Vikas Gupta, Mba (Et), Upes

POWER SECTOR SNAPSHOT
BY: - VIKAS GUPTA

M.B.A. ET
Roll No. 39
POWER SECTOR SNAPSHOT Page 1

TABLE OF CONTENT
S.NO. Topic Page No.
1 Executive Summary 3-9
2 Introduction 10-12
3 Generation 13-19
4 Transmission 20-27
5 Distribution 27-34
6 Rural Electrification 35-37
7 Power business:-Incentives 37-38
8 Generation 37-39
9 Transmission 39-40
10 Distribution 40-42
11 Power Companies in India 44
12 Power Trading 45-46
International Scenario in
13 47-50
Power Trading
Indian Power Trading
14 50-58
Scenario
15 Conclusion 59
16 List of Abbreviations 60

EXECUTIVE SUMMARY
POWER SECTOR SCENARIO DEVELOPMENT AND IMPROVEMENT
Power is a critical infrastructure for economic development and for improving the
quality of life. The achievement of increasing installed power capacity from 1362 MW to
over 100,000 MW since independence and electrification of more than 500,000 villages
is impressive in absolute terms.
However, it is a matter of concern that the annual per capita consumption of India, at
about 700 kWh is among the lowest in the world. Further, people in a large number of
villages have no access to electricity. The end users of electricity like households,
farmers, commercial establishments, industries are confronted with frequent power
cuts, both scheduled and unscheduled. Power cuts, erratic voltage and low or high
supply frequency have added to the ‘power woes’ of the consumer. These problems
emanate from:
 inadequate power generation capacity;
 lack of optimum utilisation of the existing generation capacity;
 inadequate inter-regional transmission links;
 inadequate and ageing sub-transmission & distribution network leading to
power cuts and local failures/faults;
 large scale theft and skewed tariff structure;
 slow pace of rural electrification;
 Inefficient use of electricity by the end consumer;
 lack of grid discipline
Power is a concurrent subject under the Constitution. The States have the greater share
of generation and transmission assets and almost the entire distribution under their
control. They would need to play a very proactive role in effecting institutional and
result oriented changes. Many strategies outlined in the document are inter-linked and
are mutually supportive in terms of addressing the problems. However they have been
classified subject-wise for the purpose of this document.

GENERATION
 Addition and creation of generation capacity to remove shortages
CURRENT INSTALLED CAPACITY (As on 30-04-10)
All Thermal Thermal Thermal Thermal Nuclear Hydro Other Total

India
Coal Gas Diesel Total
MW 84448.38 17055.85 1199.75 102703.98 4560.00 36863.40 15521.11 159648.49
%age 52.9 10.7 0.8 64.3 2.9 23.1 9.7 100.0
The large coal reserves in the country provide a ready and economical resource and
ensure energy security. Hence, coal has been identified as the mainstay fuel for power
generation till 2012. Emphasis has been laid on setting up large pit head stations to
avoid high costs associated with transportation of high ash bearing Indian coal and
overstraining the already stretched rail network.
Tentative Capacity Addition Plan during 11th Plan

(Figures in MW)
Sector/Fuel Total
Hydro 17,189
Thermal 46,114
Coal/Lignite 44,000
Gas/LNG 2,114
Nuclear 3,160
Total 66,463
Hydroelectricity is clean energy and its generation is not linked to issues concerning fuel
supply, especially the price volatility of imported fuels. It enhances our energy security
and is ideal for meeting peak demand. Less than one fourth of the vast hydel potential
of 1,50,000 MW has been tapped so far. Compared to the high utilisation of hydro

potential in countries like Norway (58%), Canada (41%) and Brazil (31%), the utilisation
of only 17% of its hydel potential by India is extremely low. In fact, the share of hydro
generation in India has gradually declined during the past 25 years.
Consequently, thermal generation, which should generally be used for base load
operation, is also being used to meet peaking requirements. As against the desirable
hydro share of 40 per cent, the current share is only about 25 per cent in India.
It is estimated that for building over 1,00,000 MW of additional power capacity and
associated transmission & distribution infrastructure, nearly Rs. 8,00,000 crores of
investments would be needed in the next decade. The investors have been wary of the
sector due to lack of confidence in getting returns on their investments. The payment
security measures taken till now have not yielded desired results. There is little doubt
that resource generation within the sector through prompt and efficient collection of
appropriate user charges from all the electricity consumers is the only long-term
solution to attract investments in the sector. The sector has to be made financially
strong from within in order to attract investments from outside. Pending fructification
of the long term measures in this regard, the Ministry has taken steps to set up an
alternate payment security mechanism for the investors as an interim resource
mobilisation strategy.
There have been major slippages in meeting targets of capacity addition during the VIII
and IX Five-Year Plans. Only 53.77 per cent of the capacity addition target was achieved
during the VIII Plan. During the IX Plan, too, only about half of the target of 40,245 MW
is likely to be achieved. To avoid such slippages in the X and XI Plans, a comprehensive
project monitoring and control system has been put in place. Special emphasis has been
laid on monitoring of projects at pre-implementation stage. A Power Projects
Monitoring
Committee has been set up. Special Secretary (Power) has been taking weekly reviews
to monitor the progress of power projects to be identified for commissioning up to
2012. To ensure greater success in capacity addition, the central power generating
companies under Ministry of Power are being asked to add 43 per cent of the total
required capacity as against a contribution of 23 per cent during the IX Plan.
In view of the fact that addition of new capacity takes relatively longer time, strategies
have also been formulated to augment power supply in short/medium run. These are:
 Increased generation through Renovation and Modernisation (R&M) of old
stations.
 Utilisation of the surplus capacity of the captive power plants into the grid
 Demand Side Management (DSM) to flatten the demand curves (introducing
time of day tariffs and metering).
 Introduction of a new system of matching time and load profiles for different
zones in the country.

 Energy Conservation (The Ministry is piloting the Energy Conservation Bill, which,
when enacted, will provide necessary legal framework for promoting
conservation and efficiency).
 Evacuation of power from the power surplus eastern region.
Transmission
Inadequate investments in transmission & distribution infrastructure have resulted in
power evacuation constraints from the generating stations. The problem has been
severe in the eastern region. Concentration of coal reserves and hydel sources in a few
geographic pockets calls for an effective inter-regional network to transmit the
electricity generated in fuel rich regions to other regions. Accordingly, a perspective
plan has been developed to build 30,000 MW inter-regional transmission capability by
2012. The formation of a national grid will improve reliability, quality and economics of
power supply. Ultimately, national grid is the solution to the problem of inter-regional
imbalances.
However, in view of idling of surplus power capacity in eastern region, immediate steps
to facilitate transfer of power from eastern region are being undertaken. Pursuant to
the enactment of legislation in 1998, permitting private investment in transmission,
detailed guidelines have been issued for attracting private investment in transmission
projects. Due to mismatch in generation and demand, there is a tendency among state
utilities to overdraw from the grid. This coupled with inadequate capacitors, results in
low frequency and low voltages in the grid and the cascading effect could lead to
collapse of the entire regional grid. Any failure of this proportion leads to colossal
economic losses. To maintain grid discipline, measures have been identified for strict
enforcement of the Grid Code formulated by the CERC. The failure of the Northern Grid
on January 2, 2001 had effectively derailed normal activities besides causing losses
amounting to several hundred crores.

Distribution Reforms - The Core of Sector Reforms
The toughest roadblock stalling power sector development has been the poor financial
health of the SEBs, which, in turn, is mainly due to poor performance on the distribution
front. Out of total energy generated, only 55% is billed and only 41% is realised. The gap
between average revenue realisation and average cost of supply has been constantly
increasing. During the year 2000-2001, the average cost of supply was 304
Paisa per unit and average revenue per unit was 212 paisa per unit i.e. there was a gap
of 92 paisa for every unit of power supplied. All this has caused erosion in the volume of
internal resources generation by the SEBs.
The annual losses of SEBs have reached a level of about Rs. 26,000 crores. Consequently
they are unable to make full payments to CPSUs for purchase of power and coal. This
has resulted in accumulation of outstanding of more than Rs. 40,000 Crores by the SEBs.
The growth and performance of Central Power
Sector Utilities (CPSUs) are also adversely affected by this. Poor creditworthiness of SEBs
has effectively blocked investments by private sector despite the enabling and
encouraging framework laid down by the
Centre.
The major factors responsible for financial sickness of SEBs are:
 l Skewed tariff structure leading to unsustainable cross subsidies

 l Huge T&D losses, largely due to outright theft and unmetered supply. It has
been estimated that theft alone causes loss of about Rs. 20,000 crores annually
 Lack of accountability in distribution

Power sector development cannot accelerate until the above issues are addressed with
full commitment at all levels. Accordingly, distribution reforms have been identified as
the key area for putting the sector on the right track. The strategies identified by
Ministry of Power in this direction include:
 Development of district level distribution improvement plans/projects for all

districts. The Ministry/CEA will help the States in capacity building measures in
areas related to technical and commercial activities as well as planning and
deployment of personnel. Assistance would also be provided to SEBs to improve
their accounting practices.
 Setting up of district level Energy Committees for monitoring and resource

planning.
 Development of 60 distribution circles as Centres of Excellence for distribution

reform. The funds for the project would be provided by the Centre under the

Accelerated Power Development Programme (APDP). These Centres would act
as models for replication in other districts.
 Hundred per cent metering and effective Management Information System (MIS)
for monitoring at feeder level, backed up by detailed energy audit to bring
accountability into the system at all levels.
 Taking high voltage lines up to the load centre to prevent theft of power and
reduce technical losses.
 Signing of MOUs with States for undertaking distribution reforms in a time

bound manner and linking the support of Government of India to achievement
of predetermined milestones. (Sixteen states have signed the MOUs so far).
 Privatisation / corporatisation of distribution Tariff rationalisation by SERCs (16

States have set up SERCs and 9 have issued tariff orders).
Electrification of Villages and Households
The pace of rural electrification in the VIII and IX Plans has declined. Nearly 80,000
villages are yet to be electrified. Only 31 per cent rural and 45 per cent urban
households have been covered so far. It is planned to cover all non-electrified
households by the year 2012. In order to accelerate rural electrification, it has been
proposed to treat rural electrification as a Basic Minimum Service in the Prime
Minister’s Gramodaya Yojana. The Ministry is also taking a number of other specific
measures including strengthening of the rural distribution network under the
Accelerated Power Development Programme (APDP). The objective of the Ministry is to
complete electrification of 62,000 villages by 2007, that is within the next 6 years and
18,000 remote villages (through renewable sources) by 2012. Decentralised generation
and distribution through district level Energy Committees have been envisaged to
contribute in this endeavour. All households are to be covered by 2012.
 Providing affordable power
With increasing prices of fuels and cost of installations, the cost of power generation has
significantly increased. While attending to the task of doubling the country’s generation
capacity by 2012, high priority is to be given to reduce the cost of power to enable
different segments of population and the economy to effectively utilise power as an
input. In order to recommend strategies to reduce the cost of power, an
Inter-Disciplinary Group of Experts was constituted. The Group has submitted its Report.
The implementation of a number of strategies outlined in the Report would help in cost
reduction efforts and provide affordable power to the consumer.

Benchmarking in project costs, adoption of best practices, and choosing least cost
options in capacity addition are going to be promoted. Competitive bidding will be
adopted as a transparent and cost reducing approach. Already the Ministry has ensured
that its PSUs post all their tenders on web-sites. Some State power utilities have also
done so.
 Sustainable power development
Concerns relating to pollution and the disposal of the large amount of ash from coal
based power stations, which are the mainstay of India’s power generation, are being
addressed through strategies to promote environmentally sustainable power
development. The useful recommendations of the Fly Ash Mission of TIFAC are to be
implemented. The Ministry is taking steps for making the use of fly ash mandatory for
road and bridge construction, as well as for construction of Government buildings. Fiscal
incentives to supplement the market mechanism for taking up production and
promotion of fly ash products are also envisaged.
All Central utilities have been advised to adopt ISO 14001 standards. Afforestation is
being given major emphasis and a Special Purpose Vehicle (SPV) is being set up for
afforestation. Introduction of super critical technology and clean coal technologies is
also planned to generate power with maximum efficiency and minimal pollution. The
Ministry is taking environmental initiatives in keeping with the global developments and
mechanisms. Thus, the Ministry is striking a fine balance between the power
development imperatives and the emerging concerns for the environment.
 Upgrading technical efficiency and skill levels, and re-orientation
To make the power sector truly efficient and competitive in the changing scenario, steps
have already been taken to impart greater thrust to research and development, training
of the human resources in the power sector and adoption of progressive management
practices and tools, (including IT). Personnel are also being educated about their
changed roles in the power reform scenario.
Emphasis on commercialisation of the sector is also being imparted. A Standing
Committee on Research and Development has been constituted to draw up a
Perspective Research and Development Plan to ensure optimum utilisation of the
infrastructure and provide a standing forum for R&D activities in the power sector.
Another Committee has been set up to formulate a ‘National Training Policy for Power
Sector’ and to develop a national level action plan for training of the power
professionals to align their skills and mindset to the changing requirements. Integration
of training facilities available in the sector is also planned to optimise their utilisation.

INTRODUCTION
Accelerating economic growth and achieving higher standards of living depend upon the
availability of adequate and reliable power at an affordable price. Unlike other
commodities, electricity cannot be stored for future use. In other words, its generation
and consumption have to be simultaneous and instantaneous. It is noteworthy that
within a fraction of a second of clicking the power switch, the consumer puts into
motion an intricate transaction involving a power generation company (like NTPC), a
power transmission company (like POWERGRID), and a bulk power purchaser and retail
distributor (like DVB). The unique features of power as a commodity or service make the
dynamics of its supply and demand difficult to manage. Installing power generation,
transmission and distribution capacity is a complex, time consuming and expensive
process. Power is among the most capital-intensive infrastructure sectors.
Power has been placed in the list of concurrent subjects under the Indian Constitution
with the Centre and the States both having jurisdiction. After independence, the State
Electricity Boards (SEBs)/State Electricity Departments were the sole utilities (except a
few licensees in private sector) responsible for generation, transmission and distribution
of electricity. To supplement the efforts of States in bridging the yawning gap between
demand and supply of power, it was decided, in mid seventies, to set up generating
stations and associated high/ extra high voltage transmission lines in the Central Sector.
Today, States control about 60 per cent of the country’s generation capacity, 70 per
cent of the transmission network, and almost 100 per cent of the distribution system.
Problems confronting the sector
The achievement of increasing installed power capacity from 1362 MW to over 100,000
MW since independence and electrification of more than 500,000 villages is impressive.
However, it is a matter of concern that the annual per capita consumption, at about 350
kWh is among the lowest in the world. Still many households in a large number of
villages have no access to electricity. The end users of electricity like households,
farmers, commercial establishments, industries etc. are confronted with frequent power
cuts, both scheduled and unscheduled. Power cuts, erratic voltage levels and wide
fluctuations in the frequency of supply have added to the ‘power woes’ of the
consumer. The consumers are resorting to captive power supply arrangements of
various types ranging from 300 Mega Watts (industry) to 250 Watts (households).
Almost every shop in an urban market place has a generator set. Most establishments
have battery operated inverters and diesel generation sets. Most urban households
have voltage stabilizers for different appliances.
In fact the money spent by the domestic consumer on these standby power supply (DG
sets / Inverters) and power conditioning (stabilisers) arrangements could be among the

highest in the world. The same money could be more gainfully invested through
corporate investments in power generation, transmission and distribution with assured
returns on investments.
The major reasons for inadequate, erratic and unreliable power supply are:
 Inadequate power generation capacity;
 Lack of optimum utilisation of the existing generation capacity;
 Inadequate inter-regional transmission links;
 Inadequate and ageing sub-transmission & distribution network leading to
power cuts and local failures/faults;
 Large scale theft and skewed tariff structure;
 Slow pace of rural electrification;
 Inefficient use of electricity by the end consumer.
Strengths and opportunities in the sector
 Abundant coal reserves (enough to last at least 200 years).

 Vast hydroelectric potential (150,000 MW).
 Large pool of highly skilled technical personnel.
 Impressive power development in absolute terms (comparable in size to those of
Germany and UK).
 Expertise in integrated and coordinated planning (CEA and Planning
Commission).
 Emergence of strong and globally comparable central utilities (NTPC,
POWERGRID,).
 Wide outreach of state utilities.
 Enabling framework for private investors.
 Well laid out mechanisms for dispute resolution.
 Political consensus on reforms.
 Potentially, one of the largest power markets in the world
Objectives
 To provide ‘Power on Demand by 2012’.

 To make the sector commercially sound and self sustaining.
 To provide reliable and quality power at an economic price.
 To achieve environmentally sustainable power development.
 To promote general awareness to achieve consensus on the need for reforms.

Strategies
The strategies to realise above objectives have been evolved after a comprehensive,
integrated and realistic assessment of the strengths of the sector and of the challenges
confronting it.
The process has led to a range of mutually interdependent and complementary
strategies to counter the challenges and exploit the strengths/opportunities. The
strategies integrate the supply side imperatives with demand side management, short
and medium term measures with long-term action plans, operational measures with
institutional and structural changes.
The laid down objectives can be realised only if the plan is effectively implemented by
all stake-holders in the power sector. Power is a concurrent subject under the
Constitution.
The States, have the greater share of generation and transmission assets and almost the
entire distribution under their control. They would need to play a very proactive role in
effecting institutional and result oriented changes. Many strategies outlined in the
document are inter-linked and are mutually supportive in terms of addressing the
problems.

GENERATION
Today, most of the regions in the country are plagued with power shortages leading to
erratic and unreliable supply. The problem becomes acute during peak hours and thus
necessitates planned load shedding by many utilities to maintain the grid in a healthy
state. The all India average shortages during 2001-2002 were 7.8 per cent in terms of
energy and 13 per cent in terms of peak load. There were considerable regional, local,
rural-urban and seasonal variations. The region wise shortages during the year are
depicted in the bar diagram. Based on the projections of demand made in the 16th
Electric Power Survey, additional generation capacity of over 1,00,000 MW needs to be
added to ensure ‘Power on Demand by 2012’. This amounts to nearly doubling the
existing capacity of about 1,00,000 MW. In other words, the achievements of more than
five decades need to be replicated in the next decade. Apart from massive resource
mobilisation, the task of identifying a basket of techno-economically viable and
environmentally sustainable projects in itself is a daunting challenge. The major
strategies to augment the generation capability to the required level are:
Planning of targets for each sector.
A capacity addition of 46,185 MW has been fixed for X Five Year Plan and balance 60,
885 MW in XI Plan. Central Utilities under Ministry of power are targeted to add 43
percent of required capacity (against 23% in IX plan).

The large coal reserves in the country provide a ready and economic resource, which
ensures energy security. Hence, coal would continue to be the mainstay fuel for power
generation till 2012. Emphasis has been laid on setting up large pit head stations to
avoid high costs associated with transportation of high ash bearing Indian coal and
overstraining the already stretched rail network. To reduce the environmental impact
and increase efficiency, the strategies adopted by the Ministry include introduction of
large sized units (660 MW) employing the state-of-the-art super critical technology .
Further, in view of their shorter gestation period, higher thermal efficiency and
environmental benefits, few combined cycle power projects have been identified.
Coastal locations have been given preference for such plants in order to minimise cost.
Resource Planning
It is estimated that for building over 1,00,000 MW of additional power capacity and
associated transmission & distribution infrastructure, nearly Rs. 8,00,000 crores of
investments would be needed in the next decade.
The problem of non-availability of escrow capacity with most State utilities has been
holding up the financial closure of most private sector projects. There is little doubt that
resource generation within the sector through collection of appropriate user charges
from all the electricity consumers is the only long term solution to attract investments in
the sector. The sector has to be made financially strong from within in order to attract
investments from outside. In view of the current policy against giving counter
guarantees and pending fructification of reforms measures, the Ministry has taken steps
to set up alternate payment security mechanism for the investors as an interim resource
mobilisation strategy. The mechanism has been evolved in consultation with leading
financial institutions like IDBI, ICICI, SBI Caps etc. on the basis of a memorandum of
agreement/ understanding to be signed with the reforming States wherein the States
agree on milestone based package of reforms like restructuring of SEBs, setting up of
SERCs, reduction in T&D losses, 100% metering, improvement in PLF, energy audit etc.
This would bring about improvement in revenue collection and financial health of the
SEBs and enable them to provide escrow before the commercial operation date of the
power project. In fact, 16 states have already entered into such MOUs. A system of
monitoring the performance in the Ministry has been introduced.
A Committee of Experts has been constituted to identify the sources of funds including
Government funding, multi-lateral and bilateral assistance, institutional financing,
market borrowings, internal resources, private investment etc; and\ suggest
institutional policy and other measures required for such massive resource mobilisation.
An action plan to expedite financial closure of private sector projects is on the anvil. The
policy framework has also been liberalised to encourage domestic/Foreign Direct
Investment in power sector. The measures taken in this regard include allowing Foreign
Direct Investments in generation, transmission, distribution and power trading on the
automatic route without any monetary ceiling.

Comprehensive monitoring of project implementation
Against targeted capacity addition plan of 30, 538 MW in VIII Five-Year Plan, actual
capacity addition was only 16423 MW (54%). Similarly, in IX Plan, against the target of
40,245 MW, only about 20,420 MW (51%) is likely to fructify. Thus, there have been
major slippages in both Plans. In order to ensure that such slippages are not repeated in
future, the Ministry has reviewed the project monitoring mechanism of the major
Central Power Sector Undertakings. It emerged from the review that most of the CPSUs
are having a three tier monitoring system to monitor the progress of projects under
implementation the three tiers are; a milestone oriented detailed scheduling at working
level (Level III), detailed package wise scheduling at the Project Manager level (Level II)
and an overall Master Control Network scheduling at top level The monitoring at
oganisational level is supplemented by a comprehensive and periodic review by CEA and
Ministry of Power (Level 0). With the help of NIC, the progress of ongoing projects is
reported on the Wide Area Network (WAN) integrating the Ministry of Power, the
Central Electricity Authority and all CPSUs. Thus the project monitoring of ongoing
projects is comprehensive and the problem of slippages of these projects is unlikely.
The review of the system revealed that monitoring mechanism of the projects at pre-
implementation stage was not as vigorous as it was for projects already under
implementation (or ongoing projects). The Ministry of Power has now strengthened the
monitoring systems for such projects. This would enable monitoring and follow up from
feasibility to ordering stage. A Power Projects Monitoring Committee has been set up.
Special Secretary (Power) has been taking weekly reviews to monitor the progress of
power projects to be identified for commissioning up to 2012. Efforts are also underway
to have an institutional arrangement to expedite interstate inputs for early clearance of
projects.
Integrated Action Plan for power development including Nuclear and Non
Conventional Energy Sources
India is endowed with vast energy resources, both conventional and non-conventional.
Meeting the additional capacity demand of over 1,00,000 MW requires taking
advantage of all economically viable sources of energy in an optimum manner within
the energy mix. Till now there has been a pre-dominance of coal based thermal power
plants in India’s power sector. The present nuclear capacity is 2900 MW which accounts
for only 2.9% of the installed capacity. Similarly the total installed capacity based on
nonconventional energy sources is only about 1700 MW consisting of 1269 MW wind,
257 MW biomass and 217 MW small hydro power. This constitutes less than 2% of tota
installed capacity in the country.
In the new millennium, environment compulsions on one hand and the need to achieve
energy security on the other demand thrust on development of nuclear power and

power from nonconventional resources. The “Vision 2020” of the Department of Atomic
Energy envisages a cumulative installed capacity of 20,000 MW by the year 2020.
Similarly, the Ministry of Non-Conventional Energy Sources has recently announced a
National Renewable Energy Policy. The policy envisages capacity addition of 10,000 MW
during the time-frame 2002- 2012. Hydro projects up to 25 MW have already been
designated to this Ministry for speedier development. To ensure integrated
development, a Coordination Committee for Power has been constituted for close
coordination amongst the concerned Ministries to deliberate on issues pertaining to
generation programmes, evacuation schemes, operational issues and grid related
problems. Secretary (Power) chairs the Committee, with Secretary (Department of
Atomic Energy), Secretary (Non-Conventional Energy Sources) Principal Adviser, Energy
(Planning Commission) and Chairman(Central Electricity Authority) as members.
SHORT TERM MEASURES
Since the gestation period for building fresh capacity is large, short term measures have
been identified for quick increase in generation. These are:
Supply of surplus captive power to the grid
The captive power capacity in the country is estimated at about 20,000 MW. One of the
options available to increase generation in the short term is to enable surplus captive
power capacity to flow into the Grid. Accordingly, the States have been requested to
evolve a comprehensive captive power generation policy with facilities for purchase of
power and wheeling of surplus power from captive generating plants. In this regard a
draft Captive Power Policy prepared by CEA (in consultation with States) has been
forwarded to all the States/Union Territories in July, 2001. The suggested captive policy
guidelines are:
 Liberal permission may be accorded for setting up of hydro or cogeneration
captive plants in the States.
 Captive power plants may be allowed if State/SEB or successor entities are
unable to supply required power supply. Such a captive power plant can be
considered for the uninterrupted power supply to the industry even if the State
is surplus in power.
 Units in Special Economic Zone (SEZs) and industries/ entities may be liberally
allowed to set up captive power plants.
 The captive power plant based on coal/ liquid fuel/ gas as a fuel may be
permitted to build 200% of the requirement of industry (if the State is deficit in
power) and sell the surplus power to SEB..
 Third party sale is also permissible with the approval of SEB.

Improved generation through Renovation & Modernisation (R&M)
Though the average growth in capacity addition during the last decade has been around
4.4 per cent, the growth of electricity generation during the same period has been
around 7.0 per cent. This has been achieved through steady improvement in the
average All India Plant Load Factor (PLF) from 53.8 per cent in 1990-91 to 69 per cent in
2000- 01.
CEA has identified that 170 thermal units, with installed capacity of 11,000 MW and 35
Hydel units with installed capacity of 3000 MW need renovation and modernisation.
Uprating their performance/ life extension are cost effective methods of capacity
creation (Rs. 1 crore per MW for Thermal and Rs. 60-70 lakhs per MW for Hydro as
compared to Rs. 4 to 5 crores per MW for new green field power projects). State-wise
R&M action plan is being formulated. Annual additional generation benefit of about 90
billion units (20% of existing annual generation) is expected through R&M measures.
Under the Accelerated Power Development Programme (APDP) funds would be
provided for Renovation and Modernisation schemes.
Improved PLF through other short term measures
CEA has been asked to prepare an action plan for improvement in the Plant Load Factor
and identifying generating plants having PLF less than 75%.
Capacity creation through Energy Conservation & Demand Side Management.
There has been over emphasis on the supply side management in the power sector so
far in India. There is an estimated potential of 20, 000 MW through energy efficiency
and Demand Side Management (DSM). In order to minimize the overall requirement
and cost of power, energy conservation & DSM have been accorded high priority.
It was resolved, in the Chief Ministers / Power Ministers Conference on 3rd March 2001,
to implement an effective programme in the field of DSM through:
 Energy efficient bulbs, tube lights and agricultural pump sets
 Time of the day metering and differential tariff for peak and off peak hours
 Suitable mass awareness and extension efforts. The Ministry is promoting
introduction of time-of-the day tariff, which will induce industries to shift
production from peak to off peak period.
The potential benefits to be derived by promoting end-use efficiency are:

(i) Possibility of availability of nearly 15,000 MW through end-use energy efficiency.
(ii) Saving potential of 30-35% each in industry and agriculture by retrofitting with
efficient equipment / pump sets.
(iii) Saving potential of 25-30% in commercial / Government establishments and
residential houses.

OTHER PERFORMANCE IMPROVEMENT INITATIVES
Energy efficiency/conservation measures encourage consumers to use energy more

efficiently, which will result in reduced energy consumption thereby reducing cost and
increasing productivity. Load Management will help in shifting electricity load from peak
to off peak period.
Enactment of an enabling legislation on energy conservation giving the Central and
State Governments statutory powers for promoting and enforcing a regime of energy
conservation in the country is being promoted. The scope of the proposed Energy
Conservation Bill includes all forms of energy viz. coal, oil, nuclear, renewable sources
etc. For implementing the provisions of the proposed Bill, a Bureau of Energy Efficiency
is to be set up. The Bill is pending in the Parliament for enactment. The salient features
of the Bill are:
 Setting up of energy conservation standards for any equipment or appliance
consuming, generating, transmitting or supplying energy. Certain industries,
establishments and users of energy to be notified as designated consumers
keeping in view the intensity and quantity of energy consumed. Mandatory
energy audit for all designated consumers, as and when required by the
designated authority.
 Promotion of mass awareness at both the Central and the State levels for energy
conservation, consumer education and guidance.
 Government to take steps to encourage preferential use of energy efficient
equipment and appliances.
 Constitution of an Energy Conservation Fund at the Centre and the States for
utilizing any grant or loans made available for promoting energy conservation.

Time zones planning
The Ministry has decided to set up a Committee to go into the issue of matching time
and load profiles so as to help manage the demand (specially peak demand) across
different regions in accordance with the identified timings of high and low demands in
different parts of the country.
Higher performance targets in the MOUs with the Central Power Sector Utilities
(CPSUs)
The Ministry is planning to make the CPSUs further improve their performance on all the
parameters. One of the steps envisaged in this regard is to make the MOU targets in
terms of generation, efficiency, productivity and capacity addition etc. progressively
higher. With a view to achieving excellent ratings, the CPSUs will strive harder and this
will result in gains to the sector.

TRANSMISSION
The investments in and growth of Transmission, sub- Transmission and Distribution
Systems have not matched the increase in generating capacity. Consequently, there are
constraints of power evacuation from generating stations. The problem is severe in the
eastern region, where surplus capacity is idling due to lack of absorption network and
evacuation facilities. The power sector development demands a thrust on Transmission
sector and the following blueprint is envisaged for this sector.
Formation of National Grid
Before the beginning of the planning era in 1951, the electricity supply industry in the
country consisted of generating stations supplying power to loads in their immediate
vicinity. With a view to promote reliability of power supply and achieving operating
economies, interconnections of individual systems was done leading first to the
formation of State grids. The uneven geographical distribution of exploitable energy
resources (coal and hydro potential in the country) necessitated large scale
transportation of coal across the State boundaries. A decision was taken in the early
sixties to create regional electricity grids as basic units for power planning and
operations of the electric power system. In the seventies, the regional grids were in
position and advantages of sharing generating capacity between the States, and the
inter-connected operation were being obtained. In the eighties, with the commissioning
of the Regional power stations by Central sector Generating Companies (NTPC, NHPC)
and construction of EHV transmission lines by them transcending state boundaries, the
development of regional grids was further accelerated.
This has necessitated the formation of a National Power Grid to fulfill the following
objectives:
 Enable transfer of power from power surplus regions to deficit regions.
 Enable optimal development and utilisation of coal and hydro resources, in the
overall interest of the nation.
 Improve economy, reliability and quality of power supply.
Towards the objective of formation of National Grid, a number of inter-regional

schemes have been planned for phased development. The brief status including inter-
regional links under operation, approved schemes and future programme is presented
ahead:

With the help of the above links, transfer of power among the regions, especially from
the power surplus Eastern Region

Future Programme
Looking into the future demand and availability of generation resources, a Perspective
Transmission Plan has been drawn up indicating the major inter-regional transmission
highways to be developed by 2011-12. This will ultimately lead to the formation of a
strong National Grid. These highways are proposed to be established in phases matching
with the requirement of inter-regional power transfer.
As per the envisaged programme, cumulative capacity of the inter-regional links will be
enhanced as shown in the graph.
Evacuation of surplus power from Eastern Region
Eastern Region at present is having substantial energy surplus, as load growth has not
been commensurate with the generation capacity addition, leading to non-utilisation of
available capacities. The total installed capacity in the Eastern Region is of the order of
15,000 MW(out of which NTPC contributes 3900 MW) whereas the peak load is around
6500- 7500 MW and off-peak load is 4000-4500 MW.

While the formation of National Grid is an ultimate solution to remove inter-regional
imbalances, the following schemes have been completed on priority basis to facilitate
power transfer from surplus Eastern Region to other deficit Regions,
 220 kV 3rd Ckt Korba-Budhipadar connecting ER & WR

 Jeypore-Gazuwaka HVDC Bipole between ER & SR
 220 kV S/c Balimela-Upper Sileru between ER & SR
 400 kV D/c Bongaigoan-Malda between ER & NER
 220 kV D/c Birpara-Salakati between ER & NER
 220 kV S/c Dehri-Mughalsarai between NR & ER
 400 kV Sasaram-Sarnath-Allahabad line between NR & ER
With the above concerted efforts, energy exchange from Eastern Region has increased
to the tune of about 6,790 MUs in 2000-2001 as against 5500 MUs in 1999-2000,
registering a growth of more than 23%. However total transfer of only 1100 MW is
possible currently.
Inter-regional links to increase the transfer to 4400 MW in short run involving an

investments of Rs.17,600 crores are proposed.
A task force under the Chairmanship of Special Secretary (Power) has been constituted
by Ministry of Power to formulate a short-term action plan for evacuation of surplus
power from Eastern Region.
Monitoring of grid discipline and grid issues
Grid discipline is a pre-requisite for maintenance of primary grid parameters namely

frequency and voltage within permissible limits for safe, secure and stable operation of
the grid. However in India, the operating frequency goes beyond the permissible range
of 49-50.5 Hz. Mainly due to: -
Mismatch in generation and demand.

 Due to chronic power shortages, there is a tendency among state utilities to
overdraw from the grid during peak hours.
 Predominance of thermal / base load stations and inadequate peaking capacity
(hydro / Gas Turbines) limiting the flexibility of generation control as per load
pattern of the grid.
Lack of grid discipline leads to critical situations of the kind, which happened on the 2nd
of January 2001 in the Northern region, when the entire grid failed. A failure of this

proportion not only causes severe stress on the power plant equipment and reduces its
life, it also has a cascading effect on the industries and the people. It adds up to huge
economic losses and causes immense damage to the country’s image. After the grid
failure in January 2001, at the instance of the Minister of Power, the Chairman, CEA
conducted an inquiry and submitted its report. Follow-up action on the report is being
taken on priority. The following measures have already been taken. :
 Modification and modernisation of Panipat 400 KVA substation.

 In-principle approval of CEA given to (i) series compensation for Panki-
Muradnagar, (ii) providing interconnection between 400 KVA substations of
 POWERGRID and UPPCL at Agra, and (iii) preponing of Allahabad-Mainpuri-
Ballabgarh 400 KV double circuit line.
 All States have been advised to observe strict grid frequency discipline, promptly
carry out the instructions of RLDC, ensure free governor operation of their power
plants and expedite capacitor installation programme.
As a result of these measures, there has been substantial improvement in grid

frequency. However the situation is being closely monitored to prevent its recurrence.
Encouraging FDI in Transmission
Out of the Rs. 8,00,000 crores required for doubling the power capacity to 2,00,000 MW
by the year 2012, about Rs. 2,00,000 crores would be required for the associated
transmission system including creation of a National Grid. Out of this, an investment of
about Rs.70,000 crores would be required in Central Sector Transmission Systems alone.
POWERGRID is expected to mobilise an investment of Rs.41,000 crores from its own
resources. The balance requirement of Rs.29,000 Crores is proposed to be mobilised
through private investments.
Considering the scale of investment and the volume of expansion required, attracting
large private investment in transmission is essential. The Government of India amended
Indian Electricity Act and Electricity Supply Act in 1998, to enable private sector
participation in transmission sector. In January 2000, the Ministry of Power has issued
detailed guidelines for private sector participation in transmission. The Guidelines
envisage two routes for inviting private sector participation. One route is through Joint
Venture of POWERGRID and private investor. The other route called IPTC (Independent
Power Transmission Corporation) shall facilitate private investor including investors
coming through FDI to invest 100% by themselves.
Preparation of Manual on Disaster Management
Power is an essential service and it is one of the first to be affected by natural disasters
like the earthquake in Gujarat in January, 2001 and the cyclone in Orissa in October,
1999. It is, therefore, necessary to have a clear-cut action plan ready for managing

major breakdown of essential power supply posing wide-spread and protracted
problems. Ministry of Power has directed all power sector utilities and State
Electricity Boards to prepare contingency plans to meet situations arising out of
breakdown of machinery and equipment and disruption of power system due to any
reasons including natural calamities. Such action plans have already been drawn by a
number of State Electricity Boards and Central Power Sector Undertakings such NTPC,
NHPC, PGCIL, BBMB.
DISTRIBUTION REFORMS
The poor financial health of bulk power purchasers (SEBs/ State utilities) is a major
roadblock in the development of the sector. The continuously rising commercial losses
of SEBs have touched Rs. 26,000 crores in 2000-01. They The poor financial health of
SEBs also seriously affects their ability to invest in new generation capacity, to upgrade
their Transmission & Distribution network and to undertake system improvement. owe
to Central Power utilities, Railways and coal companies, nearly Rs. 40,000 crores. This
payment deficit continues to rise and threatens the viability of the Central
power utilities. The inability of SEBs to pay has been the basic reason for poor private
investment, both domestic and foreign, in spite of liberalisation of policies at Central
Government level. Till the health of the SEBs improves, major investment from the
private sector cannot be expected.

Distribution is the weakest link in the chain of power supply. Hence distribution reforms
have been identified as the key area of focus in the power sector reform process. The
initiatives taken in this regard include:

Development of district level distribution improvement plans for all districts in
the country.
All the districts in the country will have a detailed distribution improvement plan. The
Ministry/CEA will help the States in capacity building measures in areas related to
technical and commercial activities as well as planning and deployment of personnel.
Assistance would also be provided to SEBs to improve their accounting practices.
The Expert Committee on Distribution has prepared technical manuals for project
formulation, energy audit & accounting, technical specification of equipments and
training. NTPC, CPRI, NPC, WAPCOS and POWERGRID have been assigned the task of
capacity building in SEBs, guide them to prepare DPR, train the manpower and also
supervise the execution of works in the identified circles in each States. A meeting was
held with these five organisations in July 2001 wherein it was agreed that
(a) The technical manual prepared by the Expert Committee be sent to all the States for
guidance
(b) Each of these organisations be assigned certain States
(c) These organisations would station their team in assigned States
(d) The team would identify the area of data collection and under their supervision get
the necessary data collected through the counterpart team set up at the SEB level as
well as the circle level
(e) Analyse the data in the presence of the counterpart team using the appropriate
software
(f) Obtain computer aided HVDS model
(g) Help the SEB, thereafter, to prepare DPR
(h) train the manpower. In other words, the State officials will collect the data, analyse
the same using computer software and prepare DPR under the supervision and
guidance of these organisations.
Such an approach will help in capacity building through on the job work and also
through training. The Ministry of Power is preparing the detailed scope of work for
these organisations, time frame for each activity, methodology and deliverables in order
to operationalise the project preparation for each of the identified circles.
District level Committees for Distribution Reforms Monitoring and District level
Generation Resource Planning
In order to provide for an institutional arrangement at the district level to oversee work
relating to formulation and implementation of projects aimed at strengthening the sub
transmission and distribution system and for promoting power generation from
renewable energy sources, district level committees are proposed to be constituted.
The district-level committees would be headed by the District Collector/Deputy
Commissioner. The committee could include the following:
i. Members of Parliament representing the District;

ii. Members of the Legislative Assembly/Legislative Council to be nominated by the
State Government;
iii. Chairman, Zilla Parishad; and
iv. A few non-official Prominent Persons to be nominated by the State Government.
The Superintending Engineer of the State Electricity Board/ State Power Utility
responsible for distribution in the district could be made the Convener of the
Committee.
The Committee would be entrusted with the following functions:

 To review steps taken to formulate and implement projects aimed at
improving/upgrading the sub transmission and distribution system;
 To oversee the implementation of the metering programme and the
introduction of Energy Accounting System;
 To review the implementation of energy conservation measures including
Demand Side Management (DSM);
 To promote local entrepreneurs in setting up power generation projects based
on Biomass, Wind, Solar and Small Hydro;
 To encourage involvement of local bodies and NGOs/ Cooperatives in the
management of generation and distribution;
 To explore the possibility of supplying decentralized grid energy to remote
villages which cannot be Connected to the grid;
 To organise funding of projects from funds provided by the Ministry of Rural
Development, Ministry of Non-conventional Energy Sources, MPs’ Local Area
Development Fund, RIDF, Rural Electrification Corporation and agencies such as
IREDA.
100% metering and MIS for reduction of T& D losses
Huge Transmission & Distribution (T&D) losses are a major drain on the revenue stream
affecting the very survival of the SEBs. Although reported total energy losses in T&D are
24 per cent on an all India average basis, a closer examination reveals that actual losses
including theft and wrong classification could be in the range of 40-45 per cent. Under
reporting of losses is revealed from the following table:

The T&D losses are pegged at around 10 per cent in better managed power systems in
the developed countries. In order to reduce the T&D losses, the following measures
have been initiated.
 Static meters on all 11 KV out-going feeders and HT consumers have been

installed in most of the States. These meters will record active energy, power
factor and load information for 45 days at a time. The data recorded in the static
meters can be down loaded to a computer network and software packages will
be effectively utilised to process the data for meaningful management of the
distribution system. Consequently, it should now be possible to accurately
account for the energy received in each 11 kV sub-station and 11 kV out-going
feeders; energy billed and T&D losses at the various stages of transformation. It
is expected that by October 2001, the metering at 11 kV outgoing feeder level
will be accomplished in all the states.
 In the next phase of the programme, meters will be installed in all the
distribution transformers and, thereafter, in the premises of the consumers.
With the installation of meters at all the transformation stages and in the
premises of consumers, it will be possible to operationalise the concept of “cost
and profit centre”. The implementation of energy accounting system, with billing
unit at subdivision level as the nodal point, the problem of commercial losses can
be solved. This will help fix proper responsibility at the sub-divisional, divisional,
circle and zonal levels.
 Other measures required will include installation of capacitors at all levels;
reconfiguration of feeder lines & distribution transformers in such a way as to
reduce the length of LT lines (which are characterised by large technical and
commercial losses) and make the system less LT oriented, installation of smaller
size energy efficient distribution transformers so that each\ transformer supplies
power to 10 to 15 households only; re-conductoring of over loaded sections;
development of digital mapping of the entire distribution system; and load flow
studies so that investments could be undertaken for long-term strengthening of
the distribution system.
 Along with 100 per cent metering in the districts, it is necessary to enforce
energy accounting and auditing. In this regard an effective Management
Information System
(MIS) will be put in place to ensure effective flow of information to facilitate quick
decision-making and to improve the operation and management of the distribution
system. With the adoption of above steps, it will be possible to develop the data base
essential for energy accounting and also to undertake system study and promote
measures aimed at improving load management.

60 Distribution circles as Centres of Excellence for Distribution Reforms under \
Accelerated Power Development Programme (APDP)
Under APDP, 60 distribution circles have been identified in different States for
improvement / strengthening of the sub-transmission & distribution network in such a
manner as to develop Centres of Excellence. This would enable States to replicate the
strategy in other circles. The objective is to ensure that the investment in these
distribution circles would result in quantifiable physical & financial benefits.
During the year 2000-01, Rs.576.22 crores were sanctioned under APDP for the States to
undertake short-term measures like metering at all levels covering all consumers within
the circles, installation of capacitors to correct power factor and replacement of failed
distribution transformers (DTs) and augmentation of transformation capacity which
could result in
(a) Immediate financial gain
(b) Reduction of technical losses and (c) reduction of system break downs.
All the States have taken action to implement the short-term projects. Certain States
where metering has been completed, have shown immediate gain in revenue ranging
from 20 to 30%.
Strengthening of sub-transmission & distribution network involves three broad areas of
action viz. commercial, technical and manpower restructuring.
(a) Commercial action includes tamper proof metering at all level of transformation and
for all the consumers; operationalising energy accounting up to feeder level; de-
centralised computerized billing & collection; development of MIS and proper duties &
responsibilities up to the line man. Commercial activities target reduction of commercial
losses and improvement of revenue.
(b) Technical action involves conversion of the existing distribution network into a high
voltage distribution system (HVDS) which covers reduction of LT lines; taking high
voltage line up to the load centre and supplying power through smaller capacity energy
efficient distribution transformation; reconductoring of over loaded lines; power factor
correction; Geographic Information System(GIS) mapping; polewise consumer
information etc. This requires detailed energy audit & accounting studies, analysis of the
data using software for developing component aided HVDS network model.
(c) Restructuring the manpower involves review of the manpower right from the
Superintending Engineer to line man and fixing proper duties, responsibilities and
accountability at each level.

KV Feeder as Profit Centre
The approach mentioned above will need to be implemented for each 11 KV feeder
upward up to 33/11 kV sub-station and in the entire identified circles. This will ensure
energy accounting and reduction of commercial and technical losses in the entire
feeder. This way each feeder can be operationalised as an independent profit centre.
This is possible as one junior engineer deals with two feeders on an average. Full
responsibility can be assigned to him.
Capacity Building
Even though SEBs have expertise in different fields, strengthening of sub-transmission &
distribution network as suggested above requires an integrated knowledge. SEBs, during
the regional meetings held in April and then later in June, 2001 expressed their inability
to take up such work with their own manpower. It is necessary to promote capacity
building exercise in the SEBs/State Power Utilities. This will enable SEB personnel to
prepare detailed project reports for each of the districts/ circles and implement the
project using APDP funds at a later stage. It is proposed to take up capacity building
exercise in the SEBs/ Utilities, so that they are able to take up energy audit & accounting
studies, analyse the data, using computer tools, prepare project reports and implement
the same aimed at improving sub-transmission and distribution network.
Capacity building exercise will cover:
a) Training the manpower
b) Making the SEB officials collect relevant data from each 11 KV feeder in the identified
circle.
c) Analysis of the data using computer tools to prepare feeder wise computer aided
least cost project report.
d) Supervision of implementation
Reform MOUs with the States and their monitoring
To give a strong impetus to the process of reforms, the Ministry of Power organised a
Conference of Chief Ministers / Power Ministers on Power Sector Reforms on 3rd March
2001. The Conference was chaired by the Prime Minister and was also attended by the
Deputy Chairman (Planning Commission), Union Finance Minister, and Union Power
Minister. In the Conference, a number of decisions on reforms, having farreaching
Consequences, were taken. Of various discussions on reforms, signing of MOUs with
States for undertaking reforms and restructuring in a time bound manner and linking
the support of Government of India to achievement of predetermined milestones is
expected to provide the necessary impetus to the reform process.

Privatisation / Corporatisation Models of Distribution through the Policy level
Committee
In the Chief Ministers conference held in March 2001, it was also decided to constitute a
Committee under Secretary (Power) to suggest strategies and measures for attracting
private sector investment in distribution with special reference to:
 Methodology of seeking private sector participation;

 Handling of past liabilities and making privatisation offer attractive to potential
investors
 Possible linking of private sector investments in generation with distribution; and
 Increasing the number of potential investors.
The committee has made sufficient progress and is likely to submit its report shortly.
World Bank Reform Packages
The Ministry of Power is working on a special package for reforming states, whereby,
the reform process could be partly funded through World Bank assistance. During the
visit of the President of World Bank to India in November 2000 the issue of providing
structural loans to reforming states was discussed and the World Bank has agreed to the
following in principle:
 Assistance for preparation of bankable DPRs for run of the river hydro projects.
 Structural adjustment assistance for reforming states.
 Assistance for renovation, modernisation and uprating of generating stations.

RURAL ELECTRIFICATION
Implementation of Action Plan for electrification of villages
The pace of rural electrification in the VIII and IX Plans has declined. Nearly 80,000
villages are yet to be electrified. Only 31 per cent rural and 45 per cent urban
households have been covered so far. In order to accelerate rural electrification the
proposed Action Plan is as under:
(i). Rural Electrification will be treated as a Basic Minimum Service under the Prime
Minister’s Gramodya Yojana (PMGY).
(ii). Completion of electrification of bulk of the remaining villages is targeted in the next
6 years. Full coverage of all households may be targeted for the end of the XI Plan, that
is, by the year 2012.
(iii). Setting up credit support from Rural Electrification Corporation to SEBs for speedy
electrification of dalit bastis, households of scheduled tribes and other weaker sections
of society.
(iv). Improving the quality of power supply in villages by strengthening of the
distribution network in rural areas is being supported by REC under the Accelerated
Power Development Programme.
(v). Earmarking a sum of at least Rs. 750 crores out of Rural Infrastructure Development
Fund (RIDF) for rural electrification works.
(vi). Augmenting the resources of REC, by allowing it to float capital gains tax exemption
bonds.
Sustainable Power Development
Concerns relating to pollution and the disposal of the large amount of ash from coal
based power stations, which are the mainstay of India’s power generation, are being
addressed through strategies to promote environmentally sustainable power
development.
Special Purpose Vehicle (SPV) for Afforestation
A Special Purpose Vehicle is being set up jointly by NTPC and other Central Power Sector
Undertakings as a Registered Society to take up afforestation and environmental
measures in order to reduce the carbon dioxide in the atmosphere. The objectives of
the Society shall be to:
 Undertake fruitful channelising of investments by members to increase the

national forest cover.

 Identify suitable lands for afforestation for power projects of NTPC and other
members through Ministry of Environment and Forests (MOEF) which will
coordinate
 with the State Forest Departments/District Rural Development Authority etc.
 Facilitate quick procurement of forest clearance for the forestland proposed to
be acquired by NTPC and other members for the future projects to be set up.
 Interact with MOEF to score off the necessary compensatory afforestation
required for projects of NTPC and other members, which needs diversion of
forestland.
It is noteworthy that NTPC has already planted over 1.45 crore trees, which is one of the
biggest afforestation efforts in the country. In fact the ambient temperature around the
Ramagundam Station of NTPC has come down by 30 Celsius due to the afforestation
done by NTPC as revealed in a study by the National Remote Sensing Agency (NRSA),
Hyderabad.
Fly Ash Utilisation Action Plan
All the coal based power stations put together generate around 90 million tonnes of fly-
ash per annum. The Fly Ash Mission of TIFAC has made several useful recommendations
for utilisation of fly-ash in the manufacture of cement, bricks, pavement materials, floor
tiles, wall panels etc., and in agriculture, road construction, land-filling and back-filling of
mines. Armed with the findings of the national laboratories that Fly ash is superior in
strength and durability as compared to conventional products, the Ministry of Power is
taking steps to make the use of fly ash products mandatory in road and bridge
construction, and construction of Government buildings as is being done in the
developed countries and to provide fiscal incentives initially to supplement the market
mechanism for taking up production and promotion of fly ash products.
Initiatives for improving the environmental performance of coal based stations
i) NTPC has achieved ISO-14001 standards for 11 plants owned by it and 2 more, being
managed by it. The Company is in the process of achieving the same in case of its
balance power plants.
ii) Improvement of Heat-rate is a continuous exercise in NTPC, which has yielded
significant benefits. NTPC officials have been asked to submit a detailed action plan for
the next five years for heat rate improvement not only in NTPC but also in power
stations of State Electricity Boards.
iii) Sipat Super Thermal Power of NTPC will adopt Super Critical Technology for the first
time in India. Thereafter, NTPC has planned to adopt super critical boiler technology for
North-Karanpura, Barh, Kahalgaon-II projects.
iv) With regard to setting up a commercial scale demonstration plant based on IGCC
technology, NTPC has sent coal samples to the Department of Energy in USA to find out

feasibility of IGCC with Indian coal. Thereafter, a team of officials from NTPC will visit
the concerned laboratory as well as IGCC plant under operation in USA.
Clean Development Mechanism (CDM)
To address increasing concerns related to the environment and to improve

environmental performance, the services of Tata Energy Research Institute (TERI) have
been engaged for providing consultancy services to the Ministry of Power on CDM. The
terms of reference include project formulation, base line surveys for each project,
negotiations with the CDM parties, identification of the counterpart CDM parties from
the developed countries, cost of CO2 monitoring and verification of CO2 emission
reduction and supervision of project implementation.
POWER BUSINESS AND INDUSTRY ANALYSIS

INVESTMENT OPPURTUNITIES
INVESTMENT OPPORTUNITIES IN THERMAL POWER DEVELOPMENT
 70% of the country's total installed capacity and more than 80% of the total
electricity generation is contributed by thermal power.
 Coal continues to be the main source of for thermal generation.
 The major thrust in thermal generation could be fructified through significant
jump in unit size and steam parameters resulting in higher efficiencies and better
economics. The largest unit size in the country at present is 500 MW and 600
MW super critical units are in the pipeline. The projected future unit size is 800-
1000 MW with still higher super critical parameters which will have low cost of
generation, higher efficiency and are environment friendly.
 With the identification of new gas sources and availability in international
market, there is renewed thrust in gas based combined cycle plants. Such CCGT
plants are increasingly becoming techno-economical viable with advancements
in efficient gas turbine technologies and their environmental benefits.
 The post Electricity Act 2003 scenario provides for the opportunity for any
generating company to establish, operate and maintain a thermal generating
station without the need of a license, thus providing a free hand in setting up of
a thermal generating plant.
 Strong supportive factors conducive to investment opportunity such a vibrant
strong and stable economy, low cost indigenous fuel, availability of skilled
manpower, indigenous power plant manufacturing capability, presence of
independent power producers and power sector reforms initiatives as
confidence building measures for prospective investors.

 Thrust to R&M / life extension activities with large investment potential for
improving the performance of old thermal power stations. The 10th Plan (2002-
07) is targeted towards 57 units (14270 MW) for R&M works and 106 units
(10413 MW) with anticipated total cost of more than Rs.10000 crores.
INVESTMENT OPPORTUNITIES IN HYDRO POWER DEVELOPMENT
 The 10 Plan program envisages capacity addition of\ 14393 MW from hydel
projects in the total capacity addition of 41110.
 The Govt. has initiated advance action for taking up new hydro projects. A
50,000 hydro initiative has been launched and pre feasibility reports for 162
projects prepared. In the second phase of this programme, DPRs for about
30,000 MW are under preparation for eventual implementation through both
public & private sector agencies.
 Govt. would take up for execution, all the CEA cleared projects and take steps to
up to date and obtain clearance for pending DPRS.
 Survey and investigations for new green field sites.
 Restart and activate the pending hydro projects for want of funds/inter state
issues.
 Promoting small and mini hydel projects by simple design of turbines, generators
and the civil works and in a shorter period.
 Greater private investment through IPPs and joint ventures would be
encouraged and conducive atmosphere created for attracting private sector
funds.
R&D in Power Sector
Government of India has set up a Standing Committee on Research in the Power Sector
under the Chairmanship of Chairman, CEA and DG, CPRI as the Member Secretary.
Members are drawn from various concerned organizations in the Power Sector, CSIR,
CFRI, TIFAC, NPC & other. The Committee has already identified the research projects to
be taken up on short, medium & long term basis. Action is being taken to initiate
research in each of these areas on prioritized basis.
Financial Requirements
The high capacity inter-regional transmission links, forming the back bone of the
National Power Grid would require an investment of the order of Rs. 40,000 crores of
which about 50% would be needed during the Tenth Plan period and the balance during
the Eleventh Plan period. Simultaneously, strengthening of the regional system for
meeting the increased transmission needs on account of increased inter-regional

transactions as well as for evacuation, transmission and dispersal of power from
generation resources within the regions would have to be continued and the
transmission and distribution system in the State sector would also need to be
strengthened. The requirement of funds for transmission and distribution system in the
country corresponding to the programme of 1,00,000 MW of generation addition in the
next ten years has been estimated to be of the order of Rs.3,00,000 Crores as per the
following break-up:
Opportunities for Private Sector Participation in transmission
 The Government made enabling provision for private sector participation in

transmission sector way back in 1998 by amending the then existing Electricity
Act 1948. Generation of electricity was opened for private sector in 1991.
 In the newly enacted Electricity Act 2003, any private player can seek license
from the Appropriate Commission to carry out business in transmission of
electricity.
 Government of India envisages two routes for private sector participation in
transmission ventures. IPTC route – provides 100% fund mobilization by private
entrepreneurs as Independent Private Transmission Company. And JVC route -
provides formulation of a Joint Venture Company (JVC) with CTU/STU by
selecting a private investor as joint venture partner.
 To start with, Central Electricity Regulatory Commission granted transmission
license on 13-11- 2003 to M/s Powerlinks Transmission Limited, a joint venture
company of the Power Grid Corporation of India Limited and Tata Power. This
Joint Venture (JV) project is first of its kind in India and is being promoted by
Government of India as a pilot project under its policy of encouraging private
sector participation in transmission of electricity.

 As a first project to be undertaken under the IPTC route, the Government has
already identified the Bina- Nagda-Dehgam 400kV Double Circuit transmission
line of about 700 KM route length to be taken up for private sector participation.
 Opportunity of massive investment in Transmission exists and it is envisaged that
upto Rs.9,000 crores can be invested by the private sector by the end of Xth Five
Year Plan.
Distribution Reforms and Performance Improvement
Accelerated Power Development Reform Programme:
The Distribution Sector could not grow with the required pace due to paucity of funds
and therefore, Distribution Reforms were initiated by the Government.
MoUs and MoAs were signed with the States for linking the support of Government of
India through APDRP which is ambitious plan for upgradation and strengthening of
subtransmission and distribution system with the objective of reducing the AT&C losses
to around15%.
INVESTMENT OPPORTUNITIES IN DISTRIBUTION SCHEMES
Six Level Intervention Strategy:

In order to achieve commercial viability Ministry of Power has formulated six level
intervention strategy that encompasses initiatives at National level, State level,
SEB/Utility level, Distribution Circle level, Feeder level and the consumer level.
Anti-Theft Measures:
Several States viz. Andhra Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh, West
Bengal, Maharashtra, Kerala and Gujarat have taken number of initiative to curb the
theft of power which have shown improvement in collection of revenue by the
SEBs/Utilities. The Electricity Act, 2003 provides a legal framework for making theft of
electricity a cognizable offence. Under Section 135 of the Electricity Act, 2003, whoever
dishonestly taps lines or cables or service wires, tampers, damages or destroys meters
etc. shall be punishable with imprisonment for a term which may extend to three years
or with fine or with both.
100% Metering Programme:

A programme of 100% metering has been taken up by States subsequent to Power
Ministers/Chief Ministers conference held on 26.2.2000. As on 30th September, 2004,
95% and 87% metering have been achieved in respect of 11 kV feeders and consumer
feeders respectively.

Consumer Care Centre:
To address consumer grievances various States have taken initiatives by setting up
consumer care centres and these centers are effectively operating at Hyderabad,
Vadodara, Bangalore, Faridabad, Delhi and almost all States are taking steps for
implementing the consumer care centres for large towns of the States
INFORMATION TECHNOLOGY (IT) INITIATIVES:
(i) Supervisory Control and Data Acquisition (SCADA) System:

To improve reliability and quality of power Supervisory Control and Data Acquisition
(SCADA) System has been introduced in Accelerated Power Development Reforms
(APDRP) Schemes.
(ii) High Voltage Distribution System (HVDS):

HVDS has been introduced for arresting power pilferage and reduction of losses by
Andhra Pradesh, Delhi, West Bengal, Noida Power Company Ltd. etc.
(iii) Electronic/Static Meters:

Almost all States are installing electronic / Static meters on feeders and at consumer
premises to introduce energy accounting and auditing. Andhra Pradesh, Uttar
Pradesh, Orissa have successfully introduced Meter reading Instrument (MRI) for their
towns, as also Delhi having facilities of spot billing.
FUTURE INVESTMENT REQUIREMENT
Even after investment made by the Union Government through APDRP in ST&D system,
the distribution sector needs further investment considering the growth rates of various
segments of the distribution system the projections by the end of 2006-07 are as
follows:
An investment of Rs. 86357 crores was assessed by the Working Group on Power at the
beginning of the Tenth Plan. However the same has gone to Rs. 1,00,000/- crore as on
today for the entire 10th Plan period (2002-07).
According to the National Perspective Plan on R&D in Indian Power Sector up to 2015,
distribution sector was identified as the key area for taking up the Research and
development (R&D) in this sector. The identified areas are:
 High voltage distribution system (HVDS)

 Demand side management
 Custom power devices
 Compact transformation devices
 Distribution automation
 Metering
Quality of Power Supply and Customer Satisfaction:
With the enactment of the Electricity Act, 2003 the emphasis has been given on
providing quality and interruption free supply to customers. Keeping this objective in
view Central Electricity Authority (CEA) has started monitoring of reliability index,
average tripping per month in respect of 11 kV feeders in respect of towns having
population of more than 8 lakhs. This will facilitate in bench marking various indices for
the annual frequency and duration of tripping. Various State Electricity Regulatory
Commissions (SERCs) are also in the process of making regulations for standard of
performance in compliance to various provisions of the Electricity Act, 2003.
Regulation on Installation and Operation of Meters:
In compliance to provision of Section 55 of the Electricity Act, 2003, CEA is making

regulation on installation and operation of meters. This will facilitate in uniformity of
approach for location of meters, selecting type of meters and their specification, new
investment opportunities.

MAJOR CLEARANCES REQUIRED FOR POWER SECTOR

Power Companies in India
Many government as well as private organizations have taken up the task of power
generation in India. The major Indian power companies playing prime are:
 Bhakra Beas Management Board

 Enercon Systems India
 Essar Group
 GMR Group
 Gujarat State Petroleum Corporation Ltd
 Jindal Steel & Power Limited
 Karnataka Power Transmission Corporation Limited (KPTCL)
 Karnataka Renewable Energy Development Limited
 Konarka
 Magnum Power Generation Limited
 Nippo Batteries
 Reliance Energy Ltd.
 Shri Shakti
 Durgapur Projects Limited
 Satluj Jal Vidyut Nigam Ltd.
 United Power
 Ventral Systems Pvt. Ltd.
 Enron India Power Plant
 Celetronix Power India
 Caterpillar Power India
 Alton Power India
 Thorium Power India
 GE Power Controls India
 Green Power India

POWER TRADING
AGENDA
 Introduction
 Global scenario in power trading
 Indian companies
Introduction
India is the third largest producer of electricity in Asia with an installed capacity that has
increased from 1362 MW in 1947 to about 143311 MW as of March 31 2008. However,
alongside this growth story is the existence of shortages in meeting peak (16.6% in FY
08) as well as overall demand (9.8% in FY 08). In spite of the overall shortage, the
inherent diversity in demand of various States and Regions in the country results in
periods of seasonal surplus in one State or region coinciding with periods of deficit in
another.
This coexistence of overall shortages with complementary geographical and temporal

surplus-deficits provides substantial opportunities to improve the economic efficiency
and security of supply through trading of power both within as well as across Regions.
Realizing the full benefits of trading requires the availability of adequate transmission
capacity and inter-regional links for transfer of power from a surplus to a deficit entity
and support the development of a power market in the country.
Trading is an activity in which transactions take place directly between two participants
or indirectly through an exchange.
In India, while there is a huge section of consumers, who are power deprived, there are
a lot of Captive Power Plants (CPPs) that are underutilized and a lot of merchant
capacity also expected to be added in the near future, there is a need to encourage the
peaking power plants and bring the surplus captive generation in the grid. The Electricity
Act, 2003, mandated development of power markets by appropriate commissions
through enabling regulations. This paved the way for the new trends to emerge like
Open Access and the one in February, 2007, when the Central Electricity Regulatory
Commission (CERC) issued guidelines for grant of permission for setting up operation of
power exchanges within an overall regulatory framework. The emerging trends will help
in proper flow of power from surplus regions to deficit regions and thus try to bring
about a balance in the power sector. The National Electricity Policy, pronounced in
February 2005, stipulated that enabling regulations for inter-and-intra-state trading, and
also regulations on power exchange, shall be notified by the appropriate Commissions
within six months. On 6th February 2007, the Central electricity Regulatory Commission
(CERC) issued guidelines for grant of permission for setting up and operation of power
exchanges within an overall regulatory framework. Private entrepreneurship is allowed

to play its role. Promoters are required to develop their model power exchange and
seek permission from CERC before start of operation.
Inter State Trading of Electricity
The Central Electricity Regulatory Commission (CERC) has issued final Regulations for
Inter-State Trading of Electricity after taking into account the suggestions and
comments received from the stakeholders. The Electricity Act, 2003, recognizes trading
as an independent activity and accordingly prescribes issue of trading licences by the
CERC for inter-state trading. The Commission earlier received applications from various
companies for issue of trading licences immediately after the enactment of the
Electricity Act, 2003 and the Commission had permitted all of them to continue trading
till 31.3.2004 or till the issue of Regulations by the Commission whichever was earlier.
After Notification of Trading Regulations, the interested parties could file fresh
applications before CERC, seeking inter-state trading licences, in accordance with these
Regulations.
The Commission is also initiating actions for preparation of Regulations for

establishment of a market mechanism for electricity. The Regulations for market
mechanism will be done after following a transparent process as is the normal practice
of the Commission.
The highlights of the final Regulations for inter-state trading are as follows:
 The Regulations provide for trading carried out bilaterally between the
generating company including captive generating plant, distribution licensee and
electricity trader on the one hand and the electricity trader and the distribution
licensee on the other.
 The Inter-State Trading Licence shall be granted for 25 years.
 The Regulation prescribes the application form for trading licence. The
application fee is Rs.1.00 lakh which is subject to adjustment after the same is
prescribed by the Central Government. A model licence document is also
appended to the Regulations.
 The Regulations also specify the methodology for publication of the licence
application. The application shall be published in at least two national English
daily newspapers including one economic newspaper and two local newspapers
falling within the areas of trading, one of which shall be in vernacular. The entire
application shall also be posted on the website.
 The applicant for the licence shall file his comments on the objections or
suggestions received in response to the public notice.
 The technical requirements for being an electricity trader stipulates having at
least one full time professional each with experience in i) Power System

Operations and commercial aspects of Power Transfers and ii) Finance,
Commerce and Accounts.
 Capital adequacy requirement for various categories has been stipulated.
Global scenario in power trading
Electricity trading through an exchange started for the first time in 1996 in New York
Mercantile Exchange (NYMEX). Electricity trading has two main components, i.e.
physical trading and financial trading [1]. In physical trading, supply is balanced against
demand and price is either determined in advance of trading or after trading. In financial
trading, financial contracts take place between traders as agreements that give certainty
to traders. Physical trading is generally done through an energy spot market or power
pool while financial trading is through a financial market or exchange such as NYMEX or
Chicago Board of Trade (CBOT).
Trading in an electricity market is a risky task because the electricity is much different
from other commodities due to its special nature such as non-storable, generation-
demand balance, limited demand elasticity, transmission constraints and electric price
related with other volatile commodities.
Electricity trading arrangements in USA, UK, Australia and some Latin American
countries has undergone a profound transformation in last two decades. India has also
started power trading from last four years.
 U.K. Electricity Market
UK has been one of the leaders in developing spot electricity market trading system,
which links the physical and financial domains. The initial competitive electricity market
structure involved an electricity Pool for England and Wales. After a review, a new
electricity trading arrangements (NETA) evolved slowly which provides the new
structure and rules for the E&W electricity market.
The transactions taking place within the NETA market are electricity price-quantity
transactions on a half-hourly basis.
The system operator (SO) and power exchanges (PX) are central to the functioning of
the E&W electricity market under NETA. Major contractual relationship NETA electricity
market is shown in Fig.2
PXs provide contracts that are ‘cleared’ giving a guarantee against default on a contract.
Trading through brokers, over the counter (OTC) trading and other financial instruments
(options and futures), also form the part of market trading. The SO for E&W, National
Grid (NGC), currently has two functions: firstly the management of high voltage
transmission system as transmission system operator (TSO) and secondly the supply of

operational services. Generation forecasting, congestion management and provision of
ancillary services are managed by NGC as SO. In addition the balancing mechanism
allows the SO to maintain local and national balances of generation and consumption in
real time, thus price and volume agreements within the balancing mechanism are made
directly with the SO.
 Nordic Electricity Market
Nord Pool, the Nordic Power Exchange, is the world's first international commodity
exchange for electrical power. The Nordic power market which trades with neighboring
countries and is dominated by hydropower, can be seen to be very different from that in
E&W. Fig. 3 shows the Nordic electricity market’s major contractual relationships.

The existence of a transmission system linking Denmark, Norway, Sweden and Finland
provides the basis for physical electricity exchanges organized on a national basis for
these countries. The national transmission system operators (TSOs) are responsible for
reliability and balance settlements. Nordel facilitates co-operation between these TSOs
and deals with planning, operation and transmission pricing.
Nord Pool organizes trade in standardized physical and financial power contracts
including clearing services to Nordic participants. The spot price for the Nordic
electricity market is set by Nord Pool every hour. Elspot and Elbas are Nord Pool auction
based spot market for trade in power contracts for physical delivery [15]. On Elspot,
hourly power contracts are traded daily for physical delivery in the next day's 24-hour
period. On Elbas, continuous adjustment trading in hourly contracts can be performed
until one hour before the delivery hour. New contracts are opened after the day-ahead
Elspot prices have been set. Before 2 p.m. the remaining hours of the current day are
tradable and then day-ahead contracts are open for trading.
The objective of Nord Pool financial market is to provide an efficient market, with
excellent liquidity and a high level of security to offer a number of financial power
contracts that can be used profitably by a variety of customer groups.
California Electricity Market
The competitive electric power market of California state began operation in 1998 with
the California Independent System Operator (CAISO) and now bankrupt Power Exchange
(PX) as the main operationally market facilitators. The market took off smoothly, and
the prices were seemingly just and reasonable until May 2000, when the first signs of
market crisis emerged. California’s electricity crisis was the result of the collusion of a

shortage of resources, poorly designed market and inaction by regulators or “regulatory
failure”.
The CAISO was originally designed to operate in conjunction with the PX, a day-ahead
energy market that ceased to operate in January 2001. Without PX day-ahead market,
all short-term balancing of supply and demand has been pushed into the more volatile
real-time market. This is the result of flaws in original design and inconsistencies
between the ISO’s forward and real-time markets. Now the CAISO is addressing these
flaws through a comprehensive redesign effort known as Market Design 2002 (MD02). It
allows the ISO to match buyers and sellers through a transparent day-ahead market that
reduce reliance on the more volatile hour-ahead and real-time markets. Since the PX
ceased operating there has been no transparent market for spot energy transactions to
balance supply and demand ahead of real time. It also allows the ISO to manage
congestion on the grid the day before, rather than in real time, thus enhancing real time
reliability.
INDIAN POWER SCENARIO

 Indian Electricity Market
Power Trading Corporation of India Ltd. (PTC), the leading provider of power trading
services, in India is trading power on a sustained basis since June 2002 through purchase
from surplus utilities and sales to deficit State Electricity Boards (SEBs) at an economical
price, providing best value to both the buyers and sellers and ensuring that the
resources are utilized optimally.
PTC is a ‘pure-play’ trading entity, and does not own any generating units or
transmission facilities. PTC acts as a single-window service provider that manages both
financial as well as operational risks for the buyer and seller entities in its trading
transactions. On the one hand timely payments are ensured to the sellers of power and
on the other hand a definite quantum of power is delivered to the buyers of power in a
reliable manner. For its services, PTC charges a predetermined amount of transaction
charges, worked on a per unit (KWh) basis or as a percentage of the cost of power. The
pricing and margin information is known to both the counterparties in a transparent
manner. In some instances PTC has both bought and sold power from the same entity at
different times of the day depending upon the load profile of the entity.
PTC catalyses the development of power projects by entering into multi-year contracts
for future trading of power.
These Power Purchase Agreements with PTC are being recognized by lenders as security
for financial closure of power projects. Typically, the counterparty contracts for these
projects or Power Sale Agreements are structured with multiple buyers, through which
about 80% of the power generation from the project is tied up for long term sale, and
20% is kept as reserve for the short-term market. PTC has been identified as the nodal
agency for cross border trading with neighboring countries: Bhutan, Nepal and

Bangladesh, which are rich in hydro power resources. Utilities in Bhutan account for the
nearly 24% trading volumes from cross-border sources. Being the pioneer in trading in
India, PTC sees a developmental role for itself to increase the depth and breadth of the
market under new Electricity Act 2003. PTC also views an opportunity in alliances with
emerging entities for setting up their operations in the manner that the business is
recognized globally. In future, it intends to set up an online trading platform similar to a
power exchange. Though the power-trading scenario in India is at a nascent stage, it is
growing at a rapid pace. The power market in India has evolved over the last four years
and it is expected that it is likely to grow at a faster pace – with the reforms of SEBs and
building up of transmission highways across the regions to increase Inter-regional power
transfer capacity from currently available 8000 MW to 30,000 MW.
 BIDDING STRATEGIES
In a perfectly competitive electricity market, any power supplier is not a price maker.
Microeconomic theory holds that the optimal bidding strategy for a supplier is to simply
bid marginal cost. When a generator bids other than marginal cost, in an effort to
exploit imperfections in the market to increase profits, this behavior is called strategic
bidding.
In pool market model, there are two main sides of entities participating in the market,
i.e. customer and supplier. The pool operator takes electricity transaction bids and
offers from these two entities and determines the winning bid and market clearing price
using predefined procedure. The strategic bidding problem in electricity markets is

related to pool trading in which the sealed auction is widely employed and power
suppliers, and sometimes large consumers also, are required to offer price and quantity
bid to a market operator. Power pool would implement the economic dispatch and sets
a price for electricity. In the E&W pool, generators are bidding both prices and
quantities. Effectively, they are offering supply functions each day. The intersection of
cumulative supply curve for the whole market and the total system demand curve gives
the market price. The existence of CfD covering a very high percentage of GenCos
capacities changed significantly the incentives for the GenCos in terms of how they
should bid into the pool.
The pool price in 1991 was 25% below government’s expectation at the time of
privatization. The first trench of CfD expired in March 1992. Pool price in August 1992
was some 17% above those in August 1991. In order to give a wide range of retail
choices for final customers, bilateral trading is recognized as a suitable model from the
point of view of short-term and long-term stability in the supply. Participants are
allowed to enter into bilateral contracts in most of the markets, e.g. California,
Pennsylvania New Jersey Maryland (PJM), Australia and E&W. Bilateral contracts can
also be used to manage risk in the market. An active participation from demand side
would make electricity markets more efficient and more competitive. It would also
promote a more optimal allocation of economic resources. Very low price elasticity of
demand for electricity causes large price spikes and exercise of market power by
generating companies. In some electricity markets such as California, New Zealand and
Spain, demand side bidding is permitted for large consumers to react to electricity
pricing.
 Indian companies in power trading
PTC
PTC India Ltd. (PTC), the leading provider of power trading solutions in India, is a
Government of India initiated Public-Private Partnership, whose primary focus is to
develop a commercially vibrant power market in the country.
PTC is the pioneer in developing and implementing the concept of power trading in India
and has successfully demonstrated its efficacy in optimally utilizing the existing
infrastructure within the country to the benefit of all.
Since its inception in 1999, PTC has sought to provide holistic services that address the
sustainability of a power market model, including intermediation for long-term supply of
power from identified domestic and cross-border power projects, financial services like

providing equity support to projects in the energy value chain, advisory services and
foray into providing fuel linkages to power plants of various utilities / generators
participating in the power market.
PTC has already signed/initialed various agreements / MoUs for Power Purchase
Agreements to the tune of about 10500 MW* of power from various power projects
and is in the process of signing agreements / MoUs for sale of power from these
projects to various state utilities.
IEX
On 6th February 2007, the CERC issued guidelines for grant of permission to set up
power exchanges in India. Financial Technologies (India) Ltd responded by proposing
then tentatively named 'Indian Power Exchange Ltd' and applied for permission to set it
up and operate it within the parameters defined by CERC and other relevant authorities.
Based on the oral hearing on July 10, the CERC accorded its approval vide its order dated
31st August, 2007. IEX thus moved from the conceptual level to firmer grounds. On 9 th
June 2008 CERC accorded approval to IEX to commence its operations and 27th June
2008 marked its presence in the history of Indian Power Sector as Indian Energy
Exchange Ltd (IEX), India’s first-ever power exchange goes LIVE.
IEX Day-Ahead Market

On a daily basis the Exchange will offer a double side closed auction for delivery
on the following day, which is termed as day-ahead market. Price discovery
would be through double side bidding and buyers and suppliers shall pay/receive
uniform price.
Day Ahead Market operations will be carried out in accordance with the
‘Procedure for scheduling of collective transactions’ issued by the Central
Transmission Utility (PGCIL), ‘CERC (Open Access in inter-State Transmission)
Regulations, 2008’ ,its modifications issued from time to time and the Bye-Laws,
Rules and Business Rules of the Exchange.
Process of Closed-Bidding Auction

o Bid accumulation period (Bidding phase)
During the auction sessions on each Trading Day, bids entered by
Members on the IEX Trading Platform are automatically stored in the
Central Order Book without giving rise to Contracts. During this phase,
bids entered can be revised or cancelled. Bid accumulation period shall
start at 10.00 AM and will end at 12.00 Noon.
o Auction period
At the end of the bidding session, the IEX Trading Platform will seek to
match bids for each hourly contract. After the price determination phase

is concluded, the Members, whose bids have been partially or fully
executed, will be provided all relevant trade information regarding each
contract traded on the IEX Trading Platform.
o Price Determination Process (Provisional)

All purchase bids and sale offers will be aggregated in the unconstrained
scenario. The aggregate supply and demand curves will be drawn on
Price-Quantity axes. The intersection point of the two curves will give
Market Clearing Price (MCP) and Market Clearing Volume (MCV)
corresponding to price and quantity of the intersection point. Results
from the process will be preliminary results. Based on these results the
Exchange will work out provisional obligation and provisional power flow.
Funds available in the settlement account of the Members shall be
checked with the Clearing Banks and also requisition for capacity
allocation shall be sent to the NLDC. In case sufficient funds are not
available in the settlement account of the Member then his bid (s) will be
deleted from further evaluation procedure.
o Price Determination Process (Final)

Based on the transmission capacity reserved for the Exchange by the
NLDC on day ahead basis by 2.00 PM, fresh iteration shall be run at 2.30
PM and final Market Clearing Price and Volume as well as Area Clearing
Price and Volume shall be determined. These Area Clearing Prices shall be
used for settlement of the contracts.
o Settlement
On receipt of final results, obligations shall be sent to Banks for Pay In
from buying Members at 2.30 PM and will take confirmation of the same
from the Bank. At 3.00 PM final results will be sent to NLDC / SLDCs for
incorporating in final schedules. Once a transaction is scheduled it shall
be considered as deemed delivery.
Delivery Point
Delivery point for the purpose of contract, shall be reckoned as the periphery of
Regional Transmission System in which the grid-connected exchange entity is
located. The same shall be used for the purpose of payment of transmission
charges in cash and transmission losses in kind. For example, delivery point for a
state-embedded entity in Maharashtra shall be WR periphery.
Day-ahead Scheduling of Exchange traded contracts

The Exchange traded contracts will be aggregated for each region and State for
each hour. This will also give net contractual flows between regions and/or bid
areas. After the schedules are issued by NLDC/SLDCs, the delivery shall be
deemed to have been completed.

Transmission Capacity, Transmission Charges and Losses
o Levy of transmission charges
 Following Transmission Charges shall be payable by the Members
for the traded contracts:
 Transmission Charges for respective Regional Transmission
System, as made applicable under the Central Electricity
Regulatory Commission (Open Access in inter-State Transmission)
Regulations, 2008.
 Transmission Charges for respective State Transmission Licensee,
as decided by the concerned State Electricity Regulatory
Commission. In absence of any direction or order from concerned
SERC, in this respect, the provisions as stipulated in the Central
Electricity Regulatory Commission (Open Access in inter-State
Transmission) Regulations, 2008 shall be applicable.
 Socialized Scheduling and Operating Charges for trades on the
Exchange. The Exchange shall pay such charges based on Central
Electricity Regulatory Commission (Open Access in inter-State
Transmission) Regulations, 2008 to NLDC and SLDCs. Such charges
shall be socialized over all transactions within respective State(s)
and Region(s).
 Any other charges as specified by CERC.
o Transmission Losses:
All grid connected exchange entities shall pay, in kind, the transmission
losses from delivery point to its grid connection point. Transmission
losses, for the Regional Transmission System, as decided by the NLDC for
Collective transactions, shall be accounted for at the time of scheduling.
Similarly, transmission losses for the State Transmission Licensees, as
prescribed by the respective SERC, shall also be accounted for at the time
of scheduling.
TATA POWER TRADING Company
Limited is a wholly owned subsidiary of India's largest private sector power utility, The
Tata Power Company Limited. It is one of the leading power trading companies in India
catalyzing development of Indian electricity market.
Services offered:-
 Power Trading
 Bilateral Power Trading Contracts:-

Short Term / Medium Term Contracts
Long Term Contracts
 Power Exchange
 Coal Supply Facilitation
 Advisory Services
 Other Services

Visa Power
VISA Power, with an aim of “Powering India’s Growth”, is presently planning to establish
coal based power plants in the states of Orissa, Chhattisgarh, Gujarat and Jharkhand. In
the near future, the company plans to implement all forms of power businesses
including that of Power Distribution and Transmission.
VISA Power has already obtained Inter – State Power Trading License from the Central
Electricity Regulatory Commission. The Company is confident of enhancing both the top
and the bottom line in near future via Power Trading.
Feedback Ventures
Feedback Ventures is India’s leading integrated infrastructure Services Company, with a

mission of “Making Infrastructure Happen”. Totally focused on infrastructure
development, Feedback Ventures offers an integrated suite of services across the core
and social sectors of infrastructure.
Feedback is known for its innovative work and for operationalizing challenging projects
in difficult locations. No wonder, 17 of India’s 50 biggest listed companies are
Feedback’s clients. So are the governments of 22 of the 28 Indian states and 4 of India’s
7 Union Territories.
Feedback Ventures is presently working on more than 35,000 MW of new power

generation capacity; 20,000 km of National and State Highways; 100,000 acres of real
estate development and a building area of more than 22 million square feet.
Feedback Ventures has many innovative firsts to its credit. It was the first power trading
consultant in India that established a power trading desk for state utilities.
Feedback offers the following services in the Power trading sector:
Establishment of Trading Desk – Feedback assists clients in analyzing the

prerequisites for establishing a trading desk, examining the various options for
establishment of the trading desk, recommending the optimum option and
assessment of the research support and training required. Feedback also assists
in the identification of key personnel and design of the key processes with
respect to the trading desk.

Industry Research and Pricing Analysis: Feedback assists clients in carrying out
the market research for trading of power and provides assistance in the pricing
analysis.
Transaction Structuring: Feedback assists clients in structuring of transactions

with power traders and also vets the agreements with power traders.
Business Plan Preparation: Feedback assists clients in preparing their Business

Plan for the trading function.
Reliance Power Trading
Reliance Energy companies distribute more than 28 billion units of electricity to cover 25
million consumers across different parts of the country including Mumbai and Delhi in
an area that spans over 1,24,300 sq. kms. It generates 941 MW of electricity, through its
power stations located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa.
Reliance Energy has emerged as one of the leading players in India in the Engineering,
Procurement and Construction (EPC) segment of the power sector.
Reliance Energy companies currently pursue several gas, coal, wind and hydro-based
power generation projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh and
Uttaranchal with aggregate capacity of over 13,510 MW. These projects are at various
stages of development.
Reliance Energy is also active in the trading and transmission of power, making it a fully
integrated player in the power sector.
Trading Licence
As per the Central Electricity Regulatory Commission's regulations, Reliance Energy

Trading Limited holds a trading Licence issued by the Hon'ble Commission, valid for 25
Years i.e. June 29, 2029.
To start the operations, the company had obtained an "A" category license which has
since been upgraded to "F" Category by the Central Electricity Regulatory Commission.
Trading Activities
RETL is trading in power since June, 2005 and operating in all the five regions in India. It
is trading the surplus power available from State Power Utilities, State Generating
Companies and Captive Power Plants.

Conclusion
Energy privatization has been part and parcel of a recent trend, which has placed
greater reliance on market forces and less dependence on government in the allocation
of resources. Although India is just at the beginning of the energy reforms, we sense the
opportunities that can enable us to leapfrog into new scales of development process.
The growing demand-supply gaps, ill health of state run units and technological
advancement, along with government willingness to relinquish its control, heralded the
incoming of private investors into the sector in a big way. The initial experience with
large power plants gave soar taste to many due to many different reasons
It is evident that the deficit in power availability in India is a significant impediment to

the smooth development of the economy. In this context, bridging the gap in demand
and supply has become critical and consequently, large projects are being undertaken in
different segments of the sector; Generation, Transmission and Distribution.
As India has not witnessed such a large scale of implementation before, there is a need
to review and enhance project execution capabilities to help ensure targets are met.
This strongly necessitates employing a comprehensive project management structure to
address the major challenges of the power sector projects and to be able to deliver
them as per the planned targets. Historical records also indicate the presence of a weak
project management structure which does not assess all the key project aspects.

List of Abbreviations
APDP Accelerated Power Development

Programme
BBMB Bhakra Beas Management Board
CCEA Cabinet Committee on Economic Affairs
CEA Central Electricity Authority
CERC Central Electricity Regulatory Commission
CPP Captive Power Plant
CPRI Central Power Research Institute
CPSU Central Public Sector Undertaking
CWC Central Water Commission
DPR Detailed Project Report
DSM Demand Side Management
DVB Delhi Vidyut Board
EHV Extra High Voltage
HT High Tension
HVDC High Voltage Direct Current
IGCC Integrated Gasification Combined Cycle
IREDA Indian Renewable Energy Development

Agency
MoEF Ministry of Environment and Forests
NIC National Informatics Centre
NREB Northern Region Electricity Board
NRLDC Northern Region Load Dispatch Centre
PMGY Prime Minister Gramodaya Yojna
SERC State Electricity Regulatory Commission

Vikas Gupta, Mba (Et), Upes

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POWER SECTOR SNAPSHOT

BY: - VIKAS GUPTA

POWER SECTOR SNAPSHOT Page 1

POWER SECTOR SNAPSHOT Page 2

POWER SECTOR SCENARIO DEVELOPMENT AND IMPROVEMENT

POWER SECTOR SNAPSHOT Page 3

 Addition and creation of generation capacity to remove shortages

CURRENT INSTALLED CAPACITY (As on 30-04-10)

All Thermal Thermal Thermal Thermal Nuclear Hydro Other Total

Tentative Capacity Addition Plan during 11th Plan

POWER SECTOR SNAPSHOT Page 4

POWER SECTOR SNAPSHOT Page 5

POWER SECTOR SNAPSHOT Page 6

 l Skewed tariff structure leading to unsustainable cross subsidies

 Lack of accountability in distribution

 Development of district level distribution improvement plans/projects for all

 Setting up of district level Energy Committees for monitoring and resource

 Development of 60 distribution circles as Centres of Excellence for distribution

POWER SECTOR SNAPSHOT Page 7

 Signing of MOUs with States for undertaking distribution reforms in a time

 Privatisation / corporatisation of distribution Tariff rationalisation by SERCs (16

Electrification of Villages and Households

 Providing affordable power

POWER SECTOR SNAPSHOT Page 8

 Sustainable power development

 Upgrading technical efficiency and skill levels, and re-orientation

POWER SECTOR SNAPSHOT Page 9

Problems confronting the sector

POWER SECTOR SNAPSHOT Page 10

Strengths and opportunities in the sector

 Abundant coal reserves (enough to last at least 200 years).

 To provide ‘Power on Demand by 2012’.

POWER SECTOR SNAPSHOT Page 11

POWER SECTOR SNAPSHOT Page 12

Planning of targets for each sector.

POWER SECTOR SNAPSHOT Page 13

POWER SECTOR SNAPSHOT Page 14

POWER SECTOR SNAPSHOT Page 15

SHORT TERM MEASURES

Supply of surplus captive power to the grid

POWER SECTOR SNAPSHOT Page 16

Improved PLF through other short term measures

Capacity creation through Energy Conservation & Demand Side Management.

The potential benefits to be derived by promoting end-use efficiency are:

POWER SECTOR SNAPSHOT Page 17

Energy efficiency/conservation measures encourage consumers to use energy more

POWER SECTOR SNAPSHOT Page 18

POWER SECTOR SNAPSHOT Page 19

Formation of National Grid

Towards the objective of formation of National Grid, a number of inter-regional

POWER SECTOR SNAPSHOT Page 20

POWER SECTOR SNAPSHOT Page 21

Evacuation of surplus power from Eastern Region

POWER SECTOR SNAPSHOT Page 24

 220 kV 3rd Ckt Korba-Budhipadar connecting ER & WR

Inter-regional links to increase the transfer to 4400 MW in short run involving an

Monitoring of grid discipline and grid issues

Grid discipline is a pre-requisite for maintenance of primary grid parameters namely

Mismatch in generation and demand.

POWER SECTOR SNAPSHOT Page 25

 Modification and modernisation of Panipat 400 KVA substation.

As a result of these measures, there has been substantial improvement in grid