Indian Power Sector

POWER SECTOR
Presented by:
Kuldeep Kavta- PT300713
Mustafa K. Sonasath- PT301513
CEPT University

INTRODUCTION
 Electric power is a critical input into all economic activity.
 It is essential not only for agriculture, industry and commercial business but also for
basic household lighting.
 India ranks 5th in power production in the world but still about 45% of rural India is
yet not electrified.
 Since power is a basic amenity required which is yet to be satisfied, the sector has
an immense growth potentials.
 Installed capacity of power plants in India is 250256 MW as in 2014 in which private
sector contributes about 35%, state has 25% and centre has 37 % contribution.
 Recently after formation of new government in 2014, power sector has been in lime
light for its restructuring.

GROWING DEMAND
Expansion in industrial activity to boost
demand for electricity
Growing population and per capita
usage
Power consumption is expected to
increase from 821.2 TWh in 2013 to 1433.2
TWh in 2022
ATTRACTIVE OPPORTUNITIES
Large capacity additions targeted in 12th
and 13th year plans
Increasing investments and projects
Diversification into renewable sources
HIGHER INVESTMENTS
FDI infows in the power sectors
Major investments by public as well as
private sectors
POLICY SUPPORT
Elimination of licences
Rationalisation of Tariifs and development
of UMPP
Advantage
India
INDIAN SCENARIO

Before 1956
 Electricity Act
1948
 Establishment
of SEB’s
1956-1991
1991-2003
2003
onwards
 Industrial Policy
Resolution
 Generation &
Distribution of
power under
State ownership
 Power losses,
subsidies and
resource
constraints
 Legislatives &
Policy initiatives
 Private sector
participation in
generation
 Electricity
Regulatory
Commissions Act
for establishing
Central and
State Regulatory
Commissions
 Electricity Act 2003
 National Tariff Policy 2006
 Elimination of licensing
for generation
 Launch of UMPP scheme
 Various schemes and
initiatives to promote
renewable energy
 Fuel Supply Agreement
of power companies
with CIL
 Increased competition
through international
competitive bidding
EVOLUTION OF INDIAN POWER SECTOR

608 615
1006 1104 1052
4308
4700
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Canda Germany India Japan Russia US China
World’s largest electricity producers
Production in 2012 (TWh)
• With a production of 1006 TWh in 2012, India is the fifth largest producer and
consumer of electricity in the world
• Although power generation has grown over independence, demand growth
has been even higher due to accelerating economy
Source: Energy Statistics 13, CEA
WORLD’S LEADING ELECTRICITY PRODUCERS

Thermal
68%
Hydro
18%
Renewable
12%
Nuclear
2%
Shares in total installed capacity 2013
Thermal Hydro Renewable Nuclear
168.4
40.5
31.7
4.8
0
20
40
60
80
100
120
140
160
180
Thermal HydroelectricRenewable Nuclear
Installed Capacity for different sources
2013
Capacity in GW
POWER SHARES
Source: Ministry of Coal

POWER: MARKET WITH GROWTH POTENTIAL
87 91 97
104 110 116 122
101
109 110
119 122
130
137
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013
Addition to Capacity Generation
(GW)
Capacity Peak requirement
 The per-capita electricity consumption of
India stood at 819 lower than the global
average of 2803 representing enormous
growth.
 The addition of approx. 106 GW to the
existing capacity is expected to boost GDP
growth to 8% by 2017
Source: CEA

GROWTH OF ELECTRICITY PRODUCTION
663
705 724
772
811
876 912
0
100
200
300
400
500
600
700
800
900
1000
2007 2008 2009 2010 2011 2012 2013
Electricity Production in India (TWh)
Production in TWh
CAGR=5.5%
 Over 2007-13, electricity production
expanded at a CAGR of 5.5%
 Electricity production in India stood at 911.6
TWh in 2013, a 4% over the previous fiscal.
Source: CEA

INCREASING INVESTMENTS: FDI INFLOWS
87
157
967 985
1437
1252
1652
536
0
200
400
600
800
1000
1200
1400
1600
1800
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
FDI Inflows (USD Million)
FDI Inflows (USD Million)
 Power is one of the key sectors attracting FDI
inflows in India
 Power accounted for 4% of total inflows in
the sector in FY13.
 Cumulative FDI inflows into the FY00-13 were
USD 7.8 billion
 100% FDI in Power Generation, Transmission
and Distribution from 2012.
Source: Make in India

POLICIES ADOPTED DURING BUDGET FY 14
•Government to reintroduce generation based
incentives for wind power projects to boost capacity
addition in sector
Generation Based
Incentives
•To reduce dependency on imported coal, a PPP
policy framework would be devised with CIL to
increase coal production
Public Private
Partnership(PPP)
•During FY13, Government liberalized policy for power
trading exchanges.
Liberalized FDI policy
•Low interest bearing funds to be provided from
National Clean Energy Fund to IREDA for on lending to
viable renewable energy projects
Low Interest Funds
•The total plan outlay for the power sector for FY14 was
aprox USD 1.6 billion, a significant 27% higher than
estimate of USD 1.5 billion for FY13
Growing Investments
•The total capex by power PSU’s is estimated to be USD
9.4 billion in FY14 as against USD 9.3 in FY13
Higher Capex by PSU’s

Ministry of
Power
TransmissionGeneration
Central
Electricity
Authority
Distribution
National Load
Dispatch
Centre
Central
Transmission
Utility
Govt owned
PSU’s
State Load
Dispatch
Centre
State
Transmission
Utility
Regional Load
Dispatch
Centre
State
Electricity
Board’s
STATUTORY BODIES

PPP IN POWER SECTOR
 A PPP project at Jhajjar in Haryana for transmission of electricity was awarded under
the PPP mode. Further, to enable private Participation in distribution of electricity,
especially by way of PPP, a model framework is being developed by the Planning
Commission.
 To attract private sector participation, government has permitted the private sector
to set up coal,gas or liquid-based thermal, hydel, wind or solar projects with foreign
equity participation up to 100 per cent under the automatic route.
 The government has also launched Ultra Mega Power Projects(UMPPs) with an initial
capacity of 4,000 MW to attract `160–200 billion of private investment. Out of the total
nine UMPPs, four UMPPs at Mundra(Gujarat), Sasan (Madhya Pradesh),
Krishnapatnam (Andhra Pradesh) and Tilaiya Dam (Jharkhand) have already been
awarded. The remaining five UMPPs, namely in Sundergarh District (Orissa), Cheyyur
(Tamil Nadu), Girye (Maharashtra), Tadri (Karnataka) and Akaltara (Chattisgarh) are
yet to be awarded.
 To create Transmission Super Highways, the government has allowed private sector
participation in the transmission sector

ACTS RELATING TO POWER SECTOR
1) Indian Electricity Act, 1910:
This Act was introduced to provide a basic framework for electricity supply industry in India.
Its main objectives were:
 To assign nominal powers to local governments so as to remove the problem of dual control
of electricity supply.
 To allow local governments to issue licenses for bulk supply of electricity
 To provide a legal framework for laying down of wires and other works
 To provide for laying down relationships between licensee and consumer.
2) Electricity Supply Act, 1948:
The main objective of this Act was to make provisions for the establishment of the CEA to
monitor the electricity sector at the central level. SEBs were established at the state level to
expand the supply of electricity to remote areas of the country.
3) Amendments to Electricity Supply Act, 1948:
The following are the amendments introduced in the Act:
(a)Electricity Supply Act, Amendment 1975:

 To enable the generation of electricity at the Central government level; and,
 To bring commercial viability to the functioning of SEBs by ensuring a minimum return of three
percent on net capital at the beginning of each year as a mandatory requirement for SEB
(b) Electricity Supply Act, Amendment 1991:
 To open generation to the private sector; and
 To establish the setting up of RLDCs to monitor the appropriate dispatch of
electricity within their respective regions.
(c) Electricity Supply Act, Amendment 1998:
To provide for private sector participation in transmission.
4) The Electricity Regulatory Commission Act, 1998:
The Act provided for the setting up of the Central/SERCs with powers to determine electricity tariffs.
While the CERC had responsibility over all centrally owned power stations and other interstate
stations, the SERCs were responsible for stations within their own jurisdiction or state. The constitution
of SERC was left optional for States.
5) Electricity Act, 2003 (Act):
The Electricity Act, 2003 endeavoured to provide an enabling framework for an accelerated and
more efficient development of the power sector. It encouraged competition with appropriate
regulatory intervention.

REGULATORS IN POWER SECTOR
 CERC-Central electricity regulatory
commission.
 CEA-Central electricity authority
Centre State
 SERC-State electricity regulatory
commission
 SEB-State electricity board
Goa and UT
 JERC-Joint electricity regulatory commission.

REGULATORY ROLE:
 Powers to regulate centrally owned generating companies.
 Sale of electricity in more than one State and regulate inter-State transmission/Trading.
CERC
SERC
 Powers to regulate intra-State generation, transmission and distribution.
 TEC of generation projects, technical norms etc.
CEA
SEB
 Several powers as main advisor of State Govt.

FUNCTIONS OF CERC:
 To regulate the tariff of inter-state generating companies.
 To regulate the inter-State transmission of electricity.
 To determine tariff for inter-State transmission of electricity .
 To issue licenses for inter state electricity transmission and trading.
 To adjudicate upon inter-State disputes.
 To specify and enforce the standards with respect to quality, continuity and reliability of
service.
 To fix the trading margin.
 To develop national power market.
 Promotion of competition, efficiency and economy in the activities of the electricity
industry.

FUNCTIONS OF SERC:
 Determine the tariff for generation, supply, transmission within the State.
 Facilitate intra-State transmission and wheeling of electricity.
 Issue licences for intra state transmission, distribution and trading.
 Promote co-generation and generation of electricity from renewable sources of energy.
 Adjudicate upon the intra-state disputes.
 Specify or enforce standards with respect to quality, continuity and reliability of service by
licensees.
 Fix the trading margin in the intra-State trading of electricity.
 Matters concerning generation, transmission , distribution and trading of electricity or any
other matter referred to the State Commission by that Government.

SCOPE/ACTIVITIES:
Generation
 No requirement of licence.
 Full freedom to captive generation.
 For hydro-generation clearance of CEA is necessary due to concern of dam safety
and inter-State issues.
 Generation from Non-Conventional Sources / Cogeneration to be promoted. Minimum
percentage of purchase of power from renewables may be prescribed by Regulatory
Commissions.
Transmission
 Transmission Utility at the Center and in the States to undertake planning/development
of transmission system.
 Regional Load Despatch Centres to ensure integrated operation of the power system.
Distribution
 Distribution, a licensed activity.
 Retail tariff to be determined by SERC.
 Provision for suspension/revocation of licence by Regulatory Commission as it is an
essential service which can not be allowed to collapse.

RECENTLY IN POWER SECTOR:
 Government sanctioned total 12 UMPPs. (4000 MW and above)
 The UMPPs that commissioned production are facing problem due to lack of fuel.
 Due to these UMPPs stared buying occupying coal mines in Australia, Indonesia and other
Eastern countries
 These resulted in UMPPs asking for increase in the tariff (Mundra case). The empowered panel
approved the new tariff.
 After supreme court cancelled the allocated coal blocks recently, new government came up
with new policy o revive coal India recently.
 As per statement by power minister government might go for UMPP on their own if required.
(source: business standatrd)

ISSUES AND RECOMMENDATIONS
1) Reducing the Government monopoly over coal through auctions & pooling.
 Auctions can be considered an effective method for allocating coal blocks, as mining
 companies bid according to how much they value the license.
 The government has approved auction of Coal blocks and worked out the methodology for
auction by competitive bidding of the coal blocks.
 Care has to taken by the government and regulators that bids submitted justify the value of
coal blocks.
 Secondly, the pooling of domestic and international coal prices can be used as an
important tool for reducing the vagaries arising from fluctuations in international coal prices.
 Under the pooling of coal prices, power plants would pay a uniform, average price for both
domestic and imported coal
 This process would reduce the dominance and near monopoly of CIL as the price of
domestic coal is one third the cost of imported coal and would advantage private players
as well.
 The view of the CEA that power plants equidistant from the coast and coal mines should be
supplied imported coal and that CIL should supply coal to power stations located near coal
mines should be considered by the government.
 This pooling mechanism may help reduce transportation costs of coal by 50 percent.

2) Encouragement of Private Mining and Corporatisation Of Coal India’s Subsidiary
 The government should take more concrete steps to encourage the setting up of private
mines so as to increase availability of coal for electricity generation.
 The Ministry of Environment & Forests needs to play a bigger role in giving quick clearances
for setting up of these mines.
3) Implementing Open Access
 Currently in the distribution sector, the networks of power lines supplying electricity to
consumers‘ houses are mostly owned by state utilities.
 Besides creating confusion about tariff rates, this also hinders the implementation of open
access
 A review of the existing policies and regulations, and adherence to the same is very critical.
Further, rationalisation of wheeling charges and cross subsidy surcharges, as per guidelines in
the Electricity Tariff Policy, is a prerequisite to encouraging demand for Open Access.
4) Rationalising Tariffs
 Tariff rationalisation is essential in order to ensure the financial viability of the state utilities,
and to promote private entry into the market for electricity distribution.
 To this end, there is a need to clearly define and demarcate the powers of the State
governments in tariff setting and controlling.

4) Ensuring unbundling in The Electricity Supply Chain
 There is a need to undertake measures that would ensure the unbundling of SEBs in all of
the states.
 While progress has been made in some states such as Gujarat, Maharashtra, West Bengal
and Orissa others such as Tripura, Uttarakhand, Himachal Pradesh, Jammu & Kashmir,
Meghalaya and Mizoram still have ways to go.
5) Reforming Subsidies
 Efficient and alternate ways of providing subsidies to the agriculture sector or to the poor
must be designed and implemented to benefit poor households without proving
detrimental to the functioning of private players in the electricity distribution sector.
 Private public partnerships in such reforms can lead to a more efficient distribution of
Power.
 It offers assistance to the poor directly using government finances without adding undue
burdens on the power distributing company.
6) Resolving Domain Issues Between Regulators
 Differences have cropped up between CERC and the CCI regarding jurisdiction over
anti-competitive practices in the power sector.
 The central government should clearly indicate who has jurisdiction in the domain of
competition in the electricity sector.

7) Making Umpps more Viable
 So far 12 UMPPs have been sanctioned by the government but they face fuel shortages
and losses due to their inability to set tariffs reflective of their costs.
 For eg, the CERC allowed Adani Power to temporarily increase tariffs from it’s Mundra
project and subsequently passed a similar order for TPC. Such allowances for tariff
revisions due to supply and demand conditions must continue in order for the UMPPs to
remain viable business ventures.
8) Misuse of the Powers Given To States Under Section 11 Of The Electricity Act 2003
 According to Section 11, appropriate state governments may specify that a particular
generating company may, in extraordinary circumstances, operate and maintain any
generating station in accordance with the directions of the government. This has
become a norm rather than an exception.
 The government should take necessary actions to amend the section so it is used only as
intended. The matter has been referred to the judiciary.
9) Private Sector Participation In Retail Business
 The government should consider involving private sector companies in outsourcing retail
business such as bill collections from customers, running customer care centres and other
related activities in the distribution sector. Most developed countries practice this model.

TARIFF OF ELECTRICITY IN INDIA
Tariff refers to the amount of money the consumer has to pay for making the power available to
them at their homes. Tariff system takes into account various factors to calculate the total cost of the
electricity.
Types:
1) For Consumer
The total cost levied on the consumer is divided into 3 parts usually referred as 3 part tariff system.
Total cost of electrical energy = fixed cost +semi fixed cost + variable cost = (a + b*KW +c*KW-h ) Rs.
a = fixed cost independent of the maximum demand and actually energy consumed. This cost takes
into account the cost of land, labour, interest on capital cost, depreciation etc.
b = constant which when multiplied by maximum KW demand gives the semi fixed cost. This takes
into account the size of power plant as maximum demand determines the size of power plant.
c = a constant which when multiplied by actual energy consumed KW-h gives the running cost. This
takes into account the cost of fuel consumed in producing power.

Types:
1) For DISCOMS (Availability Based Tariff)
The total cost levied on the consumer is also divided into 3 parts usually referred as Availability Based
Tariff.
This tariff mechanism also has of 3 parts: Fixed charge + capacity charge + UI (Unscheduled
interchange).
The capacity charge is for making the power available to them and depends on the capacity of
plant.
Unscheduled Interchange is the charge for making the system

5th largest producer and consumer globally
•With a production of 1006 TWh , India is the 5th largest consumer and producer in th World
Large scale government initiated plans
•The government targets expansion of 89 GW under the 12th Five Year Plan and around 100 GW under the 13th
Five Year Plan
Robust growth in renewables
•Renewable energy capacity additions of 30 GW are planned in the next five year plans to meet the growing
demand
Favorable policy environment
•National Tariff Policy ensured adequate return on investment to companies engaged in power sector and
assured electricity to end users at affordable and competitive rates
•Launch of UMPP scheme
SUMMARY

Indian Power Sector

More Related Content

What's hot (20)

Viewers also liked (17)

Similar to Indian Power Sector (20)

Recently uploaded (20)

Indian Power Sector