. and the energy sector will save at least Rs 255 cr. annually
AT&C losses in India are at 27%3 (2011)
Union power ministry's Accelerated Power Development & Reforms Programme (APDRP), 2002-03, was set up with
an objective of reducing ATC power losses to 15% 2
Source:
1. http://newindianexpress.com/states/odisha/Rs-3600-crore-power-sector-plan-to-cut-Transmission-and-Distribution-loss/2013/07/26/article1702694.ece
2. http://articles.timesofindia.indiatimes.com/2011-08-23/infrastructure/29917886_1_power-grid-power-generation-power-ministry
5
3. CRISIL Research & http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_power1904.pdf

Energy Flow from Generation to Consumers-Losses Point of View

Quick Facts
What is Govt. doing to control AT&C Losses?
To bring the losses and make the distribution sector commercially
viable, Accelerated Power Development Program (APDP) was launched
in 2000-2001 as a last means
Slowly, government realized that there is an urgent need not only for
the development of the distribution sector, but complete reforms of the
existing infrastructure. This led to the birth of Accelerated Power
Development and Reforms Program (APDRP) during 2002-2003
The objective of APDRP were:
Improving financial viability of State Power Utilities
Reduction of AT & C losses to around 10%-15%
Improving customer satisfaction
Increasing reliability &quality of power supply
R-APDRP (Restructured APDRP) was the governments renewed attempt
to revive the power sector reforms in the year 2008.
It seeks to eliminate the faults of the former avatar APDRP
Total outlay is Rs. 57,577 Cr.
Projects under the scheme are taken up in two parts.
Part-A of the project is aimed at establishing IT enabled system for
energy accounting and auditing and SCADA (supervisory control and
data acquisition) for big cities (with population of 4 lakhs.
Part-B is for regular distribution, up-gradation and strengthening
projects.
The outlay for Part-A is Rs 10,000 cr. and that for Part-B Rs 40,000 cr..
The programme will cover all urban areas, cities and towns with a
population of more than 30,000
HT-High Tension Voltage
LT- High Tension Voltage

Calculating AT&C Losses

Main reasons for Technical Losses

Overloading of existing lines and substation
equipments
Absence of up gradation of old lines and
equipments
Low HT: LT* ratio
Poor repair and maintenance of equipments
Non-installation of capacitors for power factor
correction

Main reasons for Commercial Losses

Low metering/ billing/ collection efficiency
Theft of electricity by illegal connection
7
Tampering of metering system

Power-Supply Chain

Power-Supply Chain- Agreements and Payments

Power
Transmission
Company E.g.
PGCIL

Fuel Supplier E.g.

Coal India

Pays
Fuel Supply
Agreement (FSA)
In the absence of
power purchase
agreements, units
will not receive any
coal from Coal India,
which is the latest
condition for
receiving coal under
the fuel supply
agreements*

Power
Generation
Company E.g.
NTPC

Power Purchase
Agreement (PPA)

Awarded through
bidding process
against tender
issued by State
Distribution
Companies

Power Distribution
Company
E.g. Maharashtra
State Electricity
Distribution
Company

Consumer
Retail/Industrial

*http
9
://epaper.timesofindia.com/Default/Layout/Includes/ETNEW/ArtWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM%2F2013%2F09

Cost Structure- Generation

NTPC2

FY12-13

FY11-12

Commercial
Generation(MUs)

230993
220696
Rs. Per
Rs. Per
Expenses
Rs. Cr KWh
Rs. Cr KWh
41018.
41635.
Fuel
25
1.78
46
1.89
3360.1
3101.7
Employee Benefits
2
0.15
1
0.14
General Admin and
4211.2
3588.7
Other Expense
2
0.18
9
0.16
48589.
48325.
Average
Average
Total
59
2.10
96
2.19
Tariff FY11Tariff FY1212
13
Rs. 2.94 /
Rs. 2.90 /
KWh
KWh11

Profitabili
ty
38%
1. Adjustments from previous years not
considered

Reliance Power
FY12-13

Electricity Generated
(MUs)

Income from operations

8060
Rs. Lakhs
492488

Expenses
Fuel
Purchase of energy/coal
rejects
other operating expenses
Employee benefits
General Admin Expenses
Total Expenses
Observation:
Even though cost of production
for Reliance power is higher, they
got into PPA with UP govt. such
their profitability was maintained.

Rs. Per
KWh
5.53

256207

3.18

38517
702
8034
17910
321370

0.48
0.01
0.099
0.22
3.99

Profitabili
ty
38%

3. http
10
://articles.timesofindia.indiatimes.com/2012-10-16/lucknow/34498086_1_ros

Transmission- Power Grid Corporation India Limited (PGCIL)- 1/2

Key Company Statistics as on April 1, 20133

PGCIL is a Navratna company with 50%1 market share in the

transmission business and has a monopoly in inter-state
transmission.
Nearly 95%2 of its revenue is generated from the
transmission business
The balance coming from the consulting services provided to
power companies in India and abroad and from leasing its
optic fibre bandwidth to telecom operators.
The cost-plus model which assures a certain return (15.5 per
cent return on equity on projects) with no fuel supply risks,
provides stability to earnings.
The MoP has notified PGCIL as CTU, which performs following
functions:
provides transmission facilities for interstate transmission
of power
controls power flow and frequency
ensures system reliability and congestion management
undertakes energy accounting and billing
provides reactive power support and voltage control
does investment planning4

Transmission Line

1,00,200CKm of
EHV

EHVAC & HVDC Sub-stations

167

Transformation Capacity

1,64,763 MVA

Avg. Availability of Trans.

N/W

99.90%

1. http://articles.economictimes.indiatimes.com/2011-12-05/news/30477832_1_transmission-business-power-grid-business-model
2. http://www.thehindubusinessline.com/money-wise/stock-insight/power-grid-corporation-buy/article4203773.ece
3. Annual Report, PGCIL, FY12-13
4. IDFC India Infrastructure Report.pdf

11

Transmission- Power Grid Corporation India Limited (PGCIL)*- 2/2

The Government of India has allowed independent transmission service providers to set up transmission lines for
interstate and intra-state transactions, hence India potentially has competition for the market in the provision of
transmission services,
But once a company has set up transmission facilities, duplication of resources may not be worthwhile, and hence there
will not be any competition in the market.
However, the CTU has been given extra-ordinary powers by the Electricity Laws (Amendment) Act, 1998 which may act
as barriers to private entry.
It states that a transmission license granted may authorise the transmission licensee to construct, maintain, and
operate any inter-state transmission system under the direction, control and supervision of the CTU.
It further states that the applicant should first obtain the approval of the CTU. Clearly, the PGCIL simultaneously
dons the mantle of both player and controller
DID YOU KNOW?
POWER GRIDs Telecom Arm POWERTEL
All India broadband network of 29,300 Km
Cost Structure
Only company in India providing telecom services on
PGCIL makes capital expenditure in laying out the
overhead optic fibre network using Optical Ground Wire
network
(OPGW) on power transmission lines
It charges based on energy withdrawal from the network
It earns revenue by leasing the fibre optic network to
rather than actual transmission resources used in a
Telecom Service Providers, Govt. Departments, MNCs,
particular case*
media etc.

Source:
* IDFC India Infrastructure Report.pdf

12

Transmission Network in India

13

Distribution
The distribution segment continues to carry electricity from the point where transmission leaves off, that is, at
the 66/33 kV level.
The standard voltages on the distribution side are therefore 66kV, 33 kV, 22 kV, 11 kV and 400/230 volts,
besides 6.6 kV, 3.3 kV and 2.2 kV.
Depending upon the quantum of power and the distance involved, lines of appropriate voltages are laid.
The main distribution equipment comprises HT and LT lines, transformers, substations, switchgears, capacitors,
conductors and meters.
HT lines supply electricity to industrial consumers while LT lines carry it to residential and commercial
consumers.
Recent Developments
Financial Restructuring Plan (FRP)*
According to the FRP, State Governments will take over 50% of the short-term liabilities and convert them to
bonds, and the remainder will be restructured by banks, by extending the moratorium on the principal and
giving better terms for repayment.
This assistance will be granted on the condition that the discoms carry out operational and financial reforms
including rationalising tariffs, balancing high tension and low tension loads, extending metering to all
consumers, and curtailing unauthorised electricity consumption.
Some state discoms, such as Punjab and Madhya Pradesh, have declined to participate in the FRP, wanting to
manage their finances on their own.
The FRP was adopted and started by the end of FY13, in eight states including Tamil Nadu, Andhra Pradesh,
Uttar Pradesh, Haryana and Rajasthan, with combined losses of Rs.160,000 crore.
The scheme has come under criticism for following the same pattern as older schemes, which may have
improved efficiency of discoms, but were unable to mitigate political interference
14

*http://www.idfc.com/pdf/IDFC_16AR_Shareholder_2012_13.pdf

Major Companies in Power Sector Value Chain

Power Generation
Company

Power Generation
Capacity
(MW)

NTPC

411841

Power Transmission

Power Distribution

TATA Power

85212

PGCIL

Adani Power

7260

Alstom T&D

NHPC

5702

Every state has its

own power
Distribution company

Reliance Power

25005

Others

159833

Total

225000

Kalpataru Power
Transmission, etc

Power Trading
Indian Energy Exchange
Power Exchange India
1. http://www.ntpc.co.in/index.php?option=com_content&view=article&id=64&Itemid=34&lang=en
2. http://www.tatapower.com/businesses/conventional.aspx
3. http://www.adanipower.com/AdPressReleases/15/1/2013
4. http://www.nhpcindia.com/about-overview.htm
5. http://www.reliancepower.co.in/108/21_101.pdf

15

Important Acts and Policies

Electricity Act, 20031
Salient features of the Act
State Government to unbundle the sector with transmission and system operation made independent of any
other businesses in the sector, viz., generation, distribution, and trading.
No requirement of license for generation and no requirement of techno-economic clearance except for large
hydro-generation projects.
Captive generation capacity to have open access to the transmission system and not subject to any regulations
for its pricing. Definition of captive generators liberalized to include any capacity set up by an association of
persons.
By de-licensing generation, captive power plants were freely permitted, hydro projects, though would still need
clearances
This was aimed at encouraging small units to setup their own units and meet their energy requirements
All others- transmission, distribution, and trading require licence from the regulators (CERC or SERCs)
depending upon the area of their operations.
Independent regulators to regulate the sector including award and revoking of licences, tariff setting consistent
with National Electricity Policy, defining and enforcing performance standards and quality of service, and
setting Grid Standards.
Creation of regulatory fund at the central and state level with accountability to the Parliament and Legislature
respectively.
Regulators to reduce cross-subsidies and move towards allowing open access to a class of consumers in a
phased manner.
Multiple distribution licensees allowed for distribution.
16
1. Electricity
and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris, 2009,
State Reforms
Government
to pay subsidy in advance. And tariffs to revert back to levels determined by the ERC, if the

Important Acts and Policies

Electricity Act, 20031
Salient features of the Act
Establishment of Appellate Tribunal to fast-track the appeal process on rulings of ERCs with Supreme Court being
the final arbiter.
CEA to be the body for techno-economic clearances of large hydro projects, for planning (National Plans) and for
advice and definition of technical standards.
Trading of power has been identified as an independent and licensed activity
Thrust in rural electrification and provide for management of rural distribution by local rural bodies
Provision for license for free generation and distribution in rural areas
Cross subsidy to be gradually phased out along
Major Beenficiaries2
Industrial customer- They were sold electricity at higher rates, due to cross subsidy given to farmers, they
could either buy electricity through independent power producers, merchant power plants through open access
or build their own captive power plants
Independent power producers- free generation companies from licensing provisions (subjected to certain
technical criteria) and allow setting up of dedicated transmission lines fir end user. They can sell to final
consumers through open access, this will encourage the IPP, as they might not be forced to sell to bankrupt
SEBs, and can choose credit worthy buyers
Power equipment manufacturers- Power equipment manufacturers like ABB, Alstom and BHEL were the
major beneficiaries of the act. Due to entry of private sector players, they were one of the biggest beneficiaries
of the new act.
Though
sector
open for
private
players
inYears
generation,
Transmission
Distribution
was still a
1. Electricitythe
Reforms
and RegulationsA Critical
Review
of Last 10
Experience, Ajay
Pandey, Sebastianand
Morris,
2009,
17
2.mainstay
http://crisil.com/youngthoughtleader/winners/07-Grover-NM.PDF
of public sector players like PGCIL and SEBs

Important Acts and Policies

Electricity Tariff Policy, 2006
General Approach to Tarif3
Policy aims to create conditions of competition. Towards this end, it specifies that the distribution licensees
would procure power (or capacity) competitively for medium and long-term from generators under the
procurement guidelines notified on 19th January 2005 through tariff based bids instead of MoU except from PSU
generators (who will have to do it after max. 5 years or before, i.e. after 2011).
The policy, in line with the Act, specifies that from April 1, 2006 all tariffs would be under MYT (multi-year tariff)
framework and should feature 3-5 year control period
The Tariff Policy specifies debt-equity norm of 70:30. In case equity is more, the excess should be treated as
debt but if it is less than the norm, then the actual equity should be3 considered for tariff fixation.
On Generation Tarif
The policy specifies that the two-part tariff structure should be adopted for all long-term contracts to facilitate
merit order dispatch.
The ERCs should have time-varying (peak vs. non-peak) fixed charges for better load management.
The PPAs should have adequate and bankable payment security mechanisms and in case of persistent default,
the generator should be free to sell outside the PPA.
In case of coal-based generation, the cost of project may also include reasonable cost of coal beneficiation, coal
washeries and dry ash handling and disposal system.
The captive generators on the grid should have same terms as other generating stations subject to Availability
Based Tariff (ABT) or should be paid actual variable cost and a reasonable capacity charge, which may be
different for peak and non-peak hours. Wheeling2 charges for such generators should be known in advance as
declared by the SERC1

1.Central Electricity Regulatory Commission (CERC), State Electricity Regulatory Commission (SERC)
2. Wheeling is the transportation of electric power (megawatts or megavolt-amperes) over transmission lines
3. Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian

18

Important Acts and Policies

Electricity Tariff Policy, 2006

On Transmission Tarif1
It does not lays clear cut framework for transmission tariffs
Though it states that it should be sensitive to quantum, direction and distance of flows. This could be based on
zonal postage stamp pricing or MW-mile basis or some other variant based on the principle of system users
sharing their respective share of utilization of the network
Losses should be charged on the basis of average losses arrived at after appropriately considering the distance
and directional sensitivity, as applicable to relevant voltage level
Loss compensation is reasonable and linked to applicable technical loss benchmarks
On Distribution Tarif1
The Tariff Policy recommends that the State Government should target direct subsidies, than cross-subsidies,
for the purpose as spelt out in section 65 of the Act.
Only consumers belonging to BPL category may be given special support to the extent of 50% for 30 units a
month in line with the National Electricity Policy.
The SERCs should notify the roadmap within six months the target latest by 2010-11 for brining tariffs to within
+/- 20% of average cost of supply.
For every category, the document stresses on the need for recovery of reasonable user charges. Subsidized
rates should be permitted only up to a pre-identified level beyond which cost of service should be recovered.

1. Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris,

19

Important Acts and Policies

Electricity Tariff Policy, 2006

Multi Year Tarif1

MYT has been proposed in the Electricity Act 2003 to give an element of certainty to all stakeholders. The
basic premise is that tariffs would not fluctuate beyond a certain bandwidth unless there are force majeure
conditions.
The tariff policy announced by the government of India in January 2006 states that the multi-year framework is
to be adopted for any tariff determined from April 1, 2006.
The consumer would have a fair idea of what to expect in the next three to five years and the distribution
company (Discom) would also be able to plan its business having known the likely retail tariff for the control
period.
The control period is the time duration during which time the principles laid down by the regulatory
commission for tariff determination would be held valid. MYT does not mean that the regulatory commissions
need to fix an identical tariff, year after year, throughout the control period though, of course, there is no bar if
the regulatory commission chooses to do so.
The more likely path is that the commission would fix the guidelines which would determine the retail tariffs
and having fixed the guidelines, it is expected that the tariffs would operate within a certain band.
Ideally, a MYT framework will divide all costs into two broad categories, controllables and non-controllables.
Controllables are those costs which are endogenous to the Discoms, E.g. expenditure on administrative and
general (A&G) expenses, repair and maintenance (R&M), etc.,
Non-controllables are those which are external to the utilities over which they have no control, E.g. enhanced
expenditure on power purchase due to rise in fuel cost, for example, rise in price of coal, gas, etc
20

1. http://articles.economictimes.indiatimes.com/2007-02-13/news/27688884_1_control-period-tariff-policy-regulatory-commission

Important Acts and Policies

Electricity Tariff Policy, 2006
Multi Year Tarif1 (contd.)
The regulatory commission will determine, at the beginning of the control period, how much expenditure would
be allowed during the period as far as the controllables are concerned. While doing so, it will take into account
legitimate increases on account of growing gross fixed assets (R&M expenses are a percentage of the value of
fixed assets), on account of inflation, etc.
While fixing all these costs, the regulatory commission would be guided by the base line data at the beginning
of the control period. The Discom would be responsible for any increase in the controllable expenditure beyond
the stipulated levels and such excess expenditure shall not be allowed as a "pass through" for determination of
tariffs.

1.

http://articles.economictimes.indiatimes.com/2007-02-13/news/27688884_1_control-period-tariff-policy-regulatory-commission

21

Important Acts and Policies-ABT

Availability Based Tarif1
Was introduced first time Jan 4th, 20002
Pre ABT, Tariff structure of power plants was categorized under following3:
Fixed Cost: Interest on Loan, ROE, depreciation, O&M expenses, insurance, taxes,
interest on working capital
Variable Cost: Fuel cost

1.
2.
3.

http://gopalakrishnanprasanth.wordpress.com/article/introduction-to-availability-based-3bk0x32fl4sfh-5/
http://powermin.gov.in/distribution/availability_based_tariff.htm
http://www.npti.in/Download/Distribution/YMPL/third%20party%20papers-technical%20info/ABT.pdf

22

Important Acts and Policies-ABT

New Tariff Structure
It divided the tariff into three parts
1. Capacity Charges (Fixed)1
2. Energy Charges (Variable)1
Fixed charges are payable against the
variable charges are to be paid against the scheduled
availability (declared capacity) of the generating
energy, irrespective of the actual drawl.
facility.
This splitting is expected to promote power trading.
Fixed charges excluding ROE is payable on a
prorated basis for 0-30% availability. Prorated
3. Unscheduled Interchange (UI) Charges1
ROE is payable from 30-70% availability.
A payment for deviations from schedule at a rate based
Incentive is payable to the generating station for
on the system condition, i.e. freq. at that time
availability beyond 70%.
It is negative if power plants are delivering less power
The incentive is pegged at 0.4% of equity for
than scheduled
each percent increase in availability in the 70
If plant is producing 600 MW, but was scheduled for 500
85% range. Thereafter, the incentive falls to
MW, the Energy charges will be paid only for 500 MW,
0.3%.
extra 100 MW will paid at a certain rate.
This decrease in incentive after 85% is aimed at
If freq of the grid is > 50Hz (surplus power), rate will be
discouraging the generating facility from
small
overloading the units at the cost of maintenance

If freq of the grid is < 50Hz (deficit power), rate will be

and equipment life.
higher
ABT also contains provision for penalizing the
23

If produce = Scheduled, this component is zero

generating utility for over/under declaration of
1. http://gopalakrishnanprasanth.wordpress.com/article/introduction-to-availability-based-3bk0x32fl4sfh-5/

Open Access- 1/4

Overview1
The Electricity Act, 2003, provides for open access to
energy, which contributes the second largest chunk of
20-50% of the total cost of production, next only to
raw materials. As such, easier energy availability for
industrial development is an issue of paramount
importance
Although open access to electricity may not reduce its
price much due to the prevailing high input costs, it
would make it easier for industries to procure power
from their source of choice and also potentially reduce
power tariff.
India now ranked low at 59th place in global
competitiveness index of World Economic Forum.
Compared to the USA and China (6.9 cents per unit),
electricity charges in India are higher at 10 cents, thus
making production rather uncompetitive
Indias enegy imports are expected to grow from 26%
in 2007 to 40% in 2030 while the USAs will decrease
from 33% to 27%, due to shale gas availability, during
this period.
Open access could go a long way in making Indian
costs more competitive as it would ease availability.

Emerging Industry Structure

1. http://www.thehindubusinessline.com/economy/power-traders-demand-open-access-across-india/article4885103.ece#

24

Open Access- 2/4

What is Open Access?1
Open access, a framework for development of power market and for promoting competition, is mandated to
allow freedom for consumers (suppliers) to choose suppliers (consumers).
Open access to the inter-state transmission network (that is, inter-state open access) was available from the
very beginning of the Electricity Act, 2003 coming into effect. The charges for transmission capacity and
quantum of power transmitted over it are easily discernible for effecting payments.
Open access to the distribution network (that is, intra-state transmission), owned by Discoms, however, was to
be implemented in phases on payment of open access charges and charges for cross-subsidy and additional
subsidy if any, which were to be progressively reduced to within 20 per cent of the average cost of power by
2010-11.
Open access is available for power purchase or sale by utilities or distribution licencees. However, when it
relates to generators and consumers, only some of the States have permitted limited open access. Some are
permitting open access to generators if they are connected to central transmission network.
The irony is that open access has not been allowed to succeed for various reasons, such as apprehension of the
State utilities about flight of industrial consumers from their net; non-availability of surplus power at reasonable
rates; irrational open access charges; non-availability of open access infrastructure of metering; and segregation
of consumers' lines, among other factors.
Even though the cross-subsidy surcharge on open access transactions is mandated under Section 39 and 42 of
the Act, erecting a high tariff barrier deters customers from purchasing supplies from outside the jurisdiction of
Discoms and runs counter to the tariff envisaged in the National Electricity Policy and Tariff Policy.
For meeting the demand during acute power shortage, it is observed that some States have misused their
powers to block the sale of surplus capacity of captive generators to other States, by inappropriately invoking
25
1. http://www.thehindubusinessline.com/opinion/make-open-access-in-power-a-reality/article3408885.ece
Section 11 of the Act.

Open Access1 - 3/4

Even as the central government is pushing states for mandatory implementation of open access (OA) for bulk
power consumers, an analysis by a regulators body has revealed that contrary to expectations, the
consumers in 12 states have had to pay more for power under the new regime 1
OA at various levels is the hallmark of electricity reforms and the regime has been effective in 20 states since
January 2009 on an optional basis. Under the OA regime, bulk consumers enter into bilateral deals with
discoms and stay outside the ambit of the regulated tariff system.
Analysts, however, reckon that higher prices under the open access regime are due to factors like the steep
rise in input costs primarily coal since 2009 and doesn't negate the principle that open access promotes
competition. Also, many large consumers must have chosen to pay higher prices for better-quality power from
distant discoms.
Helped by regulators, discoms have burdened OA consumers with numerous un-prescribed charges and
surcharges to increase cost of power for them.
Regulators have been levying numerous charges in addition to those prescribed
Cross-subsidy surcharge liability figures are highly inflated. This is possible because regulators
follow different methodologies for calculating cross-subsidy surcharge
Only in eight states Haryana, Karnataka, Maharashtra, Punjab, Rajasthan, Uttar Pradesh,
Madhya Pradesh and Gujarat did OA consumers pay less compared with normal consumers.

26
1. http://www.financialexpress.com/news/extra-costs-offset-open-access-gains-for-power/951897/0

Open Access- 4/4

Cost Components of Open Access1

Transmission Charges
Wheeling charges
Operating charge
UI charge
Reactive energy charge
Cross subsidy charge
Additional Surcharge
Interconnection surcharge
Connectivity surcharge
Any other charges

By manipulating above charges, especially, Cross subsidy, SEBs and SERCs make open access of electricity
prohibitive.
Now MERC2, on Feb 24, 2013 has increased the cross subsidy surcharge by 60 to 70 paise a unit for industries,
which is against the spirit of NTP, 2006, which says, cross subsidy should gradually decrease

1.

http://www.indianelectricity.com/html/pdfall/openaccess/MPERC%20open%20access%20charge%20calculation.pdf

27

Power Trading and Power Exchanges4 -PTC India Ltd

PTC India Ltd. (formerly known as Power Trading Corporation of India Limited),
was incorporated in 1999 to undertake trading of power to achieve economic
efficiency and security of supply and to develop a vibrant power market in the
country.
The intent and object of the EA 2003 was to develop power market through
increased competition, more players and protect consumer interests
Market leader in trading of power: ~43%market share
Promoted by industry participants with a credible track record and significant
sector experience
NTPC - Indias largest thermal power generator
POWERGRID - Indias largest Central Transmission Utility (CTU)
PFC Development Financial Institution (DFI) dedicated to the power
sector
NHPC - Large hydroelectric power generator in India
It has helped in creation of power market in India; Sale of MUs increased from
1,617 MU in FY 2002 to 24,325 MU in FY 2012
PTCs business includes Short term, Medium term, Long term (including cross
border with Bhutan and Nepal) power trading, banking, fuel intermediation
(done by PEL- PTC Energy Ltd.), trading of power through Power Exchanges and
Power Tolling3
1. http://
2.
3.

www.indianelectricity.com/html/pdfall/openaccess/MPERC%20open%20access%20charge%20calculation.pdf
http://articles.timesofindia.indiatimes.com/2013-02-24/nagpur/37269476_1_open-access-rb-goenka-msedcl
In the electric power market, tolling agreements are typically between a power buyer and a power
generator, under which the buyer supplies the fuel and receives an amount of power generated based on an

Key Players and Market

Share (2007-08)

28

Power Trading and Power Exchanges1 - PTC India Ltd. (contd)

Co-promoter of Indias First National Power Exchange (IEX- Indian Energy
Exchange)
Has a subsidiary PFS (PFC Finance Services), incorporated in 2006, which
has made investments in the following sectors of the energy value chain:
Power exchanegs
Bio-mass, Coal, Wind Projects
Term Financing
Presence in value chain:
Power Trading
Direct Investments in Power projects
Fuel Intermediation
Power Tolling Arrangements
Advisory Services
Power trading business can be categorized as:
Short Term trading
Medium Term trading
Long Term trading
Cross Border trading
Banking
Trading on Power exchange
Power Tolling
Capture Greater Share Of Energy Value Chain By Diversifying Into Related
Energy
Businesses
PTC Corporate
presentation,
2012; http://www.ptcindia.com/downloads.html

Power Tolling
Arrangement11

29

Power Trading and Power Exchanges- IEX

Indian Energy Exchange1

IEX, the country's first energy trading platform, was set up in 28th June, 2008
It recorded a 62% increase in trading volume in 2012-13, as frequent electricity outages forced power
distributors and industrial units to rely more on it for their needs
More than 22 billion units of electricity were traded on the Indian Energy Exchange (IEX) in 2012-13 compared
with 13 billion units a year ago
Power generators, distributors and industrial units are the exchange's main members.
Volumes growth was also driven by new memberships, which increased 74% over the previous fiscal to 2,322.
IEX brought respite to over 2,300 participants, including 1,700 industries, by meeting their electricity needs
reliably and competitively
The average power price for 2012-13, however, remained at Rs 3.49 per unit, compared with Rs 3.53 in the
previous fiscal, due to higher market participation of power producers.
In the last five years, trade in Indian power exchanges has increased at a CAGR of 56%.
Trades at IEX, set up in 2008-09, and the Power Exchange India, the other power-trading platform in the
country, account for 3% of the total electricity generated in the country.
Major hurdles in the growth of these exchanges are restricted open access and availability of transmission
network
There are states like West Bengal, Maharashtra, Uttar Pradesh and Delhi where even partial open access has
not commenced. Another issue hindering the growth of the power market is inadequate availability of the
transmission networks

1. http://articles.economictimes.indiatimes.com/2013-05-23/news/39475586_1_power-exchange-india-industrial-units-indian-energy-exchange

30

Latest News and Developments

31

Electrical Equipment Market + Revision of some facts and figures

32

Market Stats Global

Global market size is expected to grow to 29000GW by 2030. Driven by this
demand the global EE market is expected to reach $6.6 Trillion ,This translates into
~2% CAGR over the long term.
Global trade in EE has reached US$ 453 bn in 2010, with China being the leading
exporter of
electrical equipment with over 15 percent share. India accounts for less than 1% of
the total
share of exports.
The share of coal in total electricity generation is expected to rise marginally from
42% in 2009 to 44% in 2030
Non-hydro renewable energy sources biomass, wind, solar, geothermal, wave and
tidal energy are expected to continue gaining share of the market, accounting for
almost 9% of generation in 2030, up from 2.5% in 2009. The share of nuclear power
is expected to decline from 14% in 2007 to 11% in 2030. There are significant
efforts, largely from developed nations, to increase generation from non-renewable
sources of energy. But, overall the global power sector is expected to continue its
reliance on thermal energy sources.
China which has almost the same demographic size as India, has installed capacity
of around 800,000 mw, roughly four times greater than ours. The US has the largest
installed capacity of over 1 million mw, but China plans to surpass US with its target
of breaching the 1.5 million mw-mark by 2030
The global electrical equipment industry consists of the following two segments:
a. Global heavy electrical equipment market power generating equipment,
including wind turbines, and other heavy electrical equipments such as power
turbines, heavy electrical machinery intended for fixed-use and large electrical
systems.
b. Global electrical components and equipment market electric power cables,
Transformers and electrical switchgear, Transmission Line Towers, etc.
A period of deregulation is being witnessed in the power sectors of most countries,

Market Stats Global

Current Size of Indian Market : 110,000 Cr
It contributes 1.5% to the nations GDP and 10.5% to the
manufacturing GDP. Power deficits range between 9% & 13%
It is estimated that the size of the domestic market in generation
equipment is expected to reach US$ 25-30 bn by 2022 (from US$ 5.7
bn in 2011), while that of the T&D equipment industry is estimated to
grow to US$ 70-75 bn (from US$ 18.5 bn in 2011). This translates into
a CAGR of around 14%.
The industry directly employs around five lakh persons and provides
indirect
employment to another ten lakh people. Most sub-sectors of the
industry also make a large number of products in varied price and
quality ranges. Some subsectors comprise a sizeable unorganized
segment as well.
More than 83 GW of thermal plants are being developed at present,
where foreign players (with Chinese accounting for a major share)
have captured close to 45% market share.
The EE industry is projected to provide direct employment to 1.5
million people and indirect employment to 2 million in by 2022 The
entire value chain would account
for a total employment of over 5 million persons.
In 201112, Indias exports of electrical equipment were ` 22,200
crores (US$ 4.6 billion),
while imports were ` 75,057 crores (US$ 15.7 billion).

Share of coal in Indian Electricity Generation is 68.56 percent

(Global av. 42%)

EE Market Story - India

Generation Capacity : 225 GW , Worlds fifth
GDP growing at around 5.0% in FY 12-13 Electricity demand growth 10-12% per annum (to
2017)
Installed Capacity 211,766 MW as on Mar 2013 Percentage electrification 65%
Losses of State power utilities at about 200,000 Cr (Jan 2012)
Renewable generation capacity of 25,856 MW (12.5 % of total generation capacity) .Statelevel generation companies account for about 47.13% of gen.
Private Sector Generation : 29.49% (62459 MW) of total installed capacity .Transmission
almost under Public Sector (Power Grid Corp India Ltd)
Distribution under State ownership - T&D Losses 28.4 % (FY 2012) Renewable Energy 12.20 % of installed capacity but about 4% of generated energy
Target to generate 20,000 MW of solar power by 2020 Total manpower in the power sector
at the end of 10th plan was approximately 9.5 lakhs
Indias Safeguard Agreement with IAEA coupled with NSG waiver will help India to increase
its nuclear power capacity rapidly. According to Planning Commission, the nuclear power
development target would be 20,000 MW by 2020 and 62,000 MW by 2032. India plans to
import the latest reactors of high capacity ratings in large numbers to meet its above
targets. With this the countrys nuclear landscape will be rapidly transformed. A large
number of reactors, fuel management including re-processing plants, fuel fabrication
facilities and waste immobilization plants will have to be built almost simultaneously.
Indian industry is looking at huge market unfolding before them over the next two decades
through this deal. The nuclear power market is estimated to be at US$ 100 b
For 2011-12, the industry size is estimated at ` 1.20 lakh crores, of which generation
equipment segment consisting of BTG contributed `31,000crores while the major T&D
equipment segment of transformers, cables, transmission lines, switchgears, capacitors,
energy meters, etc., provided the larger share of ` 64,235crores.

Market Stats India

Foreign companies have received huge bulk orders, primarily from Indian
private players for
power plants to be commissioned during the 12th and 13th
Five Year Plans. As a result, most BTG equipment players in India do not
have healthy order books. This scenario would lead to intensified
competition for upcoming tenders.

A large share of Indias current installed thermal capacity is more than 20

years old.
Advanced ultra-supercritical boilers are being developed in the country.
Retrofitting and
refurbishing of old existing plants would become a major source of demand
in the coming
years.

Challenges
Fuel linkages: 65% of Indias power capacity is thermal-based. In
such a case fuel linkages (coal, gas, etc.) become very critical.
Obtaining secure fuel linkages is a major challenge due to stringent
government policies related to environmental and mining
clearances. The requirement of coal in power plant in the year 2017
and 2022 is expected to be 900 million MT and 1,180 million MT
respectively.
Currently close to 140 million MT out of the total 460 MT is
imported. Share of domestic supply is expected to dwindle further
with more than 150 mining projects of Coal India awaiting
clearance from the environment ministry. Specially after coalgate,
new licences are not being granted
Land acquisition legal and environmental issues
Power project funding: To meet the investment needs, Indian
players will need
to search globally for inexpensive sources of funds. Rising inflation
is resulting
in rising cost of funds in India. Consequently, many players in the
power sector
intend to secure investments from other countries. Moreover some
countries
provide
low(such
cost as
funding
their
industries and
which creates
Critical
raw
material
CRGOtofor
transformers
competitive is
pressure
on Indianas
players
generators)
being imported,
there is no domestic supplier.
These results in issues related to the availability and price volatility
of raw materials. India consumes 250,000 MT of CRGO sheets, of
which only 80,000 MT is prime material, while the others are of
second grade quality.
Lack of adequate support Infrastructure

i. Domestic testing and calibrating facilities for electrical equipment

in India are inadequate and expensive. The country does not have
testing facilities for equipment such as high capacity transformers,
which manufacturers need to send to countries such as the
Netherlands and South Korea for testing, which is time-consuming
and expensive.
ii. Congested ports and poor quality roads are some infrastructure
impediments that constitute a major issue for all industries in the
country.

T&D losses in India currently stand at 27%. The losses are largely due to overloading of
lines and substation equipment, absence of upgradation of systems, thefts and pilferage
etc. These losses cause significant financial impact to the utilities.
iv. Poor financial health of state distribution companies is leading to lowered investments
in the distribution segment and also lack of payment security for industry players.
v. Funds availability is a major issue plaguing the power sector. Lack of funds delays the
projects and puts modernisation plans on hold.
vi. Need for improvement in design of procurement process and policies of central and
state utilities
a) There is a need for improvement in procurement design and policies and qualifying
criteria (which operate on outdated tendering procedures) and system for awarding
contracts, based on L1 criterion.
b) Utilities are not awarding projects regularly and are bunching them, leading to suboptimal capacity utilization.
c) Delays by utilities in taking decisions on projects, reviews, etc., is leading to delays in
execution.
d) Sub optimal quality products are getting approved in the absence of standard
procurement policies and product specifications not defined in time.
e) There is a lack of standardization of product specifications, design parameters and
ratings for transmission and distribution (T&D) equipment across different utilities.
f) There is need for enforcing and monitoring of regulations on power plants (e.g., related
to emissions, heat rate) to ensure that good quality equipment gets installed that meets
specifications. Currently, power plants look at the capital cost of procurement and do not
consider other costs including societal and environmental costs.
g) Absence of price variation clauses in certain transmission contracts or projects is
Shortage of skilled technical manpower is major issue faced by the EE industry.
leading to imbalance in pricing, which affects the margins of companies in the event of
Industry is expected to require more than 5 million of direct manpower and
an increase in the price of raw materials and lead to delay in supply.

another 10 million of indirect manpower by 2022

Absorption of new technology by domestic manufacturers and user industries happens

at a very slow pace. Utilities procurement policies based on the L1 criterion do not
encourage technology development. R&D investments are low in most segments and
there is significant lack of dedicated funds for R&D.
Lack of strong quality control mechanisms at some Indian manufacturers to test their subvendors product qual ity leads to the final product being of poor quality.
Most EE manufacturers continue to focus on being equipment or component suppliers and
have not graduated to offering complete solutions.

Generation

Many companies have set up new capacities, while the existing ones are augmenting their existing
capacities. Generation equipment (boilers, turbines and generators) production in India is estimated
at around ` 26,600 crore
(around US$ 5.7 bn). The BTG equipment segment has witnessed significant investment from
foreign players who have set up their manufacturing facilities in India. The large demand for BTG
equipment makes India an attractive market for these companies.
There is significant import of BTG equipment (at ~13%) in the boiler segment, which constitutes a
major share of the sector. Imports are predominantly from countries such as China and Korea. Due
to the emergence of new technologies such as supercritical technology, the market share of foreign
BTG players is significant in the total orders placed.
A large part of the BTG demand from private sector players for the Twelfth Plan period has also
been bid for, making the government sector (largely NTPC) an important customer for the BTG
equipment industry segment.
Supercritical technology is gaining prominence in the Indian market. During the Eleventh Plan, the
share of supercritical technology was 14%, while in the Twelfth Plan the share of supercritical
technology will be more than 60%.

Overcapacity in the Chinese BTG segment has resulted in Chinese companies targeting growth
markets such as that in India. Chinese companies have received huge bulk orders, primarily from
Indian private players for power plants
More than 80 GW of supercritical sets have been awarded by India till date. Foreign players have
been the recipients of the major share of such orders. More than 68 GW have been awarded to
foreign players, with Chinese players capturing more than 80% of the orders placed on foreign
companies. Domestic players lag behind in adding BTG capacity in the super- critical boiler and
turbine segments.

The total manufacturing capacity of

BTG equipment in the country is
about 25,000 megawatt (MW) per
annum and is expected to increase
to 40,000 MW per annum by 201415, once six more joint ventures
become operational. As a result,
even the
generation equipment sector will
soon be sitting on huge surplus
capacity.

Generation
The move by NTPC in enforcing an offset
mechanism (where the supplier of major
equipment needs to set up local manufacturing
in I ndian as qualifying criteria for the bid) is a
welcome move to promote the domestic
equipment industry.

Some large Indian electrical equipment

manufacturers like BHEL, are already
expanding their global presence. Indian
companies are aggressively targeting exports,
The BTG equipment segment has witnessed
significant investment from foreign players who
are setting up their manufacturing facilities in
India as its an attractive market for these
companies. There is significant import of BTG
equipment (at around 13%) in the boiler
segment, which constitutes a major share of
the sector

Transmission

The investment in transmission infrastructure has been half of that on generation, leading to major inadequacies in the transmission system
Distribution of electricity in India is largely operated by states, with only 57% being distributed by private players. One of the major problems in
this segment is high AT&C losses, which continue to be around at 27% . This is substantially higher than the global average of 1015%. The total
loss incurred by distribution companies is estimated at around ` 70,000 Crs. in 201011
The capacity utilisation of the T&D equipment industry is broadly only 70%, which is a matter of concern for the industry. At present, supplies
electricity to the franchisee at a predetermined price according to the franchisee agreement. The franchisee retains a pre-defined portion of the
revenue as charge.

Transmission
Transmission and distribution equipment
Indias T&D equipment industry is heterogeneous and manufactures a wide
variety of equipment from transmission line towers and transformers to
energy meters. The industry is also characterised by its large unorganized
segment and the presence of a large number of SMEs. The size of this
industry is estimated to be ` 84,000 crore (around US$ 18.5 bn) and exports
constitute about ` 18,000 crore (around US$ 4 bn)
Indias T&D equipment industry is heterogeneous and manufactures a wide
variety of equipment from transmission line towers, transformers, switchgear
to energy meters. The industry is also characterised by the presence of a
large number of SMEs. The size of this industry (including other electrical
equipment) is estimated to be ` 89,235crores in 201112.

Indias electrical equipment industry has witnessed significant growth in the

last few years. The major T&D electrical equipment have grown at a CAGR of
23.6% from a small base of ` 18,000 crores in 2005-06 to `64,235 crores in
2011-12

Distribution
Investment
Investment in
in new
new technology
technology and
and modernization,
modernization, like
like 1,200
1,200 kV
kV
transmission
transmission lines,
lines, +/-800
+/-800 kVDC
kVDC transmission,
transmission, planning
planning of
of smart
smart grid
grid
projects
projects and
and establishment
establishment of
of the
the national
national grid
grid by
by the
the Power
Power Grid
Grid
Corporation
Corporation of
of India
India are
are major
major steps
steps towards
towards efficient
efficient utilization
utilization of
of energy
energy
by evacuating electricity from power surplus regions to meet demand in
power
power deficit
deficit regions.
regions.

Distribution of electricity in India is largely operated by states,

with only 57% being distributed by private players. One of the
major problems in this segment is high Aggregate Technical &
Commercial (AT&C) losses, which continue to be around at 26%
against the global average of 1015% in 201011
The following are key initiatives that the Indian government has
taken to improve distribution:
a. Restructured Accelerated Power Development & Reforms
Programme (R-APDRP): This programme focuses on actual,
demonstrable performance in terms of sustained loss reduction. It
aims to establish reliable and automated systems for sustained
collection of accurate base line data. It also adopts IT in areas of
energy accounting before implementing distribution-strengthening
projects, consumer attitude surveys, etc.
b. Franchise Model: Distribution companies have been
recommended to give urban areas with high losses to private
parties on input based franchisee. In this model the purchase of
power is primarily at a pre-determined rate, i.e., the input rate
from the licensee, thus significantly removing the uncertainty
linked to high power procurement costs.
c. Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY): This
scheme aims at providing access to all rural households and
villages. In addition, it intends to provide electricity connection to
Below Poverty Line (BPL) families, free of charge. As on 15 April,

Players
Major public sector companies involved in the generation of electricity include NTPC, Damodar Valley Corporation (DVC), National Hydroelectric Power Corporation
(NHPC), Nuclear Power Corporation of India (NPCI), Andhra Pradesh Power Generation Corporation (APGENCO), Tamil Nadu Electricity Board (TNEB), Maharashtra State
Electricity Board (MSEB), Kerala State Electricity Board (KSEB), in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL the four distribution companies one controlling body
GUVNL, one generation company GSECL and one transmission company GETCO). The Power Grid Corporation of India is responsible for the inter-state transmission of
electricity and the development of the national grid.

NTPC

Accordingly, NTPC has forayed in to hydro power development and is already implementing hydro projects with a capacity of 1,920 MW. NTPC
plans to have 9,000 MW of Hydro Power projects in its portfolio by 2017. At present 80% of NTPCs portfolio is based on coal. Even going forward,
NTPC plans to add large capacities based on coal. By 2017, NTPC intends to have a more diversified fuel mix with 70% of its capacity based on
coal, around 14% based on gas, 12% based on hydro, 3% nuclear and 1% based on renewable energy sources.

Considering the benefits of nuclear power generation and strong project management capability of NTPC, the company envisages setting up 2,000
MW of Nuclear Power Capacity by 2017 through a joint venture with Nuclear Power Corporation of India Ltd.

The NTPC generates a fourth of all electricity generated in the country

Players
Bhel

Maharatna . Bharat Heavy Electricals Ltd. (BHEL) has developed a demonstration model based on Integrated Gasification Combined Cycle (IGCC) and advanced
ultra-supercritical technology. BHEL should be supported by the government to build high capacity commercial units in a time-bound manner. This technology,
which is not available in the world for Indian coal, should be made available to other manufacturers. For any R&D project, the user organisation or main
beneficiary should be supported by the government for leading the research in a planned and committed manner.

It is the 7th largest power equipment manufacturer in the world. In the year 2011, it was ranked ninth most innovative company in the world by US business
magazine Forbes. BHEL is the only Indian Engineering company on the list, which contains online retail firm Amazon at the second position with Apple and
Google at fifth and seventh positions,respectively.[11] It is also placed at 4th place in Forbes Asia's Fabulous 50 List of 2010.

BHEL has a share of 59% in Indias total installed generating capacity contributing 69% (approx.) to the total power generated from utility sets (excluding nonconventional capacity) as of March 31, 2012. The company has been exporting its power and industry segment products and services for over 40 years. BHELs
global references are spread across 75 countries. The cumulative overseas installed capacity of BHEL manufactured power plants exceeds 9,000 MW across 21
countries including Malaysia, Oman, Iraq, the UAE, Bhutan, Egypt and New Zealand. Its physical exports range from turnkey projects to after sales services.

It became the only company in the world to have integrated facilities to manufacture power project equipment - from boiler to turbine to generator. The
company now has 14 manufacturing units across the country and employs 67,000 persons. It manufactures equipment for coal, gas, nuclear and hydel power
plants. BHEL-manufactured generating sets, with a capacity of nearly 55000 MW, account for about 65 per cent of the installed capacity in India. Being the only
one of its kind in the region, BHEL also accounts for a significant portion of Malaysia's power generation capacity.

Faced with the new power policy, BHEL utilised its capacity to produce equipment for the industrial sector, that is, for the non-power sector. Its Tiruchi unit in
Tamil Nadu, for example, has produced boilers for use in a range of industries - from paper to petrochemicals

76% revenue currently is from Power equipment

PGCIL

Bhel
continues
its 7,000-12,000
mwGrid
addition,
entryof
ofIndia
a player
like L&T
Power
is already
enhancing1,200
indigenous
by at
4,000
per annum
In the
transmission
sector, the Power
Corporation
Ltd. (PGCIL)
has
developed
an experimental
kilovoltdelivery
(kV) station
Binamw
(Madhya
Pradesh) with the
involvement of domestic electrical equipment manufacturers, EPC (Engineering, Procurement & Construction) contractors, and a foreign expert. This is an excellent model of
public-private partnership (PPP) for fast development of new technology / systems and should be replicated in other areas. To increase the capacity of existing transmission
lines, stress should be laid on areas such as high surge impedance loading lines and development of high temperature low sag carbon core conductors.

Focussed attention should be given to research on superconductivity, under the leadership of

L&T power has snatched huge chunk of orders In a very quick time
http://www.financialexpress.com/news/-huge-scope-for-power-equipment-biz-in-india-/596736/1
Siemens India is one of the largest players in Transformers Manufacturing
http://www.business-standard.com/article/economy-policy/boom-time-for-power-equipment-companies-109090200076_1.html

5 Year Plans

Twelfth Five Year Plan, around 78 GW of power generation capacity is expected to be added, while another 100 GW is expected in the Thirteenth Five Year Plan
During the Twelfth Five Year Plan, investments are expected to be worth around US$ 85 bn in generation, US$ 45 bn in transmission and US$ 70 bn in distribution.

Fears of a sharp increase in the price of power generated by private

power companies have made the Government replace the earlier
policy of negotiated power projects, which allowed cost-plus pricing of
electricity, with a policy that is based on competitive bidding.

Problems
Shortages
Tariffs
Dependence on imported fuels
Poor health of distribution

Demand likely to cross 300MW

Measures taken till now

Electricity Act 2003
Ultra Mega Power Projects
Tripartite agreements between central govt. , central generators and
the states
Recapitalization of State electricity boards

These measures have proved to be insufficient

The government has stipulated Power to al l by 2012

under its National Electricity Policy (NEP), with a target of
achieving 1,000 KWh per capita consumption of electricity
by 2012.

National Electricity Act-2003 & NEP

Tariff Policy

Policies

Tariff Policy

Tariff Policy

Tariff Policy

Tariff Policy

Export

Indias share in global export of electrical equipment

is less than 1%.
Switchgears and rotating machines together cover
~36% of the trade market. China is the leading
exporter in rotating machines as well as transformers
with more than 16% share, while India has less than
2% share in global trade of these products. US is the
largest importer of rotating machines as well as
transformers.
China dominates trade in most of these product
segments. Segments such as rotating machines,
transformers, lamps, cables are dominated by China
with double digit shares in global trade. Countries like
Japan, US and Germany dominate trade in a few
segments like switchgears, insulators, capacitors etc.

Import
T&D equipment trade
Although Indian manufacturers have capacities,
imports have grown faster than exports in the
recent past, significantly affecting the domestic
manufacturing industry. Over the past six
years, from 2004 to 2010, Indias trade deficit
has almost doubled, increasing from ` 3,823
crore to ` 7,923 crore. Imports increased from `
7,990 crore to ` 21,764 crore, while exports
have grown from ` 4,167 crore to ` 13,840 crore
In 201011, there was more than 15% decline in
exports, whereas imports increased by more
than 12% from the previous year, thereby
widening the trade deficit gap. Import threat is
looming large, especially from China, Korea and
Germany. Equipment categories that have been
.impacted include power transformers, HV
switchgear, EHV cables, HV insulators, 22
motors, generating sets, and turbines

Import
With Indian electrical equipment manufacturers having significant capacity to meet the domestic demand for transmission equipment, rising
Chinese imports are causing concern to the domestic industry. Chinese companies have brought down prices significantly, but the quality and
reliability of their products is not yet assured.
If Chinese manufacturers want to export to India , they have the advantage of nil duties as per our mega power project policy. But, if we want to
export to China , our products face taxes and duties of 28-40% in China .
In a mega-power project, Indian equipment manufacturers still suffer taxes and levies, whereas Chinese equipment is imported without any BCD,
CVD or SAD. Also, Indian manufacturers must follow IBR regulations, which happen to be conservative, and increase equipment weight by around
10%, raising the cost. State assistance to Chinese exporters also widens the gap. In all, Indian manufacturers suffer a disparity of around 14% of the
product value. This, on top of the advantage to Chinese exporters due to an artificially undervalued currency.

Generation
Supercritical steam generators are frequently used for the production of electric power. They operate at supercritical pressure. In contrast to a
"subcritical boiler", a supercritical steam generator operates at such a high pressure (over 3,200 psi or 22 MPa) that actual boiling ceases to
occur, the boiler has no liquid water - steam separation. There is no generation of steam bubbles within the water, because the pressure is
above the critical pressure at which steam bubbles can form. It passes below the critical point as it does work in a high pressure turbine and
enters the generator's condenser. This results in slightly less fuel use and therefore less greenhouse gas production. The term "boiler" should not
be used for a supercritical pressure steam generator, as no "boiling" actually occurs in this device.

Source of Electricity (World total year 2008)-CoalOil Natural

GasNuclearHydrootherTotal
Average electric power (TWh/year)
8,2631,1114,3012,7313,28856820,261
Average electric power (GW)
942.6126.7490.7311.6375.164.82311.4
Proportion
41% 5% 21% 13% 16%
3%100%

Coal
The average gross efficiency (excluding combined heat and power) of coal-fired power plants is projected to increase slightly
from 35% in 2007 to 40% in 2030. New power plants being planned are based on advanced technologies. Supercritical
technology is expected to be more widely used in the medium term, with advanced ultra-supercritical technology and
integrated gasification combined-cycle plants becoming more widespread after 2020.

Renewable Energy

India is endowed with huge coal reserves and almost 78% of the coal produced in the country is used for
power generation
As far as renewable energy is concerned it can definitely supplement the power generation, however,
even by 2031-32, as per the Integrated Energy Policy, the total contribution from renewable sources
including all hydro shall be around 25% of our total installed capacity. In the renewable energy segment
wind energy is a significant contributor to the power generation in the country. With a capacity of 10,464
MW, India has the fifth largest wind power installed capacity in the world. The solar insolation in the
country is one of highest in the world. Major technology breakthrough in solar could be the catalyst for
development of large solar farms and the National Solar Mission shall incentivise development of solar
power generation capacity. Hydro power generation is renewable and environmentally benign source of
energy and is unaffected by volatility in fuel prices.
Seeing the huge power requirements, coal shall continue to remain the major source for power generation
in the foreseeable future. In the medium to long term nuclear is also expected to become a major base
load power supplier.

Technical Details
The generation generally takes place at voltages around 3.3kV to
around 22kV which is medium voltage.
The voltage is then stepped up to a level of 110kV or 220 kV (high
voltage) or even 400kV (extra high voltage) depending on the
amount of power to be transmitted
At distribution stations the power is stepped down to a voltage of
430/250 V for customers taking into account the voltage drop in
distribution lines.
In India the power supply to the residential premises is at
240V,single phase, 50Hz ac. The three phase supply is at 415V.
RMU panel generally forms ring system in which distributor is
supplied from more than 1 feeders as input to RMU so that in case of
failure from any one feeder, power can be fed uninterruptedly from
other feeders at the same point
The underground system is much expensive as compared to
overhead system and is only used in areas where safety and good
appearance are of prime importance.

Faults
Transient Faults: Atransient faultis a fault that is no longer present
if power is disconnected for a short time. For eg - momentary tree or
bird contact.
Persistent Faults: Apersistent faultdoes not disappear when power
is disconnected. Faults in undergroundpower cablesare often
persistent.These occur due to some external damage.

http://www.cccindia.co/corecentre/Database/Docs/DocFiles/Presentati

Financing
Due to high cost of funds in India, private players are seeking low cost funds in international
financial markets. Indian private power roducers are sourcing funds from foreign banks which
mandate that a part of the equipment supply needs to be sourced from the bank s country of
origin.
i. The export promotion schemes of the government are not easily available for project exports.
ii. Interest Rate Subvention of 2/4 PP on Pre-shipment and Post-shipment credit, earlier provided by the government for various
sectors (including engineering) from 1st April 2007 has been discontinued with effect from 30th September 2008. Government
of India had introduced a fresh scheme of Interest Rate Subvention of PP for Pre-shipment and Post-shipment credit with effect
from 1st December 2008 till 31st March 2010 for various sectors but engineering sector was excluded from this scheme.
iii. Lack of competitive long term export financing options.

Financing
To make India the country of choice for production of electrical equipment and reach an output of
US$ 100 bn by balancing exports and imports

Overcapacity is expected in the generation equipment segment, which would lead to low levels of
utilisation. T&D equipment segment is already suffering from capacity under utilisation.
Vision 2022 for the Indian electrical equipment industry is to make India the country of choice for
the production of electrical equipment and reach an output of US$ 100 billion by balancing
exports and import

Problems in achieving vision

Technology Upgration
Indian industry as a whole does not give much importance to R&D and spends less than 1% of their sales on R&D. Large companies in other
countries spend 5 to 6% of sales on R&D. 90% of T&D equipment anufacturers in India are in the small and medium enterprises (SME) sector,
and are generally unable to upgrade echnology and improve their products
R&D in the BTG and T&D sectors takes place at the individual company level in public sector enterprises (PSEs) and in some private companies,
but there is no coordinated and collaborative effort by industries and utilities. Therefore, results are generally not forthcoming and the countrys
Skill Development
A large number of skilled workers coming out of technical institutes do not possess the required skills and are not employable dependence on the
import of technology is very high Forming a Sector Skill Council (SSC) for the electrical equipment industry with support from the National Skill
Development Corporation (NSDC) has been proposed to improve the quality of training being provided in the existing institutes. The SSC will
consolidate data regarding the number of skilled workers required in different regions of the country. It will have regional offices that will interact
with industry to provide training to the workers and also train the teachers, propose changes in curriculum, etc.
Exports
Exports of electrical equipment in 2011-121 were US$ 4.6 billion, which is about 1.5% of total exports from India, and imports were US$ 15.7
billion, which is about 3.2% of total imports. During the last five years, exports of electrical equipment have increased at a CAGR of 9.7%
whereas imports have increased at a CAGR of 27.2%. Clearly, there is an urgent need for reducing the increasing trade deficit.
Conversion of Latent Demand
Delays in timely commissioning of power projects directly impact the capacity utilisation of the BTG industry and its growth. This also leads to
delay in completion of downstream transmission projects that are linked to the evacuation of power from the power projects and thus impacts
the growth of transmission equipment industry. Because of high aggregate technical & commercial (AT&C) losses, power distribution utilities are
unable take up improvement projects and the demand for distribution equipment is not growing significantly

Description

IPP - Independent Power Producers

SCADA - supervisory control and data
acquisition
Indian Electrical & Electronics
Manufacturers Association (IEEMA)

Financing

There is a significant drop in investor confidence in the last financial year

and the continuing policy stalemate is not doing any better for the investor
confidence. As per extant policy, Foreign Direct Investment (FDI) up to
100% is permitted in the power sector, under the automatic route, for:
Generation and transmission of electric energy produced in hydro electric,
coal/lignite based thermal, oil based thermal and gas based thermal power
plant
Non-Conventional Energy Generation and Distribution;
Distribution of elective energy to households, industrial, commercial and
other users; and
Power Trading

http://www.indianpowermarket.com/2013/07/investment-scenario-in-indian-powe
r.html
Foreign players have teamed up with Indian partners to set up base in India.
Hinduja Energy India has formed a joint venture with Steag Energy Services
(India) for operation and maintenance of power projects. Another player, Toshiba
JSW Turbine & Generator Pvt. Ltd., will supply turbines for a Rs. 10,000 crore
(USD 1.90 billion) thermal power plant in Karnataka. The Kudgi project is
National Thermal Power Corporations (NTPC) first in Karnataka. The total value
of the contract is around Rs. 2,300 crore (USD 437.76 million). Neyveli Lignite
Corporation Ltd (NLC) plans to set up a 2,000 MW coal-fired power unit in
Odisha through a JV with a state government-owned PSU. The proposed
investment is of around Rs. 10,000 crore (USD 1.90 billion).
The companies are Mitsubishi Heavy Industries Ltd., Japan with L&T at Gujarat;
Hitachi, Japan with BGR at Tamil Nadu; Toshiba, Japan with JSW at Tamil Nadu;
Alstom, France with Bharat Forge at Gujarat; Ansaldo Caldie, Italy with Gammon
at Tamil Nadu; Babcock & Wilcox, USA with Thermax at Maharashtra; Hitachi
Power Europe GmbH (Germany) with BGR at Tamil Nadu. Doosan, Korea (100%

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