Energising India by Nadimidoddi Prasad

January - 2008

Biju Mathews, Dy. General Manager Indian Express (Mumbai) Group

An Energised India India is today one of the fastest growing economies in the world with a fast growing energy demand fueled by an ever increasing rate of industrialisation and urbanisation. The booming Indian economy with a nine per cent growth rate has forced the Indian government to aim higher. It is reported that for the economy to grow at ten percent, the power sector has to grow at 12.1 percent. The government has planned to add 1,00,000 MW generation capacity during the Xth and XIth Five-year plan and the cost is estimated at Rs 4,00,000 crores. There has been a global interest in India’s energy sector ever since liberalisation. India’s enormous potential for energy production and consumption has enhanced investment prospects in this field. Opportunities have widened rapidly with the opening up of this area to power developers globally. But there are challenges too. Demand-supply ratio, Environmental issues, T&D losses, rural electrification, and such like. The gov-

ernment is however, confident and there sure is a lot of optimism in the air. With this edition of Energising India, we are celebrating this optimism while also addressing the challenges. We have tried to touch all aspects of growth in the Indian energy sector while also getting into the policies of the government as also trying to find possible solutions to the challenges ahead. We spoke to few of the power barons about their performance as well as invited ministers from few states (which are doing exceptionally well) to draft their views on the performance of their respective states. With the comprehensive KPMG report on energy as well as the Ministry of Power’s annual report along with independent chapters on partners in growth of the power sector, we sure hope that you will find this edition of “Energising India” to give you a clear perspective on the direction that our country as a whole is taking in getting energized.

January - 2008

Sushil Kumar Shinde Union Power Minister, Government of India

January - 2008

Extraordinary challenges require extraordinary leaders. Hence, when the challenges on the power sector appeared insurmountable in the face of rapid urbanization and industrialization, the UPA Government, in an unusual move, decided to bring in a gubernatorial incumbent into the cabinet. Since then, the Power Minister, Sushil Kumar Shinde, has managed to convert an unenviable job into an opportunity to transform the nation. Despite the surge in demand caused by the nine percent growth rate, the genial minister appears confident of ensuring that by 2012, every person will have access to power. In an exclusive interview with the Union Power Minister, Editorial associate, Indian Express newspaper (Mumbai) Ltd, P. R. Subas Chandran, tries to find out what makes him so confident about meeting the set goals.

Q&A

nfrastructure is touted to be one of the major bottlenecks in the industrial growth of our country. As a minister holding a key infrastructure portfolio, what is your vision for the power sec-

tor?

Power is no longer a necessity only for industrial and urban sections of the society. It is even crucial for the farmers who depend on it for their survival, especially in areas not served by irrigation. A farmer might need roads only a few times during the cropping season; initially to bring in seeds and later to move out the produce. However, he cannot do without reliable power supply throughout the agricultural season. Therefore, power plays a more strategic role than other infrastructure components in crucial areas like food security. Field studies indicate that rural electrification has a strong positive correlation with health and literacy. Hence, my vision for power is beyond industrial growth. I see it as the 21st century tool to effect social transformation of rural India. We plan to electrify all villages by 2009 and make available power for all by 2012. Donâ&#x20AC;&#x2122;t you think that it is a little overambitious goal? No, not at all. It is not born out of illusion. We did our home work and considered the possible bottlenecks which could be sorted out. Look at the way we travelled. From a meager 1,362 MW at the time of Independence, we have grown commendably to generate about 1,28,182 MW at present. Still, this is not enough to keep pace with the demand and we continue to have a peak power deficit of around 13.8 per cent and an energy shortage of about 9.6 per cent.

January - 2008

Is that all? We are also actively exploring the hydroenergy rich North-Eastern states, which have been neglected for long. Our operation in North-East will not only deliver the much needed power to the rest of the country, but also ensure regional development in these states. We have already signed a Memorandum of Understanding (MoU) with Arunachal Pradesh for nine projects, which are cumulatively expected to generate 13,830 MW. In addition to this, MoUs have been signed between Arunachal Pradesh and various PSUs like NTPC, NHPC and NEEPCO. Even the national boundaries have not been a barrier for our vision. The Power

The booming Indian economy with a nine percent growth has forced us to aim higher. It is reported that for the economy to grow at ten percent, the power sector has to grow at 12.1 percent. Realizing this we

infrastructural and technological support and the target is very much achievable. The fact that we are speaking of constructing a 52, 000 MW is a telling figure when you consider that you have never added even

planned to add 1,00,000 MW generation capacity during the Tenth and Eleventh FiveYear Plans at an estimated cost of Rs 4,00,000 crore. Though we added only 21,000 MW during the 10th plan, we are quite confident of adding over 78,000 MW

25,000 MW in any one Five-Year Plan.

in the 11th plan and till date 2580 MW has been added. Six decades of struggle brought forth 1,28,000 MW. In the Tenth and Eleventh Five-Year plans, you are planning to add 1,00,000 MW generation capacity. Donâ&#x20AC;&#x2122;t you think it is a dream project? I am a product of the factory of optimism. This is a dream that is eminently convertible to reality. Look at the way we struggled to achieve 1, 28,182 MW even though there was a scarcity of resources. Today India is equipped with all-round

January - 2008

Could you unfold your well-thought strategy? Considering the scale of the target, we have embarked on a multi-pronged approach. Since we need massive capacity addition, we have gone in for Ultra Mega Power Projects (UMPPs). We plan to develop nine such projects, each with a capacity of 4,000 MW. They would be executed under tariff based international competitive bidding costing Rs 16,000 crore each. This is the first of its kind in the world and we plan to use Super Critical Technology. Two UMPPs at Sasan in MP and Mundra in Gujarat have already been handed over to successful bidders. In the next six to eight years, 36,000 MW would come from these UMPPs alone.

Ministry has signed an umbrella agreement with Bhutan Government for development of 5,000 MW hydropower projects in Bhutan through investment from India. There have been reports that the UMPPs are yet to take off. Six of the projects are yet to secure basic clearances. In Tamil Nadu, the State Government is adamant on the change of location. In Orissa, there is a shortage of feasible sites. Karnataka and Maharashtra projects have failed to get environmental clearance. Are the UMPPs becoming another Governmental plan which began with a bang but seems to end in a whimper? When we start something new there are bound to be some hiccups. The challenge lies in thinking innovatively and overcoming these hurdles. We have already awarded two UMPPs; Sasan to Reliance Energy and Mundra to Tata power and I am confident of overcoming other set- backs. I am also planning to set up a Monitoring Mechanism to ensure the speedy launching of pending UMPPs.

There is an acute shortage in the supply of generating equipments. The sole manufacturer, BHEL, is unable to meet the rising demand. How do you plan to solve this issue? BHEL has rendered good service to the nation but is facing difficulties in the face of sharply increased demand. The need of the hour is to have as many equipment suppliers as possible, even to encourage foreign ones to set up base here and transfer technology. Even the PSUs with the requisite background and expertise will be encouraged to enter this field. Recently NTPC and BHEL have decided to start a joint venture. All these are welcome measures.

ing monitored by the IIG for facilitating early financial closure.

STATUS OF POWER SECTOR REFORMS

How are you going to address areas such as transmission, distribution, wastages caused by inefficient grid system?

❐ All the states except Nagaland and

I am totally conscious of the fact that the transmission network has to keep pace with the capacity addition and this has to happen both quantitatively and qualitatively. We have realized that an integrated national grid will help meeting the increasing demand by optimal usage of existing power by balancing the power surplus and power deficit regions. The Power grid corporation of India Ltd., (POWER-GRID) is in a single-

In urban areas alone, we have given approval in principle to more than 90 projects with an outlay of Rs 1,588 crores exclusively to improve the distribution system. Another Rs 2,030 crore has been allocated under APDRP scheme Despite the initial euphoria, the private sector investment in Power has not been quite promising. What steps have you initiated to address this issue? Private investments are a key component in our strategy towards accelerated capacity addition. Hence, we have constituted an Inter Institutional Group (IIG) com-prising senior representatives from the financial institutions and Ministry of Power. This body seeks to remove the bottlenecks and encourage private investments. I think these efforts have started bearing fruit. Sixteen private sector projects, having about 7,320 MW capacity at an investment of about Rs 29,242 crore, have already achieved financial closure. Another seven projects with a total capacity of 9,357 MW, involving an investment of about Rs 27,604 crore, are be11

minded pursuit to upgrade the capacity and connectivity of our national grid.

Arunachal Pradesh have constituted/notified State Electricity Regulatory Commissions (SERCs). ❐ Twenty one SERCs have issued tariff orders. ❐ Consumer Grievance Redressal Forums (CGRF) have been constituted in 16 States by the distribution licensees for redressal of grievances of consumers. Ombudsmen have been appointed in 15 States to look into the non-redressal of grievances by the CGRFs. ❐ 26 States have notified rural areas for taking up composite schemes of generation and distribution without licenses. ❐ 27 States have constituted District Committees for coordinating rural electrification, reviewing the quality of power supply and promoting energy efficiency.

At present, the four regional grids, namely Northern, Western, Eastern and Northeastern, have been synchronized with about 90,000 MW generation capacities. The Southern grid, where we see a tremendous growth in demand, will benefit from the national grid, which will be shortly integrated. Distribution sector, which provides this crucial link to the individual consumers, is in our prime focus as both consumer satisfaction and revenue realization depends on its efficiency. We have designed an Accelerated Power Development and reforms Programme (APDRP) with an outlay of Rs. 40,0000 (Tenth Five Year Plan) to achieve reduction in AT&C losses, reduce outages

❐ 15 States have set up Special Courts for expeditious disposal of theft related cases. ❐ Six States have established Special Police Stations.

Reorganisation of the State Electricity Boards Before the enactment of the Electricity Act, 2003, various States had enacted State Electricity Reforms Acts, which facilitated the reorganization of their State Electricity Boards (SEB). So far, 13 states have reorganized their SEBs. Orissa, Haryana, Andhra Pradesh, Karnataka,

January - 2008

and interruptions and increase consumer satisfaction. We will continue with this in the 11th plan too. In urban areas alone, we have given approval in principle to more than 90 projects with an outlay of Rs 1,588 crores exclusively to improve the distribution system. In addition to this, another Rs 2,030 crore has been allocated under APDRP scheme for enhancing the distribution network. What about transmission and distribution (T&D) losses caused due to theft and pilferage?

The Bureau of Energy Efficiency (BEE) is now active in improving power governance. Through media, painting competitions, sign boards, we are trying to generate higher awareness on energy conservation.

Gujarat and MP have done so under their State Electricity Reforms Acts. Assam, Mahrashtra and West Bengal have reorganized their SEBs under the provisions of the Electricity Act, 2003.

I don’t think the Ministry alone can bring about the change. It should be a mass movement.

Guidelines for procurement of electricity

Non-conventional Energy sources are yet to take off in our country. Why hasn’t the Government promoted them in a big way?

Yes, it is important as well as an urgent is-

The Ministry of New and Renewable Energy Sources is actively encouraging and promoting the non-conventional sources of en-

sue. Primarily, it is the state government concerned which should take the necessary steps to prevent the losses.

ergy. However, it should be remembered that the entire burden cannot be placed on the Union Government alone.

However, the Central Government is pro-

While we struggle with creating newer ca-

active and has taken steps like introducing incentive schemes for reduction T&D losses. Kerala, Punjab and West Bengal have been the early gainers under the scheme. While Andhra Pradesh, Goa, Himachal Pradesh, Punjab, Gujarat,

pacities, the States also have to put in their best efforts. Please remember that electricity is a concurrent subject. Hence, I have made it clear that the states should create new capacities at least to the extent of the power shortage faced by them. ◆

Meghalaya, Chhattisgarh and West Bengal, have reported profits during 2005-06, Jharkhand, Madhya Pradesh, Haryana, Rajasthan, Uttarakhand, Karnataka, Kerala and Assam have reported reduc-tion in losses during 2005-06.

UP, Uttaranchal, Rajasthan, Delhi,

In compliance with section 63 of the Electricity Act, 2003, the Central Government has notified guidelines for procurement of power by Distribution Licensees through competitive bidding. Central Government has also issued the standard bid document containing RFQ.

Securitisation of outstanding dues An Expert Group under the Chairmanship of Montek Singh Ahluwalia, the then Member (Energy), Planning Commission, recommended a scheme for one-time settlement of dues payable by SEBs to CPSUs and the Railways. The recommendations were accepted by the Government of India. All the 28 State Governments signed the Tripartite Agreement

Input support: Manoj Saunik IAS,Ministry of Power,Govt of India, New Delhi.

(TPA), envisaged under the scheme.◆ Collection efficiency (in %) is shown in the table given below: CPSU

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07 (April - Sept.’ 07

able factor of Energy Conservation’?

NTPC

76.74

92.34

100.00

Energy conservation and efficiency are the mantras of success. A unit saved is a unit generated.

NHPC

69.03

94.44

97.06

100.00

PGCIL

88.92

95.16

98.30

99.70

100.00

If we conserve energy by 20 per cent, which is possible, it means that with a capacity of 1,32,000 MW in the country, we can save

NEEPCO

74.78

71.49

87.50

95.23

97.00

89.06

DVC

99.07

91.92

90.64

95.88

96.19

95.73

26,000 MW which, comes to around Rs. 1 lakh crore.

SJVNL

100.00

THDC

92.46

How are you going to tackle the ‘indispens-

January - 2008

he Indian Energy sector shows a lot of promise, but it needs to do a lot more to keep these promises. In the current state of affairs, while there are a few states which have done a commendable job in reaching goals of self-sustenance in the energy sector, many other states are lagging way behind. But that is quite obvious considering the geography, demography and probably in some cases even the governance. However, India needs to move on with a faster pace looking at even distribution of the varied sources of energy to all its states and union territories. The following KPMG Report gives a comprehensive picture on what India needs to do get its act together and increase the pace of sustained improvement in the energy sector.

January - 2008

A KPMG Report

In order to fuel a rapidly growing economy, the Indian energy sector requires investments to the tune of USD 120 150 billion over the next five years. The imperative for private sector investment is strong in order to complement the public sector in meeting this investment requirement and to bring in the required capabilities and technologies to enhance energy resource extraction.

January - 2008

he Government of India has recognized the need for pri vate participation and it is implementing the policies to promote private investment. Private participation in coal mining for captive use, in oil and gas exploration and in the power sector is already seeing significant progress. It is also expected that private participation in nuclear energy will be allowed as and when the Indo-US Nuclear deal goes through.

Tariff reform to phase out subsidies or to target them effectively and distribution reforms to bring efficiency in the power sector are vital. Steps have been taken in these directions with mixed results. Going forward, this is an important area to manage. The following sections highlight the key opportunities in the different sectors:

Coal India has vast reserves of coal and the participation of the private sector in captive mining, across different user industries, is an immediate opportunity for investment.

Along with private participation, there is a move to bring in market mechanisms in the energy sector under an independent regulatory oversight.

Thirty eight coal fields with mineable coal reserves in excess of 2,800 million tonnes1 have been identified and are in the process of being allocated for captive mining.

Progress has been made in sectors such as power, oil and gas where private participation is already playing a significant role.

This may imply a total capital requirement of around USD 1.5-2 billion. Investment activity in other parts of the coal value chain such as in coal washeries has also been seen in recent times.

A gradual approach is important till the supply side position improves and more players enter the sector so that markets can work effectively.

Oil

In parallel to this, the Government is making efforts to broaden the supply base both internally and externally. It is intended to diversify the fuel basket by increasing shares of Natural Gas, Hydro and even Nuclear energy. At the same time, both Government and private sector companies are looking to acquire equity in energy assets abroad and we have seen recent examples in the oil, gas and coal sectors. Energy transport infrastructure such as ports, railways, pipelines and power transmission networks need significant investment. The policy now allows private participation in all these areas and some private sector activity is already underway. Tariff reform in the energy sector and distribution reform in the power sector are two important steps that need to be successfully carried out.

The Governmentâ&#x20AC;&#x2122;s policy of allowing full private participation in upstream exploration and production has already attracted a number of private investors. Six rounds of competitive bidding under the Government policy, named New Exploration Licensing Policy (NELP), have already been done, around 185 blocks have been awarded and reserves estimated at 700 MMT of oil and gas have been discovered. The sixth round of bidding (NELP-VI) for 65 blocks was successfully completed last year. In addition, India presents a lot of potential in the refining sector due to the strategic advantages of low cost and location and is already a net exporter of products. The downstream marketing sector is also now open to private participation.

Gas Discoveries of gas to the tune of 700 bcm in the last decade have meant that gas reserves hold promise in India. The potential for Coal Bed Methane appears to be very promising and will probably exceed the free natural gas reserves. While in the near term, potential for LNG may be limited due to inability of key sectors such as power to absorb high international prices, in the longer term there will be place for LNG as the share of Natural Gas in Indiaâ&#x20AC;&#x2122;s energy mix increases.

January - 2008

A KPMG Report

project through Public Private Partnership initiatives and incentives for performance. The revised hydro policy is currently under discussion by the Government of India.

Renewable Energy India has a vast potential for renewable energy sources, especially in areas such as solar power, biomass and wind power. The current installed capacity of renewable energy is around 9220 MW, constituting about 7.3 per cent of Indiaâ&#x20AC;&#x2122;s total installed generation capacity.

On the demand side, an emerging area is auto-CNG and piped gas which have together accounted for about 7 per cent of the total gas demand in the last five years. In the next few years, at least 30 cities have been identified for city-wide gas coverage

There is a persisting need for developing techniques for economic and efficient extraction of uranium from lean sources e.g. sea water. If the Indo-US nuclear deal goes through, there will be a boost to nuclear energy and private participation in this sec-

by private and public sector players.

tor would be expected.

The draft gas pipeline policy gives support to the development of a national gas grid

Hydro

meant to create a common gas market across the country.

India is endowed with a hydroelectric potential of about 150,000 MW.

Nuclear The envisaged growth of nuclear power in India is possible provided robust technologies are developed for both the front-end and the back-end of the fuel cycle. India has one of the largest reserves of the nuclear fuel - thorium. However, the nuclear energy programme will continue to be uranium based until commercial production based on thorium becomes feasible.

January - 2008

However, only 17 per cent of the hydroelectric potential has been harnessed so far; with another 5 per cent under various stages of development. Private participation in the hydro sector will be important to meet the target of an additional 45,000 MW of hydro capacity within the next ten years. Various policy measures are being contemplated to encourage private participation which seek to address issues such as mitigating geological risks, resettlement and rehabilitation of the persons affected by the

India is already the fourth largest in the world in terms of wind energy installations and we are observing significant investment activity in this area. Technological breakthroughs for cost-effective photovoltaic technology could generate a quantum leap in the renewable energy sector since India is well endowed with solar insolation (average of 6 kwh/ sq.mt. day).

India has vast reserves of coal and the participation of the private sector in captive mining, across different user industries, is an immediate opportunity for investment. Thirty eight coal fields with mineable coal reserves in excess of 2,800 million tonnes1 have been identified and are in the process of being allocated for captive mining. This may imply a total capital requirement of around USD 1.5-2

Electricity Generation The government has envisaged a capacity addition of around 107,000 MW by 2012, out of which 22,900 MW is earmarked for the private sector. The opportunities in generation are now very encouraging on account of the emerging power trading environment, the policy of open access on transmission and distribution networks and reforms in the power sector.

Recent developments in this area include award of two Ultra Mega Power Projects (UMPPs) each with a size of 4000 MW on the basis of competitive bidding. Four more UMPPs are expected to be awarded by the end of 2007. We are also beginning to see activity in relation to merchant power plants and the Government policy is now encouraging this by assistance in providing fuel linkages and other clearances.

Transmission Private investment in the transmission sector can be done either through an Independent Power Transmission Company (IPTC) or through a Joint Venture Company (JVC).

These participations are envisaged largely for creating of the National Grid along with the state owned transmission utilities. The private sector participation is expected to be in projects requiring a capital outlay of about $4.5 billion. Last year, transmission projects in the western region covering approximately 1500 km were awarded to the private sector on a Build, Own, Operate basis in a competitive bidding process.

Trading Power trading, as an activity, is evolving rapidly in India. Currently, around 15 GWh of electricity is traded every year and there are four

or five large trading players. Merchant power plants, open access and the move to set up a Power Exchange will all give a fillip to power trading.

Energy savings and Demand Side Management A study conducted for the Asian Development Bank estimated an immediate energy saving potential of 54,500 million kWh and peak saving of 9,240 MW. This has an investment potential of USD 3 billion. In spite of the above opportunities, a lot remains to be done in terms of strengthening and building the regulatory institutions that will allow the Government to distance itself from operational decision making and make the reform process more transparent and sustainable.â&#x2014;&#x2020;

January - 2008

A KPMG Report

By world standards, Indiaâ&#x20AC;&#x2122;s energy consumption is very low. For year 2004-05, the total annual energy consumption was estimated at 572 mtoe and the per capita consumption at 531 koe. However, with a targeted GDP growth rate of 7 to 8%, and an estimated energy elasticity of 0.80, the energy requirements of the country are expected to grow at 5.6 -6.4% per annum over the next few years.

January - 2008

his implies a fourfold increase in India’s energy requirement over the next 25 years and hence, the country faces significant challenges in meeting this.

ger but recent discoveries hold promise for India’s gas reserves and coal bed methane. Renewable energy currently contributes a small fraction and it is expected to grow very rapidly especially in areas like wind and solar power.

Though India is endowed with sufficient coal resources, its oil resources are limited and as such it is depending on crude imports to meet the demand (around 71 per cent).

In the short-term, renewable energy will play an important role of supplementing the total energy requirement.

The pie-graphs reflects only primary energy sources that are commercially exploited.

Over the longer term, its importance would be more strategic so that the country can build a certain level of self-reliance in renewable technologies of the future.

A large population of India in the rural areas still depends on traditional sources of energy

Different demand-side and supply-side scenarios have been developed by India’s Planning Commission to meet the future energy re-

such as firewood, animal dung and biomass. The usage of such sources of energy is estimated at around 143 Mtoe per annum or approximately 44 per cent of total primary energy use.

quirements. These scenarios look at energy efficiency as well as supply side options. The energy efficiency options include: ❐ Energy efficiency in end-use: Efficient use of energy in industry,

Future Energy Requirements and Supply Options Coal is expected to continue to be the dominant energy source. However India will have to rapidly develop non-coal sources given that at a growth rate of 5 per cent in coal production, India’s extractable coal reserves would get exhausted in 458 years. Therefore, from a long-term perspective and in view of growing environmental concerns from use of coal, the country needs to look at developing alternate sources such as nuclear energy. India has vast reserves of the nuclear fuel thorium but the technology is not yet developed for its commercial use. India’s oil assets are mea21

lighting, household appliances etc. can lower India’s energy needs by 142 Mtoe in 2031-32 (or 7.5 per cent of the total energy requirement). ❐ Increase in rail road share of freight: Currently, the road transport carries a major portion of freight traffic. If the share of railways in freight increases from the current level of 32 per cent to 50 per cent by 2031-32, it would contribute towards an energy saving of 34 Mtoe in 2031-32 (or 1.8 per cent of the total energy requirement). ❐ Increase in transportation efficiency: Use of mass transport system in cities, better utilization of motor vehicles (such as vehicle pooling) and increase in fuel efficiency of motor vehicles (possible to the extent of 50 per cent with current technology) can save about 81 Mtoe of energy in 2031-32 (or 4.3 per cent of the total energy requirement).

January - 2008

A KPMG Report

❐ Efficiencies in thermal power generation: Currently, the efficiencies of thermal generation in India stand at 30.5 per cent. An increase to 38-40 per cent through use of super critical boiler technologies could lead to a savings of 111 Mtoe in 2031-32 (or 5.8 per cent of the total energy requirement). Together the energy efficiency measures can save 351 Mtoe of energy or around 19 per cent of India’s energy requirements by 2031-32. The supply side options include: ❐ Fully exploiting India’s hydro potential of 150,000 MW from current level of 32,326 MW ❐ Scaling up nuclear generation by sucEstimated reserves for various energy sources: Resource

Unit

Coal - Extractable Mtoe

Reserves

cessfully developing the Fast Breeder Reactor (FBR) technology (which uses uranium as fuel) and developing Advance Heavy Water Reactor for utilizing thorium (of which India has abundant reserves).

❐ The Government policies continue to lay

❐ Development of natural gas sources

❐ A large part of the power sector, for

and using it for electricity generation -

example, will become contestable by 2008, opening up a USD 5 bn market. Overall, the investment needed in the Indian energy sector is to the tune of USD 120 to 150 bn over the next five

either through indigenous exploration or through pipeline import and LNG ❐ Development of renewable energy sources, including solar power through cost effective photovoltaic technology, fuel wood, bio-diesel and wind energy.

Key Imperatives for India To meet its large and growing energy needs, there are certain key imperatives for the Indian energy sector: ❐ Private sector investment needs to complement public sector

13,489

❐ Reliability of energy supply and its cost

Mtoe

786

Gas – including Mtoe coal bed methane

1,866

will be key determinants of both, economic growth and social upliftment.

Oil

❐ Achieving this will require significant in-

Uranium – metal

Tonnes

61,000

Thorium – metal

Tonnes

225,000

Hydel

150,000

January - 2008

vestment – of capital as well as of capabilities. Private sector will necessarily need to complement the public sector in both areas.

emphasis on enabling a higher level of private sector participation. Sector reforms are aimed at attracting private investment and efficiency, through different forms of competitive markets.

years. ❐ To encourage private investment, clarity and stability in policy framework is essential. For example, clarity in matters related to pricing of energy products, the market structure and Government incentives and subsidy administration are important to minimize the risks of investment. Some clarity has emerged, for example, in areas such as oil and gas pricing where the price determination process has been set out. ❐ Encourage market mechanisms with a credible and independent regulatory oversight. The benefits of market mechanisms in bringing in production and resource allocation efficiencies are needed.

The range of utilization of different fuels in 2031-32 as compared to current levels Resource

Utilisation Current in 2031-32 utilisation (Mtoe) (Mtoe)

Oil

350 - 486

119

Natural Gas (including CBM)

104 - 150

Coal

632 - 1022

167

Hydro

13 - 35

For example, the regulator for the power sector has been in place for a while. While tight regulation was adopted in the initial years, now we see market mechanisms being used. For example, the case of longterm generation tariff is being determined through a competitive bidding process and the development of a short-term market for power. â?? Reduce vulnerability to price and supply shocks

Nuclear

76 - 98

Solar

1200

Wind

Fuel wood

620

140

Ethanol

Bio diesel

The Indian energy basket is weighted towards coal (51 per cent) and oil (36 per cent). From a long term energy security perspective, it is necessary to diversify the energy basket. For example, if the known coal reserves are

Market mechanisms will also encourage investments as it will tend to minimize the regulatory risks. However, the market mechanisms have to be introduced gradually as supply side situation improves. Currently, with the huge deficit in energy products, market mechanisms are likely to get abused if not managed to some degree by an independent regulatory oversight.

expected to exhaust in about 40 years, it would be a challenge to replace 51 per cent of the energy basket. Diversification would mean increasing the share of Natural Gas, Nuclear and Hydro energy apart from a strategic thrust towards renewable energy. The other issue is vulnerability to price shocks.

Vulnerability to price shocks is addressed by diversifying the fuel basket, enhancing domestic production of energy and in initiatives such as taking equity positions in energy resources abroad. We are observing a positive trend in all these areas. Nuclear, natural gas and hydro power are getting the required impetus. Domestic production is being enhanced with initiatives on private participation and Indian companies have begun to take equity positions in international energy resources including oil, gas and coal.

India has vast reserves of the nuclear fuel thorium but the technology is not yet developed for its commercial use. Indiaâ&#x20AC;&#x2122;s oil assets are meager but recent discoveries hold promise for Indiaâ&#x20AC;&#x2122;s gas reserves and coal bed methane.

January - 2008

A KPMG Report

Bringing in efficiency and enhancing capacity in energy transport infrastructure. In India, there is a high degree of inter-regional disparity in terms of energy sources and the growth centers. Significant initiatives are underway to enable investment in ports and railway infrastructure to move coal, pipelines and storage network for oil and gas, and transmission network for electricity. Enhanced transmission capacity will also

enable the power projects to exploit the Himalayan hydro resources in Himachal Pradesh, Uttaranchal and the North Eastern states, as also in Nepal and Bhutan. For this purpose, private participation in energy transport sector is rapidly being promoted. Private investment in ports, dedicated freight corridors, pipelines and power transmission have already begun to take place.

of the other energy products are highly distorted thereby promoting inefficient enduse and sometimes even inefficient energy choices. For example, power, kerosene and domestic gas are highly subsidized.

mean providing incentives in urban areas for mass transport systems and promoting R&D in energy efficiency. The environment should encourage energy efficiency companies to come up and operate profitably.

There have been various policy measures, to some degree of success, to address this. However, the challenge is in implementation and bringing in the required political will to address this issue.

In parallel, India is also emerging as a significantly active market in terms of Clean Development Mechanism (CDM) projects being conceptualized and registered with the Executive Board (EB).

Power sector reform on the distribution front is another key area where progress

The growing awareness of the CDM benefits would make this an important area for

has been slow. High network losses, largely due to theft and pilferage, have left the power sector cash strapped.

investments in the Indian energy sector. CDM should also give the necessary fillip for energy efficiency measures in India. â&#x2014;&#x2020;

While some states have done well on the distribution reform front, in others, private sector participation in the form of franchis-

The Government of India is recognizing the importance of private sector participation, and independent regulation in the energy

ing is now being tried as a potential solution.

sector. The future holds a lot of opportunities for international and domestic private participation. KPMGâ&#x20AC;&#x2122;s Energy and Natural Resources practice presents an analysis on each of the fuel sectors in the following chapters.

Tariff reform and power sector reform

The need of Government Support for Energy Efficiency

This is one of the most difficult and important areas as far as the energy sector is

The Government needs to create a policy framework that provides incentives for en-

concerned. Prices of electricity and some

ergy efficiency. This could, for example,

January - 2008

A KPMG Report

The majority of Indiaâ&#x20AC;&#x2122;s energy requirement is met by coal; which is largely mined in the Eastern and the Central regions of the country. In 2005-06, the total coal production in the country was around 405.2 MMT (advanced estimates) and majority of it catered to the core sectors of power, steel and cement.

January - 2008

n spite of various policy initiatives to diversify the fuel mix, it is becoming increasingly evident that coal will continue to play a major role in sustaining the growth momentum of India. Based on estimates, the consumption of coal is projected to rise by nearly 40 per cent over the next five years and set to almost double by 2019-20. However, in the recent past, the country’s coal sector has come under pressure due to its inability to meet the demand,both planned and unplanned,of the user industries. As per the government’s own estimates, production will lag behind demand by about 100 MMT as of 201112 and by 250 MMT by 2019-20.

Key Issues Facing the Sector The critical issues facing the coal sector are highlighted below: ❐ Typically washed coal is used for power generation in western countires, whereas in India only a miniscule percentage of steam coal is washed ❐ Coal mining in India has been associated with poor employee productivity. The ‘output per miner per annum’ in India varies from 150 to 2,650 tonnes compared to an

average productivity of around 12,000 tonnes in the U.S. and Australia ❐ Comprehensive solution to deal with the fly ash generated at coal power stations has not been developed in India. Clean coal technologies are available, but these are expensive and they need modification to suit Indian specifications ❐ There is a lack of an independent regulatory body to govern investments and operations in the sector. Amongst the regulatory body’s core activities should include coal block allocation, mine approval and introduce competition in price determination. Given the size of investment requirements and the level of political interference, the task of transforming the coal sector becomes formidable. In view of this, the following efforts can become the cornerstones of reform in the sector. Improvement in operational efficiency of the coal companies The public sector company, Coal India Limited, is in need of an organizational transformation in order to gradually align its operating costs to international standards. Mining costs of CIL are at least 35% higher than those of leading coal-exporting countries. To match international productivity levels, Coal India will need to invest in new technologies, improve processes for planning and execution of projects, & institutionalize a comprehensive risk management framework. Strengthening of logistics in coal distribution The logistics infrastructure of India, such as ports and railways, is congested. In order to increase freight capacity from the coal-producing regions to the demand centres in the northern and central parts of the country, it is necessary that the Indian Railways augments its capacity. At present delays are created and inefficiency prevalent because freight trains get a lower priority than passenger trains. Special freight corridors are required to raise speeds, cut costs, and increase the reliability of the system. The Dedicated Freight Corridor ( DFC), linking the ports to the hinterland costing about INR 220 Billion, is the single largest project in this direction. Focusing on technology for future Even though India’s numerous technology research institutes are working on energy-related R&D, there is a possibility that they are operating in a fragmented fashion. The Government may get improved recoveries on its investment by concentrating on only a few important technology areas. To start with, focus may be given towards tighter emission standards and development of inexpensive cleancoal technologies - viz. extraction of methane from coal deposits.

January - 2008

A KPMG Report

ments are now permitted in Indian companies taking up coal mining for captive use. The allocation of coal blocks are proposed to be done on the basis of competitive bidding ❐ Allowing State Government companies and undertakings to carry out mining of coal and lignite reserves anywhere in the country - either by the opencast or by the underground method

There has been an increased focus on Coal Bed Methane (CBM) exploration as a source of natural gas. India holds significant opportunities on commercial exploration of CBM. Till date, 26 CBM blocks, with a potential of covering 13,600 sq Kms, have been allotted under CBM exploration policy.

Policy and Regulatory Framework Currently, the allocation of coal mining blocks to non-CIL companies by the Minis-

in tariff determination. The government has now realized that a high growth rate in domestic production cannot be sustained without carrying out structural reforms and introducing competition through private participation. Hence, the Government has taken the following measures: ❐ Distancing the government from price determination of all grades of coal ❐ Opening of captive coal mining for power, iron and steel, and cement for private investment. Foreign invest-

❐ Allowing coal mining companies who have long term contracts with specified end users to apply for a captive coal block under captive dispensation route ❐ Exempting customs duty on coking coal ❐ Inclusion of coal gasification and coal liquefaction as specified end user for application of coal mining block: In addition to the above, the following measures have been accepted in principle and are awaiting implementation: ❐ Freeing the sector from distribution controls

try of Coal, is done either under government dispensation or through the captive dispensation route. Under the government dispensation route, the block is allocated to a government company and the company has the right to sell coal on a merchant basis, unless specified otherwise in the letter of allotment. Under the captive route, blocks are allocatted only to those companies which have specified end-use projects, such as power, cement and steel. All non-government companies apply for allocation of coal mining blocks under the captive dispensation route. The sector has traditionally been characterized by - state monopoly, lack of independent regulation and lack of transparency

January - 2008

A KPMG Report

❐ Establishment of a regulatory authority to resolve price disputes between the producers and the consumers of coal ❐ Allowing public sector enterprises to undertake joint venture projects with the private sector. In order to de-bottleneck the logistics chain, the government has taken the following key initiatives: ❐ 100 per cent IT exemption on port dev. projects

coal and related sectors. Participation of the private sector in captive mining, is an immediate investment opportunity. 38 coal fields with mineable coal reserves in excess of 2,800 million tonnes have been identified and are in the process of being allo-

creasingly difficult terrain and search for coal at greater depths using more sophisticated technology; thus requiring more capital investments and a larger scale of operations. Apart from coal production, there have also been investments in other

cated for captive mining. This may imply a total capital requirement of around USD 1.52 billion. However, it should be remembered that deposits, which are on the surface and are easily extractable, may have already been largely explored.

parts of the value chain such as coal washeries. There is a need to issue new regulations which support a free market, allow formation of JVs or other alliances, and encourage development of shared infrastructure.

In future, agencies will need to address in-

To achieve these goals, the Government will

❐ 100 per cent FDI for port development projects ❐ Allowing private players to invest in minor and intermediate ports ❐ Allowing private investments and ownerships in rail track, rolling stock and container depot

The India Opportunity The recognition of private investment requirements and acknowledgement for the need to improve operational efficiency provides immense investment opportunities in

January - 2008

There is a lack of an independent regulatory body to govern investments and operations in the sector. Amongst the regulatory body’s core activities should include coal block allocation, mine approval and introduce competition in price determination.

have to overcome strong opposition from political and business interests within the sector. Being a related sector, seaports that receive shipments of coal, railroads, etc will require USD 40-50 billion in investments for harmonious capacity expansion. The government’s plan to invest USD 2 billion to increase capacity and remove bottlenecks at existing major ports is much lower compared to an estimated actual requirement of USD 30 billion. Similarly, a total USD 15-20 billion is required towards creation of new freight corridors and integrating them with existing rail operations.◆ 30

January - 2008

Thiyagarajan Sankaralingam, Chairman and Managing Director, NTPC

January - 2008

BY P.R.SUBAS CHANDRAN

“NTPC is a great success story of our times. It is imbued with the spirit of ‘CAN DO IT’. My best wishes for the future growth of this magnificent enterprise”. - Dr. Man Mohan Singh, the Prime Minister of India, said at the foundation laying ceremony of the Rajiv Gandhi Combined Cycle Power Project. NTPC Limited (NTPC) is a mega company. It has an all pervasive (expansive) mega power agenda. With the mega success stories of the past, NTPC is drawing up a mega plan to ‘power’ the nation, in other words, to empower the people in all micro aspects. One of the Nava Ratnas PRS’s, NTPC is the leader which has 21% of the Power capacity (28,644 MW including JV ) of all of India’s 1,35,782 MW. Setting aside the myth of ‘PSUs cannot compete with the private sector’, NTPC is one of the leading PSUs standing tall in every aspect of business- be it profitability, Employee-employer relationship, Corporate Social Responsibility (CSR), diversification and above all maintaining business ethics. Its operational excellence, robust financial strength (net profit Rs. 67 billion), rapid growth, state-of-the-art technology, winning accolades in all-round per33

formance, are a true testimony to a progressive School of thoughts. Also, all the power stations of NTPC have been certified with ISO 14001. Ranked as the 494th largest company in the world in the Forbes List of World’s 2000 Largest Companies for the year 2006, retaining its position as the Fifth Largest Corporation in India, NTPC remains unparalleled with its enhanced power load factor of 89.43% and generated 188.6 billon units an increase of 10.41%. NTPC created another national record by running the Vindhyachal unit uninterruptedly for 559 days. Achieving a rare distinction of 90% plant load factor of its coal based Stations ,NTPC becomes a role model for the rest of the private players. No wonder, Unchahar Thermal Power Station won Asia Power plant of the year 2006 instituted by the Asian Power magazine of Hong Kong. All this performance translated electrical power into a robust financial power with NTPC profit rising to Rs 67 billion, an increase of 17.85% more than the previous year’s Rs. 58.2 billion facilitating the mega company to the pay highest ever dividend of 32%.

thermal power station was acquired by National Thermal Power Corporation (NTPC) from the Government of Uttar Pradesh”. Performance was improved dramatically by using de-bottlenecking techniques….Nobody even bothers to mention these achievements in a small column of a newspaper. Nor even is such an achievement talked about by politicians and bureaucrats. We don’t know who are the heroes and heroines who made these achievements possible through teamwork”. Dr. Kalam was referring to the outstanding performance turnaround brought about by the competent and committed team of NTPC power professionals who converted Unchahar into one of the best power stations of India. And in fact, this station won the Asia Power Plant of the Year Award 2006 instituted by Asian Power Magazine, Hongkong. The PLF at the time of takeover of Unchahar was 18%, which increased to 74% within one year of the take-over and has now reached 95.59% in 2006-07.

Hon’ble Dr. APJ Abdul Kalam states in the

NTPC received seven National Awards for Meritorious Performance for the year 200405 & 2005-06 from the Prime Minister while the Company was adjudged as “The most admired Organisation in the Public Sector”

book India: Vision 2020: “The Unchahar

in a survey conducted by ‘Power Line’, a

Winning accolades

January - 2008

reputed publication of the power sector. Adding some more cameos to its crown, NTPC won the Golden Peacock National Award for Corporate Social Responsibility in Emerging Economies (Public Sector), 2007. NTPC also received the 4th Wartsila Mantosh Sondhi Award for outstanding achievement and contribution to the Industry.

tigious Golden Peacock National Award for Corporate Social Responsibility in emerging Economies (Public Sector), 2007.

The Vision The new mantra of NTPC is business diversification. NTPC’s star performance ultimately brought surplus funds and the organisation is now planning to invest in

is engaged in creating new wings in solar, biomass energy, small Hydro projects and wind power aggregating to 1000 MW by 2017. New reforms are in the offing where employees’ morale is boosted with innovative training .Productivity linked incentive schemes are a bonanza for the wellbeing of the organisation.

Corporate Social Responsibilpower-related activities. To begin with, it Above all these schemes, NTPC started a ity NTPC’s corporate glamour never neglected social responsibilities while executing new projects. Wherever NTPC launches a new project, it first focuses its attention on rehabilitating the displaced before starting the project. NTPC’s Corporate Social Responsibility, it being a member of Global Compact, a UN initiative, continues to remain a lode star for the rest of the Business world. It is a visible demonstration to provide support to three specialised eye care centres at Bhubaneshwar, setting up two polytechnic institutes at Uttarakand, providing employment to 424 physically challenged persons and the list is long. NTPC is actively engaged in the electrification of 40,000 villages in six states under the Rajiv Gandhi Gramin Vidyutikaran Yojana. Giving a new dimension to the Industry, Academia and R&D efforts, NTPC joined Anna University, Chennai, to develop a Centre of Excellence on its campus devoted to “energy studies” and would fund 0.5 % of its profit for its R&D effort. Under green power, NTPC extensively promotes use of fly-ash in the construction industry. It is irresistible to say that NTPC has been instrumental in creating green wealth of 182 lakh trees in and around its projects. No surprise that NTPC has bagged the pres-

January - 2008

is launching a JV with Transformers and Electricals Ltd, Kerala. It is also drawing an ambitious plan to manufacture power equipment, giving a cutting edge to BHEL, the monopoly manufacturer. The diversification is now extended to coal mining and

‘Suggestion box’ to invite any one in the company to contribute to the creativity. Success stories rarely happen without the involvement of Human Resources. NTPC’s Apex training and Development centre

NTPC, which strongly believes that drops make ocean, is also focusing its attention on generating power at a cheaper price and is engaged in creating new wings in- solar- biomass energy, small Hydro projects and wind power aggregating to 1000 MW by 2017.

many joint ventures with Reliance, SAIL, Maharastra Electricity Board and Tamil Nadu Electricity Board and the Ministry of Railways. NTPC‘s latest agenda is something special. It is planning to acquire steam grade coal on its own and short listed Nigeria, Australia, Mozambique and South Africa as probable countries from where it may procure coal. Establishing power plants in Nigeria and Sri Lanka is nothing but a double demonstration of its capability. NTPC, which strongly believes that drops make ocean, is also focusing its attention on generating power at a cheaper price and

trained employees numbering 8689 and as a result generation per employee has increased from 4.56 Mllion Unit( 1996-97) to 7.97 MU in 2006-07. Who is behind this great journey? Can it be possible to run a business without compromising with an iota of social, economical, environmental and business ethics? “Yes, it is possible and we are making it possible”, says the modern power architect Thiyagarajan Sankaralingam, Chairman and Managing Director of NTPC. Here is the person who nurtured Simhadri Project in Visakapatnam District, Andhra Pradesh right since its early stage in 1992

and till date Simhadri is one of the most efficient and advanced power plants in the country. Sankaralingam’s credential is seen from the very fact that tThis project has been awarded the “International Project Management Award 2005” by the Interna-

CAPACITY UNDER OPERATION STATE

INSTALLED CAPACITY (MW)

Singrauli

Uttar Pradesh

2000

Korba

Chhattisgarh

2100

Ramagundam

Andhra Pradesh

2600

Farakka

West Bengal

1600

Vindhyachal

Madhya Pradesh

3260

Rihand

Uttar Pradesh

2000

Kahalgaon

Bihar

1340

Dadri (Coal)

Uttar Pradesh

Talcher Kaniha

Orissa

3000

Unchahar

Uttar Pradesh

1050

Talcher TPS

Orissa

460

Tanda

Uttar Pradesh

440

Simhadri

Andhra Pradesh

magnificent Power Station built by NTPC, I have revised that notion and I am inclined to say that nowhere else in the country and possibly in many parts of the developed world, will one come across such a beautiful power station achieving unheard of per-

Badarpur

Delhi

705

Sipat

Chhattisgarh

500

Anta

Rajasthan

413

formance results. I must congratulate all those associated with its conception, planning, execution besides its operation and maintenance. I would like to visit this modern temple as often as I could to get the inspiration that a power man needs to have every now and then.”

Auraiya

Uttar Pradesh

652

Kawas

Gujarat

645

Dadri

Uttar Pradesh

817

Jhanor-Gandhar

Gujarat

648

Kayamkulam

Kerala

350

Faridabad

Haryana

430

“A world class integrated power major, powering India’s growth, with increasing global presence is the vision of NTPC”, says

Total-Gas

tional Project Management Association (IPMA). This is the highest international honour for excellent project performance and NTPC is the only Asian Company to get this award. On 19 March 2004 N.Tata Rao, former Chairman-APGENCO, a true pioneer and one of the greatest technocrats, visited Simhadri and wrote in the guest directory: “Until I visited Simhadri I used to think that the best Station in the country is VTS, either in its performance or cleanliness and sophisticated equipments. After seeing this

Sankaralingam. This is his road map of the NTPC of tomorrow. His creative out look is instrumental in the growth of NTPC and this modern power manager is hell bent on generating 50,000 plus MW by 2012. ◆ Input Support: Sunil Trivedi, DGM & S.Murugan, Sr Manager NTPC

PROJECT COAL CAPACITY

Total Coal

840

1000

22,895

GAS CAPACITY

3,955

Total (Coal + Gas)

26,850

JOINTLY OWNED Durgapur-II

West Bengal

120

Rourkela-II

Orissa

120

Bhilai

Chhattisgarh

Ratnagiri

Maharashtra

1480

Total GRAND TOTAL

1794 28,644

January - 2008

Coal is gifted by nature and available in the form they were deposited. The coal deposit in India are generally of high ash content although found in abundance. India has 10% of the world’s coal. Presently the proven reserve is over 92 billion tonnes, third only to the USA and China. At current rates of production, India has enough coal for the next 217 years. The only solution to handle the problem is Beneficiation of coal by setting up Washeries. Coal India Limited is playing a vital role in driving this immensely potential sector and is constantly looking at new ways of improvisation.

ver the years CIL has emerged to be a world-class mining company as far as Opencast Technology is concerned. Its mines are comparable with

derground mines,” Partha S Bhattacharya, CMD, Coal India Limited.

Nevertheless, the typical underground

In the meanwhile, the process of introducing intermediate mining technologies like use of SDL/LHD initiated about a decade ago may continue with a view to arrest the trend of decline. “Introduction of a new

mine of yesteryears is continuing to a significant extent, even today, where relatively large numbers of persons are exposed to operations at the coalface. Not only the productivity is low and costs high, many more people than is required in mechanized dis-

technology called ‘High Wall Mining’ is another frontier hitherto not explored in India. A few mines are to be operated using this technology. CIL has a vision is to achieve complete mechanization of all underground mines by 2017,” said

tricts are exposed to mining risks, which is certainly not consistent with best safety practices.

Bhattacharya.

any other world class mines throughout the globe.

“CIL has initiated quite a few steps in this regard. The process of infusing Continuous Miner & Long wall Mining Technologies on a risk gain sharing basis initiated in some of the mines in recent years is being pursued with much more intensity. This alone holds the key to achieve reversal of the declining trend in coal production from un-

January - 2008

The projected coal demands in the terminal years of XI and XII Five Year Plans i.e. 2011-12 and 2016-17 are around 731 and 1121 million ton in the respective years and the corresponding coal production is assessed at 680 million ton and 1051 million ton respectively. Out of the above, the share of CIL is expected to be of the order of 521 (77%) million ton and 665 (63%) million ton. Coal

production in 2006-07 i.e. the terminal year of the X Plan was 361 million ton. In other words, a jump in coal production of 160 million ton (521-361) between now and the terminal year of XI Plan is envisaged for CIL. Similarly, the rise in coal production during XII Plan is envisaged at around 144 million ton. Considering that the highest rise achieved by CIL so far in any Plan period is around 84 million ton (X Plan) the projected increase during XI and XII Plan are quantum jumps. For meeting the above target, CIL is planning to open up a number of mines both underground as well as opencast. CIL has identified about 118 new projects, 30 for underground mines and 88 for opencast mines. These are to be formulated during XI th plan period and implemented during XI th and XII th plan period. These will have an aggregate production capacity of about 267 MT per year with a contribution of about 127 MT during terminal year of XI th plan period i.e. 2011-12.

A rough estimated suggests that 243 mt per annum of Washed Thermal coal would have to be delivered to different power stations by the end of the XI Plan. Supplying Washed coal, besides improving CIL’s image also (a) reduces strain on Railways, (b) reduces pace for investment by Railways to augment coal transportation infrastructure and thus save on interest/opportunity cost (c) reduces diesel, maintenance cost per K.CalKM of transport. “CIL is pursuing a plan to supply only washed Thermal coal to all Power Stations

except for those at pitheads and also generate power from rejects. Formulation of roadmap for the same is being taken up. CIL is looking forward to set up Washeries on ‘Build and Operate’ basis where capital required for construction of the Washeries shall be provided by CIL, the operator working on a remunerative conversion cost. The builders/operators of the Washeries must imbibe State-of-the-Art Technology,” said Bhattacharya. CIL is working on some forward-thinking concept. A joint venture effort between CIL,

DVC and BEML is pursuing revival of MAMCa closed public sector company which was a leading manufacturer and supplier of Mining Machinery in India. Besides augmenting its own departmental drilling capacity and modernization of the same, CIL is contemplating a sizeable amount of drilling to be outsourced. This will pave away the impediments of asserting the precise geological structure for successful underground mining. CIL is inviting foreign participation in ad-

vanced underground mining by leading manufacturer of mining machinery and mining experts to work on a risk/gain sharing basis for introducing state-of-the-art technology. This will eventually facilitate transfer of technology. “CIL plans to produce coal at a much accelerated pace in the XI and XII plan period compared to that achieved during any plan period so far. This needs a substantial investment particularly in new projects for new capacity built

for maintaining and rejuvenating existing mines,” said Bhattacharya. Out of a total investment of about 18000 crs, the investment for future projects is estimated to be more than 6000 crs, while in the ongoing projects and existing mines the investment is estimated to be about 9000 crs. Apart from this, significant investment to the tune of 3000 crs is envisaged in Washery operation, Exploration, P&D and other non-mining activities.

In order to gear up internal movement of coal, CIL is contemplating some reforms by which movement of coal from mine to railway-siding would cope up with the future needs. Fuel Supply and Transport Agreement (FSTA) in another contemplated step by which an agreement, defining the role of Customer, CIL and Rlys will be executed. This arrangement is expected to bring role clarity of each party by precisely defining their role.◆

up as well as investing in ongoing projects

January - 2008

A KPMG Report

Oil comprises about 36 per cent of Indiaâ&#x20AC;&#x2122;s primary energy consumption at present, and driven by Indiaâ&#x20AC;&#x2122;s overall economic growth, it is expected to grow both in absolute and percentage terms. The growth in demand is projected to catapult the overall demand to 196 MMT in 2011-12 and 250 MMT in 2024-25.

January - 2008

he growing demand-supply gap has led the Indian government to open up exploration and production to private participants through NELP and develop a more holistic strategy for acquisition of equity oil abroad.

Incidence of cross subsidy due to social obligations: Till recently the subsidy burden on LPG, SKO and diesel was allocated to the national oil companies; but the incidence has been spread across the private sector. Although this phenomenon is likely to remain due to social obligations of the Government, a more transparent procedure for the allocation of subsidies will boost the confidence of the investor further.

Key issues facing the Sector The following are the major issues faced by the Oil sector: Absence of statutory framework in the upstream industry: India has significantly shied away from structural regulation; regulations in India being more focused towards the use of standards in the areas of health, safety and environment, and certain critical aspects of operations and pricing. The scope of the proposed legislation, through the recently drafted Petroleum Regulatory Board Bill, is confined to the downstream industry. While the upstream industry is still governed under a policy framework by the Directorate General of Hydrocarbons. Notable is the absence of any statutory framework in the upstream sector.

Policy and Regulatory Framework The current upstream regulation is provided by Director General of Hydrocarbons (DGH) primarily on technical aspects than on pricing front. The midstream and downstream sectors are largely unregulated. However, downstream regulation is proposed to be introduced with the passing of the PNGRB bill. Over the past five to six years, the trend has been towards opening up the sector for greater investment, setting up an independent regulator to monitor post production activities, and enabling a transition from an administered to a market driven mechanism. This also includes de-controlling of most of the petroleum products and allowing private sector companies to market them at the market determined prices. Another significant trend in oil and gas regulation in India, and one which is likely to continue, is the opening up of the sector to private and foreign participation. A 100 per cent Foreign Direct Investment is allowed in exploration, creation of pipeline infrastructure, refining and in downstream retailing.100 per cent FDI in retailing is allowed subject to minimum investment of USD 445 million in midstream or upstream sector. Combined with the attractiveness of the Indian market in the oil sector, this is likely to bring forth significant investments in the future. On the pricing front, the government appointed Committee on pricing and taxation of petroleum products has recommended that the oil companies should shift from an ‘import parity based pricing’ to a ‘trade based pricing’. It has also suggested the reduction in custom duties on petrol and diesel from 10 per cent to 7.5 per cent and the shifting of excise duty from an ad-valorem levy to a specific levy. The oil marketing companies are expected to benefit from the current Union Budget proposal of lowering excise duty on vehicle fuels from 8 per cent to 6 per cent. This is expected to reduce the losses of oil marketing companies that are currently selling both petrol and diesel at discounted state-determined prices.

January - 2008

A KPMG Report

reserves estimated at 700 MMT2 of oil and gas have been discovered. However, the recent rounds of NELP bidding are still dominated by public sector. To bring new technologies and international practices into the oil and gas exploration sector, the government is keen on greater foreign participation under NELP process. Price of gasoline and diesel are still fixed by the Government, although the linkage to import parity price has strengthened significantly over the years. In NELP-VI, the latest round, a total of 65 blocks including shallow water, deepwater and onland blocks were put on offer.

The India Opportunity

ent bidding process for allocation of oil and gas blocks.

Investments under NELP To increase investment in the upstream side, the Ministry of Petroleum & Natural Gas (MoPNG) has introduced a transpar-

Six rounds of competitive bidding under the Government policy, named New Exploration Licensing Policy (NELP), have already been done, around 185 blocks were awarded and

NELP-VI was a success with 165 bids being received from both domestic and international companies for exploration rights. Going forward, Directorate General of Hydrocarbons has indicated that 70-80 blocks, including those in un-explored states, will be made available in NELP-VII. Destination India as refining hub Indiaâ&#x20AC;&#x2122;s key advantages for developing itself as an export refining hub includes cost competitiveness and location advantage. India has significant lower cash operating costs on account of cheaper power and labor costs. The capital costs are also lower by as much as 25 to 50 per cent over other Asian counterparts. Geographically, India is strategically located en route of Middle East crude for East Asian and Pacific-rim markets. In fact, India possesses surplus refining capacity and has already turned into a net exporter of products. Certain areas of the country have already been demarcated for the development of export- oriented refineries and dialogues

January - 2008

are underway between MoPNG and some oil companies on implementation of the strategy; which also includes building supporting infrastructure for enabling exports. By 2010, the expected worldwide deficit in refining capacity would be around 112 MTPA because of shutting down of some of the smaller refineries in developed economies. Smaller refineries in North America and Europe are finding it uneconomical to invest in cleaner fuels because of high compliance cost and cleaner fuel norms. In Japan and Australia, oil majors have rationalized their refining assets because they are becoming uneconomical to operate. On the domestic supply side, India’s current refining capacity stands at around 143 MMT. The domestic refining companies have planned capacity additions to the tune of 90 to 100 MMTPA in the next 4 to 5 years. This large scale commissioning of capacities, when viewed against the expected demand of 196 MMT, suggests that India’s petroleum product exports are slated to rise

•North America and

Europe

from the current 17 per cent of fuel processed in the country. It is expected that RIL’s (Reliance Industries Limited) refinery expansion of 580,000 bpd at Jamnagar will be only to supply to export markets in Europe and North America.

Price of gasoline & diesel are still fixed by the Government, although the linkage to import parity price has strengthened significantly over the years. In NELP-VI, a total of 65 blocks including shallow water, deepwater and onland blocks were put on offer. Another development has been the receipt of foreign direct investment (FDI) in a public sector refinery for the first time. Hindustan Petroleum Corporation Limited (HPCL) has entered into a partnership with Mittal Investments for setting up the refinery-cum-petrochemical complex at Bhatinda in Punjab. This development might be viewed as the first step towards greater

involvement by international oil firms in Greenfield projects. Increased investment in fuel quality upgradations Prompted by stringent fuel specifications in the developing countries and the domestic ‘Auto Fuel Policy’ which will mandate Euro IV norms by 2010, significant investments have been planned for upgrading existing refineries. In order to hedge against variation in crude supplies and achieve cost-competitiveness by accommodating cheaper quality crude, it has become essential to upgrade the refineries to more complex configurations. Indian Oil Corporation Limited has planned investments of INR 60 billion towards upgradation of its Gujarat refinery, INR 140 billion for installation of a naphtha unit at its Panipat plant and INR 30 billion for its Haldia refinery. Similar investments have been planned by HPCL and Bharat Petroleum Corporation Limited (BPCL) for their Vishakapatnam and Mumbai refineries, respectively.

•Cleaner fuel norms

Smaller refineries in the region are finding uneconomical to invest for cleaner fuels 70 (out of 375) refineries in North America & Europe are small with capacity less than 2.5 mtpa •Reduced tariff protection Inefficient refineries are closing down. 6 mtpa of sub-scale capacity was closed down due to liberalisation in China during the last two years •Greater stringent fuel norms call Another 21 refineries (-9 mtpa) are facing the threat ofclosure in the Shandong province for additional investments •Old, inefficient assets are Oil majors have rationalized their refining assets in Australia & Japan becoming uneconomical Shell has closed Clyde Refinery, Australia. In Japan, 9 mtpa of refining capacity is expected to be rationalised in next 2 years High compliance cost

• India, China and SE Asia*

• Japan and Australia

January - 2008

A KPMG Report

Building strategic petroleum reserve through public private partnership Taking into account the oil security concern, the Government has decided to set up strategic crude oil storage at various locations in the country.

from each otherâ&#x20AC;&#x2122;s strengths in areas of technology transfers, R&D, safety and training, as well as multilateral engagements such as the Asian Round Tables, International Energy Forum etc. Recently India has signed an MoU with China for joint bidding of hydrocarbon blocks.

22 strategic storage will be in addition to the existing storage of crude oil and petroleum products with the oil companies and will provide an emergency response mechanism whenever there are any short-term supply disruptions. Additionally, the government is also exploring the possibility of increasing the oil stockpile in the country through various innovative schemes such as leasing of storage space to international oil trading companies and building of additional storage terminals through the concessions route.

Competition in the downstream (retail and institutional) segment As per Petroleum Regulatory Board Bill, all upcoming pipelines will have mandatory open access. Creation of open access capacity will drive competition in retail and institutional segment. In anticipation of competition, major oil firms are expanding their retail network and forming alliances with a host of product and service companies to offer non-fuel prod-

Acquisition of overseas oil assets

ucts and services.

MoPNG has conceived a more coordinated approach towards acquisition of overseas oil assets through joint forays, bilateral engagements with other countries to benefit

On the institutional segment, incumbents are focusing on profitable segments for subsidized products as well as on specialty

January - 2008

Indiaâ&#x20AC;&#x2122;s key advantages for developing itself as an export refining hub includes cost competitiveness and location advantage. India has significant lower cash operating costs on account of cheaper power and labor costs. The capital costs are also lower by as much as 25 to 50 percent over other Asian counterparts.

products like Hexane.â&#x2014;&#x2020;

January - 2008

A KPMG Report

When compared to mature natural gas (NG) based economies like Japan, Korea, and the United States, India is a relatively new entrant. However, the increasing significance of the fuel in the Indian context can be gauged from the fact that, by 2025, the country is expected to rival both China and Japan in having the largest NG demand in Asia. Demand in each of these countries is expected to be in the range of 350 MMSCMD.

he significant potential for NG de mand, especially in the context of India’s projected GDP growth above 8 percent, is being driven by the following key factors: ❐ The share of natural gas in India’s energy basket is only around 9 per cent as compared to the world average of around 24 per cent. More than 50 per cent of NG volume goes to sectors where it is a substitute to petroleum products and the rest goes to the power sector where it substitutes coal. In this context, NG volume in the country will partly be driven as a substitute to petroleum products because it is cheaper and cleaner. In addition, reforms in the power sector will also encourage NG to be used as a cleaner substitute to coal in the long term. The share of NG in the fuel mix is expected to go up from the present 8.8 per cent levels to 22 per cent in 2031-32

likely to contribute to growth in supply. It is projected that production in 2015 may be less than 50 per cent of current production. The identification of new sources of gas supply will be critical in sustaining the demand for gas in the country. Domestic reserves/ production will not be sufficient: While there have been new finds of about 70 Bcm a year in the last decade, unattractive market prices have contributed to production not increasing correspondingly. However, significant shortfall will mean that one way or the other these reserves will have to start getting utilized. Significant incentives are being offered by the government through its NELP programmes to attract greater investment in this area Cross-border gas pipelines facing uncertainty, but attracting interest: While initiatives related to cross-border NG pipelines with Iran, Pakistan, Myanmar, Turkmenistan, etc. have been under discussion for quite some time. The political environment and international climate have been unfavourable, thus delaying these projects indefinitely. As LNG becomes even more expensive, the importance of these sources is increasingly being recognized. Interestingly, globally, transnational gas pipelines have rarely faced disruptions in supply once they have been put into use. Hence, this may be a good sign for India despite the political sensitivities involved

❐ Per capita consumption of NG in India is

Inability to take international prices: Due to the distinctive nature of

currently amongst the lowest in the world i.e., 29 cu m as compared to a world average of around 538 cu m

the Indian market, current international prices cannot be passed through to major NG user’s viz. power and fertilizer sectors (which constitute over 70 per cent of demand). These customers had traditionally been buying gas at administered prices of less than USD 3 per MMBtu upto a couple of years ago. However, due to existing plant efficiencies being significantly impacted by shortages in the recent past, gas is being purchased even at USD 6 per MMBtu. In the power

❐ Demand for NG (at more than 120 mmscmd) in the country has far outstripped supply (about 75 mmscmd), and there has been an increasing trend towards the emergence of new NG demand as well as conversion from existing fuels to NG.

sector, focus has temporarily shifted away from new gas-based capacity to coal-based capacity addition. Other industrial customers may still prefer gas because of the high prices of Naphtha, FO or LPG

Key Issues

Policy and Regulatory Framework

India’s gas supply issues are different from those of oil, mainly because domestic onshore and offshore gas has been contributing to meet more than 90 per cent of demand so far.

Over the past six years, the trend in natural gas regulation has been towards opening up the sector for greater investment, setting up an independent regulator to monitor post production activities, and enabling a transition from the administered control regime to a market

Except the LNG terminals at Hazira and Dahej, all other gas requirements are being met

driven mechanism. Significant regulatory issues which will impact the gas sector in India include:

through domestic sources only. However, existing onshore and offshore fields have been facing a declining trend in production and are un-

Petroleum & Natural Gas Regulatory Board Act, 2006 (PNGRB Act,

2006): The Act envisages setting up a Petroleum & Natural Gas Regu-

January - 2008

A KPMG Report

The India Opportunity Over the past six years, the trend in natural gas regulation has been towards opening up the sector for greater investment, setting up an independent regulator to monitor post production activities, and enabling a transition from the administered control regime to a market driven mechanism. Significant regulatory issues which will impact the gas sector in India include: Domestic exploration of NG latory Board to regulate the refining, processing, storage, transportation and distribution, marketing and sale of petroleum, petroleum products and natural gas; excluding production of crude oil and natural gas. The objective of the board is to protect the interests of consumers and entities engaged in specified activities relating to petroleum, petroleum products and natural gas, to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets in India. Policy for Development of Natural Gas Pipelines and City or Local Natural Gas Distribution Networks: The objective of the policy is to promote investments from public as well as private sector in natural gas pipelines and city or local natural gas distribution networks, to facilitate open access for all players to the pipeline network on a nondiscriminatory basis, to promote competition among entities and to protect the end consumer. A Gas Advisory Board (GAB) will be set up to promote and develop the gas pipeline network in India Gas Linkage Committee: The Gas Linkage Committee (GLC) was established to manage the allocation of gas to eligible custom-

January - 2008

ers. This was linked with the administered price mechanism which depressed domestic gas prices for certain sectors. However, new fields under the National NELP are already exempt from the purview of the GLC and can trade at market prices Infrastructure Status for gas pipelines: Development of gas pipelines and related storage has been granted â&#x20AC;&#x2DC;Infrastructure

While initiatives related to cross-border NG pipelines with Iran, Pakistan, Myanmar, etc. have been under discussion for quite some time, the political environment and international climate has been unfavorable Statusâ&#x20AC;&#x2122;. While this would translate into a number of benefits for companies planning on developing gas transmission pipelines, it could also allow for lower gas transmission tariffs if part of these benefits are passed on to the end consumer. While some quarters expect the LNG import sector to be also given infrastructure status in the interest of increasing economical gas sourcing options for the country, the same has not happened yet.

The government sees significant potential in domestic exploration as an option for matching supply with demand. On an average, reserves of more than 70 bcm a year have been discovered over the past decade. The New Exploration License Policy (NELP) provides significant benefits to private players in terms of - allowing 100% FDI, a seven year tax holiday, free marketing rights in the domestic market etc. This has already attracted a number of players in the NELP VI round of bidding. NELP VII has already been announced opening up a new set of opportunities for investors. However, unless significant finds are made the country will still have to deal with a domestic shortage of gas. Is LNG the answer? Given the shortages in domestic gas and uncertainties related to international pipelines, LNG may appear to be the answer. However, due to a number of reasons, LNG would still find it difficult to compete with other options in the short to medium term. The lack of a cross-country gas pipeline to enable transmission, the emphasis on coal as the preferred fuel for Ultra Mega Power 46

Plants and the gradual emergence of Coal Bed Methane make it difficult for LNG to compete. In addition, issues related to pricing and the limited potential LNG supply sources (i.e. Qatar, Iran, and Australia) to India need to be sorted out. Coal Bed Methane (CBM) and Underground Coal Gasification Opportunities With proven reserves of 765 Mtoe and indicated reserves of between 1,260 – 2,340 Mtoe, CBM could be a larger opportunity than either oil or natural gas. CBM exploration has already been taken up seriously, with more than 26 blocks

Development of gas pipelines and related storage has been granted ‘Infrastructure Status’. While this would translate into a number of benefits for companies planning on developing gas transmission pipelines, it could also allow for lower gas transmission tariffs if part of these benefits are passed on to the end consumer. awarded so far and more to be taken up as part of following phases of CBM bidding.

Compression of CBM and marketing as CNG could be exploited in potential industries as a substitute to conventional natural gas. A related exciting technology is that of underground coal gasification, which is already being exploited in Russia at a small level. Given India’s large coal reserve, the UGC technology could potentially produce volumes of free natural gas reserve. Emergence of the retail gas user Due to environmental and economic considerations, gas is increasingly reaching the retail user segment as a fuel for domestic and transportation purposes. The growth of Auto CNG and Piped domestic gas in major Indian urban centers has sparked off a new demand spurt for NG. Within five years, the proportion of auto CNG and piped gas together would increase from the current levels of 2 per cent to about 7 per cent of the total gas demand.

Development of common gas market through National Gas Grid The growth in each of the end user industries as well as the widespread growth of the retail segment would need to be supported by appropriate infrastructure. The planned National Gas Grid connectivity is with a view to harmonize the operations and provide interconnectivity to different gas pipelines. The New Gas Pipeline Policy announced by the Government provides a framework for development of a National Gas Grid and with the setting up of the Petroleum and Natural Gas Regulatory Board, private interest is expected to increase tremendously in the pipeline infrastructure segment.◆

January - 2008

A KPMG Report

January - 2008

The Government of India is pursuing nuclear energy as a long-term solution to meet the energy needs of the country. Besides being non-carbon emitting, its strategic importance lies in the fact that known reserves of coal, India’s dominant energy source today, are expected to last for around 45 years only with current technologies for extraction.

he importance accorded to nuclear energy by the Government of India can be gauged from the following:

ment of Atomic Energy, Government of India.

❐ Indian government’s willingness to co-

Programme comprising setting up of Pressurised Heavy Water Reactors (PHWRs) is already in commercial domain.

operate and enter into civilian nuclear agreements with countries like U.S., France and Russia, despite internal opposition to opening up of its still-

The first stage of Nuclear Power

❐ India has achieved considerable expertise in its first stage of nuclear power programme and about10GWe of nuclear installed capacity is possible from indigenous uranium

guarded nuclear reactors to international scrutiny ❐ Deal with Russian Federation for setting up of 1000 MWe Light Water Reactors (LWR’s) under IAEA safeguards

❐ Budgetary allocation for uranium explo-

❐ Aggressive targets on the nuclear

tinuously increasing in recent years. DAE is actively exploring the idea of inviting domestic and foreign private sector firms to participate in uranium exploration activities in India.

ration, including drilling, has been con-

closed fuel cycle based three-stage nuclear power programme, where Bharatiya Nabhikiya Vidyut Nigam Limited (BHAVINI) has been setup for the construction of its first Fast Breeder Reactor (FBR) by 2010 ❐ Nuclear power plant capacity targets as envisaged by the Department of Atomic Energy (DAE) are given below: ■

10,280MWe by 11th Five year plan

■

20,000 MWe by 2020

■

50,000 MWe by 2030

The second stage of Nuclear Power Programme comprising setting up of Fast Breeder Reactors (FBRs) backed up by reprocessing plants and plutoniumbased fuel fabrication plants is in the technology demonstration stage. ❐ Energy potential of natural uranium can be increased to about 300GWe in the second stage through FBRs, which utilize plutonium obtained from the recycled spent fuel of the first stage along with thorium as blanket to produce U-

■ 250,000 MWe of nuclear power by 2050

India’s Nuclear Power Programme

233 ❐ FBRs of 4000MW each will be built ev-

Three-stage Indian Nuclear Programme The importance of nuclear energy was recognised in the 1940s itself by Dr.H.Bhabha who envisaged a three–stage nuclear power programme with the aim of utilizing the thorium potential of India. The closed nuclear fuel cycle has been the core strategy of the Indian Nuclear Power Programme being followed by the Depart-

ery year from 2021 The third stage of the Nuclear Power Programme requires a large capacity of FBRs to be built up. ❐

Research on the third stage is in progress with a 300MWe Advanced Heavy Water Reactor (AHWR) developed by Bhabha Atomic Research Center (BARC) to expedite transition to thorium based system

January - 2008

A KPMG Report

of NPCIL are in the range of INR 1.75 to 2.80 per unit, depending on the life of the reactor.

India Opportunity India – US Nuclear Cooperation The India – US nuclear deal promises an access to a practically clean energy and will facilitate India in coming out of the 30 year old isolation from international nuclear technology. The final implementation of the Hyde Act and the 123 Agreement will enable India to enter legally into civilian nuclear energy cooperation agreements with nuclear energy suppliers like France, Russia and other ❐ Research on other advanced technolo-

❐ New capacity addition of 2660MWe to

gies like Compact High Temperature Reactor (CHTR), Accelerator Driven

be under commercial operation by December 2008

Systems (ADS) and indigenously built Tokamaks, as part of the nuclear fusion research programme, are in full swing at BARC However, completing this ambitious threestage plan successfully will require heavy investments and considerable development is required before the thorium cycle can be commercialized. The Government of India has been supporting all the investments required by the three-sage Nuclear Power Programme, with the ultimate goal of realizing energy security. Nuclear power projects in India: Planned and Under Operation Currently, India has 17 nuclear power plants being operated by the Nuclear Power Corporation of India Limited (NPCIL) and the total installed nuclear power capacity is 4120MWe. The Kaiga-3, 220MWe plant achieved criticality on 26th February, 2007. Given below are the plans of nuclear power plant capacity addition in India by DAE. January - 2008

■

Under Construction: 3 PHWRs (3 x 220MWe) & 2 LWRs (2 x 1000MWe)

❐ New capacity addition of 6800MW to be under commercial operation by 2012 ■

LWRs (4*1000MWe) ( Jaitapur, Maharashtra and Kundakulam, Tamil Nadu)

countries with advanced nuclear capabilities. It will help in dismantling all controls and constraints faced by giving the country a global access to fuel, technology and equipment; hitherto denied. Some of the key elements of this agreement are - the need for segregation of the civilian and military facilities, applying specially negotiated IAEA safeguards on civilian facilities including additional protocol and negotiating Fissile Material Cut-Off Treaty (FMCT) along with the U.S.

Gujarat and Rawatbhata, Rajasthan)

Some of the likely gains from the partnership with the U.S. are as given below:

Capital costs of nuclear power plants based

❐ The agreement assures uninterrupted

on PHWR technology are in the range of INR 6 to 7 Crores per MW with a corresponding design life of more than 40 years. Gestation period for setting up of nuclear power plants in India has improved over the years and is around 5 years with the cur-

supply of fuel to reactors placed under the IAEA safeguards

■

PHWRs (4*700MWe) ( Kakrapar,

rent technology. Nuclear power competes economically with coal based plants at load centre generation of around 1000 Km from the pit head coal mines. Current power tariffs from some of the atomic power stations

❐ Access to latest nuclear reactors can serve the purpose of meeting the urgent short-term energy requirements of the country and thereby increasing the share of nuclear energy in the energy mix ❐ Strengthen India’s case in the Nuclear Supply Group to relax its nonprolifera-

tion guidelines towards India, which already has an unblemished safety record ❐ Facilitate India’s participation in international nuclear research community in developing cutting edge multilateral research and thereby benefiting its own indigenous research. ❐ Import options open up the possibility of significant capacity addition through high output plants (1000MWe), apart

from the indigenous capacity addition. Once the Atomic Energy Act is amended to facilitate private participation, foreign investment is also possible to flow into the country. The actual passage of the 123 Agreement still involves a lot of hard negotiations because of the gaps between the provisions of the Hyde Act and Prime Minister Manmohan Singh’s suo-moto statement in Parliament. Some of the major issues of contention are in the areas of spent fuel reprocessing, access to enrichment and reprocessing technology, conditional access to nuclear 51

fuel (subject to India not performing any further nuclear tests) and references to Indian foreign policy towards non-proliferation. If the Indo-US agreement goes through and 123 agreement for civilian nuclear power cooperation is concluded early, then there is a good chance that the government will fast track its nuclear programme. The fuel and technology availability from the NSG (Nuclear Supply Group) will ensure that India can run a parallel program based on

either natural uranium or enriched uranium as fuel. Public- Private Partnership in Commercial Civilian Nuclear Energy Amendment to the Atomic Energy Act, 1962 will be necessary to enable any joint venture/ private participation in India. Currently the law does not permit private sector participation in nuclear power generation and all investments in the nuclear energy sector were made exclusively by the central government. Indian government is seriously considering to amend the law to facilitate private par-

ticipation in the non-strategic components of the Nuclear Power Programme ❐ Private players may enter into a joint venture with the Nuclear Power Corporation of India Limited (NPCIL) for setting up and operating the nuclear power plants ❐ With the possibilities of the civilian nuclear power cooperation agreements to be in place with countries like USA and France, there would be opportuni-

ties for domestic and foreign private investment in the nuclear power generation in India. Some of the key challenges for the private sector will be in the areas of: ❐ Managing the decommissioning of the nuclear plant ❐ Spent fuel storage and subsequent fuel resource management procedures ❐ Unlimited liability in an unlikely event of a nuclear accident can have serious implication on the financial well being of the nuclear power generating company. ◆ January - 2008

A KPMG Report

India is endowed with very large, viable and economically exploitable hydroelectric potential which is estimated to be about 150,000 MW (84,000 MW at 60 percent load factor). The current hydel installed capacity in India is about 33,941 MW.

January - 2008

he Government of India has under taken several initia-tives to increase the share of hydel energy in the overall energy mix and the Prime Minister’s 50,000 MW Hydro-electric initiative is one of the major steps undertaken by the Ministry of Power in this regard.

Key Issues Government of India is addressing various issues relating to the development of hydro power. Private sector participation is also being encouraged in a big way. However key issues still remain unaddressed with the major ones being: ❐ Funding: Hydro projects involve high initial costs with one of the lowest lifetime costs of power generation. To meet the funding

ances and issues related to the rehabilitation and resettlement. To resolve these, it is proposed that new projects should initially be taken up by government-owned companies for activities such as – conducting investigations, updation of DPRs, obtaining the necessary clearances and execution of pre-construction work. After the completion of these stages, the projects could be offered to the private sector for execution either on a ‘stand alone’ basis or for Joint Venture participation with the state owned companies ❐ Delays due to disputes between the states: In case of hydro projects involving more than one state, disputes between the states concerned have led to substantial potential remaining locked up. Even though mant mega hydro projects were well recognised as attractive and viable, they could not be taken up for implementation for these very reasons ❐ Simplified procedure for transfer of clearances: The immediate

GoI has undertaken several initiatives to increase the share of hydel energy & the PM’s 50,000 MW Hydro-electric initiative is one. requirements, the Government has decided that all Central Sector projects will be provided with budgetary support. It is also proposed to levy a ‘power developmnt cess’ in the country to fund hydro projects ❐ Geological risks: Hydro projects present geological surprises when construction starts and this leads to an increase in project cost, culminating in additional risks to the investors. Survey and investigation of the

requirement would be to transfer the clearances already accorded to non-starting hydro projects in the State to the Central Sector or to Independent Power Projects (IPP) or to JVs between IPPs and the Central Sector

Policy and Regulatory Framework Some of the key policy initiatives undertaken by the Government for faster development of hydro potential sector are: ❐ Rationalization of Hydro Tariff: Recognizing the difficulties in the execution of hydro projects, the Government has decided to ra-

potential hydro-sites, based on advanced scientific techniques, are an essential future requirement

tionalize the existing hydro tariff norms, improve the incentives for better operation and design a solution to the contentious issue of computing the completion cost

❐ Long delays in obtaining clearances: Projects

❐ Estimates on Completion Cost (Geological Risks): A realistic esti-

are delayed because of the long time taken in acquiring land, difficulty in obtaining clear-

mate of completion cost has to take into account the geological and hydrological risks, cost escalation and natural occurrences

January - 2008

A KPMG Report

❐ The Ministry of Power had come out with a set of guidelines for the development of Large Hydropower Projects (i.e. over 100 MW) by private sector through competitive tariff-based bidding. With an aim of developing the large potential of the yet-to-be-developed hydel power in states like Uttarakhand, Himachal Pradesh and the North Eastern parts of the country, the guidelines envisaged supply of surplus power to the deficit states; with host states securing benefits such as 12 percent free power ❐ Given the reservations expressed over

of land slides, rock falls, etc. The developer will be allowed to submit his proposal for enhanced costs to the Gov-

also negotiate at its own terms with the land owners. In case any cost is incurred by the developer, it will be re-

ernment

garded as ‘cost to the project’ and allowed to be considered for tariff determination

❐ Promoting Hydro Projects with Joint Ventures:With a view to bring in additional private investment in the hydro sector, there has been emphasis on schemes through joint ventures between the public and domestic / foreign private enterprises. Relaxation in certain rules pertaining to mandatory sharing of power with neighbouring states is provided in the case of joint venture projects ❐ Support for Acquisition, R&R, Catchment Area Development: The acquisition of forest and private land involves Government procedures and difficult negotiations with the land owners. As per the policy adopted by the State Government, it is now the responsibility of the State Government to acquire the land (whether be it government-owned, private or forest) for the project and

January - 2008

❐ Preparation of DPRs: With the objective of reducing time and cost overrun of hydro projects (which have largely taken place on account of poor and hasty investigation and non-availability of proper infrastructure) the Government introduced a 3-stage process for development of new hydro electric projects in the Central Sector. The three Stages are: Stage-I:

Survey, investigation & preparation of pre-feasibility report Stage-II: Detailed investigation, preparation of DPR and preconstruction activity including land acquisition Stage-III: Execution of the project after investment decision through PIB/CCEA

the applicability of the tariff based competitive bidding process to hydro power, the government is planning to come out with a new hydel power policy for allocation and development of hydel projects by the private sector. The new policy will aim at attracting private players and is likely to exclude states from following a tariff based bidding process for hydro power projects

The India Opportunity Only about 17 per cent of the vast hydel potential of 150,000 MW has been tapped so far. Countries like Norway, Canada, and Brazil have all been utilizing more than 30 per cent of their hydro potential; while on the other hand India and China have lagged far behind. India ranks fifth in terms of exploitable hydropotential in the world. As per an assessment made by Central Electricity Authority (CEA), India is endowed with economically exploitable hydro-power potential to the tune of 148,700 MW. Under the Prime Minister’s 50,000 MW hydro electric initiative, the Central Electricity Authority (CEA) has already completed the preparation of the pre-feasibility report for 162 schemes covering an installed capac54

The basin-wise assessed potential is:

Basin/Rivers

Probable Installed Capacity (MW)

Indus Basin

33,832

Ganga Basin

20,711

Central Indian River system

4,152

Western Flowing Rivers of southern India

9,430

Eastern Flowing Rivers of southern India

14,511

Brahmaputra Basin

66,065

Total

148,701

Source: Narmada Hydroelectric Development Corporation website

ity of 47,930. Most of this untapped potential lies in the North and the North-Eastern states of the country. In addition, 56 pumped storage projects have also been identified with a probable installed capacity of 94,000 MW. In addition to this, hydro-potential from small, mini and micro schemes has been estimated as 6,782 MW from 1,512 sites. Therefore, in totality, India is endowed with hydro-potential of about 250,000 MW. However, only 17 per cent of the hydroelectric potential has been harnessed so far and another 5 per cent is under various stages of development. While private participation is currently low at 3 per cent, private participation will

play an important role in meeting the ambitious target of 50,000 MW capacity addition in the next ten years.

Small Hydro opportunity Small and mini hydel projects have the potential to provide energy in remote and hilly areas where the extension of the grid system is considered uneconomical. Realising this fact, the Government of India is encouraging the development of small and mini hydro power projects in the country. India has 420 small hydro power projects of upto 25 MW station capacity, with an aggregate capacity of over 1,423 MW. Over 187 projects in this range with an aggregate capacity of 521 MW are under construction. Potential An estimated potential of about 15,000 MW of small hydro power projects exists in India. The Ministry of Non-Conventional and Renewable Energy has created a database of potential sites of small

hydro and 4096 potential sites (with an aggregate capacity of 10,071 MW) of upto 25 MW capacity have been identified. MNRE Incentives in Small Hydro Sector In order to accelerate the development of small hydro power, MNRE is giving incentives for - survey and investigation, detailed project report preparation, interest subsidy for commercial projects, capital subsidy for SHP projects in the North-Eastern region, renovation and modernization of old SHP stations and development of water mills. Manufacturing Base in India India has a reasonably well-established manufacturing base for full range of small hydro equipment. There are over 8 manufacturers in small hydro, supplying various types of turbines, generators, etc. â&#x2014;&#x2020; January - 2008

U.C.Misra, Chairman, BBMB

January - 2008

“The Bhakra Nangal Project is something tremendous, something stupendous, something which shakes you up when you see it. Bhakra, the new temple of resurgent India, is the symbol of India’s progress.” - Pt. Jawahar Lal Nehru, the First Prime Minister of Independent India on dedication of Bhakra – Nangal Project to the Nation on 22nd October, 1963. A BRIEF BY RAVI KUMAR

he Bhakra Beas Management Board (BBMB) was formally constituted in May, 1976 with the merger of the

erstwhile Bhakra Management Board and Beas Construction Board with the participation of the States of Punjab, Haryana, Rajasthan & Himachal Pradesh. The overall administrative control of the Bhakra Beas Management Board falls under the Government of India, Ministry of Power. The functions of BBMB are mainly the management & regulation of water supply to the constituent States from the river Ravi, Beas and Satluj including power generation from the waters flowing through these rivers. Some of the important projects on these rivers are Bhakra Dam & Hydro Power Project, Beas Satluj Link Project with Dehar Power Plant and Beas Dam and Pong Power House. The multipurpose projects under operation in Bhakra Beas Manage-

ment Board are providing irrigation facilities to an approximate area of 125 lakh acres spread over the States of Punjab, Haryana and Rajasthan together with generation of power ranging from 10,000 to 14,000 Million Units annually which is distributed among the beneficiary states. The

systems together with the power generation projects. It is a fact that Hydroelectric power is the cheapest renewable form of energy even today and the country has not done enough to harness this energy though we have a vast potential for Hydroelectric Power and only about less than 20% have

total installed power generation capacity of hydroelectric machines installed at various projects is 2865 MW.

been fully exploited.

The cost of power generation from these power plants under BBMB is as low as 20 paise per unit including the wheeling charges which is cheapest in the country. Multipurpose projects controlled by Bhakra Beas systems have benefited all the above

The Bhakra-Nangal Project was taken up as a Joint Venture of the States of erstwhile Punjab and Rajasthan. On re-organization of the erstwhile Punjab State in 1966, the Bhakra Management Board was constituted on Ist October, 1967 under Sec-

states in bringing out a massive green revolution in the entire area thereby increasing food grain production tremendously. This is a unique example of joint participation of states for providing massive irrigation facilities together with cost effective power

tion 79 the of Punjab Re-organization Act, 1966 for Administration, Maintenance and Operation of the Bhakra Nangal Project. Beas Construction Board was constituted under the Punjab Reorganization Act, 1966 for construction of Beas Project.

generation with the most optimum utilization of scarce resource like water. Bhakra Nangal is one of the huge multipurpose projects taken up immediately after independence which has contributed tremendously to the benefit of the people as well as for the economic development of the country. In fact, such examples would have been created elsewhere by other states in the country wherein similar benefits would have accrued to the participant states. With this, they would have controlled the biggest problem of floods by proper management of water through interlinking of various rivers and by providing a network of canal

Formation of BBMB

Bhakra Management Board was renamed as Bhakra Beas Management Board (BBMB) w.e.f. 15th May, 1976 after transfer of Beas Project on its completion by the Beas Construction Board. The main functions of BBMB are:❐ The regulation of the supply of water for irrigation from Bhakra Nangal and Beas Projects to the States of Punjab, Haryana and Rajasthan and also drinking water supply to Delhi and Chandigarh. ❐ The Regulation of the supply of power generated at BBMB Power Houses to

January - 2008

Contribution to Environment and Social Upliftment Environment management in the vicinity of the projects is one of the primary objectives of BBMB policies. Massive tree plantation programmes have been periodically undertaken and today all our project sites are full of greenery which also provide natural conditions for preservation and growth of flora and fauna in the area. The vast lakes formed by Bhakra and Pong Reservoirs have become the natural habitat for migratory birds which attracts a lot of tourists to the area. Maharana Pratap Sagar Lake (Pong Dam Reservoir) has been designated as RAMSAR, the Wetland of International im-

Punjab, Haryana, Rajasthan, HP, Chandigarh and some Common Pool consumers like old HP, National Fertil-

unit, including the wheeling charges. BBMB Hydro Stations are the main source of providing much needed support for quick res-

izers Limited Nangal, etc.

toration of the Northern Grid in case of any contingency arising out of grid disturbances. The Nangal Hydel Channel downstream of Bhakra Dam, which is the source for power generation through Ganguwal & Kotla Power Houses is continuously in op-

â?? In the year 1999 BBMB has been entrusted with the additional function of providing and performing engineering and related technical and consultancy services to states and other utilities.

Performance of BBMBProjects B.B.M.B operates six power houses consisting of 28 generating units with a total installed capacity of 2865 MW. Though, the generating units are quite old and have been in operation for the last about more than 40 years, thanks to the best maintenance practices being adopted, the performance of the machines has been excellent and in the range of 80 to 90%. The annual power generated through BBMB units has been in the range of 10000 MU to 14000MU. The cost of generation here is the cheapest in the country, which is 20 paise per

January - 2008

eration since its year of commissioning in 1954. Inspection, repair and maintenance of Nangal Hydel Channel is carried out online without any closure by adopting the best Operation & Maintenance practices. The first major river linking venture in the country, namely Beas-Satluj Link Project was constructed and commissioned by the Beas Construction Board which is now a part of BBMB. This project is the best example of most optimum utilization of water resources wherein the diverted water of Beas River is utilized for power generation twice, first in Dehar Power House before joining Satluj River and subsequently in Bhakra-Nangal Project.

portance in 2002. More than one lac migratory birds of about 220 species visit this lake every year. Jatropha tree plantation on about 300 hectares of vacant land has been undertaken at Talwara to harness bio-diesel energy which will also provide an example to other utilities in the area to adopt and promote similar initiatives towards environment preservation and reduction of global warming. The management and regulation of Ravi, Beas & Satluj rivers have enormously contributed towards achieving flood control and land reclamation in this area. Flood has been the largest natural calamity for humanity in India. Bhakra and Beas dams have totally eliminated the occurrence of floods in the plains of the Satluj and Beas rivers. By controlled releases in the rivers, vast tracts of land along the sides of the rivers have been reclaimed by the farmers mainly for agriculture. Prior to existence of BBMB Projects, most of Southern Punjab, Haryana and adjoining Rajasthan areas were facing frequent famines. Now BBMB projects have completely saved this region from famine conditions. â&#x2014;&#x2020;

January - 2008

A KPMG Report

Renewable Energy Sources (RES) are an important element of Indiaâ&#x20AC;&#x2122;s power policy aimed to meet the power needs of remote areas in an environmentally friendly way. India is the first country to have a dedicated ministry for developing and promoting nonconventional energy sources in the country (MNRE).

January - 2008

ertain forms of renewable energy sources (such as wind energy, small-hydro and biomass) have already been able to establish a strong presence. In response to the policy and incentives extended to the participants, there is a strong participation seen from the private sector. One such example is the fact that a significant share of the wind-power based generation capacity has been set-up by the private sector.

Policy and Regulatory Framework Some of the key legislative, policy and other measures initiated by the various stakeholders for promoting RES are: ❐ The Electricity Act provides for State Commissions to fix a minimum percentage for purchase of energy from renewable energy sources. Some of the State Commissions have already initiated measures in this direction ❐ The policy recognizes that renewable sources of energy should

The major issues currently being faced by the renewable energy sector are :

be offered a preferential tariff till the time that technologies evolve when they can compete with other conventional sources of electricity generation

❐ High capital costs and low plant load fac-

❐ The policy encourages generation and distribution of electricity

tors make renewable energy more expen-

in notified rural areas without any need for obtaining a licence

sive. Given the heavily subsidised nature of electricity in the Indian context and the poor financial condition of the State Governments, the ability to absorb the higher cost of renewable electricity is a major concern. However, technological evolution in renewables and the huge power deficit in the country

from the State Electricity Regulatory Commissions

has meant that power utilities are actively looking towards renewables to complement their supply ❐ Regulatory certainty on tariff and other conditions of power procurement will continue to remain crucial for maintaining private sector interest in this area ❐ Adoption of renewable energy technologies in certain cases may lead to increased competition for land-use which will need to be managed whenever usage of such technologies becomes more wide spread ❐ In some instances, the capacity of the transmission network has also been seen to be a constraint in power evacuation. Lack of grid presence in remote areas, where renewable energy opportunities may be distributed, hence becomes an issue of debate

❐ The policy encourages generation and distribution of electricity in notified rural areas without any need for obtaining a licence from the State Electricity Regulatory Commissions The current installed capacity of around 9,220 MW constitutes about per cent of India’s total installed generation capacity. And given the fact that only a small percentage of it has been utilized, it offers an exciting opportunity for various participants, including generator and equipment manufacturers, to explore and establish a strong presence. ❐ India ranks 4th in the world in wind energy potential. High demand coupled with supply constraint has meant that turbine prices have been rising sharply. This has generated interest amongst some new entrants in this space. Technology access and availability of wind sites is going to be important for new entrants. India could also emerge as a manufacturing hub for some components for turbines ❐ The other area to be keenly watched out for is the Solar Energy space. Technological evolution has meant that, globally, costs of electricity generated by solar PV have been coming down significantly. Moreover, some players are viewing India as a manufacturing hub for export oriented businesses. As the cost of RES Potential power generation comes down further, India itself could emerge as a huge market for solar energy; given the high solar incidence in India and the need to electrify vast remote off-grid areas. Government support in form of subsidy will play a crucial role because, unlike in developed countries, the trend would be

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A KPMG Report

India has an enormous potential of renewable energy across the various sources as indicated RES

Potential

Existing Installed Capacity*

Wind

45000 MW

- 619031 MW

Small Hydro (upto 25 MW)

15000 MW

- 1850 MW

Biomass power /cogeneration

19500 MW

- 950 MW

Solar Photo Voltaic Power

50,000 MW (20 MW/sq.km)

- 30 MW Very low exploitation.

Solar Water Heating

140 million sq. m collector area

1.5 million sq. m collector area

Urban and Industrial Waste-based power

70000 MW

-34.95MW.

Biogas plants

12 million

3.8 million

Improved Biomass Chulhas (Cook-Stoves)

120 million

35.2 million

Source: MNES Website

towards remote off-grid applications where affordability is likely to be an issue ❐ Potential for biomass based power generation is huge due to the vast agricultural base. But for this sector to show significant growth, innovations in fuel supply chain is crucial. Sourcing of agricultural residues and wastes and optimising the logistics cost are the dual requirements for growth of this sector ❐ Potential for small and mini-hydel (defined as less than 25 MW) is also large and is mainly confined to the hilly states of the north and north-east part of India. Knowledge of local situation and access to good sites are needed to minimise the risks.

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❐ The final growth area is in the area of bio-fuels. The government is actively encouraging bio-diesel and ethanol. Norms for ethanol blending have already been announced. In order to promote plantations for biodiesel, various State Governments have announced the availability of land at discounted rates. Bio-diesel based on jatropha plantation is being experimented in some states. In the recently announced Union Budget, exemption was also provided from certain indirect taxes for bio-diesel. Fiscal benefits combined with the minimum blending requirement should give bio-fuels the required policy impetus. The oil majors have already announced their intentions of entering this space.◆

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erendipity has a certain magic, often. History reveals, and contemporary events confirm, that chance decisions or incidents can lead to a revolution or a even evoke an idea that can change fortunes. XL Telecom and Energy Ltd met with such a chance when they entered the solar photovoltaic module and today it is one of among the top companies of the country in the business.

PHOTO BY M RAGHUNATH

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Dinesh Kumar, Managing Director, XL Telecom and Energy Ltd

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ith a current capacity of 46 MW, which is expected to be ramped up to 80 MW by June, 2008, XL Telecom & Energy Ltd is staring at a robust growth in terms of capacities as well as revenues. Having touched Rs 500 crores in

us the raw material for Ethanol and we also have a 40 MW module manufacturing plant. We are adding a cell line of our own which will be starting in the Hyderabad SEZ from June-July 2008,” said Dinesh Kumar, Managing Director, XL Telecom & Energy Ltd.

stand alone systems for their rural exchanges, purely believes in exports. According to Kumar, India is nowhere on

After implementation of its project, the company is looking at crossing a turnover of Rs 1,100 crores by year 2009. XL Telecom & Energy Ltd. is also eyeing Rs 1,100 crores

the map when it comes to the solar sector. “It is very sad considering that we have all the requirements of becoming a major solar power generating country, but there are many major obstacles. We even have the benefit of more Sun days than in comparison to anywhere in Europe. However there

expansion over the next 5-6 years.

surely is a lack on the implementation front.

It became a public limited company in 1990

“The solar industry is not only capital intensive, but the plants required to manu-

We do concentrate on the domestic market through our other energy profile, the

and in 1995 it started its first energy plant

facture the solar product are also capital

ethanol business. There is a huge scope for

XL Telecom & Energy Ltd, which entered into the PV module purely by chance after BSNL & DoT called tenders for supply of PV standalone systems for their rural exchanges, purely believes in exports. According to Kumar, India is no where on the map when it comes to solar sector.

intensive. After that the next stage would

exports but there is too much requirement

be to manufacture wafers and each plant would typically cost $300-500 million. So depending on how successfully we implement the project and how well we can envision the next move will necessitate us to making such an investment,” said Kumar.

of ethanol in the country,” he feels.

terms of turnover last year, the company hopes to touch Rs 700 crores this year. Started as a telecom in 1985, XL Telecom & Energy Limited was incorporated in Hyderabad as a private limited company in 1985.

for manufacturing of stand-alone Photovoltaic (PV) plants for the telecom sector. Slowly and steadily, the company setup its first Ethanol plant in Maharashtra in the year 2002. “Subsequently we grew it up in various stages. We have a distillery which provides

January - 2008

As on date, the company already has orders on hand for Rs 300 crores and for another Rs 350-400 crores, it has already placed its offers with various installers and they are in various stages of being finalised. “So in the next 2-3 months, we should have them closed to be able to implement it partly in this financial year, and the balance in the next,” said Kumar. XL Telecom & Energy Ltd, which entered into the PV module purely by chance after BSNL & DoT called tenders for supply of PV

As mode of expansion, XL will be looking at private equity investments because the level of investments it is looking at is huge. “The business is scalable and they will be going ahead with a lot of private equity interest into our aforesaid businesses for obvious reasons. We may have to cull out different companies representing different businesses which we represent and then we will see more private equity interest in any specific area which they would like to invest in. That would be the way ahead as far as the expansion procedure is concerned,” said Kumar. XL is looking at Bio-diesel as a brilliant potential area along with Fuel cells for the future. ◆ 66

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A KPMG Report

As per the Constitution of India, â&#x20AC;&#x2DC;electricityâ&#x20AC;&#x2122; falls within the concurrent jurisdiction of the Centre and the States. In most states in India, the sector consists of vertically integrated State Electricity Boards - most of which are now unbundled into Generation, Transmission and Distribution companies which continue to be state-owned.

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n a few States, private licensees for power distribution are also in opera tion. Currently only 10.6 per cent of the total installed capacity is in the private sector. Distribution is privatised in the state of Orissa and some cities such as Delhi, Kolkata, parts of

Key Issues Facing the Sector

Mumbai, Ahmedabad and Surat in the western state of Gujarat.

Governmentâ&#x20AC;&#x2122;s involvement in functioning of the power utilities. This combined with inadequate compensation to the power utilities, led to the degradation of the financial position of the state government.

Socio-Political Influences Over the decades, the power sector in India has become an instrument for implementation of State Governmentâ&#x20AC;&#x2122;s social policies. It is characterized by heavy subsidies, mostly poorly targeted, and State

Demand Supply Position and ExHigh level network losses pected Trends The projected elasticity of electricity w.r.t. GDP is 0.95. With this, the growth rate in electricity consumption is expected to be 7.6 per cent. The per capita consumption presently stands at 606 kWh (2005), far below the world average of 2,429 kWh. At an 8 per cent GDP growth, the per capita consumption of India is estimated to be 2,643 kWh in 2032, which is just comparable to the present day world average. With an installed capacity of 123 GW, the country currently faces energy shortage of 8 percent and a peak demand shortage of 11.6 per cent. In order to sustain a growth rate of 8 per cent, it is estimated that the power generation capacity in India will have to increase to 306 GW in the next ten years which is 2.5 times current levels.

The power utilities in India suffer from a very high level of network losses of as much as 30 to 40 per cent largely due to theft, pilferage and non-collection of dues and also due to the state of the network involving long low voltage lines. Non-realization of revenue for power generated has led to the financial degradation and spiral of worsening performance. High level financial losses Due to the reasons mentioned above, the power sector in India suffers huge financial losses to the tune of USD 6 billion per annum. These losses have accumulated over time and resulted in inadequate financial resources for capacity augmentation. Inadequate Generation and Transmission Capacity Inadequate resource generation for investments has led to generation capacity shortfall of over 15 per cent. The poor financial resources of the SEB leads to their poor capacity for escrow and this acts as a major constraint for attracting private capital. Payment security mechanisms for private players have been difficult to provide on account of the financial situation. Likewise, inadequate transmission capacity in the country has led to a situation where regional surpluses remained unutilized to meet deficits elsewhere. Poor Quality of Supply Inadequate generation capacity and the poor quality of the distribution network have resulted in poor quality of supply. Supply is characterized by planned and unplanned interruptions and deviations in voltage and frequency from prescribed parameters. There has been some improvement in these parameters in recent years owing to penalties for deviationsand incentives for utilities. Lately, availability of fuel for power generation is becoming a significant constraint. Coal shortages are increasing and gas shortages are leading to a situation where plants are not able to operate to full capacity.

January - 2008

A KPMG Report

❐ Open access on common carrier principle is allowed on transmission networks and is being phased in on distribution networks. This enables competition in procurement of bulk power as well as in retail supply to large consumers who will soon be able to contract supply on their own. There are issues related to cross-subsidy surcharge in retail supply which is a surcharge payable by the supplier or consumer to the incumbent to compensate for loss of cross subsidy. The National Electricity Policy lays down

for power planning for the country and ac-

Policy and Regulatory Frame- cording approvals for large hydro projects. work Electricity being a concurrent subject under the Constitution of India, a Central level as well as a State level jurisdiction is in place. The policy framework now hinges on bringing in competition, private sector participation and independent regulation (especially attempts bringing in independence from Government interference in state owned utilities). There is also a new emphasis on rural electrification under the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVN). The regulatory system now consists of a Central Electricity Regulatory Commission (CERC) regulating all matters pertaining to more than one state, State Electricity Regulatory Commissions (SERC) for matters within a state and an Appellate Tribunal (being the higher court of appeal against the two regulators). In addition, there is a Central Government authority – the Central Electricity Authority (CEA) responsible

January - 2008

The legislative framework is governed by the Electricity Act, 2003. This along with subsequent policies including the National Tariff Policy, the National Electricity Policy and the Rural Electrification Policies defines the policy landscape. With the growing maturity of the India power sector and also growing realization by the Indian power utilities a number of elements of the new act are getting operational. The main enablers for competition are: ❐ All new generation in private sector has to be contracted through competitive bidding and even in case of public sector the same should be done in five years time. Regulated pricing applies only when competitive bidding has not been adopted. A number of states have initiated the bidding process from the private sector for long term procurement of power through competitive bid process using price as the basis of determination of suppliers.

that the amount of crosssubsidy surcharge should not be so onerous that it eliminates competition which is intended to be fostered in generation and supply of power directly to the consumers through open access. ❐ Provisions for parallel competitive distribution networks in existing areas are made. However, parallel networks are likely to come up only in areas where the existing network is in very poor state and the consumer profile is very favourable. Draft Report of the Expert Committee on Integrated Energy Policy, December 2005

Year

Energy Installed Req. Cap. Req. (GW)34 (BillionkWh)35

2003 - 04

131

633

2006 - 07

153

761

2011 - 12

220

1097

2016 - 17

306

1524

2021 - 22

425

2118

2026 - 27

575

2886

2031 - 32

778

3880 70

The national tariff policy now also requires reduction of cross-subsidies in tariffs and bettering the target of Government subsidies. The policy allows 100 per cent FDI in generation (other than atomic reactor power plants), transmission, distribution

The Government has also intitiated the setting up of ultra mega power projects (projects of size greater than 4,000 MW). The concept involves a Government agency doing the preparatory work related to land acquisition, environmental clearances etc.

increased transmission capacity, opening up of new market for industrial/ high value consumers through open access., power trading and efforts to create a power exchange. Based on Governmentâ&#x20AC;&#x2122;s plans, by 2012, a capacity addition of 76,460 MW has

and trading. There is no limit on the project cost and quantum of FDI.

and then awarding the projects to private developers on a competitive basis. The bidding process of two of the UMPPs Sasan and Mundra based on domestic and imported coal respectively has led to a new and much lower price discovery for longterm power contracts. Bidding process for

been identified through the public and private sectors.

The India Opportunity Generation In generation segment, opportunities exist due to the large demand-supply shortfall. A number of private projects have come up

in recent times. While most of the generation would be sold through long-term contracts, there is a policy focus on enabling open access that would allow generators to sell directly to large consumers. In the bulk power market too, short-term prices of power have risen steadily and sharply reflecting the demand supply position. This and the evolving power trading market will give an impetus to merchant plants. We are beginning to see instances of merchant plants coming up in the country.

four more UMPPs is expected to be conducted by the end of 2007.

Generators can also take up coal mining for captive use. These measures along with fiscal concessions for large generation projects such as waiver of customs duty make this a very attractive opportunity. The opportunity for generators appears to be brighter than what it was earlier. This is substantially different from the approach adopted in the 1990s IPP policy. The present policy is focusing on the entire value chain - a focus on improving the health of existing distribution segment including a push for franchising, interlinking of Grids,

Transmission Private investments in transmission can be through Independent Power Transmission Company (IPTC) or a Joint Venture Company (JVC). Under the IPTC route, the private promoter will have 100 per cent own-

ership, whereas, in the JVC route a minority holding will reside with the state owned Central Transmission Utility (CTU) viz. PGCIL. Both forms of private participation are envisaged in the creation of the National Grid along with the CTU. The required capital outlay for this purpose is around USD 4.4bn. There are issues relating to payment security and obtaining right of way (ROW), environmental clearances, etc. that need to be addressed to promote private investment.

January - 2008

A KPMG Report

In the immediate future, distribution franchising seems to be the way out to bring in the private sector players. The successful handover of a circle in the state of Maharashtra to a private player is a welcome development. The challenges for making distribution franchising a success are the following: ❐ The distribution area needs to be packaged, in terms of the load profile and consumer mix, such that good players in private sector are interested ❐ Due diligence is done to ensure that the baseline data is reliable and saleable ❐ Improvement trajectories are well de-

Formation of the National Grid is a plan for strengthening of the inter-state and interregional transmission network that will enable unrestricted flow of electricity across regions and enable development of a deep electricity market in India. The new approach to bring in private sector investment in transmission was taken on the lines of Ultra Mega Power Project where two shell companies have been promoted by REC and PFC. The shell companies will take all the clearances and the project will be awarded to the transmission service provider (TSP) based on tariff based competitive bidding process. Currently, the EOI stage has been reached and the final bids for these projects are expected in next few months. If this is successful, many other transmission projects may be put up on the same lines.

expected level, the recent policy initiatives provide adequate signals in terms of attractiveness of this segment for private investment. The Act provides for parallel and second distribution licensee in the same area of supply, which enables setting up parallel distribution lines (and arguably more efficient ones) in specific areas. Privatization of existing distribution utilities is possible, though good opportunities are few owing to the large risks involved. Till risks related to measurement of operational parameters such as losses (due to inadequate metering), regulatory risks (due to relative immaturity and lack of sufficient independence from Government), information risks (state of assets in the ground) and political risks (preventing cost reflective tariffs) are not minimized, the privatization opportunities may be limited. However, privatization of urban areas might

Distribution While the experience of private participation in this segment has not been to the

January - 2008

be a possible opportunity in the future as also opportunities related to franchising of certain distribution operations.

fined to ensure that the commercial and technical improvements brought in by the franchisee are in line with the international standards Trading Power trading volumes in India, though small, have been growing steadily over the years. Investment opportunities arise due to the following: ❐ Open access in transmission and distribution networks will facilitate trading and enable direct sales to large consumers. However, to be specified by the Commission ❐ The policy of allowing 100 per cent FDI in power trading will result in entry of foreign players in the trading market and the depth and maturity of the market will increase. ❐ While inadequate transmission is a constraint at presence, efforts of the Government to enhance transmission capacity including inviting private participation and setting up of National Grid are expected to address this.

❐ There is an emerging trend of new private generators selling power to traders rather than financially weak distribution utilities. Traders are in a better position to manage risks relating to payments and demand uncertainties. Besides, with rising short term prices of electricity, traders have the potential to earn larger returns. However, there are issues relating to regulating trading margins which are the current subject of much debate. ❐ The issue of guidelines by the Central Regulator and efforts to set up the power trading

exchange will go a long way in maturing of the Indian power trading market and will assist in bringing in the required depth, transparency and structure to the market.

ducing carbon emissions and therefore, part of the investments can also be financed through the Carbon Credits generated. Some of the aspects which need attention in order to encourage energy efficiency (EE) are: ❐ Incentivising investment in EE by the utility by allowing them to keep the savings achieved on EE for any investment made by the utility ❐ Developing novel financing mechanism for funding EE for EE for energy service companies ❐ Developing consumer awareness and making EE labeling mandatory for all high energy consuming equipments.

❐ Setting of the load research centers with the regulators so that load research can be carried out, if possible, at the equipment level in a most scientific manner. Equipment manufacturing

Energy savings and Demand Side Management A study for the Asian Development Bank (ADB, 2003) estimated an immediate market potential of energy saving of 54,500 million kWh (which is 16 per cent of the total demand) and peak saving of 9,240 MW. This has an investment potential of over USD 3 billion.

The growth needs implies growing demand for generators, lines & equipment, meters, etc. While it is estimated that the existing manufacturing capacity in the country can support addition of about 6,000 MW of capacity, the future requirement is 15,000 MW every year for the next 10 years. ◆

Additional savings are possible by reduction of auxiliary consumption in generation plants. Investment in this area is also likely to aid in re73

January - 2008

D.Jai Ramesh, Chairman, Vijai Electricals

January - 2008

tarting a business from scratch during one of the most controversial periods in the history of independent India, then steering it through its many ups and downs amidst political hiccups, recession and a financially poor consumer, Vijai Electricals has withstood the test of time. It has transformed itself into a power to reckon with, literally.

PHOTO BY M VIDYASAGAR RAO

January - 2008

ndia in the 70s was not a particularly great time for an entrepreneur, with the emergency, strained relations with the US, the war with Pakistan, amonst other problems like population, poverty, food shortages and related negative spin-offs.

such as Bangladesh, Cyprus, Philippines, Vietnam, Zimbabwe, Nepal, Ghana, Brazil, Saudi Arabia, UAE etc. and its products have been inspected and accepted by several reputed third-party inspection agencies like Crown Agents, Lloyds Bureau, Veritas,

projects & Distribution projects. “We are an integrated manufacturing company, which makes all equipments, as well as a Projects Company. We construct electrification lines for villages, construct transmission lines and construct sub-stations,” says

But courage is something that ignores impediments and focuses on the ultimate goal. This was the courage that shone in the personality of a technocrat, fresh from college with just a few months of training.

S.G.S. Robert, W.Hunt Company, Bsi Inspectorate Griffith UK, OMIC Japan, Tubescope Vecto GmbH Germany and such like. The company also has a plant in Brazil and an upcoming one in Mexico. In India, it has a complex in Hyderabad, a transformer factory in Haridwar, a Conductor plant in

Ramesh. The company also tries to bring innovation around the transformers. The company now manufacturers ‘Completely Self Protected transformers’ with an inbuilt circuit breaker within the transformer, which protect the windings against short circuits. Amorphous metal transformer is

Kodagu and a huge plant in Rudraram near Medak, Andhra Pradesh where it manufactures Single Phase Distribution Transformers, Medium Range Distribution Transformers, Small Power Transformers, Dry type

another innovation with a new material and Delta core transformer is one where 10% of the core in weight can be reduced.

For D.Jai Ramesh, now Chairman of Vijai Electricals, 1973 saw the beginning of a successful but tumultuous journey. Being adept at transformer designs, he started his first transformer manufacturing plant. Like any other start-up, his company too had its initial struggles but with time he thrived. “In the last 35 years, we have come a long way. We had loads of bad periods. 1989-90 and 1997-2000 in particular were pretty bad because of the initial recession and the general financial crunch from the customer angle. But from 2001 onwards, the power sector took off well. So in order to meet this emerging demand, we invested Rs 500 crore in capital outlay much earlier than any of our other colleagues. We saw the opportunity much earlier. In the process, our company has also been engaged in energy saving products, which was also realised by us ahead of time considering the high cost of power. So for the last 20 years we have been involved in high voltage distribution system from the time when small capacity single phase transformers were being manufactured in 1987-88,” says Ramesh. Vijai Electricals is today one of the largest manufacturer’s and exporter’s of transformers up to 10000 kVA, 66 kV Class in India. Substantial percentages of its sales are constituted by exports. The company has exported transformers to countries January - 2008

We are an fully integrated manufacturing company, which makes all equipments, as well as a Projects Company. We construct electrification lines for villages, make transmission lines and construct sub-stations Cast Resin Transformers, Pad Mounted Transformers and Corrugated Tank Transformers. “Vijai Electricals is the first in India and one among the very first and also the largest in the world in manufacturing amorphous metal transformers, which are energy efficient transformers giving plenty of benefits to the customers and we are trying to popularise it as much as possible in the country,” says Ramesh. The company which was only into distribution until the year 2000, is now also into Transmission distribution. It makes EHV (Extra High Voltage) transformers and EHV switchgears – like circuit breakers. Vijai Electricals is now also into Transmission

Commenting on the quality of transformers currently in the market, Ramesh says that the transformer industry has been going through phases in terms of quality of manufacturing as such. “In the 90s when Narasimha Rao government has to liberalise the economy, they also had to allow the import of second-hand raw material for transformers, notably magnetic steel laminations which were then allowed to be freely imported. People started to get these raw materials and manufacture transformers as a result of which the quality suffered badly. There were a lot of distribution losses. It was only sometime back that a few states like Maharashtra, Rajasthan, Gujarat and Haryana woke up and blacklisted many manufacturers. The turnaround phase started in 2002-03. With exports on the high, manufacturers were bound to maintain high standards.” Having ensured high quality since inception, Vijai Electricals’ growth over the years is evidently reflected in its turnover, which were once Rs 80 crores in the year 200001. Last year the company had a turnover of Rs 1,350 crores and it is looking at touching Rs 5000 crores by 2009-2010. ◆ 76

January - 2008

The thirst for perfection never ends in a few cases. It is a thirst to achieve impeccable results above normal excellence. A few tread the route to quench this thirst. Many retire half way, thirsty. Few move on, struggling with the world, crossing hurdles, fighting self to finally reach their goal of perfection. Esennar Transformers is one company which is treading this journey of perfection and in all probability will quench its thirst for perfection and superiority. PHOTO BY M VIDYASAGAR RAO

A Sridhar Reddy, Managing Director, Esennar Transformers (P) Ltd.

January - 2008

line. “We manufacture all ranges from 250

factor is a very big issue. There are no in-

kVA to 10,000 kVA,” said Reddy.

digenous manufacturers,” said Reddy.

An ISO certified company, it follows a strict quality assurance process and at every stage of manufacturing, the transformer is

Another big challenge which the transformer industry currently faces, according

sight he now finds it worth every sweat.

inspected. “During the manufacturing process, the transformers go through ratio and phase angle error test and vector group test before connections are brazed. It is also checked for magnetic balance. Before dispatch, all transformers are tested at speci-

cuit and impulse test. “It is basically a destructive test so as to check how a transformer behaves in the worst scenario. Only few agencies undertake the test and CPRI– Bangalore and Bhopal are the main agencies. To get a date however for the testing

fied pressure to ensure leak proof joints. Ours is the first transformer company to get an ISO Certification,” said Reddy.

is very difficult and I have to wait for about two-three years for a test,” said Reddy.

Esennar’s current focus is on the domestic market essentially because of the huge demand within. Its main market is Andhra Pradesh while it does supply to all states of the country. “The domestic demand is very high. We are unable to cater to the

lenge which the industry is currently facing. With all the top end players already overloaded and even small time players booked for the next 6-7 months, the main challenge according to Reddy is to make use of the manpower to get the maximum out-

requirement of Andhra Pradesh itself because there is so much demand here. Everybody is overloaded,” said Reddy.

put so as to meet the demand. “A 400 kv class transformer takes nothing less than a year to manufacture,” said Reddy.

It is not all smooth sailing for the trans-

With the demand on a high and a minimal

The company currently manufactures a variety of transformers right from Step-up and step-down transformers, generator transformer, rectifier transformer, earthing transformer, windmill transformer, booster

former sector. The main challenge comes in the form of raw material availability. Raw materials include core, copper and oil. According to Reddy all of them are in short supply. “We have to import most of the material that goes into manufacturing of

supply, companies like Esennar are trying hard to keep pace. However for people like Sridhar Reddy, it is just another challenge which he is sure to overcome with time. After all he is treading a journey, not many dare to take. ◆

transformers and even special type transformers to maintain the capacitance of the

transformers. Most of the raw materials are controlled by the world market, so the price

aving a regular job, learning from

it, moulding it into future perfect knowledge, then harnessing an entrepreneurial acumen and eventually succeeding, makes the entire experience a worthwhile one. For A Sridhar Reddy, Managing Director of Esennar Transformers (P) Ltd., the journey was tough, but with hind-

Having started in 1999 and going into regular production in March 2000, Esennar embarked on the transformer manufacturing journey with an initial turnover of Rs 80 lakhs. Today, the company is growing rapidly and is currently on Rs 30 crores with the financial year yet to end. Last year the company did a turnover of Rs 34 crores. The company is now going for an expansion and is aiming at touching Rs 100 crores in the next four years. “Currently we manufacture 10, 000 kVA of 33 kv class transformers. With the expansion we will be upgrading ourselves, and will be manufacturing 50,000 kVA of 132 kv class in the new plant,” said Reddy.

to Reddy is a test called dynamic short cir-

The demand-supply situation is also a chal-

January - 2008

Ajay Jain, Managing Director, APGENCO

Andhra Pradesh Power Generation Corporation Limited

January - 2008

Turnaround tales can be awe-inspiring. It reflects a rare commitment and courage that is worthy of being etched in the pages of history. Andhra Pradesh Power Generation Corporation (APGENCO) is one such company which has shown a panache unseen in many PSUs by fighting back and reclaiming the lost mantle. With a burden of accumulated losses totaling Rs.256 Cr. during the last 3 years, it has earned a net profit of Rs.151 Cr. during 200607. It is now a profit making company with a net surplus of Rs.10 Cr!

PHOTO BY M. VIDYASAGAR RAO

PGENCO is surely an inspiration to many. Amid the perceived lethargy that is associated with many PSUs, it is one corporation which has shown the way ahead. The largest power generating

of its total power requirement, APGENCO is not only engaged in the business of generation of electricity from its own 5 Thermal Power Stations and 17 Hydro Stations but is also successfully executing operation

1x600 MW Kakatiya TPP stage-II, 1x500 MW Kothagudem Stage-VI, 2100 MW Gas Based Combined Cycle Power Project near Karimnagar, 2x800 MW Krishnapatnam Thermal Power Project, 2x25MW

company of Andhra Pradesh State with installed capacity of 6971 MW comprising 3382.5 MW Thermal, 3586.4 MW Hydel and 2 MW Wind power, APGENCO was established by the Government of Andhra Pradesh under the Andhra Pradesh Electricity Reforms Act 1998 on 1st February

and maintenance contracts for many others including 272 MW Gas Based Power Project in the joint Sector at Vijjeswaram and 4xl8 MW Alimineti Madhava Reddy Lift Irrigation Scheme.

Nagarjunasagar Tail Pond Project, 1x9 MW Pochampad HES Unit-4, 6x40 MW Lower jurala Hydro Electric Project, 12x80MW Polavaram HEP, 6x52 MW Dummugudem HEP and 5x40MW Singareddipally.

APGENCO is the third largest power utility in India and has the highest Hydel capacity & investment in the Country. As part of its capacity addition programme, APGENCO has drawn up the plans for massive capac-

Powered by a dedicated workforce of around 11,000 employees, APGENCO aims to be a 14080 MW Company by the end of XI Plan (2012).

1999 with the principal objective of engaging in the business of generation of electricity. APGENCO is one of the pivotal organizations of Andhra Pradesh with an asset base of Rs. 17,344 Cr., equity base of Rs.2, 117 Cr. and an annual turnover of Rs.4,300 Cr. Providing reliable and qualitative power to Andhra Pradesh, meeting more than 50%

ity addition of 8735 MW by constructing new power plants viz., 6x39 MW Priyadarshini Jurala Hydro Electric Project, 1x500 MW VTPS Stage-IV; 1x21 OMW Rayalaseema TPP Stage-III, 1x600 MW Rayalaseema TPP Stage-IV; 1x500 MW Kakatiya TPP stage-I,

According to Ajay Jain, Managing Director, APGENCO, the present installed capacity of the State is 12339 MW, out of which APGENCOâ&#x20AC;&#x2122;s installed capacity is 6971 MW (56.5%). He says, â&#x20AC;&#x153;2963 MW (24.0%) is from the Central Sector and 2405 MW (19.5%) in the Private Sector including Non

January - 2008

sanctioned by PFC, REC and other Financial Institutions. The budget estimate 200708 has been revised to Rs.3027 Crs. as additionality, with no Plan provision since neither central nor State Government gives any budgetary support for the company. The budget estimate 2008-09 is Rs.3430 Crs. as additionality,” said Jain.

VTPS

Conventional Energy sources. APGENCO operates 5 Thermal Stations and 14 Hydro Power Stations besides number of Mini Hydel Stations. Out of the total installed capacity of 6971 MW, 3382.5 MW is Thermal, 3586.4 MW is Hydel and 2 MW is from Wind Power. APGENCO is the third largest generation utility in the country next to NTPC (27904 MW) and MAHAGENCO (10054 MW). It has the highest hydro capacity (3586.4 MW) in the country, more than KPCL (3376 MW) and NHPC (3163 MW) and is contributing 50% of energy to the AP State grid requirement. APGENCO generated the highest energy of 31401 MU during 2006-07 since inception and also generated the highest daily energy of 124.33 MU on 20th August 2007 apart from generating the highest daily thermal generation of 74. 76 MU on 24th November 2007 since inception. It generated hydel energy of 53 56 MU in

2004-05, 8005 MU in 2005-06, 9351 MU in 2006-07 and 7112 MU till 31st October 2007 in 2007-08.” APGENCO has received wide recognition for its activities. It has won 5 awards (1 gold, 2 silver and 2 bronze) from the Prime Minister on 21st March 2007 for outstanding performance of Kothagudem Thermal Station, Rayalaseema Thermal Station & Upper Sileru Powerhouse for 2004-05 and Vijayawada Thermal Station & Upper Sileru Powerhouse for 2005-06. It contributed considerably to the AP power sector in getting No.1 rating by CRISIL in the country for the last three years. It is one of the pivotal organiszations of Andhra Pradesh with an asset base of Rs.17,344 Cr., equity base of Rs.2,117 Cr. and annual turnover of Rs.4,300 Cr. “The annual plan for the budget estimate 2007-08 is Rs.2033 Crs. out of which the plan provision is Rs.29 Crs. The balance is

APGENCO’s flagship unit is VTPS (Vijayawada Thermal Power Plant). VTPS is one of the major Thermal power stations of APGENCO with installed capacity of 1260 MW, comprising 6 Units of 210 MW each. VTPS is set as a Model Power Station for all other thermal stations in the country for its continuous sterling performance. It has been the continuous recipient of Meritorious Productivity Awards instituted by the CEA, for twenty-one consecutive years and Incentive Awards for twelve consecutive years. By achieving the highest Plant Load Factor, VTPS stood First in the country during the years 1994-95, 1996-97, 1997-98 and 2001-02. It bagged Gold medals for 2003-04, l0th time in a row since 1994-05 and also received meritorious performance award for the year 2005-06 as well as the prestigious ISO 9001-2000 Certification for Quality Management System. Its Unit-3 has established a National Record of continuous service for 441 days from 14th December 2004 to 28th February 2006, surpassing the previous record of 405 days achieved by the 500 MW unit of NTPC.

Comparison of APGENCO Thermal Stations PLF (%) with National average & NTPC 2002-03

2003-04

2004-05

2005-06

2006-07

APGENCO

88.9

86.0

89.7

79.9#

85.0

NTPC

82.4

83.9

87.3

87.4

89.3

All India

72.3

73.0

74.8

73.7

76.8

# Backing down of generation is 1863 MU. Otherwise PLF would have been 87.1 %.

January - 2008

A 500 MW unit is presently under construction under VTPS Stage-IV, as an expansion to the existing 1260 MW station, and is scheduled to commission by July, 2008. “The current capacity of VTPS is 1260 MW and it is proposed to add 500 MW Unit, which is under construction and likely to be 82

Three units of 9 MW capacity were installed and commissioned during 1987-88 at a cost of Rs. 30 Crores to utilize the water release of 6600 cusecs into Kakatiya canal. The irrigation authorities have increased the discharges in the canal under stage-II SRSP

Energy Generation: FY 2006-07

FY 2007-08*

Target

Actual

Target

Actual

(MU)

Achievement

(MU)

Achievement

Thermal

23156

22066

95.3

17455

14733

84.4

Hydel

7575

9335

123.2

5653

7541

133.4

Total

30731

31401

102.2

23108

22274

96.4

* up to 30 Nov, 2007 commissioned on August, 2008. 16 new power projects of total capacity 8735 MW have been taken up by APGENCO at an estimated cost of Rs.34746 Cr. These include Vijayawada Thermal Power Project StageIV (500 MW), Kakatiya Thermal Power Project Stage-I (500 MW), Nagarjunasagar Tail Pond Hydro Electric Project (50 MW), Priyadarshini Jurala Hydro Electric Project (234 MW), Pochampad Hydro Electric Project (9 MW), Kothagudem Thermal Power Project Stage-VI (500 MW), Rayalaseema TPP Stage-III Unit-5(210 MW), Pulichintala Hydro Electric Project ( 120 MW), Krishnapatnam (1600 MW) Super Critical Thermal Power Project, Lower

two on the right flank, south to the Dam called Kakatiya and Laxmi canal and one of the left flank, north to the dam called Saraswathi canal. The Sriram Sagar project at Pochampad was constructed as multi purpose Project and provision has been made to generate 36 MW (4x9MW) power by providing four penstocks in the right flank of non-over flow portion of the dam during construction of the Dam by the irrigation Department of Andhra Pradesh.

and the discharges are being maintained from 7200 cusecs to 9000 cusecs during last two years by raising the canal bunds and strengthening the lining of canal. To make use of the additional release of water into the Kakatiya canal it has been proposed to install a 4th unit of 9.0 MW capacity at an estimated cost of Rs.27.75 crores (Including IDC). By installing the 4th Unit additional energy of 16.5 M.U per annum can be generated. The project is programmed to be commissioned by November, 2008. This is the first Hydro Electric Station in India that is equipped with a sophisticated micro processor based control system for single push button operation. The generators are also designed to run as synchronous condensers to improve the voltages of the area. â&#x2014;&#x2020;

Jurala (240 MW), Rayalaseema TPP StageIV Unit-6 (600 MW) among others,â&#x20AC;? said Jain.

Sriram Sagar Project The Sriram Sagar Project is located across river Godavari in Balkonda Mandal, Nizamabad district about 200 KM from Hyderabad. The Dam is designed for a maximum flood discharge of 16 Lakh Cusecs with a spill way length of 25 I 0 feet. The storage capacity of the reservoir is 82TMC between full reservoir level of 1091 feet and minimum draw down level of 1064 feet providing irrigation to 5,70.000 Acres through a net work of three main canals, 83

January - 2008

Annual Report - MoP 2006-07

GOVERNMENT OF INDIA

January - 2008

The Ministry of Power is primarily responsible for the development of electrical energy in the country. The Ministry is concerned with perspective planning, policy formulation, processing of projects for invest ment decisions, monitoring of the implementation of power projects, training and manpower development and the administration and enactment of legislation in regard to thermal, hydro power generation, transmission and distribution.

he Ministry of Power started func tioning independently with effect from 2nd July, 1992. Earlier it was known as the Ministry of Energy comprising the Departments of Power, Coal and Non-Conventional Energy Sources. The Ministry of Power is mainly responsible for evolving general policy in the field of energy. The main items of work dealt with by the Ministry of Power is to develop the general Policy in the electric power sector and address issues relating to energy policy and coordination thereof. It also addresses all matters relating to hydro-electric power (except small/mini/ micro hydel projects of and below 25 MW capacity) and thermal power and transmission and distribution system network; provide research, development and technical assistance relating to hydro-electric and thermal power, transmission system network and distribution systems in the States/UTs; all matters relating to Central Electricity Authority, Central Electricity 85

Board and Central Electricity Regulatory Commission; and Rural Electrification. Power schemes and issues relating to power supply/development schemes/ programmes/ decentralized and distributed generation in the States and Union Territories; as well as address matters relating to Undertakings and Organizations like the Damodar Valley Corporation, Bhakra Beas Management Board, NTPC Limited, National Hydroelectric Power Corporation Limited, Rural Electrification Corporation Limited, North Eastern Electric Power Corporation Limited, Power Grid Corporation of India Limited, Power Finance Corporation Limited, Tehri Hydro Development Corporation, Satluj Jal Vidyut Nigam Limited, Central Power Research Institute and such like are also a significant part which is addressed by MoP. In all technical and economic matters, Ministry of Power is assisted by the Central Electricity Authority (CEA). The CEA advises

the MoP on all technical and economic matters. The Electricity Act 2003 mandates the Central Government to prepare an Electricity Policy in consultation with State Governments and the CEA. The Policy aims at accelerated development of the power sector, providing supply of electricity to all areas and protecting interests of consumers and other stakeholders keeping in view the availability of energy resources technology available to exploit these resources, economics of generation using different resources and energy security issues. Salient features of the Policy include; ❐ Access to Electricity: Available for all households in next five years. ❐ Availability of Power: Demand to be fully met by 2012. Energy and peaking shortages to be overcome and spinning reserve to be available. ❐ Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates.

January - 2008

Annual Report - MoP 2006-07

The scheme is being implemented through Rural Electrification Corporation (REC). Under the scheme, 90 per cent capital subsidy would be provided for overall cost of the project for provision of :❐ Rural Electricity Distribution Backbone (REDB) with at least one 33/11 kV (or 66/11 kV) substation in each block. ❐ Village Electrification Infrastructure (VEl) with at least one distribution transformer in each village/ habitation. ❐ Decentralized Distribution Generation (DDG) Systems where grid supply is not feasible or cost- effective.

❐ Per capita availability of electricity to be increased to over 1000 units by 2012. ❐ Minimum lifeline consumption of 1 unit/

partment. Delhi (2002) and Orissa (1999) privatized their SEBs. ❐ 100 per cent 11 kV feeder metering

household/ day as a merit good by year 2012.

completed in 23 States and 4 more States have achieved more than 90 per cent metering.

❐ Financial Turnaround and Commercial Viabil-

❐ 100 per cent consumer metering has

ity of Electricity Sector. ❐ Protection of consumers’ interests.

been completed in 8 States and 12 other States have achieved more than 90 per cent metering.

Since April, 2005, till 23rd February, 2007, 30562 villages have been electrified under RGGVY.

Generation Performance There has been significant improvement in the growth in actual generation over the last few years. As compared to annual growth rate of about 3.1 per cent at the end of 9th Plan and initial years of 10th Plan, the growth in generation during 2006-07 and 2007-08 (upto September, 2007) was of the order of 7.3 per cent and 7.6 per cent respectively.

Reform Status

RGGVY of Rural Electricity In- The electricity generation target for the ❐ All States have signed Memorandum of frastructure & Household year 2007-08 has been fixed at 710 BU comprising 572.194 BU thermal; 109.450 BU Understanding, Memorandum of Agree- Electrification ment & Tri- partite Agreements. ❐ All the States except Nagaland and Arunachal Pradesh have constituted notified State Electricity Regulatory Commissions (SERCs) and 21 SERCs have issued tariff orders. ❐ 13 States restructured corporatised State Electricity Boards and one State i.e. Tripura corporatised Electricity DeJanuary - 2008

Central Government launched a new scheme ‘Rajiv Gandhi Grameen Vidyutikaran Yojna (RGGVY) of Rural Electricity Infrastructure and Household Electrification’ on 4th April, 2005 for the attain-

hydro; 22.713 BU nuclear; and 5.643 BU import from Bhutan. See Table A. Table A

ment of the National Common Minimum Programme (NCMP) goal for providing access to electricity to all households in the country in five years.

100,000 MW Thermal Initia- tiative for development of coal based Ultra Mega Power Projects (UMPPs) in India, tive To accelerate the hydro power development, 50, 000 MW hydro electric initiative was launched by Hon’ble Prime Minister of India on May 24, 2003. Keeping in view the huge power generation capacity requirement, MoP/ CEA has proposed 1,00,000 MW environment friendly Thermal initiative. CEA has identified shelf of sites for thermal power projects totaling to more than 100,000 MW capacity. Large sites are being identified through studies by Central Mines Planning and Design Institute & National Remote Sensing Agency using remote sensing. Projects totaling to about 46,000 MW to be taken up during 11th Plan. Need for capacity addition during 12th Plan to be firmed up by the end of 11 th Plan.

each with a capacity of 4000 MW or above. These projects will be awarded to developers on the basis of tariff based competitive bidding. To facilitate tie-ups of inputs and clearances project specific Shell companies have been set up as wholly owned subsidiaries of the Power Finance Corporation Ltd. These companies will undertake preliminary studies and obtain necessary clearances including water, land, fuel, power selling tieup etc. prior to awarding the Project to the

National Hydroelectric Power Corporation Ltd. (NHPC) is a Schedule ‘A’ Enter-

Initially five sites were identified by CEA in five different states for the proposed Ultra Mega Power Projects. These include two pithead sites one each in Madhya Pradesh and Chhattisgarh and three coastal sites in Gujarat, Karnataka & Maharashtra. Subsequently, on the request of Govt. of Andhra Pradesh & Orissa, two sites one each in

for formulation and implementation of projects under the programme of accelerated electrification of one lakh villages and one crore households at low costs with locally available materials and having the ability to pay for themselves over

successful bidder.

Ultra Mega Power Projects. Sites are also

National Hydroelectric Power Corporation Ltd

prise of the Government of India with an authorized share capital of Rs.15,OOO Crore with an investment base of more than Rs.24,OOO Crore. NHPC has signed an MoU with the Rural Electrification Corporation Ltd. (REC)

Setting up of Ultra Mega Orissa (Pithead) and Andhra Pradesh (Coastal) were identified for setting up of Power Projects The Ministry of Power has launched an ini-

PUBLIC SECTOR UNDERTAKINGS & ORGANISATIONS UNDER MoP

a period of time.

According to Babu Singh, Power minister of Kashmir, an amount of Rs 19577.71 crores has been earmarked for the power sector under Prime Minister’s Reconstruction Plan and other centrally sponsored schemes, which include Rs 15617.87 crores being spent by various central agencies. Of this Rs 4907.00 crores are being spent under Prime Minister’s Reconstruction Plan on NHPC Hydel projects, Rs 700.00 crores under Rural Power Schemes, Rs 10.00 crores for 1000 Micro Hydel Project and Rs 2802.79 crores are being spent under the state sector.

January - 2008

Annual Report - MoP 2006-07

mechanism at central and state level, restructuring of the state power utilities, metering of feeders and consumers, energy accounting and auditing, securitization of outstanding dues of CPSUs. The Ministry of Power signed the MOU with states to undertake distribution reforms in time bound manner. 27 states (including Delhi), so far have either constituted or notified their regulatory commission and 21 states have issued tariff orders in the direction of rationalizing the tariffs. Now the states are moving towards Multi-Year Tariff, Time of Day Metering and intra state availability based tariff. Thirteen SEBs and one Electricity Department have been unbundled and corporatised.

Source

Central

State

Private

Total

Hydro

8742

4481

1170

14393

Thermal

12790

6676

5951

25417

Nuclear

1300

Total

22832

11157

7121

41110

All the states have securitized their outstanding dues towards CPSUs. Electricity Distribution has been privatized in Delhi and Orissa. At national level, 96per cent feeders and 93 per cent of the consumers have been metered so far. 100 per cent feeder metering have been achieved in 19 states.

Accelerated power developTamil Nadu (Coastal) based on requests MW from Renewable Energy Sources (RES) ment and reforms profrom the state Governments. It is proposed which has increased to 128182.47 MW as gramme being identified in Jharkhand (Pit head) and

MW hydro, 3360 MW nuclear and 6190.86

to set up pithead projects as integrated proposals with corresponding captive coal mines. On the request of the Ministry of Power, the Ministry of Coal has already al-

on 31.01.2007 consisting of 84149.84 MW thermal, 33941.77MW hydro, 3900 MW nuclear and 6190.86 MW from RES.

located captive coal mining block for Sasan UMPP in Madhya Pradesh and earmarked captive coal mining block for Orissa UMPP. For the coastal projects imported coal shall be used.

Installed Capacity The All India installed capacity of electric power generation stations under utilities was 124287.17 MW as on 31.3.2006 consisting of 82410.54 MW thermal, 32325.77

January - 2008

A Capacity addition of 41,110 MW has been targetted for the 10th Five year plan. See table below;

The Ministry of Power launched Accelerated Power Development and Reforms Programme (APDRP) in the year 2002-03 The status as on 31st January 2007 Number of Projects sanctioned

571

Distribution Reforms

Cost of projects sanctioned

Rs. 17033.58 Cr.

The Ministry of Power took various intiatives towards reforms and other policy measures for helping the state power utili-

Funds released

Rs. 6574.89 Cr.

Counter-Part funds tied up

Rs. 6468.72 Cr.

ties to bring improvement in their efficiency towards bringing about commercial viability in the power sector. Some of the major initiatives were establishment of regulatory

Counter-Part funds drawn

Rs. 4225.16 Cr.

Funds Utilized

Rs. 10152.06 Cr.

with an outlay of Rs. 40,000 crore as additional central plan assistance to the states during the 10th Five Year Plan. The objectives of the programme are as follows; ❐ Reducing AT&C losses ❐ Bringing about commercial viability in the Power sector ❐ Reducing outages & interruptions ❐ Increasing consumer satisfaction The programme has two components. Investment components : Under the investment component of the programme, funds are provided as Additional Central Assistance to the state Utilities through respective state Governments for the projects relatig to upgradation and strengthening of sub-transmission and distribution network (below 33kV or 66kV) for improving technical and commercial efficiencies of the utilities. In the beginning, assistance to the tune of 50 per cent of the project cost was being extended in form of 25 per cent grant and 25 per cent loan.

For special category states, the grant was 90 per cent and balance 10 per centas loan. However, on the recommendations of 12th Finance Commission, the loan component was discontinued from 2005-06. Now only 25 per cent grant is being provided to the general category states and 90 per cent to

Power Finance Corporation Limited (PFC)

the special category states since April 2005. The allocation of fund to the states was not based on state quota but on the basis of their preparedness towards reforms, preparation of projects and their implementation.

Incentive component Assistance under Incentive component was introduced to motivate the Utilities to reduce their cash loss as it was felt essential to integrate the investment programme in the distribution segment with an incentive mechanism linked to efficiency improvement. It was envisaged that it will help the Utilities to bring about commercial viability through improvement in billing and collection efficiency.

Dr. VK Garg, CMD, PFC The GoI incorporated PFC as a financial institution in order to finance, facilitate and promote power sector development in India with the President of India holding 100%of its equity share capital in escrow. In 1990, PFC was declared a public financial institution under section 4A of the Companies Act. As on 30th Sept 2007, its Cumulative Sanctions stood at Rs 1,55,379 crores, Cumulative Conditional Disbursements stood at Rs 82,410 crores. Its total assets were Rs 51,506 crores and networth was Rs 8,590 crores. “PFC is also contemplating to explore opportunities available in the area of private equity investment to bridge the last mile equity gap of Indian private power projects without diluting the management stake or control of the project developers. The overall objective of the initiative is to facilitate accelerated investment in the power sector through equity participation from a broader base of investors, earlier financial closure and faster drawl of loans due to timely availability of equity,” “PFC is operating through a lean but highly motivated manpower that generates more than Rs. 3 crore per employee profit” says Dr V K Garg, CMD, PFC.

January - 2008

Annual Report - MoP 2006-07

which 169 towns have broughtAT& C losses below 15 per cent. Similarly DT failure rate below 5 per cent has been reported by 215 towns, out of which 71 have reported up to 1 percent. The overall commercial loss (without subsidy) of the Utilities reduced from Rs. 29,331 Crore during 2001-02 to Rs. 22,126 Crore during 2004-05. Further, Utilities in the states of Andhra Pradesh, Goa, Himachal Pradesh, Punjab, Gujarat, Meghalaya, Chattisgarh and West Bengal reported profits during 2005-06. The States of Jharkhand, Madhya Pradesh, Haryana, Rajasthan, Uttaranchal, Karnataka, Kerala and Assam also reported The state utilities are incentivised up to 50 per cent of the actual cash loss reduction by them as grant. The year 2000-01 has been fixed as the base year for calculating the reduction of loss during subsequent years. Losses are calculated net of any subsidy & tariff compensation given by the state Government both in base as well as during the subsequent years. The revenue is considered on net realization basis only (increase in receivables is factored out). The Ministry appointed MIS CARE and MIS ICRA for independent secrutiny of the claims of the Utilities. Incentive for reduction of cash loss amounting to Rs. 1575.02 Crore has been paid to Andhra Pradesh, Gujarat, Haryana, Kerala, Maharashtra, Rajasthan, West Bengal and Punjab for showing cash loss reduction of Rs. 3618.30 Crore. The billing efficiency at national level has improved from 68.12 per cent during 200102 to 69.87per cent during 2004-05. Similarly, collection efficiency improved during January - 2008

the same period from 91.78 per cent to 94.72 per cent. Due to this improvement in billing and collection efficiency, the national average AT&C loss of the distribution companies has reduced from 38.18 per cent in 2001-02 to 33.82 per cent in 2004-05.

At present, inter-regional power transfer capacity of 11450 MW is available in the country. It is envisaged to increase the interregional power transfer capacity to around 37,000 MW by 2012. Further, based on provisional accounts for 2005-06, states of Andhra Pradesh, Goa and Tamilnadu have reported AT&C loss below 20 per cent during the year. Punjab and 2 DISCOMs of Gujarat (Madhya & Uttar) have reported AT&C loss in between 20 percent and 25 per cent during 2005-06. AT&C Losses have been brought below 20 per cent in 212 APDRP towns in the country of

reduction in their losses during 2005-06 in comparison to the previous year. The Ministry of Power constituted a Task Force headed by P. Abraham with members from utilities, regulatory commissions to assess and analyze the current efforts and to suggest restructuring of the programme to achieve the objectives of APDRP during the 11th Plan. The report has been submitted by the Task force and is under consideration of the Ministry.

Formation of National Grid Formation of strong National Power Grid has been recognized as a flagship endeavour to steer the development of Power System on planned path leading to cost effective fulfillment of the objective of â&#x20AC;&#x2DC;Electricity to Allâ&#x20AC;&#x2122; at affordable prices. A strong All India Grid would enable the exploitation of unevenly distributed generation resources in the country to their optimum potential by providing enhanced margins in inter-regional transmission system.

These margins, together with open access in transmission, will facilitate an increased real time trading in electricity.

electricity is being used within its revenue area for any purpose whatsoever’.

At present, inter-regional power transfer capacity of 11450 MW is available in the country.

even more encompassing as also target specific. A village will be declared electrified if:

It is envisaged to increase the inter-re-

❐ Basic infrastructure such as distribution

gional power transfer capacity to around 37,000 MW by 2012.

transformer and distribution lines are provided in the inhabited locality as well as the dalit basti/ hamlet where it exists. (For electrification through Non-

Rural Electrification Programme Rural electrification has been regarded as a vital programme for the development of rural areas. In 1947, only 1500 villages were electrified in India. The per capita consumption was 14 units. The initial focus was on electrification for irrigation’ to enhance agricultural produce which was reflected in the definition of village electrification accepted till 1997 -that ‘a village was deemed to be electrified if

Central Power Research Institute (CPRI)

In February 2004, the definition was made

conventional Energy Sources a distribution transformer may not be necessary. ❐ Electricity is provided to public places like schools, panchayat offices, health centres, dispensaries, community centres, etc. and ❐ The number of households electrified should be at least 10% of the total number of households in the village.

A R Tripathi, Director General, CPRI An Autonomous Registered Society under the Ministry of Power, the Central Power Research Institute (CPRI) is in the service of the Nation, undertaking applied research in electric power engineering. Besides, it also functions as an independent Testing and Certification Authority for electrical equipment and components to ensure reliability and improve, innovate and develop new products. CPRI has been accredited by NABL, ASTA-BEAB-UK, UL-USA, Canadian standards Association, and Short Circuit Testing Laison-Europe. According to A K Tripathi, Director General, Central Power Research Institute, “The vision of the institute is to be the global leader in R &D, Testing and Consultancy in Electric Power through frontier research and cutting edge technologies.”

CPRI has been accredited by NABL, ASTA-BEAB-UK, UL-USA, Canadian standards Association, and Short Circuit Testing Laison-Europe.

January - 2008

Annual Report - MoP 2006-07

Kutir Jyoti Scheme This programme was launched in 1988-89 to provide single point light connections to households of rural families below the poverty line including harijans and adivasi families. The allocation amongst the States was based on the size of the rural population below the poverty line and level of village electrification in the State, with higher weightage given to the States having larger population of rural poor and low electrification levels. This scheme has been now merged with RGGVY. Accelerated Rural Programme (AREP)

Electrification

The scheme was introduced in the year Government of India launched the following programmes from time to time for electrification of rural areas in the country apartv from RGGVY: Rural Electrification under Minimum Needs Programme (MNP) This was started in the 5th Five Year Plan with the rural electrification as one of the components of the programme. Under this programme, funds were provided as Central assistance to the states in the form of partly grants and partly loans. Since the inception of the MNP, the component that relates to rural electrification has been set off against the loan component of MNP. The areas covered under the MNP for the purposes of rural electrification were remote, far-flung and difficult villages with low load potential. The scheme was discontinued from 2004 onwards and merged with Rajiv Gandhi Grameen Vidyutikaran Yojana. Pradhan Mantri Gramodaya Yojana (PMGY) This scheme was launched in 2000-01 but

January - 2008

rural electrification component was added in the next financial year-2001-02. It was being implemented by State Electricity Boards/Electricity Departments/Power Utilities which were designated as implementing agencies. Funds were being re-

Revenue collection has improved in the states where franchisees are in operation. All 27 states participating in RGGVY have notified constitution of district committees & except Manipur, all have notified rural areas. leased by the State Government to the implementing agencies, Funds under the programme were provided to the states as Additional Central Assistance which followed the normal pattern of central assistance i.e. 90 per cent grant & 10 per cent loans for special category states, 30 per cent grant & 70 per cent loan for other states. The scheme was discontinued from 2005-06 onwards.

2003-04 under which interest subsidy of 4 percent was to be provided on loans availed by the State Governments/Power Utilities from the Financial Institutions for carrying out rural electrification programme. The assistance was limited to electrification of un-electrified villages, electrification of hamlets/dalit bastis/tribal villages and electrification of households in villages through both conventional and non-conventional sources of energy. Accelerated Electrification of One lakh villages and One crore households Government of India introduced a scheme â&#x20AC;&#x153;Accelerated Electrification of One lakh villages and One crore householdsâ&#x20AC;? in 200405 by merging the interest subsidy SchemeAREP (Accelerated Rural Electrification Programme) and Kutir Jyoti Programme. Under this scheme there was a provision for providing 40% capital subsidy for rural electrification projects and the balance as loan Assistance on soft terms from REC. The scheme has now been merged with the new scheme RGGVY. 92

Status of rural electrification under RGGVY All the states except Delhi and Goa have signed Agreements under RGGVY. GPSUs are implementing the scheme in 134 districts. Projects for 316 districts have been sanctioned at the cost of Rs. 11514.22 crore covering 69534 un-electrified villages and 27,50,784 BPL households. Since April 2005, till 23rd February, 2007, 30,562 unelectrified villages in Rajasthan, Uttar Pradesh, Uttaranchal, Karnataka, Bihar and West Bengal have been electrified under this scheme. Besides the above, intensive electrification of 7,175 already electrified villages has also been achieved. In 2006-07, 20743 unelectrified villages were electrified as on 23rd February 2007. Franchisees are in place/operation in 12 states namely, Uttar Pradesh, Uttaranchal, Karnataka, West Bengal, Assam, Nagaland, Haryana, Orissa, Madhya Pradesh, Andhra Pradesh, Rajasthan and Bihar covering 39,113 villages.

Revenue collection has improved in the states where franchisees are in operation. All the 27 states participating in RGGVY have notified constitution of district committees and all the 26 states except Manipur have notified rural areas.

National Power Training Institute (NPTI)

Energy conservation In order to institutionalize energy conservation efforts in the country, the Government passed the Energy Conservation Act in 2001, and established the Bureau of Energy Efficiency, under the Ministry of Power, Government of India. To promote the efficient use of energy and its conservation, the Ministry of Power, through BEE, initiated a number of energy efficiency steps on 1 st March 2002 including the development of a draft Energy Conservation Building Code for large, new commercial buildings; the launch of energy labeling scheme for appliances; the initiation of a process for the development of energy consumption norms for industrial sub sectors; and an annual examination to certify energy auditors and energy managers.

NS Saxena, Director General, NTPI National Power Training Institute (NPTI), a Registered Society set up by the Govt. of India, is committed towards the development of Human Resources in Indian Power and Energy sectors. NPTI with its Corporate Centre at Faridabad operates through its five Regional Institutes located at Neyveli, Durgapur, Badarpur, Nagpur and Guwahati and specialized Centres viz., Power Systems Training Institute (PSTI) & Hot Line Training Centre (HL TC) at Bangalore, a Centre for Advanced Management and Power Studies (CAMPS) at Faridabad (Haryana). â&#x20AC;&#x153;The Ministry of Power is planning to add 80,000 MW of Power by 2012, which necessitates the requirement of about 10 lakh people. Out of this, atleast 4 lakh people need to possess special skills related to the power sector. So we at NPTI are working towards building the capacity of power sector professionals at a reduced cost. The ultimate objective is to increase efficiency,â&#x20AC;? said N S Saxena, Director General, National Power Training Institute.

January - 2008

Annual Report - MoP 2006-07

stalled capacity of about 7320 MW have since achieved financial closure and 12 more projects with a total installed capacity of 12647 MW are being pursued for early financial closure.

Development of Merchant Power Plants In order to facilitate the development of electricity market, the Ministry of Power has issued the approach and the guidelines on development of merchant power plants, for which coal linkage/captive coal blocks will be available. Unlike traditional utilities, merchant power plants will compete for customers and absorb full market risk. There are no guarantees that they have a minimum off-take of their output.

However, the effectiveness of this and other measures ultimately depends on their adoption by all energy users-and consequently on their awareness of the energy savings opportunities around them. Keeping this in view, Ministry of Power has initiated National Campaign on Energy Conservation and National Painting Competition on Energy Conservation for school children.

Private sector participation in power sector The Ministry of Power has been closely monitoring the power projects in the private sector which are considered possible for early financial closure. An Inter-Institutional Group (IIG) comprising senior representatives from the Financial Institutions and Ministry of Power has been constituted to specially focus on fast track power projects which could be taken up for early commissioning and could achieve early financial closure in a time-bound manner. Through the IIG mechanism, 16 private sector power projects with an aggregate in-

January - 2008

Typically the risk of a merchant power plant

Merchant power plants upto a capacity of 1000 MW would be provided coal linkage and captive coal blocks may also be provided to merchant power plants in the range of 500 -1000 MW. It would be essential that certain normative criteria are laid down for eligibility for coal blocks allotment, particularly to IPPs and merchant plants.

is to be carried on the balance sheet of the promoter. Merchant power plants can provide additional generating reserves that India needs now and will need in the future. They are a modern, market-based partial answer to energy challenges faced by the country. Merchant power plants are a product of the restructuring of the electricity industry. Merchant power plants fill different niches in the market; some provide steady supplies to the grid, while others fire up only when demand is highest and meet the peak loads. Merchant power plants operating competitively help assure that power is produced with efficiency and supplied to locations where it is needed most. Considering the redundancies that are being provided in the grid to promote open access in the transmission and the distribution, it is reasonable to expect that merchant power plants each of a capacity of 1,000 MW and below

can be accommodated for availing open access in the transmission for wheeling of power to customers which are generally not predetermined. Merchant power plants would be expected to have dedicated lines upto the nearest regional/national grid system. Merchant power plants upto a capacity of 1000 MW will be provided with coal linkage and captive coal blocks may also be provided to merchant power plants in the range of 500 -1000 MW. It would be essential that certain normative criteria are laid down for eligibility for coal blocks allotment, particularly to IPPs and merchant plants. These criteria could relate to net worth of the company, their internal resource generation and annual turnover. The agencies being allotted to the coal blocks, may also be required to put in place bank guarantees of reasonable amounts which should be liable to be en cashed if important milestones for development of coal mines are not achieved.

The amount should be adequate enough to discourage agencies which are not serious enough for development of coal mines and power projects. The inter-mediate milestones may include not only in relation to the development of coal mines, but also with

APTransco

reference to the power projects, such as the award of EPC contracts, commencement of construction etc. Success of this scheme, however, will, to great extent, depend on the availability of reliable data and information for plant sites and other inputs in this capacity range so that developers can take further appropriate action. An initiative to prepare brief pre-feasibility reports (PFRs) for various plant locations has been taken by the Ministry with CEA to provide the technical inputs for preparation of such reports and PFC, will engage various agencies to develop brief feasibility reports in a time-bound manner for about two dozen power plant locations in the capacity range of 500-1000 MW. ◆

Rachel Chatterjee, IAS, CMD, APTRANCO Having got its entity as APTransco in the year 1999, the corporation has traveled a tumultuous but successful journey. APTransco was formed as a consequence of restructuring of the erstwhile AP State Electricity Board (APSEB) to look after Transmission of Electricity in Andhra Pradesh. From Feb 1999 to June 2005, APTransco remained as Single buyer in the state -purchasing power from various Generators and selling it to DISCOMs in accordance with the terms and conditions of the individual PPAs at Bulk Supply Tariff (BST) rates. Subsequently, in accordance with the Third Transfer Scheme notified by GoAP, APTransco ceased to do power trading and has retained with powers of controlling system operations of Power Transmission. Today APTransco’s transformation is evident. “To ensure sufficient availability, we have to take many measures. So we invest a lot to ensure that our transmission capacity is adequate. In A.P, we have a strong reliable transmission network. We invest around Rs 500 crore per annum so as to ensure that infrastructure is in place.” ◆

January - 2008

nergy is one of the major inputs for the economic development of any country. Economic growth is desirable for developing countries, and energy is essential for economic growth. In the

case of the developing countries, the energy sector assumes a critical importance in view of the ever-increasing energy needs requiring huge investments to meet them. However, the relationship between economic growth and increased energy demand is not always a straight-forward linear one. As the world becomes increasingly dependent on electrical appliances and equipment, energy consumption rises rapidly. Each country can accommodate its natural growth in the demand for energy services by some combination of supplying more energy and improving the efficiency of energy consumption. In all sectors, improving energy efficiency before increasing energy supply is generally the more economically efficient national strategy.

Energy Conservation and Efficiency The country, despite having an installed capacity of over 130, 000 MW, still faces a peak and energy shortages of about 13 per January - 2008

The mission of BEE is to institutionalize energy efficiency services, enable delivery mechanisms in the country and provide leadership to the key players involved in the energy conservation movement. The primary goal of the Bureau is to reduce the energy intensity in the economy. cent and 9 per cent respectively. Further, almost two-thirds of the electricity generation in the country is from fossil fuels that are not only limited but have adverse impact on climate and environment.

❐ To establish systems and procedures

The need for efficient use of energy and its conservation assumes significance in the overall context of energy security and sus-

and private sector support in implementation of Energy Conservation Act and efficient use of energy and its conservation programs.

tainable development of the economy. The energy intensity of the economy needs to be reduced while balancing it with the developmental concerns.

to measure, monitor and verify energy efficiency results in individual sectors as well as at a macro level. ❐ To leverage multi-lateral and bi-lateral

❐ To demonstrate delivery of energy efficiency services as mandated in the EC bill through private-public partnerships.

The broad objectives of BEE are as under:

❐ To interpret, plan and manage energy

❐ To exert leadership and provide policy

conservation programs as envisaged in

framework and direction to national energy conservation and efficiency efforts and programs.

the Energy Conservation Act.

Standards and Labeling Programmes ❐ To coordinate energy efficiency and conservation policies and programs and take it to the stakeholders

The Energy Efficiency Standards and Labeling Programme is a key thrust Area of BEE.

Central Government, under the Energy Conservation Act, 2001 has powers to: ❐ Direct display of labels on specific appliances or equipment ❐ Enforce minimum efficiency standards by prohibiting manufacture, sale and import of products not meeting the minimum standards. The objectives of this program is to provide the consumer an informed choice about the energy saving, and thereby the cost saving potential of the marketed household and other equipments. Along with the fact that this would impact the energy savings in the medium and long run, it will also position domestic industry to compete in such markets where norms for energy efficiency are mandatory. The Minister of Power, Government of India announced the Standards & Labeling programme on 18th May 2006 initially on a voluntary basis.

mum energy consumption) that manufacturers must achieve in each and every product, specifying the energy performance but not the technology or design details of the products.

to achieve desired results. There has been as steady growth in the number of countries adopting this programme as is indicated in the graph.

The programme will be made mandatory after the voluntary phase. Frost free (NoFrost), Direct cool Refrigerators, Air Conditioners and Tubular Florescent Lamps are currently a part of the voluntary scheme. Other products like General Electric Motors, Distribution Transformers, Ceiling fans and such like will be introduced in a phased manner. Energy-Efficiency Standards And Labels Standards Energy Efficiency standards are procedures and regulations that prescribe the energy performance of manufactured products, sometimes prohibiting the sale of products that are less energy efficient than the minimum standard, often called Minimum Energy Performance Standards (MPES). MPES prescribe minimum efficiencies (or maxi-

Labels Energy-efficiency labels are informative labels affixed to manufactured products to describe the product’s energy performance (usually in the form of energy use, efficiency, or energy cost); these labels give consumers the data necessary to make informed purchases. Standards And Labeling Programmes – Worldwide The programme has been used as an effective tool by many countries worldwide

Under the Standards and Labeling Program, appliances are rated on a scale of 1 to 5 stars, with the most efficient carrying 5 star label and the least efficient carrying a 1 star label. The program has been developed in a collaborative and consensus driven approach with active participation from all the stakeholders. A self-regulatory mechanism has been adopted for implementing the program.◆

January - 2008

Mohammed Ali Shabber, Minister for Energy, Coal, Minorities Welfare, and WAKF Urdu Academy.

January - 2008

He is trying to strike a balance between expectations and acceptance. While uninterrupted free power to farmers, power cut and power theft are crippling him on one side, demands from new industries and burgeoning household connections are pulling him on the other side. But this ‘We-CanAttitude’ power minister is trying to harmonise the demand and supply by augmenting resources from different sources. He is now inundated with heavy calendar like enhancing capacity addition, power reforms and qualitative power supply. He is Mohammed Ali Shabber, Minister for Energy, Coal, Minorities Welfare, and WAKF Urdu Academy. He presents an unambiguous but an ambitious agenda to take Andhra Pradesh power sector to new heights.

You are very much within the

are providing power supply to industries

framework of National Electricity Policy. You have also toeing the line of reforms. But the energy sector does not match with neither the policy nor the reforms but depict a bundle of power problems. Comment?

with reduced tariff from Rs. 4.26/kwh (2001-02) to Rs. 3.56/kwh (2006-07) which is the lowest among the major industrialized states.

Q&A

Under the leadership of our Chief Minister Dr. Rajashekara Reddy, every decision of ours would fall within the framework of the National Electricity Policy and reforms, which is the key mantra for progress. Now the question arises, why power cuts continue to haunt us in spite of adhering to the national electricity norms. This problem has arisen not due to one reason but many. Though we are producing 12,339 MW power, the demand is ever increasing which is an indicator of progress. New industries expect the government to supply instant power which we are unable to cater to, as our new power projects are yet to be commissioned. Our attempt to draw additional power supply from the central pool has not fructified .Keeping this in view, we have drawn an ambitious plan to enhance power supply to 13,661 MW during the 11th plan period of 2007-12 out of which APGENCO is adding 7109 MW to make Andhra Pradesh a powercut free state. Besides, we are trying to improve performance such as enhancing PLF, bringing down T& D losses and such like.

This is not the end of the story. We have schemes to reimburse Rs. 0.75 per unit to new industries under the industrial policy which no government would dare to do. Nearly 115 towns and 1,126 Mandal headquarters are powered with 24-hour supply, while the rural areas get 16 to 19 hours power supply. Under the roof of social governance, we have not increased any domestic tariffs. What about rural electrification? Under the Rajiv Gandhi Grameena Vidyut Yojana Programme, 13,484 habitations, and 11,78,143 rural households including 7,78,740 BPL, RHH have been provided electricity. The Transmission and Distribution (T& D) loss is 19.8% which is on the higher side. What are the measures initiated to bring it down? If you look at rural electrification in the past, it was a shocking 32.775% (2000-01) and our efforts such as consumer metering, segregation of rural, urban and industrial feeders, effective and independent energy

Fulfilling our poll promise, we have provided

auditing, conversion of LBDS to HVDS and above all watchful implementation of antitheft legislation has brought it down to 19.8%.

free power to nearly 25.38 lakh agriculture pump sets, costing us Rs. 3,745 crore, contributing to around 31% of total sales. We

Do you know that the Central Government has lauded our efforts in bringing down T&D loss to 17.5% (2007-2008), a national

How are you going to ‘power’ the people of Andhra Pradesh?

BY P.R. SUBAS CHANDRAN PHOTO BY M. RAGHUNATH

Incentives are provided for two-shifts so that industries tariff could be as low as Rs. 2.82/kwh.

January - 2008

○

Kothagudem stage-vi

500 mw

Kakatiya thermal Power stage-I

500 mw

Kakatiya thermal power Station stage-II

600 mw

Rtpp stage-II– unit IV

210 mw

Rtpp stage – III unit V

210 mw

Rtpp stage-III unit vi

600 mw

Vijayawada stage – IV

500 mw

Krishnapatnam, Nellore

1600 mw

Priyadarsini, Jurala Hydro

234 mw

Nagarjuna Sagar Tailpond

50 mw

○ ○

Pulichintala

120 mw

Polavaram

960 mw

Karimnagar Gas based Power Project

2100 mw

Dummagudem

352 mw

Singareddypalli

200 mw

Total:

8945 mw

Cost of the new projects: Rs. 36,386 crores. Ultra Megapower project Krishnapatnam – 4000 mw

Power scenario Installed capacity

12,339 mw

Hydel capacity 3,586.36 mw (Highest hydro capacity in the country) Thermal capacity

3,282.5 mw

Wind

2 mw

Apgenco total

6,970 mw

Central sector

2,963.22 mw

○

240 mw

Private sector

2,405 mw th

Capacity addition in 11 plan13,661 mw (Genco capacity addition 11th plan7109 mw)

○

ernment of India, proposed a second Ultra Mega Power Project (UMPP) with 4,000 MW installed capacity at Machilipatinam, using coal as a fuel. This is an exciting offer and we have taken it up. ◆

Lowr Jurala

Central sector

2650 mw

Private sector

3902 mw

State sector

7109 mw

○

Power Project (Stage-1) have received second and third prizes respectively for the best performing Thermal Power stations in the country while Vijayawada Thermal Power Station is se-

○

Power Station and that industries tariff could be as ducing T&D loss, the low as Rs. 2.82/kwh. Rayalaseema Thermal Ministry of Power, Gov-

9 mw

○

other constraints, we crore, contributing to around three years and earned have boldly initiated re- 31% of total sales. We are a net profit of Rs.151 crore during 2006-07. forms that brought out providing power supply to encouraging results in industries with the reduced tariff Could you claim somethe power sector. The enthing special as a new hanced power genera- from Rs. 4.26/kwh (2001-02) to achievement during this tion of GENCO has Rs. 3.56/kwh (2006-07) which New Year? brought down the cumu- is the lowest among the major lative loss from Rs. 256 industrialized states. Incentives After evaluating our percrore to Rs. 141 crore. formance on various are provided for two-shifts so Kothagudem Thermal fronts, especially in re-

○

2004-05 and 2005-06. Most of the Thermal Stations have achieved 85% PLF against What are the other 79.9% of the past. FiFulfilling our poll promise, we power-benchmarks unnally, APGENCO has have provided free power to wiped out all its accumuder your governance? nearly 25.38 lakh agriculture lated losses of Rs. 250 In spite of having limited space for growth and pump sets, costing us Rs. 3,745 crore during the last tor in the days to come.

Pochmpadu unit – IV

○

lected for meritorious performance award. Upper Sileru Power House is rated as the best performing Hydro-power station in the country consecutively for two years i.e.

○

honour. We are the toppers in maintaining the least T& D loss. We are planning to bring it down to 17 % by 2008-09 which will make Andhra Pradesh a cut above in energy sec-

○

AP GENCO NEW PROJECTS

January - 2008

100

101

January - 2008

Arcot Narayanaswami Veeraswami, Minister for Electricity, Government of Tamil Nadu

January - 2008

102

With the world burgeoning into a global village and international players becoming locals, globalization opened many gateways towards developmental activities and the impact is felt at every mile stone of India in general, Tamil Nadu in particular. Tamil Nadu, with many local, national and international investors flooding in, has become a cynosure for industrialists and no wonder the power managers inclination is increasing. Under the canopy of a well laid philosophy the government would supply uninterrupted power at a competitive price for every one, and today the developmental programme in Tamil Nadu is marching towards the most cherished goal of sustainable power supply.

BY P.R. SUBAS CHANDRAN PHOTO BY: KRISHNA MURTHY 103

January - 2008

Q&A

You have defined your target very well that the state should deliver uninterrupted qualitative power at a competitive price but the ground reality is not reflecting the spirit. What do you want to

at the overall power scenario in Tamil Nadu, except for this temporary set back of wind mill energy, we are riding high at all time. That is the reason why we are the number one performer in many power parameters.

Status of Power Plants as on July 2007

say?

Could you please post your action plan to surpass the problem permanently?

Wind Mill

We stand by our promise and it is our vision which guides our policy and programmes. Let me present some facts and figures which would defend our claims. Firstly, in order to ensure supply of quality power supply, the Government has taken a number of measures which have resulted in reliable power supply and low percentage of break downs. The Reliability index is as high as 99% and all 11 KV feeders have been metered to enable proper energy accounting to be done. The failure rate of breakdowns of Distribution Transformers is low at 7%.

2,184 MW

Thermal (4 Stations)

2, 970 MW

Gas Turbine ( 4 Stations)

424 MW 19 MW

Central Sector (Tamil Nadu share only) and from Private 4,525 MW

Considering the increase in demand and to augment power generation the state, we have planned to expand a capacity of the existing thermal stations by addition of one unit of 500 MW each in North Chennai Thermal Power Station, Mettur Thermal Power Station, Ennore Thermal Power Station and 2 units of 500 MW at Tuticorin.

Hydro (36 stations)

Total installed

10,122 MW

All these units are likely to be commissioned in the 11th Plan itself. We have also formed joint ventures with NTPC and NLC to commission two projects each bearing 1000

New Projects Scheduled to be commissioned during 11th Plan. Name of the Project

New/On going Capacity (in MW)

Probable year of Commissioning

THERMAL NCTPS Stage Extension

New

500

2010-11

MTPS Extension

New

500

2010-11

ETPS Extensin

New

500

2011-12

Tamil Nadu Government means what it says. The competitive price is an attractive incentive for industrialists to choose Tamil Nadu as their business destination.

TTPS Extension

New

1000

2011-12

2007-08

Thirdly, uninterrupted power supply is our vision and we standby it. You will be surprised to know that Tamil Nadu ranks as the number one state in India to produce 3,650 MW of wind power and it has been adjudged as the fourth of its kind in the

HYDRO

Secondly, the question of competitive price is not a rhetorical statement but a refreshing reality. The power tariff, when compared with other states, is a testimony that

Valuthur additional

On going Total

2595

Bhavani Kattalai Barrage – II

On going

2007-08

Bhavani Kattalai Barrage – III

On going

2007-08

Bhavani Barrage – I

New

2007-08

world. However, wind generation is seasonal and there is normally a shortage during October, November and December of every year. To tide over the shortage we have undertaken a series of steps such as borrowing power from grid, purchase of

Bhavani Barrage – II

New

2007-08

Kollimalai

New

2009-10

Kundah Pumped Storge

New

500

2010-11

Moyar Ultimate Stage

New

2011-12

power from neighbours, raising PLF, improving captive generation etc. If you look

Periyar Vaigai Barrages(16 Nos.)

New

2011-12

January - 2008

TOTAL

675 104

Name of the Central Generating Station

Share in MW

Year of Commissioning

B. CENTRAL SECTOR (SHARE) Kaiga Stage II – ( 2 x 200 MW)

2007-08

NPC-Kudankulam NPP – I & II Unit (1000 MW each)925

2007-08

Neyveli TS-II Expansion (2 x 250 MW)

325

2010-11

Share from PfBR Kalpakkam (500 MW)

167

2010-11

Simadri – II 1000

500

2011-12

TOTAL

2008

C. JOINT VENTURE. NTPC JV (North Chennai 2 x500 MW)

716

2010-11

NLC JV (Tuticorin 2x500 MW)

494

2010-11

TOTAL

1210

D. PRIVATE SECTOR Cudalore Thermal Power Project

1320

GRAND TOTAL

7808 MW

2011-12

MW capacity at Vallur near Ennore and Tuticorin respectively. Knowing pretty well that there would be additional demand in the coming days, as we have been witnessing a flood of offers to start new industries, Tamil Nadu Electricity Board is now plan-

utilizing natural gas. Under the dynamic leadership of Kalaingar Karunanidhi, the Chief Minister of Tamil Nadu, we are determined to make Tamil Nadu numero uno in attaining self sufficiency. Of course, we may be also in a position to supply to other

ning to set up a 2 x 800 MW Thermal Power Station at Udangudi in Tuticorin District using Super Critical Technology, in association with BHEL. This will be a semi ecofriendly project which consumes less coal and emits less carbon.

states in India.

TNEB is also planning to launch three small and big hydro projects very shortly viz., Kundah Pumped Hydro Electric Project (4 x 125 MW), Bhavani Kattalai Barrage.II (2 x 15 MW), and Bhavani Kattalai Barrage.III ( 2 x 15 MW). Adding fillip to energy production, there will be a 95 MW capacity additional unit at Valuthur near Ramanathapuram district 105

Reforms in the Power Sector are a clarion call. The reform designed by the Government of India on the lines of the National Electricity policy is yet to penetrate TNEB. What do you want to say? I understand what you mean. Reforms are a continuous process and we are into that. Some of the major reforms in the power sector are the establishment of the Tamil Nadu State Electricity Regulatory Commission (TNERC), securing the participation of private sector in generation of electricity, provision of intra State and inter State open

access, Encouragement of captive generation and co-generation; and Standards of Performance have been fixed by TNERC. However a very fundamental question needs to be answered. The Division of the Tamil Nadu Electricity Board into Generation and Transmission Sector is yet to be introduced. Please comment. If the reforms are aimed at bringing qualitative service as well as energy auditing, then we are already into that. TNEB has a long history of creativity and professionalism in working out our plans, and the recognition in the form of awards is a testimony to that. The power reforms in two different organisations, Generation and Transmission, are being effectively implemented. Our performance demonstrates the contours of reforms, for example the Revenue collection efficiency is 99% and transmission and distribution loss is the lowest at 18%. We have been awarded Meritorious Performance Award (Bronze shield) for the year 2004-05 given to the Tuticorin Thermal Power Station, received from the Government of India on 21st March 2007; Meritorious Performance Award (Bronze Shield) for the year 2005-06 to Mettur Thermal Power Station received from Government of India on 21st March 2007; Award for promotion of wind energy during the period 2002-2007 in India, received from the Ministry of New and Renewable Energy on 22nd December 2007; and SESI – Suzlon Business Leadership Award (Wind Power) received on 27th November 2007 received from the Solar Energy Society of India. However we are examining the possibility of introducing further reforms in the power sector. ◆ Input support: Mathivanan & Nagaraj, Ministry of Energy, Govt of Tamil Nadu January - 2008

S. Machendranathan IAS, Chairman, TNEB

Though many firsts adorned his crown of performance, he is insatiable because complacency has no place in his career graph. As he is taking over the role of heading the TNEB, the State is witnessing a new era of deficit in power supply. He is now redrawing the agenda with doâ&#x20AC;&#x2122;s and donâ&#x20AC;&#x2122;ts and prioritizing the needs and necessaries in power governance.

January - 2008

106

Endowed

with the pragmatism and indefatigability, he is now trying to match the expectations by augmenting resources externally till the wind mill power generation is restored. He is S. Machendranathan IAS, Chairman, TNEB, a fifty- year old organisation, & the biggest vertically integrated utility company with revenue collection efficiency pegged at 99%. TNEB is the first to complete â&#x20AC;&#x153;all village electrificationâ&#x20AC;? in India. TNEB tops the country in T & D loss and is 4th in the world. There are many more firsts to TNEB and under the leadership of Machendranathan, the board is marching towards making Tamil Nadu a top state with surplus power. BY P.R. SUBAS CHANDRAN 107

Q&A

You have now been changing the priorities of power distribution. Why?

Tamil Nadu never faced power cuts in the past but the strange and unanticipated occurrence of zero generation in wind mill sector hit the distribution system leading to a shortage of nearly 1000 MW which forced us to exercise some adjustments here and there. While this being the scenario, the proactive Government policies attracted many investors to establish industries in the State. This and consequential requirement from other sectors increased the demand by over 700 MW. To tide over this supply and demand gap, we are purchasing power from Central Grid as well as neighbouring states. The Government, being a welfare state, has chosen domestic power supply as the top priority. With increased plant load factor, Central pool support and encouraging captive power, we are confident of overcoming the present problem. What is your major agenda? Guided by National Electricity Policy, our aim is to give power to each and every household. Apart from this, per capita availability of electricity is to be increased to over 1,000 units. Of course, our major goal, which I said in the beginning, remains unchanged and we are confident of achieving it. You know Tamil Nadu tops the country with the highest per capita consumption of power of 960 units while the national average is 606 units. It will be necessary to install additional generating capacity since the capacity available with Tamil Nadu is 10,122 MW only. The new projects, designed to make Tamil Nadu a state with surplus power, are bound have a cascading impact on the Indian economy in general and Tamil Nadu in particular.

January - 2008

❐ Metering of all 11 KV feeders. ❐ Initiated measures for energy accounting at distribution transformer level. However, the bifurcation of TNEB into generation and distribution has been pending!? TNEB has been a role model to many power reforms for a decade.If reforms are meant for improving performance, then TNEB, as a single entity, is already into it. If the purpose of the reforms is achieved without bifurcation why should we insist on following a particular pattern? TNEB is consciously performing within the compass of National Electricity Policy but, at the same time, the State has to take care of its local interests without compromising the rights of the people. What about new projects? There are many. We expect that new projects during 11th plan period (2007-2012) would add another 7808 MW while Tamil Nadu Government has given permission to private promoters to establish five more coal-fired ‘Merchant’ power projects with a total capacity of 10,140 MW. In other words we will be armed with twin-engines to give sustainable power supply and assist the national requirement. Though the Power Minister presents a positive picture about the overall performance, the important topic of reforms still remains untouched. How would you react? The Government is on the path of reforms some of which are worth mentioning. ❐ Tamil Nadu Electricity Regulatory Commission has been formed and is fully functional. This independent regulator oversees all the activities of the TNEB which is a major requirement of reform. ❐ The regulatory commission has notified

January - 2008

the standards of performance of the Utility in respect of various services provided to its consumers and any deviation attracts penalty.

Could you outline other achievements in the

❐ We introduced “Wireless Phone” (VHF)

This is the first state to give 100% electrification of villages, with the least T & D loss of 18% and the highest efficiency of rev-

system to attend “Fuse of Call” in Metro cities of Tamil nadu in 2005. ❐ As a part of consumer protection mechanism and to ensure penetration of Information & Communication Technology (ICT) to the lowest level, a novel project - the first of its kind in the country, has been launched under the name ‘BEST’ (Billing of Energy Services TNEB) The 1st phase of the project has already been implemented since 1.4.2006 benefiting all Metros and Urban areas numbering 615 sections serving 50 lakh consumers. The cost of the project was Rs. 51.23 crore. ❐ Works for the 2nd phase of the project covering 1805 sections in rural areas are underway and expected to be online from January 2008.

line of reforms?

enue collection of 99% which are indicators of power reforms. Single Window System provides instant power supply, more number of 400 KV and 230 KV sub stations, computerised billing, e-payment through internet banking, computerised power failure redress centre and Citizen Charter are some of the reforms and we will do more in future. Where does TNEB stand in achieving Corporate Social Responsibility (CSR)? Tamil Nadu is the first state in the country to achieve 100% electrification to all villages as early as 1982 as against the national objective of electrification of villages in the country by the year 2007. It is now marching towards achieving 100% household electrification by the end of 11th plan.

108

To empower farmers, every year 40,000 pump sets are given connections with 3phase 14-hour power supply. Windmill, a green power, is a part of CSR. To add more greenery, T & D office premises are armed with 1.85 lakh trees. We are seriously work-

Projects expected during 11th plan period (2007-2012)

ing towards Green Power through non-conventional energy sources.

Name of the Project Kaiga APS Units 3&4

Capacity (in MW)

Probable year of Commissioning

440/91

2007-08

Koodankulam Unit 1

1000/462

2008-09

Neyveli TS II Expansion Unit 1

250/160

2008-09

Valuthur GTPP- Additional Unit

TNEB’s growth over 50 years (1957 – 2007)

Bhavani Kattalai Barrage II & III

2009-10

❐ Consumer base from 4.30 lakh to

Bhavani Barrage HEP I & II

2009-10

Neyveli II Expn. Unit 2

250/165

2009-10

Koodankulam Unit 2

1000/462

2009-10

Kollimalai

2009-10

NCTPS Stage II

500

2010-11

NTPC Joint Venture

1000/716

2010-11

NLC Joint Venture Unit -1

500/247

2010-11

FBR at Kalpakkam

500/167

2010-11

Mettur Stage II

500

2010-11

Cuddalore IPP Units 1&2

1320

2011-12

Tuticorin Stage IV

1000

2011-12

Ennore Expn.

500

2011-12

1000/500

2011-12

Kundah Pumped Storage

500

2011-12

Modified Moyar utimate Stage HEP

2011-12

Periyar Vaigai 16 Nos.

2011-12

500/247

2011-12

185.82 lakh. ❐ Installed capacity from 256 MW to 10,122 MW ❐ Number of sub-stations from 89 to 1148 ❐ Number of Distribution Transformers from 3773 to 1,73,053. ❐ Length of LT lines from 13,055 km to 5,01,807 km ❐ Number of electrified towns, villages and hamlets from 1813 to 63177

First by TNEB: TNEB is the first in India, ❐ To commission the highest head hydro turbine in ‘30s at Pykara (as Govt. Electricity Department). ❐ To introduce EHT 230 KV voltage level

Simhadri Stage II

grid with load dispatch centre, at Erode. ❐ To introduce “Power Line Carrier

NLC Joint Venture Unit 2

Communication” (PLCC) in grid operation. ❐ To introduce “Wireless Phone” (VHF) system to attend “Fuse of Call” in Metro Cites in India. ❐ To design and execute an integrated, cascading hydro river valley project

TOTAL

7808

PUSHEP: The Pykara Hydro Station(70 MW) in Nilgiri District, established by British engineer, Sir Howard, is the first commercially run electricity generating station in Tamil Nadu and it celebrated its Platinum Jubilee last year. ◆ Input support: Akshaya Kumar, Superintendent Engineer, TNEB, Chennai

in India in Bhavani river at Kundha, Nilgiris. 109

January - 2008

Energy Products manufacture in the emerging economies as well as developed economies of the world, have been increasingly becoming Technology driven. This is particularly so in the area of Steam Generation Equipment. And companies like Thermodyne are few who have the maturity to understand its importance.

nergy Products manufacture in the emerging economies as well as de veloped economies of the world, has been increasingly becoming Technology driven. This is particularly so in the area of Steam Generation Equipment. High or latest Technology may not be the right choice for all regions of the world and for all applications. A judicious selection, in other words, an Appropriate Technology blending high technology application and region specific requirements, needs to be adopted.

Conditions, Statutory requirements, Logistics, Man-hour costs, Raw Material availability, Automation. All these are essentially region specific (local conditions).

Fuel Fuel is the single most important factor

which determines the design of the boiler. Fuel, its associated ash characteristics (in case of solid fuel) and fuel preparation play a vital role in designing the boiler configuration. The nature and characteristics of It is Appropriate Technology, rather than the available fuel is extremely region speHigh Technology, that should be driving the cific. Hence a boiler design, however, hiindustry growth. Appropriate Technology is tech it may be, if it is based on the fuel availcustomization of the design to maximally suit able in a particular region may not meet

region specific factors and application for with its end-use if applied in other region the product and calls for a deeper under- based on superficial fuel characteristics. standing of these factors. For example, a bituminous coal fired boiler Keeping the above in the back drop, some design from a certain region of the US or of the key aspects which go into design and say South Africa may not meet fully with construction of a Steam Generation Equip- the end-userâ&#x20AC;&#x2122;s requirements in a specified ment are Fuel, Boiler Efficiency, Ambient region in India or South East Asia. This

January - 2008

S Damodaran, Founder Director, Thermodyne would call for an appropriate design getting deeper into the basics of engineering.

Boiler Efficiency High efficiency increases the initial cost and decreases running fuel cost while low efficiency has the opposite effect. There is a techno-economic optimum level of efficiency to be chosen depending upon the individual circumstances. Expensive fuels which are purchased by the end user would dictate high efficiency levels. In case of Waste fuels which are generated during the process (and not purchased from outside), most often the boiler efficiency would be dictated by balancing the plant steam requirement vs. the waste fuel generated in the process in-house. This is particularly so when disposal of excess waste fuel is not very attractive. However, it is becoming increasingly relevant to generate maximum steam out of the available waste fuel, use the excess steam to generate additional power either for own use or for exporting. This is basically an exercise in steam-waste fuel-power balance and efficient. This calls for high pressure high efficiency boilers. Various configurations are possible in such a co-generation system. 110

Ambient Conditions The Ambient Conditions like Ambient Temperature, Humidity, Site Elevation, Seismic Zone, Wind Velocity, etc. influence the design and construction of the Boiler.

Statutory Requirements Steam Generation Equipment almost in all parts of the world, are governed by certain statutory safety requirements in terms of design, construction, installation and operation. These requirements have to be complied with as per the region where it is installed.

Logistics & Man-hour Costs One of the ways of classifying Steam Generation Equipment is on the basis whether

it is shop assembled, field assembled or semi-shop assembled. Certain ranges of boilers are necessarily field assembled or shop assembled based on the size, weight and configuration. There is a range where the choice could be either shop assembled

Logistics often dictates to a certain extent some of the technological features of the boiler, depending on whether it is shop assembled, field assembled or semi-shop assembled. The choice between the shop assembly and field assembly is also dictated

or field assembled.

111

January - 2008

by the shop or field man-hours. For example, in the US, shop assembly is overwhelmingly preferred since on one hand bigger sizes with heavier assembles can be transported and on the other hand, Field labour costs are much higher than the shop labour costs. These two conditions dictate the choice decisively in favour of shop assembly. Whereas in certain parts of the world like India, the aspects of logistics as well as labour costs dictate the opposite, i.e. favouring field assembly. In many instances, the basic design philosophy needs to be changed to suit the above conditions.

Raw Material Availability The raw material plays an important role in terms of manufacturing cycle time as well as costs of the boiler. Appropriate Technology means taking this important factor into account with the design of the product, so that a cost and time effective product is built.

Automation The level of automation to control the parameters of the boiler may significantly vary. Normally adopted automation in one region may become an over instrumented product in another area. The difference in uniformity in sizing and quality of the fuel (in case of solid fuels especially) also plays a role in this regard. Though most of the application factors are taken into account while designing the boiler, some of the region specific requirements may not have been considered. Thus choosing an Appropriate Technology, whether it is high end technology or moderated, would be the key that would deliver a product of satisfaction to the end user.

January - 2008

Thermodyne: Uniquely Placed ❐ The first and only Indian Boiler ComThermodyne Technologies Pvt. Ltd., as a Boiler manufacturer armed with state-ofthe-art engineering, is distinctively placed on account of its ability to offer Appropriate Technology solutions for its products depending upon the region and application. Thermodyne located in Chennai and founded in 1991, has extensive experience and in-depth expertise in a wide spectrum of Steam Generators. Thermodyne’s range of products covers Boilers of 1 to 150 TPH capacity, 7 to 105 kg/cm2 pressure, firing almost the entire range of Fossil and Renewable Fuels. The Boilers are with matching Combustion Systems and of suitable Water Tube or Fire Tube or Compo type configurations.

Cutting Edge Thermodyne, has established itself as one of the leading Industrial Boiler Turnkey Suppliers on Concept to Commissioning basis. Thermodyne, has, to its credit, the distinction of having secured / executed several unique jobs. These along with numerous other jobs undertaken by Thermodyne, bear testimony to the confidence reposed by the customers in the capabilities of Thermodyne, to meet the ever increasing market demands satisfactorily. Some of the prestigious jobs include: Thermodyne is the First and only Indian Boiler Company to be the Technology Provider being Principals to Petra Boilers & Advance Boilers leading Boiler Manufacturers in Malaysia. Over 70 boilers have been built to Thermodyne design & are in operation in Malaysia and Indonesia. Thermodyne is the first Indian Boiler Company to Export Palm Oil Mill Boiler to Indonesia.

pany to provide Boiler Technology to a leading Boiler Manufacturer in U.S.A. The English Boiler & Tube Inc, Richmond, Virginia. ❐ First to introduce Dumping Grate combustion system for Bagasse at 87 kg/ cm2(g) pressure Boiler (110 TPH / 87 atg / 510 Deg.C ) ❐ The first and only Indian Boiler Company to couple Waste Heat Boiler with externally fired Biomass combustor (Installation in Malaysia). ❐ Thermodyne’s first Oil & Gas Fired Smoke Tube Boiler to be supplied was for the export market, to Indonesia. ❐ Thermodyne’s first Oil & Gas Fired Water Tube Boiler was for the export market to Magadi Soda, Kenya. ❐ Pulverised Fuel Firing System to augment Waste Heat Boiler based 5 MW Captive Power Plant. This is the first and ONLY of its kind in India. ❐ 5 TPH, 35 kg/cm2 with Integral Superheater Smoke Tube Boiler for Department of Atomic Energy. This Boiler is unique with highest possible pressure for a smoke tube boiler of this size and with integral superheater. ❐ 30 TPH, Multifuel Fired Boiler design and engineering and supply of Grate for Advance Boilers, Malaysia to fire Empty Fruit Bunch, Rice Husk and Log Wood. This is unique application demanding use of 2 metre long log wood and continuous ash discharge, combined with capability of firing other biomass fuels. ❐ Smoke Tube Boilers with Air Preheater and FD / ID System to handle high moisture fuels. This gives higher combustion efficiency and with controlled excess air, results in significant reduction in fuel consumption. ◆

112

❐ Fertilizer ❐ Chemical ❐ Power ❐ Petrochemical Product superiority coupled with effective

Mahakoshal’s have been doing business with heat for nearly four decades. They are manufacturers of bricks and allied products for the boiler industry. Mahakoshal Refractories Pvt Ltd, earlier known as Mahakoshal Ceramics was established in 1969. It operates from Katni, Madhya Pradesh. The company manufactures Fireclay and High Alumina Bricks, Insulating Bricks, Acid Resisting Bricks and Tiles, Acid Resisting

113

Mortars, Mortars, Castables, High Alumina Refractory Cements for boilers industries. The reputation of the company has earned it the ISO 9001:2000 certification. Behind each quality product and service of Mahakoshal, there is a dedicated team of highly trained engineers and technologists who ensure quality and consistency. The total solutions approach of the Company has won it business partners and acclaim from a wide range of metallurgical and processing industries ❐ Steel ❐ Cement ❐ Non-ferrous

customer support has earned the group an enviable reputation in India and overseas markets. Mahakoshal Refractories also export their products to countries like Australia, Bangladesh, China, Egypt, Ethiopia, Indonesia, Iran, Iraq, Jordan, Kenya, Kuwait, Nepal, New Zealand, Nigeria, Philippines, Qatar, Saudi Arabia, South Africa, Sri Lanka, Oman, Sweden, Thailand, UAE, Uganda, UK, Zambia and Zimbabwe. Mahakoshal have received the export award for highest growth in exports in the year 2005-06 from IRMA (Indian Refractory Makers Association).◆

January - 2008

division and FMCG. Now, the focus would be to provide FMCG products and packaged essential commodities to the people at competitive prices.

Sanjay D Ghodawat, MD, Sanjay Ghodawat Group of Industries

The group has always been a step ahead, be it business or philanthropy. The group has focused its strength to give humanity a face lift in all adverse predicaments and calamities.

eeping this in mind, the Ghodawat group of Industries has set up wind farms of capacity 35 MW in various states viz. Maharashtra, Karnataka and

Rajasthan. The Investment of the Company in this sector is nearly Rs 175 crores. The electricity generated from these wind farms is being sold to State Electricity Boards as well as to private industries. Recently, the company has set up a wind farm in the state of Andhra Pradesh with installed capacity 6.4 MW. The dynamic entrepreneurship and vision of Sanjay D. Ghodawat has led ‘Sanjay Ghodawat Group of Industries’ popularly known as STAR GROUP, to a remarkable success in a short span. The key for this success is to provide “Uncompromising Quality at Competitive Prices”. Today, the Sanjay Ghodawat Group has diversified its activities into different streams viz. Wind Power, High-Tech Agriculture, Chemicals, Flexible Packaging, Edible Oils, Real Estates, Heavy engineering, Textile

January - 2008

To serve the society, the needy, the down trodden and every deprived brethren of the basic needs, the Sanjay Ghodawat Group has initiated various charitable trusts thoroughly engaged in extending its best helping hands. The group runs a self funded ‘Shree Gangabai Khivraj Ghodawat Kanya Mahavidyalaya’ located at Taluka Shirol, which has endowed literacy to 1400 girls since 1995, from 52 villages. It is the only college in Jaysingpur city with its own building and mastered staff that provides education in both arts & commerce stream along with vocational courses like tailoring, fashion designing, computer education etc. Sou. Sushila Danchand Ghodawat Charitable Trust is providing social, medical and educational help since its inception. Acharya Shree Tulsi Blood Bank, one of the best Blood Bank in India, is run by this Trust. The Trust also provides ‘Ambulance Service’ for Rural areas round the Clock.

The best things in life are available for free, goes a saying. With the non renewable resources like coal and petroleum products depleting day by day, the need of the hour is to harness the abundantly available non-conventional energy resources like the wind and the sun, which is available free of cost at the input level. The Ghodawat Group is one player, which has successfully harnessed the potential of wind into power and has big plans. The group comprises of the following companies in diversified areas:

Ghodawat Foods International Pvt Ltd To meet the growing demand of Packaged Edible Oil and Extraction, Sanjay Ghodawat Group has set up a Solvent Extraction and Edible Oil Refinery plant viz. Ghodawat Foods International Pvt. Ltd. in the year 2003. The manufacturing capacity of Solvent Extraction is 250 MTPD with further expansion of 500 MTPD and that of Edible Oil Refinery is 100 MTPD. The packaged Edible Oil is sold under brand name STAR555, in the domestic market completely. The Extraction i.e. de-oiled cake 114

(DOC) is being exported to the extent of 80% and remaining DOC is being sold in domestic market.

Star PVG Exports Indian mining and logistics today witness a new and extensive exploration with the amalgamation of two giant corporate’s. Strategically coming together to scale the unexplored heights in iron ore exports.... an unprecedented winning move that is all set to magnify the scope and opportunities of the nation globally. Under the ravishing brand of STAR PVG Exports, the duo will iron ore mines, implement work class and environment friendly iron ore techniques, engage in customized crushing, screening & washing units to extract & export iron ore world wide through it’s own network of rail & wagon & shipping lines.

tridges and automatic roll changing devices.

Star Oxochem Pvt Ltd

Shrenik Industries

Jain Group of Mumbai and Remik Group of Gujrat entered the Chemical Industry in 1997 by setting up a Plant to manufacture OXALIC ACID by the name Star Oxochem Private Limited. This is the second largest

This is the engineering Division of the group engaged in Heavy Fabrication Engineering unit. The unit is mainly involved in the manufacturing of Wind Mill Tabular Towers mainly, 56 Meter and 75 Meter Towers. We have manufacturing capacity of 250 Nos. per annum of 56 Meter towers and 150 Nos. of 75 Meter towers. We manufacture windmill towers as per customers requirments. This project in one of the very few projects in the country

Shreya Exports FMCG Division of Shreya Exports is engaged in packaging and distribution of free-flow iodized salt under the brand name “STAR555” this unit has expanded its sales

Sanjay Ghodawat Group in partnership with

The Investment of Ghodawat group in the energy sector is nearly 175 crores. The electricity generated from these wind farms is being sold to State Electricity Boards as well as to private industries. Recently, the company has set up a wind farm in the state of Andhra Pradesh with installed capacity 6.4 MW.

manufacturing plant of Oxalic Acid in India. The Company has its own well-equipped ultra modern laboratory for testing and analyzing of various products and raw materials.

Starline Textile

Star Flexipack Industries The unit is well equipped with various types of hi-speed printing machines such as Rotogravure Printing Machines (Two Nos.) having 10 color and 8 color units manufactured by and expert industries, with autoregistration control system ( Both Horizontal and Vertical) and web video to maintain the quality with a yield of 250 Mtrs. / Min. Expert machine is having extra printing car-

115

activities in various states of Maharashtra, Karnataka Orissa, Gujarat, Rajasthan M.P. Chhattisgarh, and A.P. There is another Sanjay Ghodawat Group entity. The main activity of this entity is blending and marketing of Tea under the brand name STAR555. Various types of blends available are dust, premium dust, leaf, & premium leaf etc. Presently the products of this unit are marketed in Maharashtra, Karnataka and Goa. Activity started in the year 2004.

Starline Textiles, another enterprise of Sanjay Ghodawat has come up with wide range of apparel fabrics in shirting & suiting range.

Topaz Investments Private Limited The main activity in this company is acquiring the premises and leasing them out to the prospective Lessees. ◆

January - 2008

The Chennai based Grundfos India conducts energy audit and files the reports to its client which enables them to cut cost on energy and increase profit

he efficient use of energy is a vital factor in managing the demand and supply of energy. Conservation of energy begins with controlling energy wastage. Chennai based Grundfos Pumps India Pvt Ltd, have been conducting energy audit to many of their clients in order cut the overuse of energy by pumps. Grundfos India was established in March 1998. What began as a liaison office for Grundfos Gulf Distribution in Mumbai in 1997, Grundfos India has expanded by leaps and bounds with a Head office, Warehouse and Service-cum-Training centre in Chennai and 10 regional offices at Mumbai, Delhi, Bangalore, Kolkata, Hyderabad, Cochin, Pune, Ahmedabad, Nagpur and Vizag.

January - 2008

Starting in 1998 with 4 employees and 4 distri-butors, Grundfos India in 2005 has a manpower strength of 90 and operates with about 70 Distributors and Dealers. Grundfos India has seen impressive growth from a small turnover of Rs. 50 million in 1999, to a modest turnover of Rs. 518 million in 2004. Grundfos India is also responsible for sales of Grundfos products to Bhutan, Bangladesh & the Maldives. Why save energy? Energy is one of the key barometers in identifying a country’s economic development and hence the more energy saved improves the country’s security as also the economy.

❐ Higher energy needs results in huge investments in the form of setting up power plants and allied activities. ❐ Depleting natural resources is quite disturbing trend and thus the need to save energy becomes inevitable. ❐ Its an initiative for a clean, green and sustainable environment. ❐ It improves the country’s energy security ❐ It reduces the cost of operation / production. Energy Audit An energy audit is a process of identifying

116

and evaluating energy management opportunities at a defined site. It focuses on specific areas of the site’s energy system, such as natural gas boilers, steam distribution, pump/motor systems, refrigeration, compressed air, venting system and related

crease in competitiveness, increase in productivity with effective energy usage, improved quality and more profits.

Some of the clients who have benefited from the Grundfos energy audit report are :

The benefit of energy efficiency on a national perspective

water and wastewater discharge issues.

❐ Efficient use of energy reduces the fuel

galore, Le Meridien, Bangalore; Trident Hilton, Jaipur & Udaipur; CIPLA, Goa; Ranbaxy, Punjab; Appollo Tyres, Baroda; MRF, Pondicherry; Karnataka Breweries and Distilleries Ltd, Bangalore; Glaxo Smithkline, Rajamundry; among others.

During an audit, a baseline is developed to characterize and benchmark energy use. Individual unit operations, processes and major energy consuming equipment are evaluated to identify efficiency opportunities and high reurn on investment projects. Energy Audit on pumps While industry consumes 50% of the total energy expanded, 20% of this is consumed by pumps. 30-50% of this energy guzzled by pumps can be saved. The life cycle of a pump reveal that the energy cost eats away 8%, maintenance costs 10% and the initial investment in the product is a meager 5%. Grundfos role in Energy Audit Save a minimum of 1.5MW power for the nation every year. Visit end users and promote the concept of energy savings and encourage them to use energy efficient equipment; Conduct simple walk through audits to identify the potential of energy savings in pumps at various end user locatons; Conduct detailed energy audit by a qualified energy auditor at customer’s plant and submit a comprehensive and professional energy audit report with payback period; Follow up with customers for implementation of the proposal. Assistance during commissioning and maintenance; Follow up with customers till the payback period is achieved as committed. Energy Efficiency benefits Energy efficiency in an industry has the benefits including reduced energy bills, in117

import ❐ It helps in conserving limited resources

Grundfos India has seen impressive growth from a small turnover of Rs. 50 million in 1999, to a modest turnover of Rs. 518 million in 2004. Grundfos India is also responsible for sales of Grundfos products in Bhutan, Bangladesh & Maldives.

Taj Group of Hotels, Windsor Manor, Ban-

Case Study 1 Customer: Chemfab Alkalies, Pondicherry Audit conducted in: 2003 Status of Audit: Implemented No of pumps audited: 34 No of pumps recommended for replacement: 26 Power consumption before replacement with other make pumps KW/hr: 223

❐ Imporves energy security

Power consumption after replacement with Grundfos make pumps KW/hr: 128

❐ The cost saved from reducing the ex-

Power savings achieved, KW/hr: 95

penditure can be used for other welfare measures. Across the globe energy efficiency means reduced CHG and other emissions and maintaining a sustainable environment. Methodology adopted for energy audit At Grundfos, a four-point method is followed for conducting energy audits for pumping system in any industry. ❐ Preliminary Audit ❐ Detailed Audit ❐ Detailed report The comprehensive and professional energy audit report will consist of – executive summary, introduction, write-up, existing and new system layout, detailed calculations, commercial offer, technical brochures

Savings achieved in Rs.lacs: 20 Investment, Rs. Lacs: 30 Payback months: 18 Case Study 2 Customer: MICO, Nasik Audit conducted on: 2006 Status of Audit: Under Implementation No of pumps audited: 11 No of pumps recommended for replacement: 5 Power consumption before replacement with other make pumps KW/hr: 58.51 Power consumption after replacement with Grundfos make pumps KW/hr: 35.5 Power savings achieved, KW/hr: 23 Savings achieved in Rs.lacs: 6.5 Investment, Rs. Lacs: 10.8 Payback months: 20 ◆

January - 2008

Keromiyons is a business conglomerate born out of consistent endeavor by technocrats. The company’s expertise spans a wide spectrum of activity from architecture to Engineering to Management consultancy.

ncorporated in August 2004 the ac tivities of the company are in all ar eas of involvement encompassing wide spectrum of activity in the area of Art, Architecture, Construction, Interior Designs, Engineering, Marketing, Trading, Quality Assurance & Control Systems, Technical / Engineering Services, Human Resource Management, and Management Solutions.

The primary focus of Keromiyons is the Power Sector, Thermal and Nuclear, a wide range of products such as Control Valves, Industrial Valves, Sonic Soot Blowers are being Engineered / Manufactured and Marketed by Keromiyons Intech Private Limited (KIPL). KIPL is set to emerge as a major player in

applications in conventional Fossil fuel Power plants, Combined cycle Power plants and Nuclear power Plants. Sound Blast Sonic Power Co., Ltd., Hongkong, leaders in Sonic Soot Blowing, are represented by Keromiyons. Sonic Soot Blowing is now a global industrial phenomenon. This trend will grow more and more as manufacturers of industrial boilers and heat exchangers elect to use Sonic Soot Blowers instead of traditional Steam Soot Blowing systems. KEROS Brand Industrial Valves marketed by Keromiyons are of world class quality meeting International standards. The product range include: ❐ Gate Valves

the power scenario of the country by way of contributing its share of products meeting a wide spectrum of applications in the industry.

❐ Globe Valves

KIPL offers a variety of products and services. They are:

❐ Butterfly Valves

Leslie Controls, USA manufactured Control

At Keromiyons the focus is to provide the customer with complete solution to the

Valves & Accessories, Regulators and On/ Off valves are marketed by Keromiyons. Leslie Controls has more than 130 years standing in steam conditioning products. Leslie valves are used in wide spectrum of

valve problem by going into the ‘know why’ of the malfunction by way of conducting extensive analysis of the flow / process control.

January - 2008

Valves stamped ‘Total Solution’ bear the mark of testimony as having been serviced by expert hands and have had the functional problem(s) totally done away with. The expertise and experience of the personnel who man the KIPL render a lasting touch in providing the solution.

Valve Remanufacturing The Keromiyons way of providing solution to valve / flow control problem is based on the principle of ‘fitting the valve to the flow /process’. This is achieved by studying the actual process parameters that the valve experience on-line vis-à-vis the predicted process parameters at the project design stage. The Keromiyons expertise is in bringing in required changes to the valve / actuator design and or to suggest suitable valve to meet the service requirement.

❐ Check Valves ❐ Ball Valves

The Team A well trained and experienced team of engineers and technicians is the back bone which provides solutions to flow control problems encountered by way of Application Engineering expertise as well as Remanufacturing capability. KIPL personnel are trained to take a professional approach in suggesting and implementing solutions. ◆ 118

119

January - 2008

Pattabhiraman, Managing Director of GB Engineering

B Engineering was incorporated in 1980 as a manufacturing company

for boiler components. The promoters have been working earlier in BHEL high pressure boiler plant. As a vertical integration along with a few BHEL engineers, Enmas Engineering Private Limited (EEPL) was promoted. EEPL was undertaking supply of complete boilers with component supplies coming from GB Engineering. Subsequently, the two companies were combined under a corporate holding company - Resurgent Investments Pvt Ltd. (RIPL). In order to have command over other disciplines required for growing as a EPC group RIPL have promoted many subsidiary companies - Ram E&I Systems Pvt Ltd (an electrical & instrumentation company), Enmas GB Power Systems (an engineering and project management company), Enmas Andritz Pvt Ltd (an engineering & project management company specializing in Chemical recovery systems of pulp and paper mills consisting of Recovery boilers, evaporators, caustisiserers and line kilns). “As an R&D effort EAPL has developed the capability of strengthening the concentration of baggase liquor, incineration of non condensible gases and desilication of In-

January - 2008

Indian boiler manufacturing industry has come of age. The potential for boiler sector in India is mainly driven by coal as the stable fuel. The high rise in price of petroleum fuels and natural gas mainly account for this and popular perception is that the growth rate of the boiler industry would be about 13-15%. And playing as vital role in this growth is GB Engineering. dia black liquor which in many cases has high silica content). Enmas O&M Services Pvt Ltd (undertaking operation and maintenance of a large number of thermal power plants), Enmas Engineus Projects Ltd (con-

and desalination plants,” said Pattabhiraman. The company has supplied pulverized fuel boilers, atmospheric fluidized bed combustion boilers, circulating fluidized bed combustion boilers, chemical

struction company for power plants), Resurgent Software Technologies Pvt Ltd (to give total IT support to the group), Resurgent Corporate Support Services (to take care of all the infrastructural needs of the group companies). The group is expecting

recovery boilers, blast furnace gas-fired boilers, water heat recovery boilers, heat recovery steam generators and deareators to various Indian and off-shore customers.

to create many more such companies for production of auxiliary equipments for boilers and undertaking total EPC contracts for power stations,” said Pattabhiraman, Man-

In particular GB, and as a group RIPL, have gone in for many joint ventures and licenses. The recovery island business for the pulp and paper industry is with Andritz of Finland. This has given almost a near

aging Director of GB Engineering.

80% market share to EAPL for chemical recovery boilers in India.

GB Engineering manufacture Boiler - Economizer coils, Helical coil Boiler for Fertilizer Plants, Reheater Coil and Burner Panels.

The joint venture with Ansaldo Caldaie, Italy works on power boilers and spares for ex-

“With the group members and partners, we have the capability to design, manufacture, erect, commission, operate and maintain boilers for power, paper, fertilizer, steel and chemical industries as well as deaerators

isting Ansaldo boilers all over the world. It is expected that the Indian joint venture may become the hub for the supplies required by the JV partner for the global requirements.

120

“The joint venture with Sofinter S.p.a. of Italy (earlier Saline Water Specialists) will be concentrating on desalination multiple stage flash desalination ( MSF ), multiple effect desalination ( MED ) and mechanical compression ( MVC )). The same JV will be

about 40%. This is expected to be more than 50% during 07-08, there by establishing its credentials in the global market. Capacity expansion introducing state-of-theart manufacturing technologies has been initiated which is expected to yield consid-

concentrating on engineering, manufacture and supply of boiler feed water deareators. We have agreements with other off-shore companies for supply of fans, steam turbines, electro static precipitators and waste heat recovery boiler systems,” said Pattabhiraman.

erable advantage in cost reduction and quality improvement by the end of 08-09,” said Pattabhiraman.

GB Engineering had a turnover of Rs.120 Crores during the year 2006-07 and the Resurgent Group has a turnover of Rs.380 Crores. In the last one year the company has increased the export content of its products. “During 06-07, the export content was

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GB expects to grow at an average rate of 25% in the coming years. The Resurgent group in total is expecting to cross a turnover of Rs.1000 Crs by 2010-2011. The company’s concentration will be on both domestic as well as export markets. It expects a 50-50 share for domestic and export. “With our present relationship, many of the boiler makers in India and out-

side India will be served by us for the manufacture and supply of critical boiler components,” said Pattabhiraman. By the year 2010, the Resurgent Group intends to have the capacity to manufacture most of the items of boilers - boiler pressure parts, pipings, all auxiliaries, instrumentation and such like. Resurgent will have the capacity to undertake large capacity power plant EPC contracts. Resurgent also intends to partner in power generation stations . It is also expected to run independent power plants for power generation and supply to the State grids. GB and the Resurgent Group is expected to be in the boiler and thermal power segment as its core area of business. ◆

January - 2008

Ahmed Buhari, Founder - President and CEO, Coal & Oil Group

January - 2008

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A decade before India awoke to the reality of the approaching energy crunch, C&O set up “Coastal Energy”, an associate firm in India, with a far reaching vision to emerge as an ‘Integrated Energy Conglomerate’.

he Coal & Oil Group (C&O Group), es

tablished in 1998 is promoted by Ahmed Buhari (Founder - President and CEO) and his family (the co-promoters of the US$ 4 billion ETA - Ascon Group) in partnership with the Al Rostamani Group of Dubai.

The C&O Group today comprises of over 7 different companies, each specialized in key aspects of the energy supply chain. In the ten years since inception, C&O has notched up an annual group turnover of about US$ 450 million (FY 2006-07). C&O is a pioneer in providing Fuel Management Solutions to customers in India & Pakistan and aims to emerge as a most preferred provider of ‘Integrated Energy Solutions’ to consumers in the Indian subcontinent. C&O offers a diverse range of coal products including steam coal, coking coal, anthracite, petcoke, metcoke, PCI, and such like, satisfying the specific requirements of power, cement, steel, chemical, paper and other industries. With a vision to be a key player in all links of the energy supply chain from ‘Mine, Mouth to Microwave’, C&O is now planning to enter power production with independent coast based power plants 123

in India and is exploring mine acquisitions

Coastal Energy Pvt. Ltd., India operates

around the world.

through both large and small ports on the east as well as the west coast of India and has over 12 field offices in the ports of India to offer logistics support to its clients, with several more being planned. The comprehensive basket of services offered to customers includes sourcing, shipping, on-

The C&O Group is currently one of the largest suppliers of steam coal into India having imported close to 6 million tonnes in the year 2006-07. It services some of the top blue chip companies in India including

In the ten years since inception, C&O has notched up an annual group turnover of about US$ 450 million (FY 2006-07). C&O is a pioneer in providing Fuel Management Solutions to customers in India & Pakistan and aims to emerge as a most preferred provider of ‘Integrated Energy Solutions’

shore and off-shore logistics, transportation and technical consultancy. The C&O group employs over 200 employees in three countries and is currently the only fuel supply provider which has a vessel of its own, a Panamax, to ensure freight security for its customers. The group is also planning acquisitions of more such shipping assets. During the past decade, C&O has supplied

Tatas, Reliance, Calcutta Electric, Gujarat Narmada Valley Fertilizers, Gujarat Ambuja,

various types of coal from countries like Indonesia, Russia, China, South Africa, Australia, Syria, Vietnam and USA in association with major companies such as Anglo Coal, TOTAL, BHP Billiton, Shenhua, Minmetals, CNCIEC, Shanxi, Banpu Group,

Madras Cements, Tamil Nadu News Prints and major cement companies in Pakistan. It supplies coal both on CIF Indian port basis as well as on delivered basis through its group company Coastal Energy Pvt. Ltd., India.

Kideco, Bukit Asam and KOCH Carbon. Its shipping and banking associates include Klaveness Shipping, d’Amico, Oldendorff, BNP, Standard Chartered Bank, Indian Overseas Bank, Corporation Bank, ICICI Bank and J&K Bank. ◆ January - 2008

J Jeyakumar CEO, Vitaa Zeus Energy Private

Vitaa Zeus Energy specializes in providing predictive, preventive optimization in the field of wind turbines. Wind turbines of the megawatt class generally consist of more than 10,000 components, each distinctive and critical for generating quality power by maintaining the flicker and harmonic ratios as demanded by the national and international grid code. Vitaa Zeus Energy Private Limited is also one of the leading developers for installing wind turbines in various states and is in the final stages of acquiring a land bank for 350MW of Wind Energy in proven locations identified by CWET and also have independently put up wind masts in various states for data collection.

oday the need of the hour is clean

wind speed suddenly changes, a relatively

and environment friendly energy to meet the quantum demand for power all over the world. The coming years will see an influx of wind turbine manufacturers from all over the world more so from China. The latest report states that every

small amount of acceleration and angular movement at the gearbox input gets multiplied 100 times at the output â&#x20AC;&#x201D; building up massive amounts of torsional windup and strain energy in the gears.

province in China will be producing wind turbines of various sizes to meet the global demand. This leads us to the billion dollar question on post installation, operation, maintenance and services? Turbines have a giant rotor, in some cases as large in diameter as a football field, generating 1 to 2 million lb-ft of torque. The gearboxes commonly have 75:1 to 100:1 step-up ratios, taking wind energy from the rotors at about 20 rpm up to 1,500 to 1,800 rpm at the generator. The trouble is, when

January - 2008

Turbines typically use planetary gears to divide torque along three paths and reduce individual loads on each gear. But torsional loads twist gears out of alignment, and slight dimensional variations in gearbox components - including shafts, bearings, gears, and carrier - means planet gears donâ&#x20AC;&#x2122;t equally share the load. Misaligned gears, shock loads, and uneven forces lead to high localized stresses and, eventually, fractures along the gear edges. It also causes bearings to skid rather than roll, smearing and micro pitting the raceways and hastening failure.

Fatigue Loads Wind turbines are subject to fluctuating winds and hence fluctuating forces. This is particularly the case if they are located in a very turbulent wind climate. Components which are subject to repeated bending, such as rotor blades, may eventually develop cracks which ultimately may make the component break. This is the critical factor which we specialize in providing predictive maintenance on an 8760 hour basis and which is the major difference between us and other service providers.

Structural Dynamics A 50 metre tall wind turbine tower will have a tendency to swing back and forth, say, every three seconds. The frequency with which the tower oscillates back and forth is also known as the eigenfrequency of the

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tower. The eigenfrequency depends on both the height of the tower, the thickness of its walls, the type of steel, and the weight of the nacelle and rotor. Now, each time a rotor blade passes the wind shade of the tower, the rotor will push slightly less

creases the service life of the machines. The system also serves to control the plants in the grid with the objective to achieve high quality electricity and grid stability. Thus, Vitaa Zeus Energy Management is an important service offered to the operators of

against the tower. If the rotor turns with a rotational speed such that a rotor blade passes the tower each time the tower is in one of its extreme positions, then the rotor blade may either dampen or amplify (reinforce) the oscillations of the tower.

wind turbine systems for secure energy supply. Vitaa Zeus optimizes the operational results and costs of your energy facilities.

The rotor blades themselves are also flexible, and may have a tendency to vibrate, say, once per second. As you can see, it is very important to know the eigenfrequency

Preventative and Predictive maintenance with Vitaa Zeus OMS Management com-

age completes the early fault detection system: All major components including the gear oil and compliance with all maintenance regulations are regularly checked by experienced technicians in accordance with a specified inspection plan. The Vitaa Zeus monitors all systems from the 24h control centre and directs the work of the service teams. These service teams are available 24/7 and deal with any fault

Modules for maximum avilabilas quickly as possible. No effect without a ity

prises of the below given components:

cause â&#x20AC;&#x201C; as a mobile research laboratory, Vitaa Zeus is always on the lookout for the causes of component wear and faults, to further increase the service life of all com-

of each component in order to provide a safe and smooth running of turbines that do not oscillate out of control and again this forms one of the critical aspects in maintaining wind turbines.

Operation & maintenance Maximum Machine availability at calculable costs is the prerequisite for economic success in wind power generation. A demanding technical and logistical task. The solution is provided by our professionally qualified and skilled man power with more than 35 million hours of man hour experience in operating and maintaining various turbines manufactured by various leading Wind turbine Companies.

Vitaa zeus OMS management The name says it all. This comprehensive maintenance and operating system for power plants was developed on the basis of experience that technically caused yield losses are generally avoidable. Power Management reduces system down time, significantly reduces yield losses, prevents expensive consequential damage and in-

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The internet-linked online monitoring system Vitaa Zeus Terminal allows the operator to react to all events immediately and facilitates a complete overview of all systems, their operating status and their performance, irrespective of the manufacturer. The early fault detection function of the automatic status monitoring system Vitaa Zeus helps you to purchase spare parts on time and to avoid expensive consequential damage. Repairs can be scheduled for lowwind periods. The Vitaa Zeus service pack-

ponents. The detailed examination of operating data is just as much an everyday-use tool as high-precision power train measurements in wind turbines. Vitaa Zeus database collects all information on system operation and presents all required operating information intelligibly. In addition to permanent operating data recording, each event, whether inspection, maintenance or repair, is automatically registered and evaluated. This data allows optimal planning of preventative and predictive maintenance measures. â&#x2014;&#x2020;

January - 2008

RS Windtech Engineers P. Ltd, which is in the business of Operation and maintenance of Wind turbines on annual contract basis, has so far erected about 500 machines, the capacity of which aggregate to about 450 Mw of power. About 100 of these machines are of 1,650 Kw rating, each of which is capable of generating about 60 lakhs units of energy annually. J Rajasegar MD, RS Windtech Engineers P. Ltd

ervicing Wind Turbines by condition

mark, the country which pioneered in this

ing NOCs (No Objection Certificates), Safety

monitoring machines and suggest ing ways and means to improve power generation, mediating between the owners and the nodal agencies like Electricity Boards, Electrical Inspectorate on matters like Energy Bills, renewal of Safety

field. His knowledge was fortified by his hands-on experience in Installation, commissioning, operation and maintenance of Wind Turbines.

Certificates, and such like as well as undertaking annual operation contracts for the machines which are under their care during the warranty period.

He says, “It is an ‘Energy-thirsty-world’. While the reserves of fossil fuels are depleting so rapidly, Wind is the best alternate renewable resource for Energy. To extract maximum possible power from the wind, it is imperative to monitor the condi-

In terms of infrastructure, the company possesses a set of three hydraulically operated Telescopic mobile cranes with capacities 330 T, 80 T and 12 T. The company spares them to its customers on hire basis for installation/maintenance of WTGs. “We

tion of the machines very closely, carry out timely maintenance and operate the machines at optimum level at each and every moment. An AMC service provider alone can ensure these things.”

have a well equipped workshop where the Gear Box, Generator and other Nacelle components are repaired. As the size of the Machine is growing year after year, the handling capacity in the workshop is also to be enhanced. To meet the present day

Certificates, providing them spares as and when need arises, extending crane facilities, R S Windtech Engineers have come a long way primarily because of its expertise in the field. Started by J Rajasegar, who is the Managing Director of RS Windtech Engineers P. Ltd, the company has reached to this stage mainly because of his foresight. His experience in this field is as old as the first wind turbine of Tamil Nadu. He has acquired indepth knowledge in this field by undergoing several training programmers in Den-

January - 2008

R S Windtech also serves manufacturers of wind turbines in terms of installation and commissioning of Wind Turbine Generators, liaisoning with nodal agencies for obtain-

requirements, we are going in for a large scale workshop which can handle Nacelles of 1,650 Kw machines. Apart from that we

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have an Electronic Lab and a Hydraulic Lab, wherein we service Electronic modules, Instruments, and hydraulic power packs. We possess well established communication facilities and transport facilities. Above all these, we are a team of dedicated Engi-

depends on the Power Purchase Price agreed to by the State Electricity Board. In order to encourage Wind Power Generation, this price should be enhanced on par with the Industrial tariff. Or, at the least, sale to third party should be permitted and

curtailment of wind power generation when the wind speeds are at its peak. “The Government has to develop the Infrastructures needed without depending on WTG manufacturers. Similar curtailment is resorted to at the time of low power demands or high

neers and our Technicians are well experienced,” says Rajasegar.

implemented. If the Energy Goal and the Environmental Goal of mankind is to be achieved, the Government has to pay its cost. Since Wind Mill Projects help achieving the above goals and uplift the welfare of the community as a whole, it always has the option and rights to pass on the burden

Hydro Generation. Coal in Thermal Power stations and water in Dams could be stored and utilized as and when power is needed. But, wind cannot be. We have no control over it, absolutely. We have to generate power when it blows. Keeping this in mind, curtailment of wind power generation has

to the public. The Government should implement such policies which would attract such investors also.”

to be averted and First priority shall be given to it. The Carbon Credits earned by the wind turbines fetch some relief to the owners. The Government shall take efforts to ensure that the benefits of the credits continue beyond the year 2012,” he adds.

Commenting on the government’s role in improving the industry, Rajasegar feels that only those wind mill owners who also own Industries which consume enormous electric power stand to gain to some extent by way of wheeling the power generated by their machines. He says, “The returns for them depend upon the Industrial Tariff applicable to their Industry. However, those who sell the power generated to State Electricity Boards receive much less returns. It

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According to him, another bottleneck for this Industry is the inadequacy of Power Evacuation facility, which sometimes forces

◆

January - 2008

Surjya Narayana Patro Minister for Energy, Information Technology & Culture, Govt. of Orissa

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nterestingly, the state, a surplus power bank, under the dynamic Transparency, a powerful leadership of Naveen Patnaik, the Chief Minister of Orrissa, en method of judging the dowed with dynamism, is drawing up a bright plan to multiply righteousness of power production, involving of course, National and International playGovernance, is vibrantly ers. Orissa has identified important power-project locations which seen from entry to exit. Shunning extravaganza and will catapult Orissa into an investor friendly hub for industrial revolution. The power minister, supported by the Chief Minister, Naveen a dilly-dallying attitude, he Patnaik, has set an ambitious goal to convert Orissa into a ‘power’ful administers his office state. professionally. He holds the portfolio of Energy minister Power Scenario in the most “powerfull” It was a dismal situation during 2002 when Surjya Narayana Patro state where a power cut took over the power ministry. Four hours of power cut were the orhas been unheard of in a decade. Orissa is the super der of the day. Within three months he changed the contours of the power position and maintaining his promise that as long as Naveen duper power house where Patnaik, continues as Chief Minister power cuts will be a thing of the surplus power flows to past. Of course he maintains it in letter and spirit. neighbouring states whenever they are power - He also brought down the T&D loss from 62% to 32% and enhanced the PLF factor to 90% from 50 %.The present installed capacity of short. Surjya Narayana Orissa is 3822 MW comprising hydro 1935 MW, thermal 880 MW and Patro, a lawyer turned Central share 1007 MW while the firm capacity is 2200 MW. The politician, is a Minister peak power demand of the state is around 2000 MW leaving 200 MW holding portfolios like of surplus power available for sales. energy and IT. He presents The Minister very well understood that power availability is the yardan interesting picture of Orissa where, possibly, the stick to measure the development of a state. The Government of Orissa, is now thereby planning to launch 13 new power projects to state could become a “potential” power centre to generate 16,125 MW of total additional capacity (3748 MW of state share)through Independent Power Producers’ (IPP’s). These ambicater to Indian power tious projects are born out of heavy and sudden entry of new indusstarving states. th

BY P.R. SUBAS CHANDRAN

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tries in mines and mineral extraction. The 11 five-year-plan is going to add another 4946 MW thus giving an impetus to the Orissa power sector. Based on past experience and meticulous homework for the

January - 2008

Meditative Efforts Being a seasoned politician and having experienced the brunt of bureaucratic delays, Mr Patro persuaded the Government of India (GOI) which yielded a positive result. A Task Force consisting of the Ministry of Power and Finance, from GOI, State Ministers’ of Power from Andhra Pradesh, Orissa, Maharastra, Uttar Pradesh and Assam, representing five regions, was formed with Montek Singh Aluwalia as the

future, the ministry anticipates an additional requirement of power supply. Patro is now

we have to opt for alternative power projects. Nuclear Power Corporation en-

working overtime to generate power to feed a proposed 46 new, major steel plants, 4 aluminium plants, plus 100 medium and small scale industries with an investment of Rs.5 lakh crore within the next 5 years. Aiming at high industrial development

trusted Orissa Hydro Power Corporation with the task of exploring water resources to start a 6000 MW nuclear power project at Patisonpur in Ganjam district and preliminary work is going on. This has yet to take a final shape.”

through 24x365 days of uninterrupted power supply, Patro will be transforming the Orissa State into a citadel of the mining industry which is the second highest in the country-enriched with 25% of iron ore, 28% of coal, 62% of bauxite & 92% of chorme. In other words, all these industries will need an additional power supply of nearly 3000 MW. To make this happen, the power minister is now pressing buttons everywhere to see that this ambitious agenda becomes an energizing reality. To a question why Orissa could not launch a single Nuclear power project, Patro said, “Yes, we are aware that Orissa should have one. Orissa being a power surplus state, our priority was rallying around green power. As the demand is likely to increase,

January - 2008

His order of priority is something worthy. The minister is conscious about the air pollution caused by thermal power and some renewable energy stations. He has given a back seat to power generated out of coal or other fossil fuels. Underscoring the damage meted out to the environment by these power houses, the Minister is now asking for a compensation of an additional 12 % free power from such projects and assures the State that the Government will spend this additional revenue in generating more green houses to nullify the adverse effect. Kudos to Surjya Narayana Patro’s corporate social responsibility. “One should not forget the high initial cost factor involved in alternative energy”, says the power architect.

Chairman to oversee the progress of power projects and a fortnightly meeting is held regularly. “All this was possible because of our dynamic Chief Minister Naveen Patnaik who has given us a free hand to deal with the Central Government. I am proud to work under him”, says Surjya Narayana Patro.

Transparent Entry Empowered with a single window system for industries, the power minister ensured that private players do not fall prey to bureaucratic hurdles. He has generated a two tier system of sanctioning power projects as early as possible. While investments below Rs.100 crore will be sanctioned by a committee headed by the Chief Secretary, projects above Rs.100 crore are monitored by a high power committee consisting of the Chief Minister, Industry, Finance & Energy Ministers so that the approvals become faster and more effective without having to wait for one ministry or the other for approval. This simplification has opened the floodgates of companies coming to ‘backward’ Orissa and it is Orissa is well heard of for its all-round development. Patro is not complacent with the blueprint of capacity addition which would meet the demands of the new investors. If so what about the power business? What will the state do with enriched coal 130

and other sources? Should they sell coal for a song or generate power and mint money? He opted for the latter and signed a memorandum of agreement with the Government of India to start an Ultra Mega Power Project (UMPP) of 4000 MW with

furcated the power sector into Transco and Genco making it more visible and vibrant for effective operation. Another positive step is the disinvestment of 49% of the share of the Orissa Power Generating Company leading to public participation. To bring

coal as fuel. This UMPP is being set up in Sundargarh district which not only facilitates proliferation of new industries but also arms the state with surplus power. This apart, the ministry is flooded with 38 applications to start Thermal Power Projects in Orissa. No wonder, if all the applications

in more reforms, Patro is now planning to give an IT orientation to the power sector and may be in the years to come every citizen in this state will be able to access power through the touch of a button or at the flick of a switch.

are translated into reality, Orissa is bound to become a major power supplier for national industrialszation.

Creative agenda

True ‘Transformers’ Reforms, a mantra, are not merely uttered but actively practised in day to day administration. Falling in line with energy reforms, this modern power manager, Patro, has bi-

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Waging a war to provide power at a cheaper rate, Surjya Narayana Patro, known for his creativity, initiated a new mechanism involving OHPC and three shell companies to start power projects based of tariff bidding. In other words, the lowest bidder who promises to give power at a cheaper rate only will get project sanction.

Transmission and Distribution Loss When asked how is he going to bring down the transmission and distribution loss, the third highest in the country (32%), Patro has outlined his programme and is confident of bringing it down to 18–20% by installing advanced gadgets, improving existing infrastructure with modern equipment and finally bringing the pilferages to accountability by making the new power companies responsible for collection, environmental friendliness as well as profitability, in accordance with the latest International Energy Protocol. He is planning to wage a perpetual war against power theft in the state. He is also planning to invite national/international organizations to bring a foolproof mechanism for effective energy auditing as well as look at energy from sea-waves. ◆

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