INDIA’S POWER SECTOR

A OVERVIEW
S.C. MAHALIK
FORMER SECRETARY TO
GOVT. OF INDIA
&
FORMER CHAIRMAN
ODISHA
ELECTRICITY REGULATORY
COMMISSION
 ELECTRICITY AS PRIVATE
ENTERPRISE
Pre-1948, all generation privately-owned.
Total installed capacity:1300 MW
Retail distribution only around generating
stations.
No transmission.
Licensed & regulated by Govt. under Indian
Electricity Act, 1910.
Government’s role as regulator only.
ELECTRICITY NATIONALIZED
Post–Independence, Electricity( Supply) Act,
1948, aimed to increase access to electricity.
Transmission to wider hinterland of
generating stations – creation of grid.
All privately-owned generating stations
nationalized with some exceptions.
Creation of vertically-integrated SEBs as
quasi-commercial entities.
Govt. becomes owner and operator in
addition to being regulator. Conflict of
interest.
 1,362

2,695

4,653

9,027

Source: CEA
16,664

28,448

42,585

63,636

81,171

1,05,046
INDIA ( in MW)

1,07,877

1,18,426

1,24,287

1,32,329

2,24,907 *
GROWTH OF INSTALLED CAPACITY IN
 Installed Generation Capacity
(as on 30 SEP 2013)
Sector Wise %age

5
INDIA’S INSTALLED CAPACITY
BY SECTOR
(as on 30 SEP 2013)

SECTOR MW % age
States 90,062.14 39.37
Central 65,732.94 28.73
Private 72,926.66 31.88
TOTAL 2,28,721.73 100.00
INDIA’S INSTALLED CAPACITY
BY FUEL AS ON 30 SEP 2013
INDIA’S INSTALLED CAPACITY BY FUEL
(as on 30 SEP 2013)

Fuel MW % age
Total Thermal 155968.99 68.19
Coal 134,388.39 58.75
Gas 20,380.85 8.91
Oil 1,199.75 0.52
Hydro 39,788.40 17.39
Nuclear 4,780.00 2.08
Renewable 28,184.35 12.32
Total 2,28,721.73 100.00
INDIA’S INSTALLED CAPACITY
MAY 2014
 INDIA’S INSTALLED CAPACTY
IN MAY 2014

FUEL CAPACITY (in MW)

Coal 147,568
Natural Gas 22,608
Petroleum and other
1,200
liquids
Hydroelectricity 40,662
Nuclear 4,780
Other renewables 31,692
 ELECTRICITY GENERATION IN
SELECTED COUNTRIES
2009 & 2011

COUNTRY GENERATION %age of GENERATION %age of

2009 total 2011 total
(in Twh) (in Twh)

U.S.A 4149.0 20.7 4327 19.6

China 3725.1 18.5 4716 21.3

Russian 993.1 4.9 10.53 4.8

Fed.
India 869.8 4.3 10.52 4.7
 TOTAL & PER CAPITA
CONSUMPTION IN SELECTED
COUNTRIES - 2011
SOURCE: U.N & WORLD BANK STATISTICS
COUNTRY TOTAL PER CAPITA
CONSUMPTION CONSUMPTION
(Twh) (Kwh)
CHINA 4207.708 3298
U.S.A 3882.600 13246
RUSSIA 869.267 6486
INDIA 757.947 684
TOTAL ENERGY CONSUMPTION
IN INDIA
 PER CAPITA CONSUMPTION OF
ELECTRICITY IN INDIA

(Projected)

As per UN Methodology (Gross Electrical Energy Availability /

Source: CEA Population)
 DOWNWARD SLIDE
By early 90’s, State Electricity Boards were
bankrupt.
Accumulated losses of the SEBs exceeded
Rs.260 billion in 2000-01.
Unpaid dues to central power generating
companies alone exceeded Rs. 400 billion.
Total return of SEBs in 2005-06 was (-) 26%.
Financial collapse leading to operational
collapse
 ROADBLOCKS TO PRIVATE
INVESTMENT IN GENERATION
Private Sector participation in generation
permitted in 1993 but little private sector
interest.
Lenders found SEBs( sole buyers from
generating companies) unviable buyers.
Lenders unwilling to finance generation
projects due to poor revenue in downstream
Distribution.
Led to realization that Distribution reforms
critical for overall reforms.
 PAYING FOR POWER IS KEY
Poor metering - only 40% of total sale
metered. Billing on presumptive / assessed
consumption.
Poor billing & collection – only 55% of energy
generated is billed & only 41% realised.
High T&D losses( 40- 50 % approx ) – No
serious attempt to address issue.
Tariff recovers on an average 69% of the cost
of supply. Domestic recovery : 56%.
Agriculture recovery : 15%
Distribution segment losing Rs. 470 billion
annually. ( Ministry of Power estimates )
T & D LOSSES
Electricity Demand Projections

Year Total Electricity Required Installed Capacity (MW)

( Billion kWhr)
GDP Growth Rate
7% 8% 7% 8%
2011-12 1031 1097 206757 219992
2016-17 1377 1524 276143 305623
2021-22 1838 2118 368592 424744
2026-27 2397 2866 480694 574748
2031-32 3127 3880 627088 778095
Source: Energy Policy Report, Planning Commission, India
 FUEL CHOICE - COAL
Coal reserves, at current level of
consumption, can last some 80 years.
If all inferred reserves materialize, coal &
lignite can last for more than 140 years.
If domestic coal production continues to grow
at 5 percent per year, total extractable
reserves would run out in about 40 years.
In-situ coal gasification can increase energy
from domestic resources significantly.
FUEL CHOICE - COAL
 COAL IMPACT ON POWER
Coal shortfall of more than 250 MT by 2017
expected.
22 GW of generating capacity in 2011-12 was
underutilized on account of coal shortages.
Coal shortage forces the end consumer to
switch to diesel backup power. Per unit costs
upward of Rs.12 per KWh.
Electricity prices based on 250 MT of costly
imported coal to make up expected shortfall
will be unviable.
FUEL CHOICE - GAS
 FUEL CHOICE - HYDRO
Present installed capacity is 40,662 MW.
At the last 5 years’ average of 30% load
factor, 1,50,000 MW of installed capacity
justified. Accelerated hydro development plan
aims to add 50,000 MW of new capacity.
Problems of environment and ecology and
social problems of resettlement of project
affected people are barriers to large-scale
exploitation of hydro resources.
 FUEL CHOICE - NUCLEAR
India poorly endowed with uranium, just enough
to fuel 10,000 MW.
India’s uranium reserves are of low grade,
extraction percentage being 0.1% compared to
12-14% abroad. Therefore 3-4 times costlier than
international supplies.
Substantial thorium reserves has to be converted
to fissile material through Fast Breeder Reactors.
India has to import uranium fuel and FBR
technology.
 POWER PURCHASE COST AS %AGE
OF COST OF SUPPLY
Paise per kwH
469

357 365 349

Other
cost►

Power purchase
cost►

Maharashtra Delhi Gujarat All India

Power purchase
cost as %age of cost 62 77 73 66
of supply
LEGISLATIVE FRAMEWORK FOR
COMPETITION
Gencos free to supply electricity to any
licensee or to any consumer
Non-discriminatory open access to Gencos,
licensees & consumers in transmission &
distribution.
Open access enables non-discriminatory
sale/purchase of electric power/energy
between two parties utilizing the system of an
in-between (third party), and latter not
blocking it on unreasonable grounds.
COMPETITION IN GENERATION
Guidelines issued for tariff-based bidding process
for procurement of electricity by DISCOMS for
medium term (one to seven years) and for
long-term (for more than seven years).
Legislation provides for development of electricity
market for price determination/price discovery.
A well functioning power market leading to free
competition provides national-level access to all
buyers and sellers for transparent price discovery,
rewards more efficient generators and reduces
power procurement cost.
 TOWARDS A COMPETITIVE
MARKET STRUCTURE

National •Open access

‘Tariff’ Policy •Competitive bidding
-2006 •Separating wires
•Enforcing USO
Competitive & Contestable
Comp. Bidding Price Discovery in New
Guidelines -2004/5 Generation

Electricity Wholesale and

Open
Act 2003 Retail Competition
Access
 Reformed Structure in Power Sector
Government (Policy)

Regulatory Commission
(Licensing, monitoring performance,
tariff
tariff setting
setting & consumer
and consumerprotection)
protection )
Generation
(State-owned
Transmissio
Transmission
n
utilities &
((Also
AlsoBulk
bulk
independent
power Retail Supply & Purchase)
purchase in
producers) Distribution some States )

DISCOM DISCOM DISCOM

SEB MODEL
FIRST STAGE REFORM
MODEL
PRESENT REFORM MODEL
FINAL REFORM MODEL
PROBLEMS OF POWER SECTOR
Growth in demand for power outstripping
growth in capacity addition
Land acquisition problems and R & R issues
Delay in environmental and forest clearances
Non-availability of major fuels i.e. coal & gas
High T& D losses of about 28 % - 30 %
Tough criteria set by banks for funding a
project like 25-year cash flow prediction
Finally the most important challenge is the
increasing financial burden on Discoms.
 LOSSES OF DISTRIBUTION COMPANIES
During the 5 years period - FY2006 to FY2010 -
losses were Rs.1,79,000 crores before subsidy and
Rs. 82,000 crores after subsidy.

These losses were primarily because of the gap of

about Re. 0.60 per kwh between average cost and
average revenue.

Re. 0.60/kwh gap could have been bridged by

operational and managerial improvement.
Had the Aggregate Technical and Commercial
Losses (AT&C Losses) been reasonable and
revenue improvement measures pursued with
greater focus,DISCOMs finances would have been