Its All About Power Sector

Electricity Act 2003 is considered as an indispensable measure to enhance the growth of power sector in India. All Generation, Transmission and Distribution sectors have had an impact in the past decade and most of which were positive. The act brought in various changes in the then existing policies and laid path to creation of new policies. The act owns very critical objectives regarding policy formulations, promotion of competition, protecting consumer interest, supply of electricity to all areas, rationalization of tariff, etc., Below is a review of what EA-2003 has in it's store to show us in a decades time. This should help us understand what has it achieved and what more needs to be done to take it to the next level.

• Incompliance with Section 3 of the Electricity Act 2003, National Electricity Policy which aims at meeting the demand fully by 2012, supply of reliable and quality power, increase of per capita availability of electricity, financial turn-around and commercial viability of electricity sector and protection of consumer interests was notified in June 2005.
• In compliance of section 3 of the Electricity Act 2003, the Government of India has also notified the Tariff Policy on January 06, 2006 to ensure availability of electricity to consumers at reasonable and competitive rates, ensure financial viability of the sector and attract investments, promote transparency, consistency and predictability in regulatory approaches across jurisdictions and promoting competition, efficiency in operations and improvement in quality of supply.
• The Tariff Policy has been subsequently amended from time to time to take care needs of hydro generation, transmission capacity and renewables.

Development of Electricity Industry

• Section 7 & 8 of Act provides for delicensing of generating station subject to compliance of technical standards relating to connectivity with the Grid and Concurrence of CEA needed for setting up of Hydro projects.
• Before 2003, total generated energy was 530 Billion Units (BU). Total generated energy has increased to 912.05 BU between 2003-13 which is an increase of 382.05 BU in a span of 10 years.
• Per Capita availability of power increased from 592 Units in 2003-04 to 917 Units in 2012-13.
• Share of Private sector increased to 32% in 2013 from 9.38% in 2004.
• As per Section 9 of Act, no license shall be required for supply of electricity generated from Captive generation plants to any licensee.
• Captive generation capacity has increased from 18740 MW in 2004 to 34444 MW in 2013.
• Section 38 & 39 of the Act provides for setting up of Central Transmission Utility (CTU) & State Transmission Utility (STU) for development of transmission network in a planned and coordinated manner.
• Transmission Capacity (66KV and above) has increased from 3,04,258 Ckt.Kms in 2002 to 4,58,529 Ckt.Kms In 2013.
• Section 131 of the Act provides for reorganization of SEBs to transfer rights and liabilities vested in the state government to be re-vested by the state government in a Government Company or Companies.
• 19 out of 21 State Electricity Boards (SEBs) have been restructured.

Promoting Competition

• Section 63 of the Act provides for determination of tariff through transparent process of bidding in accordance with the guidelines issued by the Central Government.
• Central Government notified guidelines for procurement of power by Distribution Licensees through competitive bidding in 2005 and Issued the Standard Bidding Documents (RFQ, RFP & model PPA) for long term procurement of power from Case-2 projects in 2006 and Case-1 projects, in 2009 and amended time to time.
• Issued Guidelines for short-term procurement of electricity i.e. for a period of less than or equal to one year, in 2012.
• In pursuant to the decision of the EGoM on UMPPs, reviewed Standard Bidding Documents (SBDs) and the Model Bidding Documents (MBDs) for construction and operation of power generation projects/ UMPPs on DBFOT basis have been issued on September 20, 2013 and the guidelines published on September 21, 2013.
• The tariff adopted by CERC for Four UMPPs (located in Mundra, Sasan, Krishnapatnam and Tilaiya) have been determined through the process of bidding and tariffs have been competitively determined.
• Two power exchanges have been set up and Short term market volume increased from 24 BUs in 2008-09 to 60 BUs in 2012-13.
• All this is expected to bring in larger private sector investments in power sector and also competitive tariffs. 
• Section 38, 39, 40 & 42 mandates for providing non-discriminatory open-access to the transmission system for use by any licensee or generating company on payment of transmission charges and by any consumer when such open access has been provided by Sate Commission on payment of transmission charges and a surcharge thereon.
• 27 SERCs have issued regulation on open access in intra-State transmission and distribution.
• 25 SERCs have allowed open access to consumers with loads of 1 MW and above.
• 22 SERCs have determined transmission and wheeling charges for open access.
• 20 SERCs have fixed cross subsidy charges for open access.
• Open access at Inter-state level is fully operational. The total number of transaction for open access availed on inter-state transmission system has increased from 15414 in 2008-2009 to 32088 in 2012-2013, transmitting a total of 73153 million Units in 2012-2013 as against 778 million units in 2004-2005

Protecting Consumer Interest

• Section 42(5) of the Act provides for establishment of a Consumer Grievances.
• Forum for redressal of grievances of consumers in accordance with the guidelines specified by State Commission.
• 9 Consumer Grievance Redressal Forum have been set up in 33 States/Union Territories by distribution licensees.
• Section 42(6) of the Act provides for appointment of Ombudsman who shall settle the grievance of the consumer with in such time and manner specified by State Commission.
• 28 Ombudsman have been appointed by SERCs.
• Section 153 of the ACT provides for constitution of Special Courts for the purposes of providing speedy trial of offences to in sections 135 to 140 and 150.
• 23 States have set up Special Courts for speedy trials.
• Consumers are represented in Tariff determination process by CERC through Public hearing.
• In compliance with Section 110 of the Act Appellate Tribunal (APTEL) has been established to hear appeals against the orders of the Adjudicating Officer or Appropriate Commission.

Supply of Electricity to all Areas

• National Electricity Policy formulated in pursuance of Section 3 of Act, mandates for access to electricity to all households by 2010 and demand to be fully met by 2012.
• Rural Electricity Policy formulated in pursuance of Section 4 of Act, mandates for provision of access to all households by year 2009.
• Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) Scheme launched in 2005 with a goal of electrifying all un-electrified villages/ hamlets and providing access to electricity to all house-holds. The scheme is still under progress.
• 1,07,615 unelectrified villages have been electrified till September 30, 2013 as against 1,12,980 unelectrified villages sanctioned for X & XI Plan.
• 3,01,533 partially electrified villages have been electrified till September 30, 2013 as against 3,83,470 partially electrified villages sanctioned for X & XI Plan.
• 212.63 Lakh BPL house-holds have been electrified till September 30, 2013 as against 276.76 Lakh unelectrified BPL households sanctioned for X & XI Plan.
• Total Outlay for X & XI Plan projects: Capital subsidy of INR 39000 Crore.
• In order to rationalize the tariff in all states, Ministry of Power made a reference to APTEL regarding filing of Annual Tariff revision petition in time by State Distribution utilities. APTEL in its order in 2011, has asked for periodic revision of tariffs by SERCs on suo moto basis. All SERCs have revised tariff in 2012-2013.

Promotion of  Efficient and Environmentally Benign Policies

• Improved availability and efficiency through successive regulations by CERC.
• Improved reliability and power supply through grid code regulations and Unscheduled Interchange mechanism.
• Introduction of point of connection tariff regulation in transmission for removal of regional cascading of transmission charges and for providing level playing field for all generators.
• Renewable Purchase Obligations fixed by all SERCs.
• CERC have notified Renewable Energy Certificate regulation and tariff regulations for renewable energy sources.
• Tariff Policy amended to provide for solar specific minimum purchase obligation of 3% by 2022 in accordance with National Solar Mission Strategy.
• Generation capacity has gone up from 3.5 GW in 2002 to 25 GW in 2012.

With so many issues addressed by the EA-2003, there still persist many issues and challenges in the power sector. These issues include Grid security, Financial viability of distribution licensees and high AT&C losses, Robust implementation of Open Access and Promotion of competition in distribution & retail sector, Accountability of Regulators and regular filling up of vacancies in Regulatory Commissions. Reviews help us understand the status of existing scenario and help us plan for necessary amendments in the act to address the issues and challenges.

Source: Cerebral Business Research Pvt. Ltd.

The Mega Power Policy was introduced in November 1995 for providing impetus to development of large size power projects in the country and deriving benefit from economies of scale and quick capacity addition. Under Mega policy, fiscal benefits in the form of zero duty imports, income tax waiver etc. are extended to the certified Mega power projects.

The Mega Power Policy was amended in 2009 to make it liberal and operationally more effective. Amended Mega Policy allowed the developers to tie up all power to even one state and as per National Electricity Policy they could also sell power upto 15% outside the long term PPA. Thus, the policy stipulates that the private power companies must tie up only 85% of power of the plant with Discoms / State designated agencies through tariff based competitive bidding.

Based on the representation from the industry that there has been delays in signing of PPA through competitive bidding (which is mandatory for grant of mega power status), MoP in consultation with Department of Revenue, issued guidelines for issuance of Provisional Mega Certificate where the projects undertake to sign long term PPA of at least 85% of plant capacity within 36 months from the date of issuance of such Provisional Mega certificate, to enable the developers to continue with the execution of the project and tie up PPAs in that three year period with an undertaking to that effect backed by bank guarantee.

Developers have also represented that even if they commissions the plant they are unable to get the benefits of Mega Policy as they are unable to tie up 85% power through competitive bidding because not many States are calling bids for procurement of power and some of them are taking too long for finalizing the bids that are received. The developers have requested that any power project tying up the long term PPA of their part capacity be given Mega benefits proportionately. In other words, if any developer is able to achieve less than 85% power tie up, they can be extended mega benefits in the proportion of the tied up PPA.

The salient features of the Mega Power Projects is minimum plant capacity size of 1000 MW for Thermal Power Project in normal areas and of 700 MW for North Eastern States and J&K. So the mega benefits cannot be extended unless the projects achieve this threshold capacity of commissioning as they would fail to meet the definition of Mega Projects as per the Mega Power Policy.

It is proposed to extend the Mega Policy benefits in proportion to the extent of signed PPAs as provided in Tariff Policy 2006 once the threshold capacity of the Provisional Mega project gets commissioned and also extend the time period for Provisional Mega projects to get final Mega Status from the present 36 months to 60 months as adequate bids were not forthcoming from Discoms for procurement of power.

It was recently approved by the cabinet that Custom Duty @5%, CVD @12% (as applicable and equal to  excise duty on domestic industry from time to time) & SAD @  4% to  be uniformly applicable to the imported equipments of all categories of Power generation projects, viz., Mega Power Projects (including  UMPPs) and non-Mega Power Projects. All projects certified as mega power project and provisional mega projects before the date of Cabinet decision will be exempted from the duty structure proposed in the above and they will continue to get all the benefits available under Mega Power Policy.

With the above decision, at present only provisional Mega projects are to be given final Mega certificates and no new power project can be accorded Mega Status.  Thus the duty free imports of equipments are no longer available to any new power project except certified mega projects and provisional Mega projects.

This decision was arrived based on the following:
To avail the benefits under Mega Policy, the developer must tie up at least 65% of installed capacity/ net capacity through competitive bidding and up to 35% of installed capacity/ net capacity under regulated tariff as per specific host state policy and approved by the respective regulators under long term PPA with Discoms / State designated Agency. This dispensation would be one time and limited to the 15 projects which are located in the States having mandatory host State power tie up policy of PPAs under regulated tariff.

Allow propotional Mega policy benefit to the developer (25 projects) in proportion of the long term PPAs tied up as permitted under the Mega Power Policy, once the threshold capacity of the projects gets commissioned.

Extend the maximum time period to 60 months instead of 36 months from the date of Importation for provisional Mega projects (25 projects), for furnishing the final Mega certificates to the Tax authorities.

Source: Cerebral Business research Pvt. Ltd.

1. Carrying out clause wise changes in the E-Act 2003 or
2. By introducing a chapter in the E-Act which will describe the proposal and responsibilities of Wires and Retail Supply Licensee and authorizing appropriate Commission to Issue detailed regulations elaborating the scheme in detail.
   • By introducing a chapter, the advantages are as follows:
     • Minimizes the probability of missing any change which may later be a cause of dispute
     • Few provisions may be required under certain situations such as cases where no Retail Supply Licensee shows interest in small areas/ rural areas
   • For the purpose of changes in E-Act, Wires Licensee has been termed as Distribution Network Licensee, so as to provide ample clarity about its role and minimize the changes required in the E-Act.
   Key Steps
   • Initiating consultations with state government to make them understand the benefits of the scheme
     • Choice to consumers
     • Infusing Competition
     • Infusing operational efficiency in the wires
     • Improved customer service
   • National Distribution Policy will be framed in consultation with the stakeholders i.e. state governments, Incumbent Licensees, CEA, CERC, SERCs etc.
   • As the scheme is proposed to be implemented through National Distribution Policy, the Policy would be required to be issued preferably along with the Amendments of the E-Act.

1. Notwithstanding anything contained in this Act, in respect of any area of supply notified by the state government, the retail sale of electricity to consumers by using any distribution system shall be carried out in accordance with the provisions of this Part.
2. The state government shall, within 2 years from the appointed date, notify the entire area within the state under this Part.

1. The state government, in consultation with the distribution licensee, shall draw up a transfer scheme to bifurcate and vest the property, interest in property, rights and liabilities which have been vested in such distribution licensee, with effect from the appointed date, in the transferee, being a distribution network licensee and one or more retail supply licensees, and publish such scheme as statutory transfer scheme under this Act.
2. The provisions of section 131 shall apply in so far as may be necessary for the purposes of drawing up a transfer scheme under sub-section (1) and the notification thereof.
3. The transferee companies referred to in sub-section shall be deemed to be distribution network license and retail supply license with effect from the appointed date.
4. Within five years from the appointed date or such earlier date that may be determined by the Appropriate Commission by regulations, the distribution network licensee will cease to have any direct or indirect interest in retail supply business.

1. No person shall carry on business as a distribution network licensee or a retail supply licensee, unless he is authorized to do so by a license granted by the Appropriate Commission for such purpose.
2. An application for grant of license under sub-section (1) may be made in accordance with section 15.
3. Save for a license issued under sub-section (3) of section 60C, an application for grant of a license under this Part shall be made after the date determined by the Appropriate Commission under sub-section (4) of section 60C.
4. PROVIDED that a person granted a distribution network license pursuant to an application made under Section 15 shall not be eligible for the grant of a retail supply license in the same network area.

1. All provisions of the Act that are applicable to a distribution licensee shall apply, mutatis mutandis, to a distribution network licensee or a retail supply licensee or both, as may be specified by the Appropriate Commission in the license or by regulations after the notification of this part.
2. While specifying the duties under sub-section (1), the Appropriate Commission shall provide the following: the distribution network licensee is obligated to develop and maintain an efficient, co-ordinated and economical distribution system in his network area and to provide connection to any premises on an application being made by the owner or occupier of such premises; the distribution network licensee will provide, if required, electric plant or electric line for giving electric supply to any premises by a retail supply licensee; the distribution network licensee shall allow mandatory and non-discriminatory open access to retail supply licensees in its network area to supply electricity to ail consumers on payment of wheeling charges; the distribution network licensee is obligated to provide, non-discriminatory open access in its network area under sub-sections (2) and (3) of section 42 for supply of electricity by persons other than retail supply licensees; subject to availability of distribution system and payment of necessary charges, a retail supply licensee shall supply electricity to any consumer who makes an application for such supply; obligation of a retail supply licensee to purchase of electricity from renewable sources of energy; the retail supply licensee will act as the sole interface with the consumers, both in respect of supply and connection; disconnection of any electric supply line or other works shall be the responsibility of the distribution network licensee.

1. The Central Government shall notify the National Distribution Policy to provide for separation of distribution network and retail supply business, to provide for optimum and cost effective utilization of the distribution system and assets, to bring in competition in retail supply of electricity and to provide choice to consumers. In discharging its functions the Appropriate Commission shall implement the provisions of National Distribution Policy.
2. The Central Government may, from time to time, in consultation with the state governments and the Authority, review or revise, the National Distribution Policy referred to in sub-section (1).

Source: Cerebral Business Research Pvt. Ltd

What is viability gap funding?
There are many projects with high economic returns, but the financial returns may not be adequate for a profit-seeking investor. For instance, a rural road connecting several villages to the nearby town. This would yield huge economic benefits by integrating these villages with the market economy, but because of low incomes it may not be possible to charge user fee. In such a situation, the project is unlikely to get private investment. In such cases, the government can pitch in and meet a portion of the cost, making the project viable. This method is known as viability gap funding.
How does the scheme work?
VGF is typically provided in competitively bid projects. Under VGF, the central government meets up to 20% of capital cost of a project being implemented in public private partnership (PPP) mode by a central ministry, state government, statutory entity or a local body. The state government, sponsoring ministry or the project authority can pitch in with another 20% of the project cost to make the projects even more attractive for the investors. Potential investors bid for these projects on the basis of VGF needed. Those needing the least VGF sup-port will be awarded the project. The scheme is administered by the ministry of finance.
Which are the eligible sectors?
Projects in a number of sectors such as roads, ports, airports, railways, inland waterways, urban transport, power, water supply, other physi-cal infrastructure in urban areas, infrastructure projects in special eco-nomic zones, tourism infrastructure projects are generally eligible for viability gap funding. The government now proposes to add social sectors such as education and health to the list.
How does the government benefit?
The government has limited resources. It can use those funds to build everything on its own, but such public funding will take years to cre-ate the infrastructure that is needed to achieve higher growth. Through viability gap funding, the same amount of funds can be used to execute many more projects through private participation. VGF is in that sense a force multiplier, enabling government to leverage its re-sources more effectively.
What has been the success rate?
The government has so far approved 199 VGF-supported projects in-volving investment of Rs 170,651 crore by the end of December 2009.
Source: Economic Times

• The incumbent Distribution License would be split into two
  • A Wires License; and
  • A Retail Supply License.
• The incumbent Retail Supply Licensee would also be the Default Retail Supplier with Universal Service Obligation for the entire licensed area.
• The Wires Licensee would be the Distribution Network Owner (DNO) and shall be responsible for
  • All the activities carried out by the erstwhile Distribution Licensee\
  • Except the activity of retail supply of electricity to consumers.
• The Distribution Network would include Distribution System starting from the interface with the Transmission System stretching up to the Retail Consumer Meter.

• The Wires Licensee shall continue to be responsible for overall development and growth of the Distribution network - up to the consumer meter.
• Gradually, in this phase, additional Retail Supply Licenses would be granted by the concerned SERCs with universal service obligation, as per the Licensing philosophy to be adopted and norms notified, offering choice to the retail consumers.
• The SERC would declare one of the Retail Supply Licensees as the 'Default Supplier' with Universal Supply Obligation for the entire area under the jurisdiction of Wires Licensee.
• Setting of a Bulk Power Procurer- a Government owned company - with the following responsibilities:
  • Tie-up bulk purchases from the generator
  • Management of existing PPAs,
  • Sale of power in bulk to the Retail Suppliers; and
  • Treasury management
• The Retail Supply Licensees would have the option to procure power from the Bulk Power Procurer, in addition to the choice of procuring on its own, subject SERCs approval and adherence to the retail tariffs notified by the SERC
  • There would be no cross subsidy surcharge levied on the consumers moving from one Retail Supply Licensee to another.
  • Retail Supply Licensees to develop their own risk mitigation plan to deal with the situation
• Complete segregation of ownership between the Wires and Supply Licensees - Ownership of the retail licensee would be completely cut off from the wire licensee. Even the group company of wire licensee will not have retail license.
• The implementation of this phase would be decided by the SERC in terms of:
  • Timing of implementation of the phase
  • Strategic phasing of suggested measures; and
  • The structure of the industry for Bulk power purchase and sale to the Retail Supply Licensees. 

Your valuable comments on the same are most welcome and an healthy discussion on the same should produce more insights into the sectoral performance in terms of operations and financial viability.
Source: Cerebral Business research Pvt. Ltd.

With a view to augmenting coal mining capacity, bridging the gap between demand and supply of coal in the country reducing transaction cost, ensuring transparency, Public Private Partnership (PPP) has been identified as a focus area for attracting private capital in coal mining. Private participation has always proven good results to any sector including power sector with Electricity Act 2003 focusing on greater participation in generation transmission and distribution segments. In this regard, Planning Commission has prepared a draft Model Concession Agreement (MCA) for PPP in Coal Mining for discussion with stakeholders and experts, to be used by the owners of captive coal mines.
Salient features of the draft MCA are as follows:

• Elements of financial viability : The three critical elements that determine the financial viability of coal mining projects are the concession period, capital costs and mining charge. The concession period for a coal mining project should be fixed keeping in view the expected life of the mines. It could be fixed for a period of about 20 years, including the construction period, with a provision for extension of 5 years at the option of either the Concessionaire or the project authority (the “Authority”). Yet another extension of upto 10 years can be undertaken if both the parties so agree. This timeframe should enable a robust project structure.
• Fixed Charge : The Concessionaire shall be paid a Fixed Charge for availability of the mines for excavation and delivery of coal equivalent to the specified annual production programme. This would be a pre-determined amount linked to the pre-determined estimated project cost. The Fixed Charge actually payable to the Concessionaire would be reduced proportionate to any reduction in the availability of the mines for excavation and delivery of coal. An annual increase of 2 per cent in Fixed Charge has been stipulated to account for the increase in mining cost as the excavation goes deeper. The Fixed Charge so determined shall be revised annually to reflect 80 per cent of the variation in WPI.
• Investment Support : The Authority shall provide to the Concessionaire, a pre-determined amount of investment support by way of a capital contribution ranging between 20 and 40 per cent of the total project cost. The investment support shall be payable only after the Concessionaire has expended at least 50 per cent of the equity and shall be disbursed proportionately along with the loan funds disbursed by the lenders. The recovery of investment support shall be undertaken through a deduction in Fixed Charge and appropriation thereof.
• Variable Charge : The Authority shall pay to the Concessionaire a Variable Charge for excavation and delivery of coal, which would be determined through open competitive bidding. The Variable Charge shall be increased annually at a compounded rate of 2 per cent and the amount so arrived shall be revised to reflect the variation in WPI.
• GCV based payments : The payment of Mining Charge shall be linked to the normative Gross Calorific Value (GCV) of coal and shall be payable in terms of a GCV as Adjusted Tonne (GAT). In case of any variation in actual GCV as compared to the normative GCV, the weight of coal shall be correspondingly adjusted for the purposes of payment to the Concessionaire. Thus, if the GCV of coal supplied during an year exceeds the normative GCV, its equivalent GAT shall be eligible for payment of Mining charge.
• Removal of Overburden : The Concessionaire shall be responsible for the excavation, removal and depositing of Overburden so as to maintain the geometry of the mines in conformity with the provisions of the Agreement and Good Industry Practice. The removal of Overburden prior to commercial operation shall be measured in three stages and the cost thereof shall be borne by the Concessionaire as part of its initial capital investment. The cost of removal of Overburden after COD would be recovered from the Mining Charge payable to the Concessionaire. The Independent Engineer shall inspect the mines every year to ensure compliance in respect of removal of Overburden and in case of any breach of its obligation by the Concessionaire, a part of the payments due to the Concessionaire shall be withheld.
• Selection of Concessionaire : Selection of the Concessionaire will be based on a two-stage process of competitive bidding. All project parameters such as the concession period, Fixed Charge, technical parameters and performance standards are to be clearly stated upfront. Based on these terms, the short-listed bidders will be required to specify their financial offer in terms of a unit Variable Charge, without any qualification. The bidder who seeks the lowest unit charge should win the contract. The financial offer for the unit charge shall be made only for the initial year and the actual Variable Charge payable to the Concessionaire will be revised annually based on pre-determined indexation, in addition to a fixed annual increase of 2 per cent.
• Force Majeure : The MCA contains the requisite provisions for dealing with force majeure events. In particular, it affords protection to the Concessionaire against political actions that may have a material adverse effect on the project.
• Termination : In the event of termination, the MCA provides for a compulsory buyout by the Authority, as the site is owned by the Authority. Termination payments have been quantified precisely as compared to the complex formulations in most concession Agreements relating to infrastructure projects. Political force majeure and defaults by the Authority would qualify for adequate compensatory payments to the Concessionaire and will thus guard against any discriminatory or arbitrary action by the Authority.

Central and State Government owned Power Producers do not have experience in coal mining except NTPC. These companies which do not have coal mining experience, appoint MDO for all activities related to mining development and operation that include obtaining clearances like approval of mining plan, EC/FC clearances, approval of R&R plan, etc. Government sector producers only facilitate obtaining these clearances. Governments of Maharashtra, Rajasthan, Gujarat and DVC have appointed MDOs on the basis of per tonne extraction of coal, for operation of mines owned by them.

Source: Cerebral Business Research Pvt. Ltd.

Generation capacity addition of about 88,000 MW is envisaged during XII Plan, in which large numbers of generation projects are coming-up in resource rich States, i.e. Odisha, Jharkhand, Sikkim, Madhya Pradesh, Chhattisgarh, Tamil Nadu, Andhra Pradesh under private sector. POWERGRID, the Central Transmission Utility and nodal agency for grant of LTA to private producers has undertaken development of high capacity transmission corridors for evacuation of large quantum of power from various Independent Power Producers (IPP) projects. For integrated development of transmission system for dispersal of power from these generation projects, 11 High Capacity Power Transmission Corridors (HCPTC) have been planned at an estimated cost of about INR 75,000 Crore. Out of this POWERGRID is mandated to implement HCPTCs work of about INR 66,000 Crore. Implementation of these corridors is taken up in phased manner matching with generation projects. Status of implementation of HCPTC is given below:


Source: Cerebral Business Research Pvt. Ltd.

• Coal is the main stay of India's energy and will continue for quite some time into the future.
• About 55% of primary energy supply and about 70% of power generation in the country is coal based.
• The supplies of coal in the recent times are falling short of projected demand due to domestic production capacity constraints on various
  accounts like Environment & Forest Clearance, Land acquisition & related R&R, Law & Order, Coal Evacuation facilities etc..
• We are the third largest producer of coal after China and USA, but we are dependent on imports of coal mainly to meet the requirements of coking coal for metallurgical purposes on qualitative and quantitative reasons and thermal coals due to demand-supply gap.
• The XI Plan ended with an overall production of 540 million tonnes in 2011- 12 against which the production envisaged in the XII Plan is 795 million tonnes implying a growth of 8%.
• The gap between the demand and domestic supply in the terminal year 2016-17 of the XII Five Year Plan works out 185 million tonnes which needs to be met through imports.
• Monitoring coal production, off-take and the status of environmental and forestry clearances apart from keeping a close liaison
  with the State Governments so as to achieve the production targets.
• We need to augment domestic production of all the available resources in meeting the projected demand for energy. While there are constraints in
  availability of oil & gas, nuclear fuel and development of hydro resources, country is endowed with adequate coal resources on which our energy
  plans are mainly relied upon. Also domestic coal has cost competitiveness over other fuels.
• The assessed geological resources of coal as of 1/4/2013 stand at 298.91 billion tonnes with 123.18 billion tonnes (41%) of. proved reserves.
• To achieve the projected growth in production a number of new projects are planned to be taken up in PSU coal companies and a number of coal
  blocks have been allocated to various private and government companies and few more are in the pipeline for allocation. Besides, supplies would
  also need to be made good through imports.
• For increased transparency in coal block allocation the provisions of MMDR Act have been amended and new set of Rules have been framed for
  allotting new blocks through competitive bidding. Recently 14 blocks for power and 3 for mining have been put on offer under government
  dispensation route. Few more blocks for offer to private sector are in the pipeline.
• In order to fast track development of some of the coal blocks in CIL, it is proposed to develop these blocks through mine developer and operator
  (MDO). Modalities are being worked out in this regard.
• The potential coalfields from where the future production contribution is envisaged are North Karanpura in Jharkhand, Mand-Raigarh in
  Chhattisgarh, lb and Talcher in Odisha. Ministry of Coal is rigorously following with Ministry of Railways for implementing the identified critical
  rail links in these coalfields as well as establishing last mile connectivity.
• With a view to infuse competition in the coal sector and to review the existing institutional mechanism, it has been proposed to take up the
  exercise of restructuring of Coal India Limited.
• With a view to improve production, productivity and safety, it has been proposed to take up a Study on modernisation and technology
  development in CIL.
• The issue of dealing with imports through CIL particularly with regard to pooling of price has been appropriately addressed.

Share your thoughts and views as comments below on the listed facts above.
Source: Cerebral Business Research Pvt. Ltd.

Source: Cerebral Business Research Pvt. Ltd.

In the recent developments of Renewable Energy Sector, setting up Utra Mega Solar Plants is considering the most recent and in respect of this a Joint Venture(JV) company of various PSUs will be formed for setting up 4000 MW Solar PV project on 18000 ha. Land at Sambhar. Out of total 4000 MW Solar Energy Potential, the 1000 MW (Phase-I) Solar Power Project will be developed entirely by JV company on its own as a generator to generate 1760 MU annually. A small snapshot of the same is provided below for your reference.
The finalisation of the MOU is to be signed for the formation of JV company. As per draft finalized MOU, following equity has been agreed for various PSUs :

Time Line: Phase-I 1000 MW
Approval & Clearances: 6 months
Tendering : 6 months
Project Execution : 2 years

It was observed to ascertain as to whether the proposed JV company will be a generating company or merely a developer for Investment of funds. To the above observation, it is clarified that the proposed JV company will be as a generating company.

Opinion of Finance/Legal
Proposal has been examined by finance and concurred.

Specific Approval
It is requested to approve the following:
(i) Approval of participation of SJVN Ltd. in JV company being formed along with other partners for setting up 4000 MW Ultra Mega Green Solar PV Project with 16% equity.
(ii) To authorize Chairman and Managing Director, SJVN Ltd. to take such steps as may be necessary for obtaining approvals, statutory, contractual or otherwise, in relation to the above and settle all matters arising out of and incidental thereto and sign and execute Memorandum of Understanding (MoU), JV Agreement, all deeds, applications, documents and writings that may be required on behalf of the company and generally to do all the acts, deed
s and things including sub-delegation of these powers, that may be necessary, for proper, expedient or incidental for the purpose of giving effect to the aforesaid Proposal.

Source: Cerebral Business Research Pvt. Ltd.

The figures below indicate a very impressive growth during the first year of 12th Five year plan and leaves behind a lot of concerns over availability of fuel supply (coal and gas) to these plants. A noteworthy of this is the supply of gas to power plants which left most of the plants running below 30% PLF which are expected to run at 90% and above in actual terms.

• The targets fixed for Capacity addition for Thermal and Hydro Power for the year 2012-13 are well exceeded. The target of 15956 MW fixed for non-nuclear capacity addition through conventional sources – thermal and hydro for the year 2012-13 has been well achieved and exceeded with the capacity addition of 16,407 MW. The achievement of 16,407 MW comprises 4397 MW from the central sector, 2907 MW from the state sector and 9103 MW in the private sector.
• Under the central sector, 100% target has been achieved in the thermal sector by the commissioning of 4023 MW of central sector projects – 5 projects of NTPC totaling 2660 MW – Mauda Unit 1, (Maharasthra), 500 MW, Rihand III, Unit 5. (UP), 500 MW, Sipat Unit 3, (Chhattisgarh) – Super critical Unit, 660 MW, Vindhyachal IV Unit 11, UP, 500 MW and Indra Gandhi Unit 3 in Haryana (500 MW). Except for Chattishgarh, all these have turbines and generator made by BHEL. Two other projects with main plant equipment by BHEL namely Vallur, in joint sector between NTPC and TANGEDCO (Tamil Nadu State Government Corporation) 500 MW in Tamil Nadu and Tripura Gas Module 1 (363 MW) set up by ONGC have also been commissioned. DVC also in the central sector has been also able to achieve its target of 500 MW with the commissioning of the 500 MW Koderma project in Jharkhand.
• As regards hydro sector, 60% of the target of 645 MW in the central sector was achieved by NHPC in February, 2013 and the balance projects will be commissioned in the next 10 days. NHPC is thereby set to achieve 100% of the hydro target also in the central sector. Important hydro projects which have already been commissioned include Chamera (210 MW) in J&K, 3 units of Teesta Low Dam III totaling 99 MW in West Bengal. Other important projects which will be commissioned include Uri II, 240 MW in J&K and 1 unit Parbati III (130 MW) in Himachal Pradesh.
• The private sector has achieved 125% of the set target of 7250 MW by commissioning 9103 MW as on 17 March, 2013. This record capacity addition has been possible with the commissioning of the Tata Group’s four Mundra UMPP units of 800 MW units (Gujarat) each commissioned during the year. With this, Tatas now hold record of 3,200 MW, the maximum capacity addition ever during a year by any Utility with NTPC closely following at 3,160 MW. Furthermore, the first 660 MW unit of the second Ultra Mega project at Sasan (MP) has already been synchronized and is also likely to be commissioned in the next 10 days.
• BHEL has achieved commissioning of 6,027 MW of projects and about 1,540 MW are already under advance stages of commissioning following their synchronization whereby, BHEL is likely to achieve its 2012-13 target of 7948 MW. More than 4000 MW of projects have been synchronized and are in advanced stages of commissioning.

Considering that the above achievements are likely to project lesser deductions in capacity addition during the mid-term appraisal, which otherwise was a different scenario during other five year plans, what arises is the improvements in the distribution sector and financial health status. The coal availability, demand and supply, similarly gas availability, the utilities preferences towards load shedding and aversion to procure power at market competitive price are all considered a threat to the power industry growth. There is an immediate need to make the entire value chain follow the same graph line in terms of growth.

Give your suggestions as comment below so as how to connect all these sectors (Conventional, Non-Conventional, Transmission, Distribution, Consumption) with a similar growth pattern.
Source: Cerebral Business Research Pvt. Ltd.

I was recently going through a report and found these excerpts very informative and thought of sharing them. I strongly believe that a broader view and analysis on the guidelines mentioned below will lead to strengthening of power sector operational performance and give a better place for investments into the sector which in the recent times deterred. You may have your different view on any of the below guidelines and you may comment the same below the article.

1. Strengthening of institutions at the National/ Regional/State level such as National Load Despatch Centre/Regional Load Despatch Centres/State Load Despatch Centres is vital to the implementation of open access.
2. To give a clear timeline for States to expedite reassignment of the Power Purchase Agreements to Distribution Companies (DISCOMs) and for winding up the single buyer model as early as possible enabling provision may be made in this regard in the National Electricity Policy.
3. State Electricity Regulatory Commissions (SERCs) should provide long term trajectory for Renewable Purchase Obligation (RPO).
4. The Principles & guidelines evolved through consensus by the Forum of Regulators (FOR) for the RPO of Obligated entities and Renewable Electricity Certificate(REC) mechanism should be followed up for timely adoption by corresponding Regulations of SERCs in keeping with Government Policies.
5. The Consumer Grievance Redressal Forum (CGRF) should be a multi-member setup with members from all stakeholders. FOR to play an important role in ensuring consonance of guidelines/regulations pertaining to CGRF & Ombudsman in respective States and UT's.
6. Consumer Advocacy Cells may be instituted by all the Commissions to provide the required legal advice, support, and assistance to Complainants for representing their case before the Ombudsman.
7. Power procurement and allocation of power to be done in line with the tariff policy and the guidelines/ Standard Bid documents (SBD) issued by Govt, of India under the Electricity Act, by the State Government.
8. Alternative methods of calculating cross subsidy surcharge to be worked out to ensure that neither open access is throttled nor does the host DISCOM unduly suffer.
9. SERCs should impose reasonable trading margin for the intra-state sale irrespective of the final destination of the electricity. SERCs should incentivize the intra-state trading in line with Act and Policy.
10. The concerned SERC should ensure automatic pass through for any increase in power purchase cost arising out of rise in cost of fuel
11. A substantial part, say about 80-85% of the requirement needed to be sourced by DISCOMs through long/ medium term contracts so that the infrastructure is developed accordingly.
12. The provision under section 11 or 108 of Electricity Act, 2003 should not be misused to deal with shortage of power in the State as this section was meant to be invoked in extra ordinary circumstances like security of the State, public order or a natural calamity. This position may be clarified in the National Electrical Policy
13. For all 1 MW and above consumers seeking open access, Standby charges should apply only if the distribution licensees continue to have the universal service obligation for energy supply. In case the distribution companies do not have the universal service obligation, stand by charges may be decided by mutual agreement between the open access consumers and the distribution companies.
14. Definition of minimum area of supply may be modified and it may be left to the discretion of the SERCs to decide the area, however, with due consideration to the fact that the grant of second/subsequent license does not lead to "cherry picking".
15. At the state level, DISCOMs also need to create Distribution Control Centres (DCCs) and empower them so that open access at the distribution level becomes a reality.
16. The institution of Chief Electrical Inspectorate to Govt, of India (CEIG)/State Government is strengthened so that quick and timely approvals are given. Central Electricity Authority(CEA) should work out a scheme of delegation of authority of mandatory inspections, including self-certifications, which would be in consonance with liberalization of bureaucratic control without compromising system safety and suggest possible steps for strengthening of Chief Electrical Inspector institutions which may be adopted by the State Governments.
17. Suitable incentives to those states who have adopted Time Of Day (TOD) tariff. TOD for Low Tension industries and Domestic consumers should be operationalized in phases
18. Pre - paid meters to be promoted to high value consumers and to those categories of consumers who are chronic defaulters to avoid piling up of arrears.
19. 100% Spot billing, Spot collection, Semi / fully automated meter reading and Standardization of metering protocols shall be done for extensive usage of AMR.
20. The State Governments should not only clear all the outstanding dues to the Utilities, but ensure payment of subsidies as per section 65 of Electricity Act, 2003 in future. FOR to evolve principles & methodologies in this regard through consensus and further follow up the progress.
21. As the Act provides for transmission, distribution and trading activities by the State Governments under section 14 of the Act, in the interest of promoting competition and fair play; Trading by state entities should be undertaken only after meeting the power demands of its own consumers.
22. RPOs should be distributed among the states in line with the targets set under the National Action Plan on Climate Change to be done through amendment in Electricity Act 2003 and/ or Tariff Policy.
23. Long term procurement of power by the distribution licensee to be done through competitive bidding process (CBP) and Power Purchase Agreements (PPA). To start with, the provisions in the Tariff Policy may be amended suitably for phase-wise introduction of competition for the different sources of renewable energy. Renewable Power procuring state will have the following procurement options:-
    1. Long term procurement through competitive bidding.
    2. Short term procurement through Purchase of REC or at preferential tariffs.
    Source: Cerebral Business Research Pvt. Ltd.
    

1. Coal Banking is an arrangement between a project developer and CIL, whereby the developer would provide surplus coal which is produced during the development of the block to CIL, and CIL would return this coal on pre-agreed terms after a specified duration for use in the identified end-use plant. The situations where coal can be rendered surplus could be as follows:
   1. Mismatch between mine development and progress of end use plant leading to a situation where coal mine production has started but the end use plant is not ready
   2. Increased mining capacity due to technological improvements, provided the revised mining plan is also approved by the competent authority
2. If the right policy framework is provided, captive coal blocks awarded to power sector can produce nearly 25 MTPA additional coal by 2015-16 that would help to reduce the dependency on imported coal to that extent. APP further stated that apart from CIL, banker for the purpose of coal banking can be another end use project in the same end use sector. Regarding the period of banking, depositor has to indicate the period after which he wants the coal returned, depending upon his mining plan, ramp up, end-use project commissioning etc. At this point, Member (Energy) stated that the period of the coal banking should not be open-ended and should not exceed 5 years in any case.
3. The price level at the time of banking as well as at the time of taking back, the price should be based on last 12 month average CIL e-auction price with the adjustment to the calorific coal.
4. Regarding the price there is also another view that instead of e-auction price it should be linked to CIL notified price and any increase in prices should be indexed to price variation in the international coal price index.
5. Any extra coal generated either because of the mismatch on the coal mining and end use plant or through the surplus coal available due to better technological production in any case, would be beneficial for the nation in view of the current shortage of coal and the same should be encouraged by the Government of India. Any surplus coal available through coal banking or through the captive coal mine earmarked for the power sector should remain with the power sector and the should not be diverted to the other sectors.
6. Maximizing the availability of coal through coal banking mechanism is good for the economy of the country. Platform for surplus coal should not be treated as the commercial trading of coal as per the spirit of the above Act. The availability of surplus coal because of mismatch arising due to delay in completion of end use plant where as the mine has already started production but is not willing to agree with the second reason for surplus coal production by deploying improved technologies.
7. Approved mine plan specifies certain level of production based on the rate of extraction for specified period of time for a given level of reserves which ultimately ensures coal supplies for life of end use plant. It needs to ensure that additional level of extraction or better recovery of resources by deploying better technologies should not lead to short supplies for the end use plant in the subsequent years.
8. The motive is not to increase profits through coal banking but welcoming the additional coal production based on the concept of coal banking. Any risks associated with banking can be hedged, if the concept is agreed. CIL notified price is average price of coal produced from both opencast and underground mining operations. It is a known fact that cost of coal produced from underground mining operations is very high as compared to the opencast mining.
9. CIL is incurring loss to the extent of INR 2000/tonne on an average on account of the underground mines and the loss is compensated to some extent by cross subsidy through open cast mining. CIL further stated that considering the negative balance of the inventory in the foreseeable future based on its commitments, CIL is willing to take surplus coal from the captive developers and give it to the other consumers but would not be able to give any commitment on returning back the coal to the entities who have banked with the company.

With the right policy and the right mechanism to implement coal banking will motivate the captive miners to enhance their coal production levels and thereby support the aim of reducing coal shoartage.

Source: Cerebral Business Research Pvt. Ltd.