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Imagineering India India Power Sector 2010

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India - 1.3+ Billion citizens on the move to realise their potential - How would you act?

India - 1.3+ Billion citizens on the move to realise their potential - How would you act?

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Imagineering India   India Power Sector 2010 Imagineering India India Power Sector 2010 Presentation Transcript

  • INDIA  Emerging  Into  the  Light  
  • Contents 1.  India  :  An  Overview   3   2.  India  :  From  the  Pages  of  History   6   3.  LiberalizaBon  :  A  New  Era  :  India  Ascending   17   4.  Global  Power  Sector  :  Energizing  the  World   27   5.  Indian  Infrastructure  Sector  :  InviBng  Private  Investment   43   6.  Sector  Specific  Outlook  :  The  Growth  Factor   50   7.  The  Power  Sector  in  India  :  Let  there  be  Light   57   8.  Indian  Power  Sector  :  An  Overview   60   9.  Opening  up  of  the  Power    Sector  :  The  New  Era  Begins   66   10.  Emerging  OpportuniBes  :  Rewards  of    Bringing  in  Ingenuousness   73   11.  Outlook  for  Power  Sectors  :  Indicators  &  Forecast   85   12.  Government  IniBaBves  for  Private  Sector  Involvement  :  Opening  up  Private  Capital  Inflow   97   13.  The  Indian  Power  Sector  :  OpportuniBes,  Risks  &  Rewards   102   14.  Summing  Up  :  Power  Sector  Investment  :  Why  India?   115  
  • India  An  Overview   Back  to  Contents  
  • India:  An  Overview  •  Geographically,  the  seventh  largest  country  in  the  world  (3.3  million   square  kilometers).  •  Second  most  populous  country  a_er  China  with  a  populaBon  of     1.18  billion,  expected  to  be  the  most  populous  country  by  2020.  •  ~  65%  of  the  demography  is  less  than  25  years  of  age.  •  The  world’s  largest  democracy.  •  GDP  growth  of  7.2%  in  2009-­‐2010.  •  11th  largest  economy  in  terms  of  nominal  GDP  ($  1.2  trillion  in  2009).  •  4th  largest  economy  in  terms  of  Purchasing  Power  Parity  GDP  ($3.5  trillion   in  2009).  •  Total  exports  of  $155  billion  in  2009  (free-­‐on-­‐board  basis).  •  Total  imports  of  $232  billion  in  2009  (free-­‐on-­‐board  basis),  remains  a  net   importer.  •  Foreign  reserves  of  $287  billion  (as  of  31  December,  2009).   Back  to  Contents   4  
  • India:  Drama1c  Diversity,  Amazing  Unity  •  LogisBcally  ideal  for  trade,  with  a  coastline  extending  on  three  sides  of  the   peninsula,  facilitaBng  passage  of  freight  –  Indian  Ocean  to  the  South,   Arabian  Sea  to  the  West,  and  the  Bay  of  Bengal  to  the  East.  •  Comprised  of  28  states  and  7  Union  Territories.  •  Boasts  vast  variety  and  diversity  of  people  and  culture,  coexist  in  relaBve   harmony  and  unity.  •  A  pluralisBc,  mulB-­‐ethnic,  mulB-­‐lingual  and  mulB-­‐cultural  society  –  the   Indian  ConsBtuBon  recognizes  22  main  and  21  scheduled  languages.  •  Diversity  in  religion  –  Hinduism,  Islam,  ChrisBanity,  Buddhism,  Jainism,   Zoroastrianism,  Judaism  and  B’ahai  pracBced  across  the  country,  with  a   strong  sense  of  religious  tolerance  being  the  accepted  as  way  of  life  for  a   majority  of  Indians,  both  by  law  and  tradiBon.  •  An  amazing  ‘melBng  pot’  of  mulBple  philosophies,  languages,  fesBvals,   cuisine,  clothing,  literature,  music,  dance,  fine  arts  and  cra_s.   Back  to  Contents   5  
  • India  From  the  Pages  of  History   Back  to  Contents  
  • India:  A  Chronological  History   India  is  the  cradle  of  the  human  race,  the  birthplace  of  human   speech,  the  mother  of  history,  the  grandmother  of  legend,  and   the  great  grand  mother  of  tradiBon…   –  Mark  Twain  •  2500–1500  B.C:  The  Indus  Valley    CivilizaBon  flourishes  in  the  western  part  of  the  Indian  sub-­‐ conBnent,  arrayed  around  the  Indus  (Sindhu)  River.  Archaeological  finds  of  the  main  ciBes  –   Harappa  and  Mohenjodaro  –  reveal  traces  of  a  sophisBcated  culture,  with  trading  Bes  to   Mesopotamia  and  other  civilizaBons  flourishing  around  the  same  Bme  in  other  parts  of  the   known  world.  •  A  well-­‐planned  civic  and  sanitary  system,  trading  posts,  a  measuring  system,  weapons  and   tools,  etc.  are  believed  to  have  been  used  by  the  people.  •  From  1500  B.C:  Aryan  tribes  from  the  north-­‐western  regions  of  Asia  begin  to  enter  India  and   senle  down  in  various  parts  of  the  country  covering  the  north,  east  and  west,  up  to  the   Vindhya  mountains  in  central  India.  In  the  south,  a  vibrant  Dravidian  culture  flourishes.  •  The  Vedas  and  epics  such  as  the  Mahabharata  are  composed,  the  geography  is  divided  into   poliBcally-­‐organized  territories  called  ‘Mahajanapadas’  and  the  caste  system  is  created.   Back  to  Contents   7  
  • India:  History  (contd.)    •  600–400  B.C:  The  seeds  of  Jainism  and  Buddhism  are  sown  with  the  birth  of  Mahaveera     (599  B.C)  and  Gautama  Buddha  (563  B.C).  •  400  B.C–0  A.D:  Invasions  from  the  north  and  west  conBnue,  including  assaults  by  Alexander   the  Great,  whose  ambiBon  of  world  conquest  is  stopped  at  the  northwest  fronBer  (326  B.C).  •  Chandragupta  Maurya  establishes  the  Mauryan  Empire  and  for  the  first  Bme  a  large  part  of   the  country  is  unified  under  the  rule  of  one  dynasty.  The  Mauryan  empire  lasts  Bll  2  B.C,  with   great  rulers  such  as  Ashoka  and  Chandragupta  II.  Ashoka  is  responsible  for  the  spread  of   Buddhism  across  the  country.  •  0–1000  A.D:  Many  prominent  dynasBes  –  the  Pallavas,  Hoysalas  and  the  Chalukyas  –  rule   over  central  and  southern  regions,  while  the  Gupta  dynasty  comes  into  being  around     326  A.D.  •  This  was  the  Golden  Age  in  Indian  history,  when  culture  and  arts  flourished,  with  significant   work  in  literature,  science,  mathemaBcs  and  astronomy.  •  Many  famous  temples,  which  are  great  anracBons  even  today,  were  built  during  this  Bme  –   Khajuraho,  Belur,  Halebeid,  etc.  •  This  is  also  the  period  during  which  noted  scholars  from  other  parts  of  the  world  –  Fa-­‐Hein,   Hiuen-­‐Tsang,  Alberuni  –  visited  India  to  learn  about  culture  and  religion.   Back  to  Contents   8  
  • India:  History  (contd.)  •  1000–1800  A.D:  The  earliest  of  Muslim  invasions  begin  with  Mahmud  Ghazni  in  1026;   explorers  such  as  Marco  Polo  (1288  A.D)  and  Vasco  da  Gama  (first  voyage  in  1498)  make   their  way  to  India  –  the  objecBve  is  to  check  out  the  fabulous  wealth,  culture,  arts  and  trade   for  which  the  country  is  famous  throughout  the  world.  •  Columbus  set  out  on  a  voyage  from  Spain  to  visit  India,  but  ends  up  discovering  a  new   conBnent  –  America  –  instead!  •  Babur  establishes  the  Mughal  Empire  in  the  1500s  and  the  Mughals  rule  India  unBl  1857,   albeit  in  a  diminished  form.  Babur,  Humayun,  Akbar  and  Aurangazeb  are  among  the  more   well-­‐known  Mughal  emperors.  •  Between  1500  and  1800,  many  European  traders  –  Portuguese,  Spanish,  French,  the  Dutch   and  the  English  –  set  up  trading  posts  in  various  parts  of  the  country,  to  export  spices,   texBles,  precious  stones  and  other  goods,  for  which  India  is  widely  known.  •  The  trading  companies  gradually  take  poliBcal  control,  due  to  the  weak  and  fragmented  reign   of  Indian  rulers  around  this  Bme.  The  Portuguese  take  over  Goa,  the  French  and  Dutch  over   the  Malabar  and  Coromandel  coasts  and  finally,  the  BriBsh  East  India  Company,  annexes   most  of  the  country  in  1757.  •  Official  BriBsh  rule,  i.e.  the  takeover  by  the  BriBsh  monarchy,  begins  at  the  end  of  the  failed   First  War  of  Independence  in  1857.  The  BriBsh  rule  India  Bll  1947.   Back  to  Contents   9  
  • India:  The  Glorious  Past   We  owe  a  lot  to  the  Indians,  who  taught  us  how  to  count,   without  which  no  worthwhile  scienBfic  discovery  could     have  been  made   –    Albert  Einstein  •  The  richest  country  in  the  world  Bll  the  17th  century.  •  The  number  system,  the  zero,  the  decimal  system,  algebra,  trigonometry,  calculus  and  chess   were  all  invented  in  India.  •  India  was  the  only  source  of  diamonds  unBl  1896.  •  The  earliest  system  of  medicine  –  Ayurveda  –  was  established  by  Charaka  2500  years  ago.  •  In  the  5th  century,  Bhaskaracharya  calculated  the  Bme  earth  took  to  orbit  the  sun.  •  Spices,  texBles,  gems,  indigo,  muslin,  conon,  etc  are  just  some  of  the  goods  which  originated   in  India  and  were  famed  throughout  the  world.  •  The  concepts  of  irrigaBon  and  reservoir  systems,  urban  planning,  sewage  systems,  weights   and  measures,  coinage,  etc  were  first  introduced  in  ancient  India.   Back  to  Contents   10  
  • India:  Colonial  Rule  •  The  East  India  Company,  iniBally  called  the  East  India  Trading  Company,  and  later  the  BriBsh   East  India  Company,  was  the  oldest  among  the  other  European  East  India  Companies.  •  Focused  earlier  on  the  trade  of  commodiBes  such  as  conon,  silk,  indigo  and  opium,  it  later   went  on  to  gain  administraBve  control  of  large  porBons  of  the  Indian  subconBnent.  •  The  Company  Rule  in  India  commenced  in  1757,  lasted  Bll  the  Indian  Rebellion  of  1857,   following  which,  administraBon  of  the  Indian  Colony  was  taken  over  directly  by  the  BriBsh   Monarchy.  •  Thus  ended  the  rule  of  the  East  India  Company  and  thereby  began  the  dramaBc  era  of  the   BriBsh  Raj.  India  was  the  ‘jewel  in  the  Crown’  for  the  vast  BriBsh  Empire.  •  In  the  Indian  subconBnent,  the  purview  of  the  BriBsh  Raj  extended  across  present  day   Pakistan,  India  and  Bangladesh.    •  Many  people  believe  that  the  Raj  had  adverse  effects  on  the  economy  of  India  as  a  whole.   BriBsh  poliBcian  Edmund  Burke  pointed  out  in  the  late  18th  century  that  the  East  India   Company  had  ruined  the  Indian  economy  with  their  trading  and  administraBve  pracBces.  •  Noted  Indian  historian  Rajat  Kanta  Ray  accused  the  BriBsh  Raj  of  eaBng  into  Indias  food  and   financial  stocks  and  implemenBng  such  high  duty  structure  that  it  ulBmately  led  to  the   horrific  Bengal  famine  of  1770,  which  was  responsible  for  the  deaths  of  one-­‐third  of  the   populace  of  Bengal.   Back  to  Contents   11  
  • Post  Independence:  License  Raj  •  One  of  the  important  observaBon  post  India’s  independence  in  1947  concern  the  countrys   economy,  which  conBnued  to  remain  in  a  state  of  stagnaBon  Bll  1990,  this  period  was   dubbed  the  ‘License  Raj’  or  ‘Permit  Raj’,  a  cynical  wordplay  on  the  previous  200  years  of   BriBsh  ‘Colonial  Raj’.  •  The  terms  referred  to  extensive  licensing,  regulaBons  and  bureaucraBc  red  tape  which   governed  and  strangled  the  Indian  economy  from     1947–1990.  •  Any  economic  acBvity  –  starBng  a  business,  expanding  or  any  significant  changes  –  required   obtaining  regulatory  approvals  from  nearly  80  government  agencies.  Even  then,  the   government  would  regulate  all  operaBonal  working,  for  the  enBty  to  remain  in  business.  •  The  economy  was  administered  centrally  and  modeled  as  a  ‘socialist’  or  ‘mixed’  economy  –   a  mix  of  western  capitalism  and  Soviet  communism.   Back  to  Contents   12  
  • Post  Independence:  License  Raj  (contd.)    An  excerpt  from  a  1998  report  by  BBC,  India:  The  Economy   “Before  the  process  of  reform  began  in  1991,  the  government  anempted  to   close  the  Indian  economy  to  the  outside  world.  The  Indian  currency,  the   Rupee,  was  inconverBble  and  high  tariffs  and  import  licensing  prevented   foreign  goods  reaching  the  market.  The  central  pillar  of  the  policy  was  import   subsBtuBon,  the  belief  that  India  needed  to  rely  on  internal  markets  for   development,  not  internaBonal  trade  -­‐  a  belief  generated  by  a  mixture  of   socialism  and  the  experience  of  colonial  exploitaBon.  Planning  and  the  state,   rather  than  markets,  would  determine  how  much  investment  was  needed  in   which  sectors.  The  energies  of  investors  were  directed  towards  winning   licenses,  rather  than  capturing  markets  or  producing  superior  goods,  and   profits  tended  to  be  guaranteed  irrespecBve  of  quality  or  efficiency.  External   regulaBon,  major  controls  on  foreign  direct  investment  and  a  high  tariff  wall   then  protected  companies  from  foreign  compeBBon.  RestricBons  on   consumer  goods  were  the  Bghtest,  thanks  to  the  belief  that  precious  foreign   exchange  should  not  be  wasted  on  consumer  goods.”     Back  to  Contents   13  
  • Post  Independence:  License  Raj  (contd.)  •  The  License  regime  had  far-­‐reaching  and  devastaBng  effects.  •  The  newly  independent  Republic  of  India  began  with  high  growth  rates,  an  open   environment  conducive  to  trade,  foreign  and  domesBc  investment  and  overall  stability.  •  However,  by  1980,  the  Indian  economy  was  in  a  stagnant    and  suspended  state  with   extremely  low  growth  rates,  a  hosBle  atmosphere  totally  closed  to  outside  investment  and   inter-­‐country  trade,  a  restricBve  regime  obsessed  with  licenses  and  central  economy  control,   a  total  failure  to  deal  with  spiraling  social  expenditure  and  an  apatheBc  bureaucraBc  system   with  a  stranglehold  on  governance  in  all  spheres.   Back  to  Contents   14  
  • The  Hindu/Socialist  Growth  Rate  •  The  term  ‘Hindu  Growth  Rate’  (also  referred  to  as  ‘Socialist  growth  rate’),  coined  by   economist  K.N.  Raj,  suggested  that  India,  with  its  majority  Hindu  populaBon,  had  a   significantly  low  growth  rate  in  comparison  with  its  Asian  counterparts  (specifically,   Singapore,  Hong  Kong,  South  Korea  and  Taiwan),  whose  economies  also  started  out  at  the   same  level  as  Indias  in  the  early  1950s.  •  The  Indian  economy  had  literally  stalled  at  3.5%  in  the  period  between  1950–1980.  In  this   Bme,  the  per  capita  income  of  India  hovered  at  1.3%.   Per  capita  GDP  of  South  Asian  economies  &  South  Korea  (1950-­‐1995)   45   42.4   40   35   30   24.8   25   20   15   11.4   11.8   11.8   12   7.1   9   7.6   8.3   7.5   7.8   10.2   7   6.5   8.4   9.4   6.5   5.7   7.6   9.4   8.3   10   5.1   5.2   5   0   1950   1960   1970   1980   1995   Bangladesh   India   Pakistan   Sri  Lanka   South  Korea  Source:  Eldis  &  Wikipedia   Back  to  Contents   15  
  • The  Hindu/Socialist  Growth  Rate  (contd.)  •  Well-­‐known  Indian  journalist  Arun  Shourie  pointed  out  that  the  Socialist  Rate  of  Growth  was   a  direct  consequence  of  the  various  socialist  policies  which  prevailing  rigid  governments  had   implemented.  He  firmly  stressed  that  it  had  nothing  to  do  with  Hinduism,  whatsoever.  •  In  comparison  with  other  countries,  an  Indians  average  yearly  income  stood  at  $439  in  1947,   while  this  was  $619,  $770  and  $936  for  China,  South  Korea  and  Taiwan,  respecBvely.    •  By  1999,  these  numbers  had  touched  $1,818,  $3,259,  $13,317  and  $15,720  for  the  four   countries,  respecBvely.  •  The  difference  between  India  and  South  Korea  stood  out  the  most.  In  1947,  the  per  capita   income  of  South  Korea  was  twice  that  of  India.  •  By  1960,  it  grew  to  four  Bmes  the  size  of  Indias  per  capita  income.  •  By  1990,  the  South  Korean  per  capita  income  was  a  whopping  20  Bmes  that  of  India.   Countries  above  and   below  world  per     capita  income  of  USD   10,500   Above   Below   Back  to  Contents   16  
  • Liberaliza1on:  A  New  Era   India  Ascending   Back  to  Contents  
  • Liberaliza1on:  Background  •  Before  1990,  the  government  viewed  the  BriBsh  colonial  era  as  exploitaBve;   encouraged  by  the  reformaBve  views  of  BriBsh  Fabian  Socialists,  all  policies   designed  and  implemented  were  biased  towards  a  protecBonist  and  restricBve   environment.    •  The  policies  favored  import-­‐subsBtuBng  industrializaBon,  control  and  intervenBon   of  the  government  in  all  aspects  of  labor  issues  and  financial  sectors,  a   comprehensive  public  sector,  regulaBon  of  all  businesses  and  Central  Planning.  •  In  the  mid  1950s  many  industrial  sectors  including  steel,  water,  mining,  tools,   telecommunicaBon  and  insurance  were  effecBvely  transformed  into  state-­‐owned   enterprises.    •  Consequently,  only  few  licenses  for  steel,  power  and  telecommunicaBons  were   issued  to  private  players  and  these  select  few  managed  to  establish  giganBc   empires,  the  country  witnessed  the  emergence  of  a  very  extensive  public  sector,   many  of  these  government  enterprises  stockpiled  huge  losses  and  monopolized   the  economy.  •  This  resulted  in  severely  lagging  infrastructure,  with  insignificant  investments.   Back  to  Contents   18  
  • Liberaliza1on:  Background  (contd.)  By  1991,  the  economy  was  at  a  breaking  point,  nearing  bankruptcy  and  unable  to  pay  internaBonal  creditors.   According  to  the  Astaire  Report   “In  return  for  an  IMF  bailout,  gold  was  transferred  to  London  as   collateral,  the  Rupee  devalued  and  economic  reforms  were  forced   upon  India.  That  low  point  was  the  catalyst  required  to  transform  the   economy  through  badly  needed  reforms  to  unshackle  the  economy.   Controls  started  to  be  dismantled,  tariffs,  duBes  and  taxes   progressively  lowered,  state  monopolies  broken,  the  economy  was   opened  to  trade  and  investment,  private  sector  enterprise  and   compeBBon  were  encouraged  and  globalizaBon  was  slowly   embraced.  The  reforms  process  conBnues  today  and  is  accepted  by   all  poliBcal  parBes.”   Back  to  Contents   19  
  • The  New  Policy   in  India  under  the  leadership  of  the  Prime  Minister  P.V.  •  In  1991,  breakthrough  reforms  began   Narasimha  Rao  and  Finance  Minister  Manmohan  Singh.  •  First  and  foremost,  the  new  policy  dispensed  with  the  License  Raj.  •  The  government  concentrated  on  increasing  foreign  investment  ,  increased  parBcipaBon  and   investment  by  enthusiasBc  private  sector,  deregulaBng  Indian  business  ventures,  reducing  the   countrys  fiscal  deficit  and  ramping  up  the  financing  and  investment  in  the  countrys  sagging   infrastructure.  •  Some  notable  reforms:   –  Industrial  licensing  was  removed,  while  norms  regulaBng  industrial  growth  were  raBonalized.   –  The  SEBI  Act  was  introduced  in  1992  along  with  amended  Security  Laws.   –  The  NaBonal  Stock  Exchange  was  established  in  1994  as  a  trading  system  based  on   computers.  It  became  the  countrys  largest  exchange  by  1996;  with  T+2  senlement  &   clearance.     –  Tariffs  were  slashed  from  the  previous  85%  to  a  significantly  lower  25%.     –  The  government  increased  the  cap  on  foreign  investment  from  40%  to  51%  and  allowed   100%  foreign  equity  in  certain  priority  sectors  for  the  first  Bme.  The  procedures  for   obtaining  FDI  approvals  were  significantly  raBonalized  and  consolidated.   –  The  government  also  iniBated  the  privaBzaBon  process  of  several  large  and  inefficient  public   sector  companies.   Back  to  Contents   20  
  • The  New  Policy  (contd.)  •  The  Vajpayee  government  conBnued  with  privaBzaBon  procedures,  reducBon  of  taxes  and  duBes   and  a  stable  fiscal  policy  which  aimed  primarily  at  reducBon  of  debt  and  deficit.  •  Disclosure  of  informaBon  was  earlier  limited  and  restricted  by  the  Indian  government.  On  June  15,   2005,  the  government  passed  a  new  law  in  Parliament  –  the  Right  to  InformaBon  (RTI)  act.    •  The  enforcement  of  the  RTI  was  a  landslide  victory  for  the  Indian  people,  who  now  had   unprecedented  access  to  government  informaBon,  unlike  the  restricBve  past.  •  In  2008,  India  signed  a  bilateral  agreement  with  the  US  on  civil  nuclear  cooperaBon  between  the  two   countries.    •  This  was  one  of  the  biggest  internaBonal  agreements  made  by  India,  by  virtue  of  which  India   promised  to  disjoin  its  civil  and  nuclear  units,  thereby  placing  its  nuclear  faciliBes  under  the  purview   of  safeguards  of  the  InternaBonal  Atomic  Energy  Agency  (IAEA).  •  In  return,  U.S.A.  agreed  to  work  towards  complete  nuclear  cooperaBon  with  India.  •  Indian  media,  primarily  television,  was  one  of  the  biggest  beneficiaries  of  the  economic  liberalizaBon   era.    •  Before  liberalizaBon,  television  was  state-­‐owned  with  only  one  channel:  Doordarshan.    •  A_er  liberalizaBon,  the  government  not  only  permined,  but  encouraged  foreign  investors  to  engage   in  Indian  media  operaBons.    •  Satellite  broadcasts  began  with  companies  such  as  CNN  and  Zee  TV  among  others.    •  Today  television  caters  to  more  than  400  million  people  in  70  million  homes,  via  more  than  100   diversified  channels.   Back  to  Contents   21  
  • Indian  Economic  History:  Ups  &  Downs  Then...   •  Before  and  during  the  period  leading  up  to  colonial  rule,  Indias  contribuBon  to  the   world  economy  was  outstanding.   •  India  accounted  for  a  nearly  40%  of  global  wealth,  the  largest  in  the  world.   •  Under  Mughal  rule,  Indias  share  was  $17.5  million,  $1.5  million  more  than  Britains   $16  million.   •  During  Aurangazeb’s  rule  (1700s),  the  Indian  economy  accounted  for  24.4%  of  the   worlds  total.  Under  BriBsh  rule,  in  1820,  Indias  share  in  the  world  economy   plummeted  to  16%;  in  1870,  it  fell  further  to  12.2%  and  by  1913,  Indias  share  was  a   miniscule  7.6%.   •  In  1952,  the  Indian  economy’s  share  was  only  3.8%  in  world  income;  in  1973,  it  was   around  $495  billion  or  just  3.1%.  A`er  liberaliza1on...   •  In  1998,  Indias  economy  totaled  nearly  $1,703  billion  and  its  contribuBon  to  global   economy  inched  up  to  5%.  In  2005,  Indias  economic  contribuBon  to  world  income   edged  up  further  to  6.3%  and  totaled  $3,816  billion  on  Purchasing  Power  Parity  basis.   Back  to  Contents   22  
  • The  Catalyst  for  Change:  People  •  Indias  burgeoning  populaBon  was  cited  as  the  primary  reason  for  all  economic   and  social  issues  and  was  considered  a  hindrance  to  development.  •  However,  it  is  the  progressive  populaBon  which  has  been  crucial  in  India’s  dynamic   resurgence  in  the  last  2  decades.  Out  of  every  10  Indians,  seven  are  below  25  years   of  age.  Prime  Minister  Dr  Manmohan  Singh  commented  that  India  is  forecasted  to   produce  500  million  workers  by  2020.    •  This  would  account  for  a  quarter  of  the  global  work  force.  Within  the  next  ten   years,  the  average  working  age  of  an  Indian  is  pegged  to  be  29.  This  contrasts  with   the  average  working  age  of  60  in  the  US  and  Europe,  and  45  in  China.  •  According  to  the  InternaBonal  Labor  OrganizaBon  (ILO),  India  will  not  surpass   Chinas  populaBon  Bll  2030,  but  will  have  more  youngsters  (aged  20–24)  by  2013.   India  will  have  116  million  workers  in  this  age  limit,  in  contrast  to  94  million     in  China.  •  The  downside  to  Indias  exponenBal  economic  growth  is  that  the  demand  for   educated  graduates  is  increasing  every  day  from  all  sectors  ranging  from  IT  to   retail  to  professional  services.   Back  to  Contents   23  
  • The  Catalyst  for  Change:  People  (contd.)   Popula1on  Median  Age  (in  years)  in  2006   50   43.0   36.0   37.0   40   33.0   30   24.0   20   10   0   India   China   US   Russia   Japan   Growth  in  Working  Age  Popula1on  (15-­‐64  years)  by  2010  (in  million)   Stock  Posi1on   Addi1ons  to  Working  Age  Popula1on   2005   by  2010   World   4,168   314   India   691   71   Africa   500   64   China   934   44  South  East  Asia   362   33   LaBn  America   359   31   Southern  Asia   132   17   US   200   10   Europe   497   0   Japan   85   -­‐3   -­‐5   40   85   130   175   220   265   310   355   In  million   Back  to  Contents   24  
  • Looking  Ahead  •  India  harbors  the  worlds  second  largest  English-­‐speaking  populaBon,  both  in   absolute  and  GDP  terms.  •  This  is  one  of  the  main  reasons  why  Indian  employees  are  in  high  demand.  Apart   from  the  indigenous  growth  in  human  resources  and  domesBc  employment,   various  internaBonal  companies  outsource  their  operaBons  to  India.  Outsourcing   has  become  a  lucraBve  employment  opportunity  for  young  Indians,  whose  lifestyle   changes  are  spurring  domesBc    demand  for  many  goods  and  services.  •  Apart  from  people,  a  vast  and  humming  democracy,  the  mix  of  industries  and   services  which  make  up  the  Indian  economy,  play  an  important  role  in  ever   increasing  interest  from  the  global  community.  •  India  focuses  on  manufacturing  high  quality  precision  products,  mainly  in  the   so_ware  and  design  industry  and  is  a  world  leader  in  the  IT  sector,  not  to  forget   Cricket  and  Bollywood  –  India’s  mesmerizing  passion  for  sports  and  creaBve   media.  •  India  is  focused  on  manufacturing  goods  such  as  industrial  grade  steel,  tanks,   ships,  etc.  The  automoBve  industry  has  witnessed  an  unprecedented  growth  in   recent  Bmes.     Back  to  Contents   25  
  • Looking  Ahead  (contd.)   What  makes  India  an  abrac1ve  economy  to  invest  and  par1cipate  in?  •  Poli1cal:  The  world’s  largest  democracy  conBnues  to  endure  63  years  a_er  independence   from  colonial  rule.  •  Social:  A  relaBvely  stable  society  which  acBvely  pracBces  social,  cultural  and  religious   tolerance,  is  open  to  new  experiences  and  cultures,  and  openly  welcomes  diverse  people  from   all  walks  of  life.  •  Economic:  Indigenous  industry  and  innovaBon  are  acBvely  encouraged  since  liberalizaBon.   Witness  the  progress  made  by  companies  such  as  Wipro,  Infosys,  the  Tata  Group,  Reliance  and   many  more.  •  Interna1onal:  India  is  a  respected  member  of  the  internaBonal  community  –  poliBcally,   economically,  socially  and  culturally.  At  the  same  Bme,  a  lot  of  progress  is  sBll  needed  to  ensure  the  arrival  of  sustainable  and  fully    developed  India;  a  valuable  member  of  Global  CiBzenship.  Regional  poliBcs,  poverty,  illiteracy,  weak  infrastructure,  corrupBon  and  lack  of  accountability,  lax  laws  and  public  apathy  are  the  major  reasons  for  the  slow  progress  .  But  the  situaBon  is  infinitely  brighter  than  it  was  20  to  30  years  ago  as  India  conBnues  to  grow  steadily,  now  powered  by  People  and  facilitated  by  the  Government;  Aspiraon  Unleashed.   Back  to  Contents   26  
  • The  Global  Power  Sector   Energizing  the  World   Back  to  Contents  
  • Top  Six  Power  Producers  &  Consumers   Back  to  Contents  
  • Power  Genera1on  &  Consump1on  Facts  •  USA  accounts  for  25%  of  total  energy  consumpBon  in  the  world,  with  only  5%  of   the  total  global  populaBon.  •  Energy  consumpBon  per  person:     ‒  USA  (11  kW  per  person)   ‒  Germany  &  Japan  (6  kW  per  person)   ‒  China  (1.6  kW  per  person)     ‒  India  (0.7  kW  per  person)     ‒  Bangladesh  (0.2  kW  per  person)  •  China’s  energy  consumpBon  has  increased  by  almost  6%  every  year  in  the  last  25   years.  •  Coal-­‐fired  thermal  power  plants  sBll  conBnue  to  be  the  major  source  of  power  in   most  countries.  •  Hydroelectric  power  is  the  largest  source  of  power  in  Brazil,  Norway,  Paraguay,   Canada,  Venezuela  and  Switzerland.  •  Norway  &  Paraguay:  Hydroelectric  projects  contribute  100%  to  total  power   generated;  Paraguay  exports  90%  of  this  power  to  ArgenBna  &  Brazil.     Back  to  Contents  
  • New  Areas  of  Focus  •  India,  China  and  the  United  Kingdom  are  anracBng  huge  interest  with  respect  to   increased  investment  acBvity  in  power  sector.   350   312   304   300   288   289   245   211   2006   2007   2008   2009  Source:  China  Electricity  Council   Government  spending  on  electricity  generaBon   Government  spending  on  grid  capacity   Back  to  Contents  
  • Cumula1ve  Investment  in  the  Power  Sector    by  Region  •  China  leads  with  respect  to  investments  in  the  power  sector,  in  comparison  with   other  global  economies,  with  India  in  the  fourth  posiBon  a_er  OrganisaBon  for   Economic  Co-­‐operaBon  and  Development  (OECD)  regions  such  as  North  America   and  Europe.   OECD  Pacific   OECD  North  America   China   GeneraBon   Rest  of  Developing  Asia   Transmission   Other  LaBn  America   DistribuBon   Middle  East   0   500   1000   1500   2000   2500   3000   3500   Billion  Dollars  (2005)  Source:  IEA,  World  Energy  Outlook,  2006   Back  to  Contents  
  • Future  Outlook   •  According  to  staBsBcs  released  by  the  U.S.  Energy  InformaBon  AdministraBon  (EIA)  in   its  InternaBonal  Energy  Outlook  2009,  global  electricity  generaBon  is  set  to  rise  by  a   whopping  77%  from  2006-­‐2030,  with  an  average  growth  of  2.4%  per  year!   •   By  2030,  non-­‐OECD  countries  (including  India)  are  expected  to  account  for  nearly  60%   of  the  global  electricity  consumpBon.   Trillion  Kilowanhours   Index,  1990  =  1   History   ProjecBons   History   ProjecBons   Total   Net  Electricity   GeneraBon   Total  Energy   OECD   ConsumpBon   Non-­‐OECD  Source:  History:  Energy  InformaCon  AdministraCon  (EIA),  InternaConal  Energy  Annual  2006  (June-­‐December  2008),  web  site  www.eia.doe.gov/iea.  Projecons:  EIA,  World  Energy  ProjecCons  Plus  (2009)   Back  to  Contents  
  • Future  Outlook  (contd.)  •  Coal-­‐fired  power  generaBon  was  responsible  for   41%  of  the  global  electricity  producBon  in  2006.     Trillion  •  With  an  esBmated  global  share  of  43%  in  2030,  it   15   Kilowanhours   is  expected  to  maintain  its  number  one  posiBon   as  the  most  coveted  fuel  for  electricity   generaBon.   10  •  Natural  gas-­‐based  power  generaBon,  will  follow   renewable  energy  as  the  fastest  growing  power   source,  with  a  growth  rate  of  2.7%  every  year   through  2030.   5  •  Global  oil  prices,  which  are  already  skyrockeBng,   are  expected  to  touch  $130/barrel  in  2020.    •  Even  though  it  is  forecasted  to  rise  0.7%  from   2006  to  2015,  oil-­‐based  power  generaBon  will   0   2006   2010   2015   2020   2025   2030   drop  0.5%  on  average  every  year  a_er  that  Bll   2030.   Liquid   Nuclear   Renewables   Natural  Gas   Coal  •  Nuclear  power-­‐based  electricity  producBon  is   Source:  2006:  Derived  from  Energy  InformaCon  AdministraCon   (EIA),  InternaConal  Energy  Annual  2006  (June-­‐December  2008),   forecasted  to  rise  nearly  41%  to  3.8  trillion   web  site  www.eia.doe.gov/iea.  Projecons:  EIA,  World  Energy   kilowan-­‐hours  in  2030  from  2006  levels.   ProjecCons  Plus  (2009)   Back  to  Contents  
  • Future  Outlook  (contd.)  •  Non-­‐OECD  Asia,  led  by  China  and  India,  has   the  potenBal  to  become  the  fastest   growing  economy  (at  a  rate  of  4.4%)  in  the   Trillion  Kilowanhours   global  power  generaBon  sector  in  the   10   period  spanning  2006–2030.  •  In  2006,  79%  of  Chinas  and  71%  of  Indias   8   total  electricity  generaBon  was  anributed   to  coal.  On  current  projecBons,  in  2030,   6   coal  will  account  for  56%  of  Indias  and   75%  of  Chinas  power  producBon.   4  •  As  with  the  other  countries,  non-­‐OECD  Asia   will  witness  a  drop  in  the  demand  for  liquid   2   fuels  to  power  electricity  producBon.  •  India  has  laid  out  plans  to  increase  nuclear   0   2006   2010   2015   2020   2025   2030   power  generaBon  capacity  from  the   Liquid   Renewables   Natural  Gas   Nuclear   Coal   currently  operaBonal  3  gigawans  (GW)  to   20  GW  by  2020  and  to  40  GW  by  the  end  of   Source:  2006:  Derived  from  Energy  InformaCon  AdministraCon   (EIA),  InternaConal  Energy  Annual  2006  (June-­‐December  2008),   2030.   web  site  www.eia.doe.gov/iea.  Projecons:  EIA,  World  Energy   ProjecCons  Plus  (2009)   Back  to  Contents  
  • Country  Analysis:  India  •  Currently,  of  the  total  electricity  consumed  in  India,  75%  is  generated  by  thermal  power   plants,  21%  by  hydroelectric  plants  and  4%  by  nuclear  power  plants.  •  India  had  an  installed  electricity  capacity  of  144  GW  in  2006,  generated  703  billion  KWh  of   power.  •  In  2006,  thermal  sources  accounted  for  ~71%  of  the  electricity  producBon,  hydel  power  for   16%,  nuclear  energy  for  2%,  and  renewable  energy  sources  accounBng  for  the  rest.   800   ConvenBonal  Thermal   Hydroeletric   Nuclear   Geothermal,  Solar,  Wind,  and  Water   700   600   500   400   300   200   100   0   1986   1991   1996   2001   2006  Source:  Country  Analysis  Briefs,  EIA   Back  to  Contents  
  • Country  Analysis:  India  (contd.)  •  India’s  current  electricity  consumpBon  of  600  TWH  is  set  to  double  within  the  next  ten  years.  •  GeneraBng  capacity  needs  to  increase  from  150  GW  in  2006  to  241  GW  in  2020  to  meet   increased  demand.  •  GeneraBon  capacity  increased  by  40  %  in  2006  over  2000,  on  account  of  reforms  in  2003   which  iniBated  much-­‐needed  restructuring  of  the  power  sector.  Yet,  it  is  esBmated  that  at   least  500  million  Indians  sBll  have  no  access  to  electricity.  •  This  effecBvely  points  to  the    HUGE  potenBal  in  the  Indian  power  generaBon  arena.  •  India’s  peak  power  deficit  is  expected  to  hover  at  12.6%  of  total  capacity  this  year  –  up  from   11.9%  in  2009.  •  The  lucraBve  nature  of  this  sector  is  spurring  private  investors  to  begin  building  power  plants   in  the  country.  •  Private  investment  share  in  power  generaBon  currently  stands  at  13%,  and  is  expected  to   grow  with  numerous  foreign  and  domesBc  investments  planned.  •  Although  India’s  growth  rate  in  the  period  between  2000–2008  was  the  second  highest   among  BRIC  countries  at  5.7%,  its  per  capita  consumpBon  of  electricity  was  the  lowest.  •  India  is  indeed  an  ATTRACTIVE  DESTINATION  FOR  FOREIGN  CAPITAL  INVESTMENT.’    (Source:  KPMG  Survey)   Back  to  Contents  
  • Country  Analysis:  USA  •  Ranks  highest  on  the  worlds  energy   consumer  list  with  a  total  usage  of  100   quadrillion  BTU/105  exajoules  (EJ)  in  2005  –   thrice  the  amount  consumed  55  years  ago.  It  is   the  worlds  seventh  largest  per  capita  energy   Natural   Gas   consumer.   21.6%  •  Forty  percent  of  the  countrys  energy  was   Coal   sourced  from  petroleum,  23%  from  thermal   48.5%   coal  and  similar  amounts  from  natural  gas  in   Nuclear   2005.  Nuclear  power  accounted  for  8.4%,   19.4%   while  renewable  energy    represented  7.3%.  •  In  the  period  of  1992–2005,  270,000  MWE  of   gas  based  power  was  added.  Only  14,000   MWE  of  fresh  nuclear  and  coal-­‐fired  capacity   Hydroeletric,   5.8%   came  on  stream,  of  this  2,315  MWE  was   Other   Renewable nuclear.   Gases   s  2.5%   Other   0.3%   0.3%   Petroleum  •  In  2008,  US  wind  power  capacity  was  at   16,818  MW.   1.6%  •  The  SEGS  group  of  solar  plants  in  the  Mojave   Sources:  EIA,  Form  EIA-­‐923,  “Power  Plant  OperaCons  Report”  and   Desert  has  a  capacity  of    354  MW.  It  is  the   predecessor  form(s)  including  Form  EIA-­‐906  “Power  Plant  Report”     worlds  largest  solar  plant.   and  Form  EIA-­‐920.  “Combined  Heat  and  Power  Plant  Report.”   Back  to  Contents  
  • Country  Analysis:  China    China’s  electricity  generaBng  capacity   YEARLY  INCREASE    has  surged  over  the  last  four  years   IN  MEGAWATTS  because  of  a  boom  in  the  construcBon  of   120000  new  power  plants.  China  has  emerged  in  the  past  two  years  as  the  world’s  leading  builder  of  so-­‐called  clean  coal  power   100000  plants.   80000   60000  Yearly  increase  in  power  genera1ng  capacity   40000   20000   0  97   98   99   00   01   02   03   04   05   06   07   08   Thermal  power  (virtually  all  coal)   All  power  sources  Source:  China  NaConal  Bureau  of  StaCsCcs,  via  CEIC  data   Sources:  Energy  InternaConal  Annual   Back  to  Contents  
  • Country  Analysis:  China  (contd.)  •  Total  electricity  generaBon  was  3.71  trillion  kWh  in  2009,  while  consumpBon  was  almost  on  par  at  3.64   trillion  kWh.  •  Total  installed  capacity  for  electricity  producBon  is  874  GW  –  a  10%  increase  year-­‐on-­‐year.  •  The  naBon  plans  to  establish  a  grid  spanning  the  enBre  country  in  the  period  between  2015–2020.  •  TradiBonally  generaBng  most  of  its  electricity  from  coal,  China  is  in  the  process  of  se~ng  up  more  than  550   greenfield  coal-­‐fired  thermal  power  plants  over  the  coming  years.  •  Leading  the  worlds  renewable  energy  arena  with  a  152  GW  installed  capacity,  China  ranks  highest  among   the  global  wind  turbine  and  solar  panel  producing  countries.  •  The  naBons  consumpBon  of  renewables  for  electricity  generaBon  is  set  to  touch  10%  of  its  total  electricity   producBon  in  2010  and  16%  in  2020.  •  With  the  worlds  largest  hydel  power  capacity,  China  generated  616  billion  kWh  of  electricity  in  2009  from   hydel  power  -­‐  nearly  17%  of  its  total  electricity  producBon.  •  China  aims  for  a  70  GW  nuclear  power  capacity  by  2020  and  160  GW  by  2030.  Source:  NaConal  Bureau  of  StaCsCcs  of  China   Back  to  Contents  
  • Country  Analysis:  Japan  •  Imports  significant  quanBBes  of  crude  oil,  natural  gas  and  rare  fuels  such  as  uranium,  due  to  a  severe  dearth   of  fossil  fuels  barring  coal.  •  Dependent  on  imported  primary  energy  fuels  for  over  84%  in  1990.  •  In  2008,  Japan  took  third  spot  in  global  electricity  generaBon  values,  following  USA  and  China.  Japan   generated  a  linle  more  than  1  trillion  kWh  that  year.  •  Japans  per  capita  electricity  consumpBon  was  nearly  8,500  kWh  in  2004  –  21.8%  higher  than  levels  in  1990,   but  68%  lower  than  the  average  per  capita  electricity  consumed  by  Americans  in  2004.  •  More  acBve  in  nuclear  power  generaBon  with  53  acBve  nuclear  power  plants  in  2009,  third  only  to  USA   which  had  104  reactors  and  France  with  59.  Source:  U.S.  Energy  InformaCon  AdministraCon   Back  to  Contents  
  • Country  Analysis:  Russia  •  One  of  the  worlds  two  energy  super  powers   (the  other  being  Saudi  Arabia).  •  Russia    harbors  the  largest  known  reserves  of   natural  gas,  second  largest  reserves  of  coal   and  eighth  largest  oil  reserves  in  the  world.  •  Follows  USA,  China  and  Japan  as  the  fourth   Hydro   largest  electricity  generaBng  economy  in  the   21%   world,  Russia  is  also  the  worlds  largest  net   energy  exporter  &  supplier  to  the  European   Union.    •  In  2005,  the  country  exported  23  TWH  of  the   Nuclear   Thermal   total  951  TWH  that  it  generated.   63%   16%  •  It  produced  175  TWH  of  hydro  electricity  in   2005  –  nearly  6%  of  the  worlds  total  hydel   power  generaBon.  •  Total  installed  nuclear  capacity:21,244  MW.  •  In  2005,  Russia  generated  149  TWH  nuclear   energy  –  >5%  of  global  generaBon.   Sources:  EIA  (www.eia.doe.gov)   Back  to  Contents  
  • Country  Analysis:  Brazil  •  Total  consumpBon  of  410  TWH  in  2007.  •  Heavily  reliant  on  hydroelectric  power   generaBon.  •  Total  of  633  hydel  plants  with  installed   capacity  of  73,678  MW  as  of  2007.  •  10%  of  total  power  generaBon  is  from   natural  gas,  to  be  increased  to  12%  by   2010.  •  Remains  a  net  importer  of  electricity,   mainly  from  ArgenBna,  yet  striving  for  self-­‐ sufficiency.   Sources:  EIA  InternaConal  Energy  Annual   Back  to  Contents  
  • Indian  Infrastructure  Sector   InviBng  Private  Investment   Back  to  Contents  
  • Infrastructure:  An  Overview  •  Building  world-­‐class  infrastructure  in  developing  countries  like  India  is  a  greater  imperaBve  than  it  is  in   developed  economies,  many  of  which  have  reached  saturaBon  point.  •  Total  investment  requirement  in  India’s  infrastructure  sector  is  esBmated  to  be  $445  billion  in  2012   (beginning  of  the  12th  Five  Year  Plan),  of  which  power  sector  requirements  are  the  highest,  at  $143  billion.  •  Investment  of  $1.7  trillion  over  the  next  ten  years  (2010–2020)  is  required  in  the  infrastructure  sector   (Source:  Goldman  Sachs).  •  Reasons:     –  Explosive  growth  in  populaBon;     –  Infrastructure  for  rapid  industrial  growth  to  sustain  itself;  and     –  Increase  in  passenger  and  commercial  traffic.    •  In  the  four  years  preceding  the  global  recession,  the  economy  grew  consistently     by  8.5-­‐9%,  increasing  the  need  for  higher  infrastructure  spending.  •  FDI  inflows:     –  $7.8  billion  in  2005–2006,     –  $19.5  billion  in  2006–2007  and     –  $24  billion  in  2007–2008  –  are  inadequate  for  infrastructure  growth.  •  A  Compounded  Annual  Growth  Rate  (CAGR)  of  15%  over  the  next  5  years  is  required  to  sustain  industrial   growth.  •  In  India,  much  of  funding  in  infrastructure  has  been  in  the  form  of  loans  and  government  funding,   increased  FDI  parBcipaBon  is  essenBal  and  acBvely  encouraged.   Back  to  Contents   44  
  • Government  Ini1a1ves  in  Infrastructure  I   A  radical  change  in  strategy  by  the  Government  of  India  –  Abrac1ng  private  sector   investments,  both  foreign  and  domes1c,  in  infrastructure  which  requires  a   massive  infusion  of  funds  as  well  as  mul1-­‐disciplinary  know-­‐how.  •  Priority-­‐Sector  status  for  construcBon  of  roads  and  highways.  •  Cess  levied  on  petrol  and  diesel  to  fund  road  projects.  •  Venture  Capitalists  invesBng  in  power  or  telecom  exempted  from  paying  taxes  on   dividend  income  and  long  term  capital  gains.  •  Tax  exempBon  for  40%  of  profits  from  long-­‐term  financing  of  infrastructure   projects,  subject  to  certain  condiBons.  •  Tax  exempBon  in  income  from  dividends  and  interest,  and  long-­‐term  capital  gains   for  Infrastructure  Capital  Funds.  •  Five-­‐year  tax  holiday  for  Build-­‐Operate-­‐Transfer  (BOT)  and  Build-­‐Own-­‐Operate-­‐ Transfer  (BOOT)  projects  in  all  crucial  infrastructure  segments  –  roads,  power,   airports,  ports,  bridges,  railways,  etc.   Back  to  Contents   45  
  • Government  Ini1a1ves  in  Infrastructure  II  •  Tax  breaks,  annuity  payments  and  capital  grants  for  road  project  funding.  •  Foreign  InsBtuBonal  Investors  (FIIs)  now  allowed  to  invest  in  unlisted   infrastructure  companies  (considerable  delays  in  lisBng  infrastructure  companies   due  to  long  gestaBon  periods).  •  Delinking  of  PSUs  so  that  power  equipment  manufacturers  can  sell  equipment  in   the  merchant  market.  •  Projects  to  be  reserved  for  the  private  sector  and  awarded  through  compeBBve   bidding.  •  Open  access  to  Transmission  &  DistribuBon  (T&D)  network;  enhanced  regulaBon   of  T&D  to  cut  losses.  •  Proximity  advantage  of  coal  and  other  fuel  linkages  and  “Zero”  import  duty  for   capital  goods  import  for  plants  being  set  up  with  iniBal  installed  capacity  of  1000   MW  or  more.  •  100%  FDI  allowed  in  all  energy  sectors  except  Atomic  Energy  •  PPPs  are  favored  model  where  public  and  private  sectors  bring  their  respecBve   strengths  to  the  table.   Back  to  Contents   46  
  • Private  Sector  Investment  Ini1a1ves  Radical  reforms  in  government  policies  on  infrastructure  have  galvanized  the  private  sector  to  increase  investments  in  infrastructure.   To  invest  $5.48  billion  in  its  thermal  power  business  to  realize  its  hydro  generaBon  capacity   target  of  5500  MW  by  2015.   Invested  $10  million  in  a  container  freight  staBon  at  Ponneri  in  Tamil  Nadu.   Plans  to  invest  50.36  million  pounds  at  its  railway  producBon  facility  in  Hayange,  France.   Firmed-­‐up  plans  for  invesBng  $5.19  billion  for  its  upcoming  power  plants  at  Mundra,  Maithon   and  Jojobera  over  a  period  of  three  years.   Plans  to  invest  $1  billion  in  se~ng  up  2  to  3  greenfield  plants  in  the  country.   Se~ng  up  Ultra-­‐Mega  Power  Plants  (UMPPs)  with  a  combined  generaBon  capacity  of  nearly   16000  MW.   Plans  to  add  another  4380  MW  thermal  and  6100  MW  hydro-­‐power  capacity  in  the  next  5   years  (exisBng  capacity  of  1000  MW).  Three  joint  ventures  between  Toshiba  CorporaBon  (Japan)  &  JSW  Group,  Ansaldo  Caldalo  SpA  (Italy)  and  GB  Engineering  Enterprises,  and  Alstom  SA  (France)  and  Bharat  Forge  planning  to  launch  power  equipment  manufacturing  faciliBes.   Back  to  Contents   47  
  • FDI  in  India  I  •  India  ranks  third  today  in  anracBng  total  FDI  and  is  expected  to  conBnue  within  the  first  five   (Source:  UNCTAD  Report  “World  Investment  Prospects  Survey”).  •  India  is  ranked  the  second-­‐most  promising  investment  desBnaBon,  a  sign  of  how  far  India  has   come  since  its  days  of  closed  door  policy  in  the  1980s,  when  FDI  was  allowed  only  in  cases   where  technical  knowhow  was  required  (Investor  Survey  conducted  in  Japan  in  2009).  •  Improved  investor  confidence  resulted  in  India  anracBng  $1.74  billion  of  FDI  in  Nov  2009,   61.1%  higher  than  the  FDI  inflow  of  $1.08  billion  in  the  corresponding  period  of  2008.    •  Investment  in  the  infrastructure  sector  has  doubled  from  4%  of  GDP  in  2004–2005  to  8%  of   GDP  in  2007–2008  (Source  Data  from  Planning  Commission).  •  Comparisons  between  FDI  inflows  to  India  and  China  are  very  common.  While  China  adopted   the  Top-­‐Down  model,  se~ng  up  its  physical  infrastructure  first,  India  adopted  the  Bonom-­‐Up   model,  pu~ng  a  policy  framework  in  place  first  before  emphasizing  focus  on  infrastructure.  •  Net  FDI  inflows  to  China  increased  from  $0.4  billion  in  1990  to  $52.7  billion  in  2002,  while   inflows  to  India  went  up  from  $0.07  billion  to  a  meager  $2.6  billion  in  the  same  period.  •  India’s  FDI  as  a  share  of  GDP  was  1.7%,  while  China’s  was  2.8%  in  2007,  considering  much   larger  GDP  base  of  China.  •  China  ranked  1st  in  the  FDI  Confidence  Index  (2002  and  2003),  while  India  ranked  15th  in   2002  and  6th  in  2003  (Source:  AT  Kearney  report).   Back  to  Contents   48  
  • FDI  in  India  II  •  French  power  equipment  manufacturer  Alstom  has  partnered  with  Bharat  Forge  to  invest   $105.6  million  in  a  power  equipment  plant.  •  Federal  Agency  for  State  Property  Management  of  Russian  FederaBon  will  buy  a  20%  stake  in   telecom  company  Sistema  Shyam.  •  ADB  has  approved  financial  assistance  of  $200  million  for  investment  in  the  power  sector  in   Assam  for  a  project  with  innovaBve  features  such  as  off-­‐grid  renewable  energy-­‐based   electricity,  reducBon  in  CHG  emissions  and  distribuBon  through  franchisees.  •  The  Unar  Pradesh  government,  which  is  targeBng  total  power  generaBon  of  25,000  MW  by   the  end  of  the  12th  Five  Year  Plan  (2017),  has  signed  a  MoU  with  Lanco  Infratech  for  se~ng   up  plants  to  generate  1320  and  660  MW  at  Fatehpur  and  Anpara,  and  with  Bajaj  Hindustan   for  400  MW  at  five  of  its  sugar  mills.  •  CumulaBve  FDI  inflows  into  India  between  1990  and  2007  were  $160  billion.  •  The  majority  of  FDI  inflows  were  from  USA,  UK,  Japan,  MauriBus,  Netherlands,  Singapore,   South  Korea  and  France.   Back  to  Contents   49  
  • Sector-­‐Specific  Outlook   The  Growth  Factor   Back  to  Contents  
  • Ports  •  The  coastline  in  India  is  7,517  kilometers,   Government  ini1a1ve   touching  13  states;  there  are  12  major  and   187  minor  ports  in  the  country  (Source:  The   The  Public  Private  Partnership  Appraisal  Comminee  (PPAC)   Economic  Survey,  2007–2008).   set-­‐up  to  evaluate  and  sancBon  JV  projects,  has  approved  4   PPP  projects  valued  over  $897.7  million.    •  Indian  ports  are  not  compeBBve  enough:   average  turnaround  Bme  for  cargo  services   •  Development  of  a  mega-­‐container  terminal  at  Chennai   is  3.5  days  as  compared  to  10  hours  in   Port.   Hong  Kong  ports.   •  Developing  a  berth  to  serve  mulBple  purposes  at   Paradip  Port,  Orissa.  •  Some  improvements  have  been  made  and   •  Development  of  a  container  terminal  at  the  New   traffic  handling  has  grown  by  10.7%  (third   Mangalore  Port.   quarter  ended  December  2009)  over  the   corresponding  period  in  2008  (Indian  Ports   •  Development  of  a  2nd  North  Cargo  Berth  at  TuBcorin   AssociaBon  (IPA)  figures).   Port  (Tamil  Nadu).  •  Major  ports  registered  a  12.8%  year-­‐on-­‐ Future  projects  cleared  by  the  Cabinet  Commibee   year  (YOY)  growth  in  cargo  volumes,  due  to   increased  capaciBes.     on  Infrastructure  (CCI)  in  the  pipeline  •  Total  investment  required  for  upgrading   •  Development  of  a  $1.44  billion  container  terminal,  at   and  modernizing  ports  in  the  11th  Five  Year   the  busy  Jawaharlal  Nehru  Port.     Plan  (2007–2012)  is  around  $12  billion   •  ConstrucBon  of  a  $129.6  million  standalone  container   (Economic  Survey,  2007–2008).   handling  facility  at  Mumbai  Port  (to  be  completed   within  2  years).     Back  to  Contents   51  
  • Roads  I  •  India  has  one  of  the  largest  road  networks  worldwide:  3.34  million  km.  •  The  GOI  has  ambiBous  plans  for  private  sector  parBcipaBon  in  the  massive  investment   program  for  development  and  upgrade  projects  as  a  PPP  model.  •  The  total  investment  Bll  the  end  of  the  11th  Five  Year  Plan  (2012)  is  approximately  $55  billion   (Source:  The  Economic  Survey,  2007–2008).   Upcoming  projects   •  Road-­‐widening  project  (covering  445  km)  to  be  undertaken  by  the  NaBonal  Highways  Authority  of  India   (NHAI)  at  an  esBmated  cost  of  $950  million  in  a  design-­‐build-­‐finance-­‐operate-­‐transfer  (DBFOT)  model.   •  Four  lane  road  (83.85  km)  at  the  Godhra-­‐Gujarat-­‐Madhya  Pradesh  border,  at  a  cost  of  $156.55  million.   The  government  will  meet  the  pre-­‐construcBon  cost  of  $24.5  million  for  land  acquisiBon.   •  Four  lane  road  (13  km)  on  the  Coimbatore  bypass  at  $186.2  million.   •  Six  lane  road  (54.83  km)  on  the  Chengalpanu  highway.   •  Four  lane  road  (155.15  km)  connecBng  Indore  and  Jhabua  at  a  cost  of  $256.65  million  (DBFOT  model).   •  Four  lane  road  connecBng  Haridwar  and  Dehra  Dun  on  a  DBFOT  basis  at  a  cost  of  $104.4  million.   •  Four  lane  road  (80  km)  connecBng  Muzaffarnagar  and  Haridwar  at  a  cost  of  $164.6  million.   •  Four  lane  road  (65.07  km)  on  Goa-­‐Karnataka  border  at  $102.8  million  under  DBFOT.   Back  to  Contents   52  
  • Roads  II   Projects  funded  purely  by  the  private  sector   • Reliance  Infra:  $218.3  million  DBOFT  project  on  the  Pune  -­‐  Satara  Road,  with  four   lane  roads  connecBng  the  ports  at  Mundhra  and  Kandla,  to  be  completed  by  2012.   • Another  project  executed  at  a  cost  of  $165.5  million  by  a  consorBum  of  private   sector  companies  connects  Electronic  City  and  Silk  Board  juncBon  in  Bangalore,   Karnataka.  Based  on  a  Build-­‐Operate-­‐Transfer  (BOT)  model,  it  is  scheduled  for   transfer  to  the  NHAI  a_er  18  years.  The  boasts  of  innovaBve  features  such  as  CCTV   surveillance,  auto  rickshaw  traffic  counters,  emergency  call  boxes,  etc.   Back  to  Contents   53  
  • Railways  •  Globally,  the  Indian  Railways  is  the  second  largest  rail  network  under  the   management  of  a  single  corporaBon.  •  Passenger  and  freight  traffic  have  been  growing  at  an  average  of  7%  and  9%  per   annum  respecBvely,  between  2006–2009.  •  Railway  traffic  is  expected  to  double  2007–2008  figures  by  the  end  of  the  11th  Five   Year  Plan.  •  The  total  investment  needed  for  modernizing  and  upgrading  of  railway  faciliBes   and  infrastructure  is  currently  $75  billion  (The  Economic  Survey,  2007–2008).    •  The  central  and  state  Governments  have  idenBfied  22  railway  staBons  at  major   ciBes  and  popular  tourist  spots  for  modernizaBon  and  upgrades.    •  The  PPP  model  will  be  adopted  in  most  cases.  •  Dedicated  freight  routes  are  already  in  the  process  of  being  developed  at  a  cost  of   $7.5  billion,  according  to  recommendaBons  laid  down  in  the     11th  Plan.     Back  to  Contents   54  
  • Telecommunica1ons  •  India  has  the  third  largest  telecommunicaBons  network  in  the  world.  •  TelecommunicaBons  in  the  wireless  segment  has  registered  a  CAGR  of  over  87%   since  2003,  reflecBng  a  large  investment  opportunity.  •  A  total  investment  of  $76  billion  is  currently  required  in  segments  such  as  network   infrastructure  and  value  added  services  alone  (Investment  Commission  of  India).  •  The  enormous  potenBal  for  investment  in  telecommunicaBons  infrastructure  is   due  to:   –  Rapid  technological  advancements  that  have  enabled  a  sharp  fall  in  tariffs  –   among  the  lowest  in  the  world  –  with  expectaBons  of  a  further  fall,  following   subsidies  extended  to  service  providers.   –  A  spiraling  subscriber  base,  enabled  by  easy  affordability.   –  Growing  integraBon  of  TelecommunicaBons  with  InformaBon  Technology,   which  has  widened  the  scope  of  developing  telecom-­‐specific  so_ware   manifold.   Back  to  Contents   55  
  • Airports  •  The  need  for  augmenBng  civil  aviaBon  infrastructure  received  a  boost  in  2009,  with   traffic  registering  a  rise  of  7.9%  over  the  corresponding  period  in  2008.  •  Major  airlines  operated  at  70%  of  fleet  capacity,  which  is  in  keeping  with  internaBonal   traffic  trends,  an  increase  of  over  3.5%  per  annum  between  2007  and  now.  •  The  Economic  Survey  of  2007-­‐2008  says  that  the  total  investment  requirement  for   expansion  and  modernizaBon  of  the  country’s  airports  is  $10  billion  in  the  11th  Plan   period  (2007–2012)  alone,  paving  the  way  for  private  sector  parBcipaBon.  •  ChhatrapaB  Shivaji  InternaBonal  Airport  (CSIA)  at  Mumbai  saw  the  highest  recorded   monthly  passenger  traffic  at  2.3  million,  in  December  2009.  •  The  modernizaBon  and  expansion  program  for  CSIA  has  been  entrusted  to  the  Mumbai   InternaBonal  Airport  authoriBes  and  is  currently  on.  •  ModernizaBon,  expansion,  operaBons  and  maintenance  work  of  major  airports  at  Delhi,   Mumbai,  Bangalore  and  Hyderabad  have  already  been  executed/  are  currently  on.  •  Thirty  five  other  airports  at  non  metro  ciBes  are  to  be  modernized  and  expanded   shortly.  •  The  favored  model  for  most  of  these  projects  is  the  PPP.   Back  to  Contents   56  
  • The  Power  Sector  in  India   Let  There  Be  Light…   Back  to  Contents  
  • Power  Woes:  Impact  on  Economy  and  Immediacy   India  Power  Woes  May  Force  Subbarao  to  Raise  Rate,  Adviser   Says   May  13,2010  (Bloomberg)  -­‐-­‐  India’s  central  bank  Governor   Duvvuri  Subbarao  may  need  to  raise  interest  rates  as  capacity   constraints  in  power  and  roads  and  record  borrowings  fuel   inflaBon,  an  adviser  to  Prime  Minister    Manmohan  Singh  said.   Manufacturers  in  India  are  struggling  to  pay  for  more  expensive   fuel  and  other  raw  materials,  and  unlike  China,  the  South  Asian   naBon  lacks  world  class  infrastructure  that  lowers  the  cost  of   goods.   Back  to  Contents   58  
  • Private  Sector  Investment  in  the  Indian  Power  Sector:  The  Road  Ahead   The  regulatory  regime  (in  the  power  sector)  is  evolving  and   being  amended  to  induce  greater  transparency  and  a  level-­‐ playing  field.  Above  all  else,  there  is  a  mulB-­‐party  agreement  on   the  need  for  urgent  reforms,  which  minimizes  the  chance  of   poliBcal  disrupBon.  From  a  private  investor’s  standpoint,  this   augurs  remarkably  well,  and  players  who  are  willing  to  cope   with  an  evolving  regulatory  regime  will  reap  rich  rewards  in  the   near  to  medium  term  future   –  Rajeev  Anantaraman,  Senior  Fellow,     Indian  Council  for  Research  on   Interna1onal  Economic  Rela1ons  (ICRIER)   Back  to  Contents   59  
  • The  Indian  Power  Sector   An  Overview   Back  to  Contents  
  • The  Power  Sector  In  India:  Important  Facts    •  The  power  sector  in  India  is  a  comprehensive,  well-­‐structured  network  of  power   corporaBons  involved  in  the  generaBon,  distribuBon  and  transmission  of   electricity.  •  Public  sector  undertakings  (PSUs)  sBll  dominate  the  sector  with  a  combined  87%   share  held  by  the  central  and  state  governments.  •  The  private  sector’s  share,  averaging  at  13%  in  the  11th  Five  Year  Plan  (2007–2012),   is  expected  to  touch  34%  in  the  12th  Five  Year  Plan     (2012–2017)  on  the  strength  of  radical  policy  reforms  aimed  at  being  investor-­‐ friendly.  •  The  Ministry  of  Power,  the  apex  body,  is  currently  responsible  for  the   development  of  electricity  in  all  its  forms  in  India.  Earlier  known  as  Ministry  of   Energy,  it  was  revamped  and  renamed  in  1992,  with  a  specific  focus  on  power.   Back  to  Contents   61  
  • Power  Sector  Structure:  Post-­‐Liberaliza1on   Policy   Centre   State   N.A.  (  Private  Sector)  Plan   Ministry  Of  Power     State  Government   N.A.  Regula1on   CEA,  CERC   SERC   SERC   Central  GeneraBng  Genera1on   GENCOs,  IPPS   Private  Sector  Players   Units   Central  Transmission   State  Transmission   Private  Sector  Players/  Transmission   Units   Units  (STUs)   STUs  Opera1ons   NRLDC,  RLDC     SLDC   Private  Sector  Players  Distribu1on   N.A     DistribuBon  Licensee   DistribuBon  Licensee  Appeal   Appellate  Tribunal   Appellate  Tribunal   Appellate  Tribunal   Back  to  Contents   62  
  • Public  vs.  Private  Sector:  How  Big?  During  the  11th  Plan  period  (2007–2012),  the  public  sector’s  combined  share  in  power  generaBon  is  around  87%,  with  the  private  sector  accounBng  for  about  13%.  During  the  12th  Plan  period,  (2012–2017),  the  private  sector’s  share  in  power  generaBon  is  expected  to  increase  to  34%,  enabled  by  policy  reforms,  substanBally  higher  demand,  emerging  areas  of  opportunity,  a  friendly  legal  climate  and  many  other  factors.   Installed  capacity  (MW)   Installed  capacity  (%)   Private   Private   24,988   13%   Central   49,581   State   51%   Central   36%   State   76,505   Back  to  Contents   63  
  • The  Power  Sector:  Structure  •  Prominent  power  sector  PSUs  in  the  Central  segment  are:  NaBonal  Thermal  Power   CorporaBon  (NTPC),  Nuclear  Power  CorporaBon  (NPC),  and  the  NaBonal   Hydroelectric  Power  CorporaBon  (NHPC).  The  Power  Grid  CorporaBon  of  India   oversees  the  transmission  of  electricity  from  one  state  to  another.  •  At  the  state  level,  State  Electricity  Boards  (SEBs)  were  involved  in  the  generaBon,   distribuBon  and  transmission  of  electricity  within  the  state  concerned,  prior  to   liberalizaBon.  •  The  Electricity  Act,  2003,  has  split  SEBs  into  three  separate  enBBes,  i.e.  generaBon   (GENCO),  transmission  (TRANSCO)  and  distribuBon  companies  (DISCOMs).  •  The  restructuring  has  helped  increase  transparency  in  the  system,  enabling  these   enBBes  to  transform  themselves  into  disBnct  profit  centers.   Back  to  Contents   64  
  • The  Power  Sector:  Structure  (contd.)   Foreign  private  sector  companies   Major  domes1c  sector  power   (currently  only  in  the  power   companies   equipment  segment)   Back  to  Contents   65  
  • Opening  up  of  the  Power  Sector   The  New  Era  Begins   Back  to  Contents  
  • Radical  Reforms:  Milestones   1897   First  power  plant  (hydel)  set  up  in  Darjeeling   1888-­‐89   Commercial  generaBon  and  distribuBon  launched  in  Calcuna   1910   Indian  Electricity  Act  enacted   Electricity  Supply  Act  enacted;  SEBs  set  up;  central  government  power  companies  established,   1948   Central  Electrical  Authority  (CEA)  comes  into  existence     1956   Industrial  Policy  ResoluBon  passed;  reservaBon  of  power  for  public  sector  legalized  1960-­‐1969   Rural  electrificaBon  sees  major  thrust   1975   Se~ng  up  of  NTPC  and  NHPC   1989   Power  Grid  CorporaBon  of  India  established   LiberalizaBon  of  the  Indian  economy  by  the  Narasimha  Rao  Government;  amendments  made   1991   in  Electricity  Supply  Act     1992   Ministry  of  Power  set  up   Back  to  Contents   67  
  • Radical  Reforms:  Milestones  (contd.)   1995   Policy  for  mega  power  projects  put  in  place   Central  Electricity  Regulatory  Commission  (CERC)  and  State  Electric  Regulatory  Commissions   1998   (SERCs)  established   2001   Energy  ConservaBon  Act  passed   2003   New  Electricity  Act  passed   2005   CompeBBve  bidding  guidelines  issued   2005   NaBonal  Electricity  policy  announced   2006   NaBonal  Tariff  Policy  announced   2008   New  Hydro  Policy  announced   2008   New  Mega  Power  Project  Policy  announced   2009   Revised  Guidelines  for  compeBBve  bidding  issued   Back  to  Contents   68  
  • Towards  Transparency  and  Fair  Play   Electricity  Act  2003  •  Unbundling  Of  all  State  Electricity  Boards;  Move  Towards  Greater   Transparency,  Loss  MinimizaBon  And  eventually  Profit-­‐orientaBon    •  Open  Access  To  All  Power  Sector  Segments  •  CompeBBve  Bidding  Process  Laid  Down  For  Transparent  Non   Discriminatory  Project  Awarding  •  CERC  To  Advise  Government  on  Making  the  Sector  Increasingly  CompeBBve  •  Phasing  Out  Cross-­‐subsidizaBon   Back  to  Contents   69  
  • The  Impact  of  Adop1ng  Good  Work  Prac1ces  •  Return  on  Equity  (ROE)  of  68.49%,  Plant  Load  Factor  (PLF),  which  reflects   the  operaBonal  efficiency  of  a  power  plant,  is  now  an  anracBve  16%.  •  Studies  of  the  sector  in  2006–2007  show  PLF  in  the  private  sector  at  its   highest  in:  SabarmaB  GeneraBng  StaBon  (Torrent  Power  104.14%)  in  the   private  sector;  the  Dadri  unit  (NTPC  101.80%)  in  the  central  PSU  sector;   the  Kota  unit  (Rajasthan  Rajya  Vidyut  Utpadan  Nigam  100.15%)  in  the   state  PSU  segment.  •  Compare  this  with  an  average  PLF  of  55%  in  2000–2001  and  84.7%  by   2005.   Back  to  Contents   70  
  • The  Impact  of  Adop1ng  Good  Work  Prac1ces  (contd.)   T  &  D  Losses  •  The  impact  of  adapBng  good  work  pracBces  on  transmission  and  distribuBon  (T&D)  losses  has  been   significant.  Coupled  with  this,  the  Accelerated  Power  Development  &  Reform  Programme(  APDRP)   introduced  in  2001,  which  aims  to  reduce  Aggregate  Technical  and  Commercial  losses  (AT&C)  losses   to  15  per  cent  by  the  end  of  the  11th  Plan,  has  been  successful  in  containing  losses.  As  a  result,  T&D   losses  have  already    come  down  from  38.86  per  cent  in  2001–02  to  34.54  per  cent  in  2005–06;   commercial  losses  dropped  to  Rs.  19,546  crores  from  Rs.  29,331  crores  during  this  period  •  Methodology:  AdopBng  the  Aggregate  Technical  &  Commercial  Losses  Method  to  capture  technical   and  commercial  losses.  Technical  losses  were  on  account  of  inadequate  investment  in  systems  and   overloading  due  to  unplanned  extensions  of  distribuBon  lines,  transformers  and  conductors.   Commercial  losses  were  mainly  from  metering  inefficiency,  the_  and  pilferage.  •  In  2001,  the  Accelerated  Power  Development  &  Reform  Program  (APDRP)  was  launched  for  reducing   losses  by  15%  by  the  end  of  the  11th  Plan.  Improvements  in  conducBng  energy  audits,  billing  and   collecBon  and  fixing  accountability  were  recommended.  •  That  the  situaBon  has  shown  improvement  is  evident  from  the  fact  that  Tata  Power  and  Reliance   Energy,  two  of  the  biggest  private  sector  majors,  are  being  awarded  management  control  of   electricity  supply,  working  with  state  insBtuBons.  •  Tata  Power  has  cut  losses  from  50%  to  30%,  and  is  the  first  company  to  secure  a  criminal  convicBon   for  power  the_.  Several  thousand  cases  on  similar  grounds  have  been  filed,  an  encouraging   development  for  other  private  sector  players  about  the  prospects  of  legal  redressal  in  India.   71   Back  to  Contents  
  • Plant  Load  Factor:  Analysis  PLF  in  central  units  at  84.3%,  state  units  at  71.17%,  and  private  sector  units  at  91.01%  during  April–Sept  2008.   Increase  in  plant  load  factor  from  6th  Plan  to  11th  Plan   100   90.9   86.4   90   85.6   84.8   80   74.7   76.8   77.9   69.5   71.2   74.3   70   69.9   71.1   57.5   62.2   64.4   70.6   71.5   60   67.0   61.9   56.5   60.3   52.4   50   53.0   49.2   40   VI   VII   VIII   IX   X   XI*   Central  Sector   State  Sector   Private  UBliBes   Overall  (Source:  CEA)   Back  to  Contents   72  
  • Emerging  Opportuni1es  Rewards  of  Bringing  in  Ingenuousness   Back  to  Contents  
  • Emerging  Opportuni1es:  Power  Equipment  •  Radical  changes  in  government  policies  have  created  numerous  opportuniBes  for   the  private  sector.  •  Overall  share  of  private  sector  to  increase  from  13%  to  34%  during  the  12th  Plan   period  (2012–2017).  •  Example:  It  is  no  longer  mandatory  for  PSU  power  companies  to  source  all  their   generaBng  equipment  from  other  PSU  establishments  only.  They  can  source   equipment  from  private  sector  manufacturers  as  well.  This  creates  enormous   opportuniBes  for  private  sector  power  equipment  manufacturers  to  sell   equipment  to  India’s  large  PSU  power  generaBng  corporaBons.  •  Many  private  players  have  ramped  up  producBon  capaciBes  to  enter  compeBBve   bidding  for  the  supply  of  power  equipment.  In  fact,  with  the  extension  of  regional   power  trading  agreements  to  Nepal  and  Bangladesh  apart  from  Bhutan,  have   created  major  opportuniBes  for  power  equipment  suppliers  since  government   monopolies  no  longer  strangulate  this  sector.    •  Power  equipment  is  now  being  sourced  through  compeBBve  bidding  and  this   segment  is  seeing  substanBal  private  parBcipaBon.   Back  to  Contents   74  
  • Emerging  Opportuni1es:  Power  Transmission  •  Transmission  and  transmission  equipment  are  other  areas  which  present   opportuniBes  for  the  private  sector.  •  With  transmission  capacity  lagging  behind  generaBon  capacity,  it  is  someBmes  not   possible  to  evacuate  the  power  generated.    •  Several  Indian  companies  like  L&T,  Reliance  Infra,  Kalpataru  Transmission  Systems   as  well  as  foreign  companies  like  Areva  T&D  have  entered  the  transmission   equipment  space.   Back  to  Contents   75  
  • Opera1ng  and  Funding  Models  While  100%  FDI  is  allowed  through  the  automaBc  route  in  India  today,  private  sector  players,  and  parBcularly  foreign  companies,  may  iniBally  prefer  the  comfort  of  a  PPP  model.   Models   Sources  of  Funding  •  Build-­‐Own-­‐Transfer  (BOT):  A  firm  enters  into  a  contract  with  an   •  Sponsors  and  Promoters.   offshore  partner  to  build  a  shared  services  or  offshore   •  Banks  and  financial   development  center  for  a  predetermined  interim  period,  on  the   insBtuBons  (debt  porBon).   expectaBon  that  the  offshore  partner  can  begin  operaBons  and   anain  stability  faster  than  the  other  partner.     •  Public  Issues.  •  Build-­‐Own-­‐Operate-­‐Transfer  (BOOT):  A  single  organizaBon  or  a   •  Private  Equity,  Venture   consorBum  build,  finance,  operate  and  own  the  firm  for  a   Capital,  Infrastructure  and   predetermined  period  and  then  transfer  ownership  to  a  partner   Energy  Funds.   idenBfied  at  the  outset.  This  100%  debt  funding  model  is   •  MulBlateral  InsBtuBons,  i.e.,   popular  with  large  infrastructure  plant  promoters.   World  Bank,  ADB,  IFC,  IDFC,  •  Build-­‐Lease-­‐Transfer  (BLT):  The  developer  builds  the  enBre   EIB,  etc.   facility  and  sells  it  to  the  government  or  Joint  Venture  (JV)   partner,  then  leases  it  back  to  itself  for  a  fixed  period  and  then,   finally  transfers  it  to  the  government  or  partner  at  a   predetermined  or  market  price  at  the  end  of  the  tenure.   Back  to  Contents   76  
  • Fiscal  Incen1ves  •  Nil  customs  duty  on  imported  capital  equipment  •  DomesBc  bidders  to  get  deemed  export  benefits  •  Ten  year  tax  holiday  for  companies  se~ng  up  power   generaBng  plants  •  Higher  external  commercial  borrowing  limits  •  Lower  import  duty  on  fuel  •  100%  foreign  direct  investment  allowed  in  all  energy   sectors  except  atomic  energy  •  ExempBon  of  import  duty  on  capital  equipment  imports   for  generaBon  plants  >  1000  MW   Back  to  Contents   77  
  • Cap1ve  Power  Genera1on  •  CapBve  Power  GeneraBon  (generaBon  from  a  unit  that  has  been  set  up  by  a   company  or  an  industry  mainly  for  its  own  consumpBon)  has  thrown  up  many   advantages  for  those  se~ng  up  such  backward  integraBon  plants.  •  Reliability,  uninterrupted  quality  power  supply  and  the  Government  of  India’s   (GOI)  emphasis  on  “  Power  for  All”  by  2012  are  the  main  consideraBons  behind  the   se~ng  up  of  such  plants.  •  Current  installed  capacity  of  this  sector  is  esBmated  at  25,000  MW,  although   esBmates  are  slightly  varying.  •  Average  capacity  of  these  plants  ranges  between  15–60  MW  at  a  cost  of  Rs.  3.5   crores  per  MW  to  Rs.  5.5  crores  per  MW.  45%  of  these  plants  are  steam-­‐based,   40%  are  diesel  and  15%  are  naphtha  gas.  •  SubstanBal  interest  from  the  steel  and  cement  sector,  parBcularly  sponge  iron   units  where  waste  recovery  has  high  economic  viability.  •  The  excess  generaBon  a_er  meeBng  100%  of  these  needs  can  be  sold  to  GRIDCO   to  meet  general  needs.   Back  to  Contents   78  
  • Capacity  Building  Through  Mega  Projects  •  Nine  projects  of  around  4,000  MW  each  (on  BOT  basis)  being  set  up  at  an   investment  of  Rs.  16,000  crore.  •  Projects  awarded  on  tariff-­‐based  compeBBve  bidding.  •  All  projects  based  on  super-­‐criBcal  technology  (pithead-­‐capBve  block  or  imported   coal).  •  Total  exempBon  of  central  excise  duty  on  equipment  and  goods  procured  for   super  criBcal  technology.  •  All  projects  likely  to  be  located  in  coastal  ciBes  for  easy  coal  import;  Mundra   project  in  Gujarat  already  awarded  to  Tata  Power  and  Krishnapatnam  project  in   Andhra  Pradesh  awarded  to  Reliance  Power.  •  Power  ministry  to  coordinate  with  other  ministries  and  state  governments  for  fuel   bloc  allocaBon,  clearances,  linkages  and  payment  mechanism.  •  Mundra  –  the  first  Ultra  Mega  Power  Project  (UMPP)  to  be  commissioned  in  2012.   Back  to  Contents   79  
  • Power  Sector  in  India:  Moving  Ahead    •  Growth  figures,  which  have  been  consistently  increasing,  send  out  posiBve  signals,   overall:   –  During  the  9th  Plan  period,  the  sector  grew  at  3%  per  annum.   –  Between  2002–2005,  growth  was  notched  consistently  above  5%.   –  Between  April–Oct  2005,  it  was  5.2%  on  an  annualized  basis.   –  During  the  corresponding  period  in  2006–2007,  annualized  growth  was  7.3%.  •  With  the  emphasis  on  distribuBon  reforms,  cases  of  the_  and  loss  of  electricity   have  come  down  considerably  in  state  uBliBes,  which  in  turn  has  improved  their   creditworthiness.  •  Many  Independent  Power  Producers  (IPPs)  have  already  achieved  financial   closure.  About  7,000  MW  of  IPP  financial  closure  has  already  been  achieved,  and   another  9,000  MW  is  in  the  pipeline.   Back  to  Contents   80  
  • Power  Sector  in  India:  Moving  Ahead  (contd.)  •  Some  of  these  projects  are:   –  Reliance  Infrastructure:  Achieved  financial  closure  of  the  WRSS  power   transmission  project  with  a  consorBum  of  banks  funding  Rs.  970  crores  of  the   debt  porBon.  The  project  has  the  disBncBon  of  being  the  first  to  achieve   financial  closure  within  3  months  of  signing  the  Power  Transmission   Agreement  (PTA).   –  Lanco:  A  thousand  MW  thermal  project  at  Anpara.   –  JSW  Energy:  Achieved  financial  closure  of  its  1,200  MW  power  based  on   imported  coal,  with  the  debt  porBon  of  Rs.  3,375  crores  funded  by  a   consorBum  of  21  banks.   –  Essar  Power:  A  6,000  MW  generaBon  project  is  set  to  achieve  financial  closure   by  2012  and  funding  arrangements  are  currently  being  finalized.  •  There  has  been  considerable  growth  in  capBve  generaBon  faciliBes.  •  A  quantum  leap  in  investments  with  projects  totaling  installed  capaciBes   of  43,000  MW,  valued  at  $5  billion,  under  execuBon.   Back  to  Contents   81  
  • Per  Capita  Consump1on:  A  Comparison  •  India’s  economic  growth,  fuelled  mainly  by  reforms  following  liberalizaBon  in  1992,  has  been   a  prime  driver  of  energy  generaBon  and  consumpBon  in  the  country.  Some  staBsBcs   reflecBng  a  very  posiBve  outlook  are  given  below:  •  Today,  India  is  the  sixth  largest  consumer  of  energy  in  the  world.    •  Annual  power  producBon  in  India  registered  good  growth  over  a  20-­‐year  period,  from  190   billion  KWH  in  1986  to  over  680  billion  kWh  in  2006,  Yet,  there  is  a  major  shor‚all  because  of   the  rapid  rise  in  demand.  •  Per  capita  consumpBon  accounts  for  3.4%  of  total  global  energy  consumpBon,  which  reflects   the  country’s  untapped  potenBal.  •  The  per  capita  consumpBon  of  electricity  in  India  was  a  meager  704  KWH  in  2007-­‐2008  as   compared  to  2197  KWH  in  China  in  2006,  a  staggering  12,924  KWH  in  the  USA  and  2300  KWH   as  a  world  average.  This  shows  the  growth  potenBal  of  the  sector  in  India  through  bridging   the  demand-­‐supply  gap.   Per  capita  consump1on  of  electricity  (MW)   16000   12924   12000   8000   MW   2300   2197   4000   704   0   US   World   China   India   Source:  Figures  from  Ernst  &  Young  report   Back  to  Contents   82  
  • Power  Genera1on:  Targets  and  Deficits  •  According  to  March  2009  figures,  the  installed  power  generaBon  capacity  of  the   country  was  147,000  MW.  •  According  to  an  Assocham  report,  only  20%  of  the  targeted  increase  in  installed   capaciBes  has  been  achieved  in  the     11th  Plan  period  so  far  (2007–2012).  •  The  Government  of  India  has  framed  policies  that  aim  at  adding  78,000  MW  by   way  of  installed  capacity  by  2012.  •  The  aggregate  demand  for  electricity  in  India  is  projected  to  exceed  950,000  MW   by  2030.  •  Although  electricity  producBon  figures  are  on  a  growth  trajectory,  there  is   enormous  scope  for  bener  growth  through  FDI  and  domesBc  private  sector   investment.   Back  to  Contents   83  
  • Growth  In  Genera1on  Capacity     1990-­‐91   264.3   2000-­‐01   499.5   2001-­‐02   515.3   2002-­‐03   531.4   2003-­‐04   558.3   2004-­‐05   587.4   2005-­‐06   617.5   2006-­‐07   662.5   2007-­‐08   704.5   2008-­‐09   723.6  Source:  CEA  (billion  units)   Back  to  Contents   84  
  • Outlook  for  Power  Sectors   Indicators  &  Forecast   Back  to  Contents  
  • Sources  of  Electricity  in  India   Coal-­‐based  Thermal  Power  Plants  •  As  of  December  2008,  total  installed  capacity  of  all  thermal  power  plants  was     96,794.64  MW.  •  Coal-­‐based  thermal  power  plants  sBll  dominate  the  scene  and  account  for  about  64%  of   the  total  demand  for  energy  in  the  country  and  over  50  %  in  the  commercial  sector.     −  India’s  vast  coal  reserves  make  this  supply  of  thermal  power  possible.     −  Other  sources  of  power  are  either  too  expensive,  or  dependent  on  the  vagaries  of  the   weather,  accounBng  for  the  dominance  of  coal  energy.   −  However,  coal  reserves  are  not  always  of  high  quality  and  require  washing  before  use.   Hence,  imports  of  coal  are  expected  to  increase.  Some  companies  have  already  set  up   bases  in  countries  like  Indonesia  and  South  Africa  to  facilitate  the  purchase,   development  and  operaBon  of  coal  mines  from  those  locaBons,  but  problems  such  as   resistance  from  locals  exist.   −  The  trend  is  to  regularize  the  coal  supply  chain  by  allocaBng  coal  blocks  close  to  coal-­‐ based  plants.   −  In  keeping  with  environmental  norms,  generaBng  plants  are  going  in  for  clean  coal   technology,  such  as  Integrated  GasificaBon  and  others.   Back  to  Contents  
  • Sources  of  Electricity  in  India  (contd.)  •  Hydroelectric  power  plants:  Contribute  about  24%  of  the  total  power  generated,  with  a   total  installed  capacity  of  36,917  MW.  •  Nuclear  power  plants:  Contribute  only  4120  MW,  a  meager  3%.  •  Renewable  Energy  Sources  (RES):  Huge  investments  are  being  made  in  non-­‐ convenBonal  sources  such  as  wind  energy,  solar  power,  bio  fuels,  etc.  to  increase   capaciBes.  RES  accounts  for  around  9  per  cent  of  total  generaBon  in  the  country.  •  The  current  combined  installed  capacity  of  RES  stands  at  13,242.41  MW.  Tamil  Nadu,  in   South  India  contributes  4379.64  MW,  about  one-­‐third  of  India’s  total  installed  capacity   and  nearly  half  of  the  country’s  wind  power  generaBon.  •  The  fast-­‐  growth  trajectory  of  wind  power  mirrors  the  global  trend  in  OECD  countries   and  Japan.    •  According  to  2008  figures,  India’s  total  installed  capacity  of  wind  power  generaBon  was   pegged  at  9,655  MW.  •  In  2009,  the  Ministry  of  Power  announced  a  plan  targeted  at  producing  20,000  MW  of   solar  power  by  2020,  with  a  financial  outlay  of  $19  billion.    •  Funding  routes  envisaged:  100%  private  investment  route  (this  includes  FDI)  or  the  PPP   model.   Back  to  Contents   87  
  • Power  Genera1on  Mix   Installed  Capacity  (MW)   Genera1on  type  (%)   Renewable   13,242   Renewable   Renewable   9%   Hydel   36,917   Hydel   24%   Nuclear   4,120   Thermal   64%   Thermal   96,794   Nuclear   3%   0   20,000   40,000   60,000   80,000   100,000   120,000  Source:  CEA   Back  to  Contents   88  
  • Power  Genera1on:  Thermal  Power  •  As  of  December  2008,  the  installed  capacity  of  thermal  power  is  96,794.64  MW,   accounBng  for  64.7%  of  the  total  installed  capacity.  •  The  current  installed  base  of  Coal-­‐based  thermal  power  is  79,458.88  MW.  •  The  current  installed  base  of  Gas-­‐based  thermal  power  is  15,636.01  MW.  •  The  current  installed  base  of  Oil-­‐based  thermal  power  is  1,699.75  MW.  •  The  western  state  of  Maharashtra  accounts  for  the  highest  producBon  of  thermal   power  in  India.   Back  to  Contents   89  
  • Power  Genera1on:  Hydroelectric    •  India  was  one  of  the  earliest  countries  to  set  up  hydroelectric  power  plants.     Darjeeling  (1898)  and  Shivanasamudra  (1902)  were  the  first  two  hydroelectric   power  plants  in  Asia.  •  The  installed  capacity  of  hydroelectric  power  was  around  36877.76  MW  in  2008.  •  Dominated  by  PSUs  which  account  for  almost  97%  of  the  installed  hydro  capacity.  •  The  Central  Electricity  Authority  (CEA)  has  targeted  the  increase  of  hydroelectric   capaciBes  to  40,943  MW  between  2007-­‐2017  (the  11th  and  12th  Five  Year  Plan   periods).    •  The  Government  plans  to  step  up  the  development  of  hydroelectric  power   throughout  the  country  by  offering  incenBves.  •  Enactment  of  legislaBon  that  affords  private  sector  developers  a  tariff  to  ensure  a   fixed  return  on  investment  •  Generators  allowed  to  sell  40%  of  their  producBon  in  the  spot  market  to  increase   ROI  •  Provide  support  to  state  governments  such  as  Himachal  Pradesh  and  Arunachal   Pradesh,  which  are  commercializing  faciliBes  to  double  capacity  from  2012  to   2015.   Back  to  Contents   90  
  • Power  Genera1on:  Nuclear  Energy  •  India  occupies  the  9th  posiBon  globally  in  terms  of  nuclear  capacity.  •  Although  the  country  has  an  acBve  nuclear  power  program,  it  has  been  mired  in   controversy  for  long.  •  India  uses  imported  enriched  uranium,  though  many  stages  of  its  nuclear  program   have  been  developed  indigenously  to  support  its  reactors.  •  However,  the  limited  quantum  of  imports  has  adversely  affected  the  development   of  advanced  technologies.  •  The  country  has  made  a  lot  of  progress  in  developing  a  thorium-­‐centered  fuel   cycle,  a  major  driving  factor  in  its  nuclear  program,  since  thorium  reserves  are   available  in  much  larger  quanBBes  in  India  than  uranium  deposits.   Back  to  Contents   91  
  • Power  Genera1on:  Renewable  Energy  •  Wind  Power:  Muppandal,  a  village  in  Tamil  Nadu  showcases  India’s  $2  billion  clean,  renewable  energy  program.   –  India  is  a  leading  producer  of  wind  energy.   –  The  current  combined  installed  base  of  Renewable  Energy  sources  of  electricity  now  stands  at  13,242.41  MW.   This  accounts  for  9%  of  the  total  installed  base.  The  state  of  Tamil  Nadu,  in  South  India,  contributes  4379.64   MW,  which  is  close  to  one-­‐third  of  India’s  total  installed  capacity  of  Renewable  Energy  and  close  to  half  of  the   country’s  wind  power  generaBon.  Tamil  Nadu’s  contribuBon  is  mostly  in  the  form  of  wind  power.     –  The  sector  is  emerging  as  an  anracBve  desBnaBon  for  foreign  investment  ever  since  government  policies   announced  tax  breaks  for  companies  se~ng  up  wind  farms  in  the  country.  •  Solar  Power:  Although  India’s  potenBal  for  solar  energy  is  close  to  5000  TKWH  per  annum,  exorbitant  iniBal  costs   are  restricBng  growth.   –  India  has  an  unparalleled  advantage  in  terms  of  high  solar  insulaBon,  which  could  obviate  the  need  to  lay   high-­‐cost  grids,  once  solar  energy  becomes  cheaper.  •  Bio  Mass  Power:  Investment  in  the  biomass  segment  could  yield  good  returns.     –  Obstacles  to  investment:  arriving  at  mutually  acceptable  agreements  with  farmers  and  unhindered  supply  of   fuel.     –  Need  to  set  up  mulBple  plants  to  anain  criBcal  mass  since  plant  size  is  small.  •  Poten1al  for  RES  power  genera1on  in  the  12th  Plan  period  (2012–2017):   –  Wind:  45,000  MW   –  Small  Hydro  Plants:15,000  MW   –  Biomass:  19,500  MW   –  Urban  and  Industrial  Wastes:  17,000  MW   –  Tidal  Wave  Energy:  Not  yet  esBmated   Back  to  Contents   92  
  • The  Transmission  Sector  •  The  Electricity  Laws  Amendment  Act,  1998  has  brought  about  many  changes  in  the   transmission  phase  of  the  power  sector.    •  India  is  now  divided  into  five  regions  for  se~ng  up  transmission  systems.  •  The  transmission  network  has  grown  from  3708  circuit  kilometers  (CKM)  in  1950  to   220,794  CKM  in  2008-­‐2009.  The  objecBve  is  to  boost  the  network  to  293,372  CKM   by  2012,  thereby  realizing  the  dream  of  “power  for  all”.    •  Work  on  se~ng  up  a  NaBonal  Grid  is  currently  on,  with  a  target  of  200,000  MW   grid  capacity  and  17,000  MW  of  inter-­‐regional  transmission  capacity  by  2012.  •  But  with  the  rapid  growth  in  power  generaBon  which  would  see  an  incremental   generaBon  of  1,00,000  MW  by  2012,  there  is  a  parallel  need  for  further  growth,   and  consequently,  for  private  investment  in  the  transmission  sector,  as  envisaged   in  the  1998  Act.  •  The  responsibility  of  evacuaBng  the  power  generated  would  be  taken  up  jointly  by   Power  Grid,  Central  Transmission  UBlity  (CTU),  State  Transmission  UBlity  (STU)  and   private  investors.    •  A  total  investment  of  Rs.  71,000  crores  is  envisaged,  of  which  Rs.  50,000  crores   would  come  from  Power  Grid  and  the  remaining  from  the  private  sector.   Back  to  Contents   93  
  • The  Transmission  Sector  (contd.)  •  In  2000,  the  GOI  issued  guidelines  which  said  either  of  two  models  could  be   adopted.  •  One  was  the  PPP  or  JV  model  with  the  Indian  partner  holding  at  least  25%  of  the   equity,  and  the  other,  the  Independent  Private  Transmission  Company  (IPTC),   where  the  private  enBty  held  100%  of  the  equity.  •  Joint  Venture  Route:  As  a  pilot  project,  Tata  Power  entered  into  a  JV  with  Power   Grid,  for  transmission  lines  connected  to  the  Tata  Hydro  Electric  project,  for  a   route  length  of  1,200  km  (from  Siliguri  in  North  Bengal  to  Mandola  at  UP)  at  a  cost   of  Rs.  1,100  crores.    •  The  project  is  running  successfully  and  Tata  Power  now  holds  51%  of  the  equity.   The  success  enthused  Power  Grid  to  idenBfy  2  more  JV  projects  at  a  cost  of  Rs.   1,275  crores.    •  ITPC  Route:  The  400  kv  Bina-­‐Nagda-­‐Dehgam  line  in  the  Western  region  was  taken   up  as  a  pilot  project  by  Power  Grid  in  late  2004.   Back  to  Contents   94  
  • The  Transmission  Sector  (Contd.)  •  A  mix  of  factors  will  drive  growth  in  the  transmission  sector  over  the  next  few  years   –  Two  power  exchanges  have  become  operaBonal.   –  Many  merchant  power  plants  are  being  developed.  Power  from  them  will  flow  in  various   direcBons,  with  wider  variaBons.   –  The  need  for  evacuaBng  the  power  generated  will  be  higher  since  the  increase  in   generaBon  capacity  has  gone  up  from  4000–5000  MW  per  year  to  10,000–15,000MW   per  year,  at  the  minimum.  •  Growth  in  network  length  is  esBmated  at  a  minimum  of  10%  per  year  and  in  transmission   capacity  at  14%  in  the  11th  Year  Plan,  as  against  6–7%  earlier.  •  The  Ministry  of  Power  (MoP)  is  encouraging  private  investment  in  transmission  by  reserving   12  projects  for  the  private  sector,  to  be  awarded  through  compeBBve  bidding.  •  There  needs  to  be  greater  effort  towards  establishing  a  successful  PPP  model  because   –  Unlike  generaBon  projects,  transmission  lines  run  crisscross,  creaBng  ‘right  of  way’   issues,  which  can  be  solved  easily  with  public  sector  involvement.   –  Holding  hands  with  central/state  government  companies  would  create  confidence  in  the   private  sector  partner  in  a  PPP,  each  can  bring  respecBve  strengths  to  the  table.  •  Power  trading  is  an  important  acBvity  –  rural  supply  and  open  access  to  T&D  network  are   factors  that  would  create  great  scope  for  the  growth  of  the  private  sector  in  transmission.     Back  to  Contents   95  
  • The  Distribu1on  Sector  •  Apart  from  the  transmission  networks  that  transmit  power  from  generaBng  staBons  to   the  grid  substaBons,  there  is  also  a  vast  sub-­‐transmission  network  used  for  distribuBon   to  consumers.  •  Among  the  public  sector  enBBes  in  the  distribuBon  sector  are  the  mulBple  DISCOMs   created  a_er  the  unbundling  of  the  SEBs.  The  private  sector  players  include  BSES,  BEST,   CESC,  Tata  Power,  Ahmedabad  Electricity  CorporaBon,  Surat  Electricity  CorporaBon,   and  NOIDA  Pvt.  Ltd.  •  Investment  to  upgrade  T&D  systems  has  been  inadequate,  and  this  has  led  to  large   technical  and  commercial  losses,  restricBng  the  financial  viability  of  SEBs.  In  2000–2001,   T&D  losses  were  32.86%.  •  The  Accelerated  Power  Development  Reform  Programme  (APDRP)  came  into  force  in   2001,  to  improve  the  sub-­‐transmission  and  distribuBon  network  and  bring  down  the   T&C  losses.  •  As  a  result  of  these  measures,  T&D  losses  came  down  from  38.86%  in  2001-­‐2002  to   34.54%  in  2005–2006  and  losses  of  the  state  power  uBliBes  from  Rs.  29,331  crores  to     Rs.  19,546  crores.  •  The  APDRP  program  is  being  revamped  to  bring  down  T&D  losses  to  15%  by  the  end  of   the  11th  Plan  (2012).   Back  to  Contents   96  
  • Government  Ini1a1ves  for  Private   Sector  Involvement   Opening  up  Private  Capital  Inflow   Back  to  Contents  
  • Growth  Catalysts:  Government  Policy    •  Government  policies  in  India  have  moved  away  from  being  protecBonist  towards   being  conducive  to  the  growth  of  the  Power  sector,  and  parBcularly,  in  fostering   private  sector  parBcipaBon  in  the  country  through  fair  compeBBve  bidding.  •  In  recent  years,  demand  for  power  in  India  has  been  increasing  at  one  of  the   fastest  rates  among  developing  countries,  driven  by  populaBon  and  economic   growth.  Certain  factors  impact  the  shor‚all  in  power  supply,  and  the  Government   has  resolved  to  bridge  the  gaps,  which  in  turn  makes  investments  in  this  sector  an   anracBve  proposiBon.   –  Environmental  issues  make  it  imperaBve  to  move  towards  clean  technologies,   but  the  cost  remains  high  and  inaccessible  to  many.     –  DomesBc  incomes  are  increasing,  which  will  boost  the  demand  for  power   through  clean  technologies.   –  The  economy  is  growing  fast,  and  there  will  be  an  ongoing  increase  in  the   demand  for  reliable  power  supply.   –  Fossil  fuels  are  in  short  supply;  therefore,  there  is  a  need  to  import  large   quanBBes  of  crude,  gas,  petroleum  products  and  coal.   Back  to  Contents   98  
  • Government  Policy  &  Strategy   Power  Genera1on   Transmission  Strategy   Distribu1on  Strategy   Strategy  •  Low  input  costs.   •  Developing  the   •  Loss  reducBon.  •  Low  generaBon  costs.   NaBonal  Grid.   •  The_  minimizaBon.  •  OpBmal  uBlizaBon  of   •  Establishing  inter-­‐state   •  System  upgrades.   capacity.   connecBvity.   •  Consumer  orientaBon.  •  Emphasis  on  opBmal   •  Technology  upgrades.   •  High-­‐quality  power.   fuel  mix.   •  OpBmizaBon  of   •  DecentralizaBon  of  the  •  Technology  upgrades.     transmission  costs.   distribuBon  process.  •  Thrust  on  non-­‐ •  Rural  supply.   convenBonal  renewable   energy  sources.  •  Commercial  viability  of   power  companies.   Back  to  Contents   99  
  • Government  Policy  &  Strategy  (contd.)   •  ProtecBng  consumers’  interests.   Strategy  for   •  Ensuring  commercial  viability  of  the  sector.   Regula1on   •  RegulaBng  sector  players  to  ensure  good  business  pracBces,  ethics  and   corporate  governance,  minimizing  the_  and  losses.   •  GeneraBng  adequate  funds  and  other  resources   •  ProacBvely  wooing  private  sector  investment,  both  domesBc  and  foreign,   Financing   by  establishing  viable  models  such  as  PPPs  in  the  sector.     Strategy   •  Offering  various  incenBves  to  anract  investment.   •  Introducing  sweeping  reforms  conducive  to  investment,  through  a  new   approach  to  policy  making.   •  OpBmizing  the  use  of  electricity.   •  Pu~ng  in  place  policies  to  avoid  wastage.   Conserva1on   •  Managing  loads  properly.   Strategy   •  Upgrading  technology  from  the  point  of  view  of  providing  the  latest   energy-­‐efficient  equipment.   •  Issuing  adverBsements,  advertorials,  and  tying  up  with  the  media  to  Communica1on   spread  awareness  about  issues  such  as  wastage  and  the_  of  electricity,   Strategy   use  of  renewable  energy,  etc.   Back  to  Contents   100  
  • Government  Policy  &  Strategy  (contd.)   Electrifica1on  of  Rural  Areas  •  The  focal  point  of  reform  in  the  Power  sector  in  India  is  sBpulated  in     SecBon  6  of  The  Electricity  Act,  2003  as  the  wide  outreach  that  ensures   power  for  all,  including  rural  areas.  •  The  central  and  state  governments  will  collaborate  to  ensure  that   consumers,  including  rural  households,  who  are  willing  to  pay  a  reasonable   tariff  are  assured  of  an  adequate  supply  of  quality  electricity  within  the  next   five  years.  •  Village  electrificaBon  levels  were  at  82.2%  as  of  2006.  •  The  Rural  ElectrificaBon  CorporaBon  of  India  is  the  nodal  body  overseeing   the  implementaBon  of  government  policies.   Back  to  Contents   101  
  • The  Indian  Power  Sector   OpportuniBes,  Risks  &  Rewards   Back  to  Contents  
  • Power  Sector  Investment:  Risks  And  Rewards  •  In  the  coal-­‐based  thermal  sector,  which  accounts  for  83%  of  the  thermal   sector’s  total  installed  capacity,  the  risk  and  return  would  depend  mainly   on  the  power  sale  model.    •  For  example,  under  the  Cost  Plus  Tariff  Model,  entered  on  the  basis  of   long-­‐term  (PPAs),  the  developer  is  allowed  an  anracBve  return  on   investment  (ROI)  of  15.5%  under  the  latest  CERC  regulaBons  (2009–2014).  •  This  could  go  up  higher  to  16%,  for  projects  that  are  completed  on  Bme.  •  AddiBonally,  the  developer  has  a  share  of  revenue  from  carbon  credits   which  comes  as  an  incenBve  if  certain  norms  are  met.   Back  to  Contents   103  
  • Power  Sector  Investment:  Risks  And  Rewards  •  In  the  case  of  compeBBve  bidding  of  projects,  a  long-­‐term  contract  is  signed  between   the  distribuBon  company  (DISCOM)  and  the  successful  bidder.  Returns  here  depend   on  capital  cost  efficiencies,  lower  construcBon  Bme,  compeBBve  financing,  etc.  •  However,  there  are  too  many  variables  to  consider.  For  example,  in  Case  2  bidding,   where  the  government  acBvely  supports  the  developer  in  acquiring  land,  clearances   and  fuel,  the  risk-­‐return  is  lower.  In  Case  1  bidding,  where  the  enBre  onus  is  on  the   developer,  the  risk-­‐returns  are  higher  •  Again,  in  Case  2,  the  DISCOM  purchases  the  enBre  producBon,  whereas  in  Case  1,  the   developer  is  allowed  to  sell  power  in  the  merchant  power  segment,  where  returns   could     be  higher.  •  An  encouraging  development  is  that  some  state  governments  are  giving  even  Case  2   developers  the  leeway  to  access  the  merchant  market  to  sell  part  of  what  they   produce.  •  Returns  for  merchant  plants  that  run  purely  on  short  to  medium  term  basis  are   considerably  higher  than  long  term  ones.  The  weighted  average  power  price  for  short   term  was  Rs.  7  per  KWH  (as  on  Sept  2008),  whereas  for  long  term  it  was  Rs.  2.50-­‐Rs.   3  (in  the  case  of  coal-­‐based  projects).   Back  to  Contents   104  
  • Power  Sector  Investment:  Merchant  Power  Plants  •  Private  developers  have  been  acBve  in  se~ng  up  both  peak  load  as  well  as   base  load  merchant  power  plants  because  of  the  higher  returns.  •  Jindal  Power’s  1000  MW  coal-­‐based  thermal  plant  at  Chha~sgarh  came   out  with  outstanding  results  within  the  first  quarter  a_er  all  its  units  were   commissioned.  It  generated  a  profit  a_er  tax  (PAT)  of  Rs.  575  crores  in  the   third  quarter  of  FY  2008-­‐2009.  •  Companies  with  comparable  results  could  easily  register  a  PAT  for  two   quarters  that  could  exceed  total  equity.  •  The  Government  has  to  weigh  the  trade-­‐off  between  growth  and   regulaBng  prices  at  this  stage.  If  the  CERC  goes  ahead  with  a  plan  to   impose  a  cap  of  Rs.  5–6  per  KWH  on  short  term  sale  of  power,  it  will  curb   returns  from  this  segment  considerably.   Back  to  Contents   105  
  • A  Call  for  Ac1on   Significant  progress  has  been  made  in  spurring  growth,  but   some  aspects  s1ll  bear  closer  scru1ny  and  ac1on  •  AcquisiBon  of  land.  •  ExpediBous  forest  and  other  clearances.  •  ExpediBous  environmental  clearances.  •  RehabilitaBon  of  displaced  people.  •  ExpediBng  allotment  of  coal  blocks  and  other  coal  linkages.  •  Containing  volaBlity  of  fuel  prices  that  would  affect  gas-­‐based  plants   adversely.  •  Containing  T&D  losses.   Back  to  Contents   106  
  • Power  Sector  Investment  Prospects:    Renewable  Energy  (Wind  Energy)  •  This  is  a  thrust  area  and  has  high  potenBal  for  anracBng  private  sector   investment.  •  As  on  Jan  31st,  2009,  the  installed  capacity  for  wind  energy  was  9,756  MW,   which  was  69%  of  total  Renewable  Energy  capacity  of  14,225  MW  in  India   as  of  that  date.  •  This  was  enabled  by  a  host  of  factors,  mainly  government  policy  reforms   such  as  subsidies,  carbon  credits,  targets  on  DISCOMs  relaBng  to   Renewable  Energy  procurement.  •  According  to  the  Ernst  &  Young  Renewable  Country  AnracBveness  Index,   India  is  placed  among  the  top  5  countries,  globally.  •  Independent  Power  Producers  (IPPs)  are  looking  at  higher  returns.  They   can  opt  for  the  greenfield  route  and  place  large  orders  with  reputed   vendors  who  can  supply  quality  equipment  at  compeBBve  prices  for   se~ng  up  new  plants;  or  choose  the  acquisiBon  route  where  exisBng   farms  could  be  picked  up  at  discounts  on  book  value.   Back  to  Contents   107  
  • Power  Sector  Investment  Prospects:    Renewable  Energy  (Small  Hydro  Power)  •  Small  hydro  power  plants  are  an  important  source  of  power  and  suitable   for  India.  •  Low  operaBon  and  maintenance  (O&M)  costs,  government  subsidies,  high   levels  of  conversion  efficiency  and  advanced  technology  all  make  the   sector  investor  friendly,  yielding  high  returns.  •  Lower  capital  outlay,  less  inimical  to  environment  issues,  fewer  clearances   and  lower  and  bener  distributed  risk  and  ownership  make  small  hydro   power  plants  suitable  for  India.   Back  to  Contents   108  
  • Power  Sector  Investment  Prospects:    Solar  Energy  •  Solar  power  projects  have  incenBves  from  the  government  in  the  form  of   subsidies,  as  well  as  high  feed  in  tariffs.  •  But  project  costs  are  typically  high  –  investment  of  Rs.  20  crores  or  more,   taking  the  cost  of  generaBon  up  to  Rs.  15  per  KWh.  •  ModaliBes  are  being  worked  out  to  go  in  for  advanced  technology   upgrades.  •  The  government  also  plans  to  step  up  fiscal  support.   Back  to  Contents   109  
  • Power  Sector  Investment  Prospects:    Biomass  •  Investment  in  the  biomass  segment  could  yield  good  returns.  •  However,  there  are  problems  that  have  to  be  tackled.    •  The  biggest  obstacle  is  arriving  at  mutually  acceptable  agreements  with   farmers.  •  Unhindered  supply  of  fuel  can  be  another  obstacle.  •  Since  each  plant  would  be  small,  developers  would  need  to  set  up  mulBple   plants  if  the  sector  is  to  anain  criBcal  mass.   Back  to  Contents   110  
  • Power  Sector  Investment  Prospects:    Nuclear  Power  •  Nuclear  power  growth  is  sBll  in  its  nascent  stages  and  accounts  for  about  3%  of   total  installed  capacity.  With  the  li_ing  of  the  nuclear  embargo  against  India,  an   addiBonal  30,000–40,000  MW  in  the  next  20  years  is  envisaged,  opening  up  new   investment  avenues  for  private  sector  players  $30–$80  billion  in  the  next  20  years.  •  Clear  policies  on  the  perennial  availability  and  cost  of  fuel,  management  of  waste,   availability  and  cost  of  heavy  water  (from  PSUs)  and  the  cost  of  decommissioning   are  required  before  the  sector  becomes  truly  investment-­‐anracBve.  •  Other  issues  that  are  sBll  ambiguous  and  need  further  clarificaBon  are:  the  role  of   government  bodies,  suitable  models  for  private  sector  parBcipaBon,  procurement   of  uranium,  etc.   Back  to  Contents   111  
  • Opportuni1es  Across  The  Power  Spectrum  •  Investment  opportuniBes  for  Independent  Power  Producers  (IPPs)  and  prospecBve   promoters  of  capBve  plants.  •  Se~ng-­‐up  distribuBon  faciliBes  in  Special  Economic  Zones.  •  OpportuniBes  to  invest  in  coal  and  gas-­‐based  thermal,  hydro,  nuclear  and  all   categories  of  the  fledgling  renewable  energies  sector.  •  OpportuniBes  to  set  up  100%  FDI  plants  or  JVs  across  all  segments,  e.g.  generaBon,   transmission,  distribuBon,  power  equipment  manufacturing.  •  OpportuniBes  in  refurbishment  of  old  plants,  maintenance,  operaBons  and   infrastructure  support.  •  Alliances  with  generaBon  companies  to  enable  power  evacuaBon.  •  DistribuBon  and  trading  franchising.  •  OpportuniBes  in  turnkey  consulBng,  technical  consulBng,  loss  detecBon  and  other   cost  reducBon  soluBons.     Back  to  Contents   112  
  • Private  Equity  Players:  Investment  Percep1ons  about  Power  •  With  the  demand-­‐supply  gap  and  government  incenBves  making  the  power  sector  in  India  an   anracBve  investment  proposiBon,  this  sector  is  likely  to  get  a  major  chunk  of  about  $1.84   billion  earmarked  for  infrastructure  investment  by  large  private  equity  (PE)  funds  which  have   idenBfied  the  power  sector  in  India  as  an  anracBve  investment  desBnaBon.  •  There  will  be  a  resurgence  in  PE  investment  a_er  the  recession,  when  there  was  a  precipitous   drop  of  almost  80%  between  April  and  September,  2009.  Investments  from  the  PE  sector   dipped  to  around  $157  million  (Rs.  770  crores)  from  $902  million  (Rs.  4,419  crores)  during   the  previous  corresponding  period.  The  total  number  of  deals  also  dropped  down  to  6  from   17,  during  the  recession.  •  According  to  Venture  Intelligence,  a  research  unit  focusing  on  PE  funds,  investment  from  this   class  of  investors  had  been  seeing  steady  growth  over  Bme  before  the  one-­‐Bme  negaBve   growth  due  to  the  recession.  For  example,  investments  in  2006  were  $122  million,  rising  to   $495  million  in  2007.  •  An  Assocham-­‐Ernst  Young  report,  “Private  equity  in  Indian  Infrastructure:  Strengthening  the   Nexus”  states  that  power  is  the  most  sought  a_er  sector  for  future  private  investment.  •  For  foreign  companies,  many  of  which  can  access  debt  at  around  2–4%,  investments  in  the   Indian  power  sector  with  returns  of  between  15–16.5%  are  a  very  anracBve  proposiBon.   Back  to  Contents   113  
  • Foreign  Investments  •  Not  all  foreign  companies  may  want  to  look  at  Ultra  Mega  Power  Projects   (UMPP);  for  example,  many  Japanese  companies  are  showing  interest  in   projects  of  a  size  ranging  between  1,200  MW  to  1,400  MW.   FDI  Equity  Inflows  in  Power  Sector  •  FDI  inflows  into  the  power  sector   have  increased  in  the  last  few   years,  but  given  the  volume  of   2008-­‐09   985   investment  required,  FDI  inflows   need  to  increase  significantly.   2007-­‐08   967  •  For  that  to  happen,  investors  will   look  for  good  returns,  sustained   2006-­‐07   157   reforms  without  rollback  of   concessions,  easy  clearance,   0   250   500   750   1000   1250   seamless  linkages  etc.   Source:  GOI   Back  to  Contents   114  
  • Summing  Up:  Power  Sector   Investment   Why  India?   Back  to  Contents  
  • Power  Sector  Investment:  Why  India?    •  Reforms  are  an  ongoing  process,  demonstraBng  the  GOI’s  seriousness  of  purpose.   Breakthrough  radical  reforms  have  been  brought  in  by:     –  The  Electricity  Act,  2003     –  The  Electricity  Policy,  2005,  and   –  The  Electricity  Act,  2007  •  Return  on  Investment  (ROI),  though  variable,  averages  at  an  anracBve  15–16.5%.   AddiBonal  revenues  can  be  generated  from  carbon  credits,  commissioning  of   plants  on  schedule,  rural  electrificaBon,  renewable  energy,  clean  technology   projects,  gasified  coal-­‐based  plants,  etc.  •  With  the  “Power  for  All”  program  scheduled  for  closure  in  2012,  the  government’s   stepped  up  thrust  on  the  sector  creates  a  congenial  investment  climate  as  never   before.  •  Per  capita  consumpBon  of  electricity  in  2007–2008  was  a  meager  704  KWh  as   compared  to  2197  KWh  in  China  in  2006  and  a  staggering  12,924  KWh  in  the  US  –  a   huge  potenBal  for  growth  through  bridging  the  demand-­‐supply  gap.  The  esBmated   requirement  is  100,000MW  to  200,000  MW  in  short  to  medium  terms.  Investors   must  capitalize  on  this!   Back  to  Contents   116  
  • Power  Sector  Investment:  Why  India?  (contd.)  •  Only  50%  of  the  10th  Plan  target  was  achieved  (21,095  MW  against  41,110  MW).  An  increase   in  private  sector  investment  will  rule  out  a  recurrence  of  this  situaBon.  •  AddiBonally,  in  spite  of  total  installed  capacity  showing  a  sharp  rise  from  89,103  MW  in   1997–1998,  to  147,965  MW  and  19,050  MW  of  capBve  power  generaBon  by  March  2007,   there  was  a  significant  shor‚all  due  to  the  poor  financial  health  of  SEBs  and  the  private   sector’s  inability  to  achieve  financial  closure  due  to  poor  payment  security  mechanisms  that   existed  earlier.  With  the  new  reforms,  private  sector  parBcipaBon  has  a  bener  chance  of   success  than  previously,  and  is  an  opportunity  which  must  be  exploited.  •  Because  of  high  demand  coupled  with  low  per  capita  consumpBon,  India  needs  investment   of  $167  billion  between  2007–2012  (Investment  Power  Commission  figures)  to  add  90,000   MW  of  generaBon  capacity  to  tap  the  growth  potenBal  and  meet  the  GOI’s  objecBve  of   “Power  for  All”  by  2012.  •  India  allows  the  opBons  of  100%  FDI  in  all  three  Power  segments,  i.e.,  GeneraBon,   Transmission  and  DistribuBon,  as  well  as  joint  ventures.  •  As  of  2008,  generaBon  capacity  stood  at  141  GW  from  663  billion  units.  CAGR  was  5%  over   the  past  5  years.    •  The  Transmission  and  DistribuBon  network  of  6.6  million  circuit  kilometers  is  the  third  largest   in  the  world,  but  further  expansion  is  required.   Back  to  Contents   117  
  • Power  Sector  Investment:  Why  India?  (contd.)    •  Private  sector  parBcipaBon  is  increasing,  parBcularly  in  generaBon  and   distribuBon.    •  DistribuBon  licenses  for  several  ciBes  have  been  already  handed  over  to  the   private  sector.  •  Three  ultra  large  projects  of  4,000  MW  each  have  been  recently  awarded  to  the   private  sector,  based  on  compeBBve  global  tenders  •  The  Plant  Load  Factor  (PLF)  has  increased  substanBally.  •  In  keeping  with  environmental  needs,  even  convenBonal  coal-­‐based  technologies   are  moving  towards  non-­‐polluBng  technologies.  Two  of  the  most  popular   technologies  are:  Fluidized  Bed  CombusBon  (FBC)  and  Integrated  GasificaBon   Combined  Cycle  (IGCC).  This  is  a  major  advantage  for  India,  given  the  fact  that  it   has  large  reserves  of  coal.   GOI  provides  major  incen1ves  in  the  form  of  •  A  tax  holiday  for  10  consecuBve  years  (within  the  first  15  years  of  operaBons).  •  Capital  goods  import  duBes  on  Mega  Power  projects  (above  1,000  MW  capacity)  are  waived.    •  Dedicated  coal  blocs  that  are  alloned  to  coal-­‐based  thermal  plants  will  be  within  close  proximity.  •  Plants  which  import  coal  are  given  fast  track  clearance  to  be  set  up  in  coastal  areas.   Back  to  Contents   118  
  • Power  Sector  Investment:  Why  India?  (contd.)  •  There  is  a  large  gap  in  demand-­‐supply;  the  all-­‐India  average  energy  shor‚all  is  9%,   the  corresponding  peak  shor‚all  is  12–14%  (graph  on  next  slide).  •  Demand  registered  a  CAGR  of  around  6%  from  1998–1999  to  2008–2009.  •  The  17th  Electric  Power  Survey  esBmates  that  energy  demand  will  rise  at  8.4%  to   969  billion  KWH  during  the  11th  Plan  period  (2007–2012).  •  Peak  demand  is  expected  to  register  a  CAGR  of  12.3%  (167,054  MW)  by  2012.  •  Analysts  state  that  this  makes  the  opportuniBes  for  se~ng  up  Ultra  Mega  Power   plants  very  high;  9  projects  of  4,000  MW  each  have  already  been  set  up  by  the   private  sector.  •  The  government  is  facilitaBng  growth  by  policy  changes:   –  Coal-­‐imporBng  plants  are  to  be  located  in  coastal  areas  for  easy  import.   –  Natural  Gas/CNG-­‐based  turbines  will  be  located  close  to  load  centers  or  near   gas  terminals.  •  LocaBon-­‐related  factors  will  lead  to  considerable  reducBon  in  transportaBon  costs.   Back  to  Contents   119  
  • Power  Sector  Investment:  Why  India?  (contd.)  •  According  to  GOI  reports,  hydel  power  has  an  untapped  potenBal  of  150,000  MW.  •  RenovaBon  of  exisBng  hydel  and  thermal  plants  are  on  the  anvil.  •  An  addiBonal  60,000  circuit  kilometers  of  transmission  network  is  expected  to  be   set  up  by  2012,  to  facilitate  “Power  for  All’’  and  the  higher  sustained  demand  a_er   2012.  •  The  total  investment  potenBal  over  a  5-­‐year  period  is  $150  -­‐  $167  Billion.    •  Foreign  investors  have  the  opportunity  of  invesBng  in  renewable     energy-­‐Wind,  Solar  Photo-­‐voltaic,  Solar  Thermal,  Small  Hydro,  Biomass,     Co-­‐generaBon,  Geothermal,  Tidal  and  Urban  &  Industrial  Wastes  based  power   projects.  There  are  incenBves  from  the  government  for  se~ng  up  RES  projects,   which  could  yield  high  returns  of  16%  or  even  more.   Back  to  Contents   120  
  • Demand-­‐Supply  Gap:  Growing  Wider  •  Energy  requirement  during     Demand-­‐Supply  Gap     2008–09  was  774,324  million  units   (bn.  units)   (MU),  while  available  energy  was   774.3   689,021  MU.  •  This  resulted  in  an  energy  shortage  of   620.9   11%  in  2008-­‐2009,  as  compared  to   559.4   689.0   9.9%  in  2007–08.   447.3   559.4   517.4  •  The  peak  demand  for  energy  during   2008–09  was  109,809  MW,  while  the   266.4   395.9   peak  demand  that  was  met  was   168.1   96,685  MW.   245.4   156.8  •  The  peak  shortage  was  12%  in  2008– 2009,  as  compared  to  16.6%  in  2007– VI   VII   VIII   IX   X   XI*   08.   Demand   Availability   Source:  CEA  2008-­‐2009   Back  to  Contents   121  
  • Energy  Input  Per  Unit  Of  GDP    •  Energy  Input  per  unit  of  GDP  is  an  area  where  considerable  efficiencies  are   required.  In  India:  this  is  three  Bmes  higher  than  in  Japan  and  double  than  in  USA.  •  PotenBal  saving  of  at  least  25,000  MW  by  lowering  energy  input  per  GDP.  •  This  priority  is  expected  to  be  stepped  up,  and  compliance  made  mandatory  with   the  growing  realizaBon  that  energy  conservaBon  typically  has  short  return  periods.  •  One  major  reason  why  this  crucial  issue  has  sBll  not  received  high  priority  is  that   over  the  past  25  years,  the  usually  strong  correlaBon  between  industrial  growth,   GDP  and  energy  consumpBon  has  been  diminishing,  which  otherwise,  would  have   added  significantly  to  India’s  unenviable  record  of  losses  in  the  power  sector.  •  The  correlaBon  is  diminishing  largely  because  of  the  growing  share  of  the  services   sector,  which  consumes  far  less  energy  than  the  manufacturing  sector  in  the   economic  acBvity  of  India.   Back  to  Contents   122  
  • Growth  in  Electricity  Consump1on  and  GDP   Growth:  Correla1on     •  The  average  annual  GDP  growth  rate  (at  constant  prices)  during  the  8th,  9th  and  10th  Plan  was   5.9%,  5.5%  and  7.7%,  respecBvely.   •  The  comparaBve  annual  growth  in  electricity  consumpBon  during  these  periods  was  7.2%,   5,7%  and  4.4%  respecBvely.   •  ElasBcity  of  electricity  consumpBon  vis-­‐à-­‐vis  GDP  has  fallen  from  1.47%  during  the  6th  Plan  to   0.60%  during  the  10th  Plan.   •  In  spite  of  dominaBon  of  the  services’  sector,  a  growing  industrial  sector,  rural  electrificaBon   needs  and  an  upsurge  in  domesBc  demand  will  sustain  the  need  for  a  massive  increase  in   se~ng  up  capaciBes.     Correla1on  between  GDP  growth  rate  and   Elas1city  of  electricity  consump1on  vis  a  vis   electricity  consump1on  (annual)   GDP  growth   10   2   7.2   7.7  Percentage   5.7   Percentage   1.5   5   5.9   5.5   4.4   1   0   0.5   8th   9th   10th   Plan   0   GDP  growth  rate(annual)   6th     10th   Electricity  consumpBon  growth(annual)   Plan   Back  to  Contents   123  
  • Appendix  1:    Leading  Domes1c  Private  Sector  Players  The  Tata  Group  has  been   Reliance  Energy  has  a   Torrent:  This  company  in  the  Indian  power  sector   significant  presence  in   made  an  entry  into  the  for  over  90  years.  It  has  a   generaBon,  transmission   sector  not  through  the  strong  presence  in  all   and  distribuBon  in   greenfield  route  but  segments  -­‐  generaBon,   Maharashtra  and  Goa.   through  acquisiBon.  It  has  transmission  and   Could  contribute   built  up  a  presence  in  distribuBon.  In  many  ways   significantly  to  the  power   generaBon  and  a  pioneer  of  private  sector   shor‚all;  currently   distribuBon.  involvement  in  power  in   execuBng  three  UMPPs  of  India.   4,000  MW  each.   Back  to  Contents   124  
  • Appendix  2:    Leading  Foreign  Private  Sector  Players  Foreign  power  companies  are  currently  more  involved  in  power  equipment  manufacturing  rather  than  the  core  sectors  of  generaBon,  transmission  and  distribuBon  –  largely  due  to  obstacles  in  land  acquisiBons,  clearances,  problems  with  linkages,  etc.   CLP  Group:  One  of  the  largest  investors  in  the  wind  power  sector,  with  a  presence  in   Gujarat,  Karnataka  and  Maharashtra.  The  company’s  Indian  wing  posted  a  net  profit  of  Rs.   250  crores  on  a  total  revenue  of  Rs.  1,300  crores  in  2007–2008.   NTPC  Alstom  Power  Service  (NASL):  A  JV  between  Alstom  and  NTPC.  Alstom  and  BHEL  have   entered  into  a  15-­‐year  agreement  for  the  manufacture,  supply  and  technology  transfer  of   super  criBcal  boilers  in  2005.   L&T-­‐MHI  Boilers:  A  JV  between  L&T  (51%)  and  Mitsubishi  Heavy  Industries  (49%),  with  an   investment  of  $167  million,  to  manufacture  power  equipment.   Ansaldo  Caldie  (India):  A  JV  between  Italian  company  Ansaldo  Caldie  (85%)  and  GB   Engineering  (15%).  Ansaldo  has  handled  projects  in  India  since  the  1980s,  through  JVs  with   NTPC,  Neyveli  Lignite  CorporaBon,  Reliance  Power  and  others.   Toshiba  Corpora1on:  JV  with  Jindal  SW  Group  (75:25)  in  2008  for  the  manufacture  of  super   criBcal  steam  turbines  and  generaBon  equipment  for  thermal  plants.  It  has  already  executed   many  projects  in  India,  and  sold  equipment  for  hydro  power  projects.   VA  Tech  Hydro:  The  first  company  to  set  up  faciliBes  for  hydro  equipment  manufacturing  in   India.  The  company  undertakes  turnkey  projects  of  electrical  and  electro  mechanical  works.   Back  to  Contents   125  
  • Satya Chari  Imagineering India  Email: schari@bigpond.net.auCell: +61 413 078 871 (Australia) +91 961 950 7523 (India)  Driving value based opportunities with India forward…Insightful Advice – Considered Strategy – ExecutionLeadership   Back  to  Contents