Investment Opportunities North East Region and Pan India.

1. Investment Opportunities
North East Region and Pan India

2. TABLE OF CONTENTS
INLAND WATERWAYS................................................................................................................................2
Introduction Historical Background................................................................................................2
Potential for Cargo............................................................................................................................3
River Brahmaputra as National Waterway-II ...............................................................................4
Kaladan Multimodal Transit Transport Project.............................................................................7
PRINCIPAL PROJECT COMPONENTS .........................................................................................9
IMPLEMENTATION FRAMEWORK...............................................................................................9
RESPONSIBILITIES OF PDC......................................................................................................10
Sittwe :-........................................................................................................................................10
Paletwa :-.....................................................................................................................................11
PORTS PAN INDIA INFRASTRUCTURE.......................................................................................................12
Sector Overview..............................................................................................................................12
Policy and Promotion .....................................................................................................................14
Major Players...................................................................................................................................15
Sector Outlook ................................................................................................................................16
POWER SECTOR......................................................................................................................................19
Sector Overview..............................................................................................................................19
Policy and Promotion .....................................................................................................................20
Other conditions: ............................................................................................................................22
Major Players...................................................................................................................................23
Sector Outlook ................................................................................................................................24
Entry Modes.....................................................................................................................................24
Setting up a non-corporate entity ............................................................................................24
Setting up a corporate entity....................................................................................................26
Entry Procedure ..............................................................................................................................26
Incorporation of a company......................................................................................................27
Incorporation procedure: ..............................................................................................................28
1

3. INLAND WATERWAYS
2
Introduction Historical Background
Northeast India has many large and small rivers providing facilities for
water transport, especially in their plains sections. From the ancient
period until roads were constructed, the Brahmaputra and Barak rivers
were commonly used as the medium of transport. During the period of
British rule the Brahmaputra and Barak-Surma rivers were used
extensively for transport and trade between northeast India and the port
of Calcutta (now Kolkata). With the growth of the tea industry these rivers
became important carriers of trade. The East India Company started the
water route along the Brahmaputra from Kolkata to Dibrugarh in 1844 and
steamships were introduced by the Joint Steamer Company in 1847. At
about the same time Silchar was linked with Kolkata along the Barak-
Surma-Meghna navigation channel. However, with the partition of India in
1947, water transport received a serious blow as a foreign country was
born between northeast India and the port of Kolkata.
Network of Rivers
It is estimated that the North Eastern Region has about 1,800 kilometers
of river routes that can be used by steamers and large country boats. The
inland water transport departments of both the state and central
governments have been trying to improve the water transport system in
the region. The Brahmaputra now has several small river ports. In
addition, there are more than thirty pairs of ferry ghats (crossing points)
on the Brahmaputra, transporting both passengers and cargo. The Barak
also has small ports at Karimganj, Badarpur, and Silchar and ferry services
at several places across it.

4. In Arunachal Pradesh the rivers Lohit, Subansiri, Burhi Dihing, Noa Dihing,
and Tirap are used for navigation by small country boats in those
stretches where there are no rapids. The rivers Dhaleshwari, Sonai,
Tuilianpui, and Chimtuipui in Mizoram are also used for navigation with
small country boats in convenient stretches. Similarly, in Manipur, the
Manipur River, along with its three main tributaries, the Iril, Imphal, and
Thoubal, is used for transporting small quantities of merchandise by
country boats.
3
Potential for Cargo
The largest expected cargo movements in the North Eastern Region shall
arise from the ambitious power projects being implemented by various
private sector companies along with the National Hydroelectric Power
Corporation Ltd (NHPC), North Eastern Electric Power Corporation Ltd.
(NEEPCO), National Thermal Power Corporation (NTPC) on various
tributaries of the Brahmaputra particularly in Arunachal Pradesh. These
developments are expected to generate cargo movements of about 50 -
100 million metric tons over a period of 20 years. (2.5 -5.0 million metric
tons per year). Accordingly, the infrastructure requirements for the same
will be enormous in size. IWT can play the most complementary role in
catering to the needs of such large requirements.
Other identified cargo movements include coal from Meghalaya, fly ash
from Farakka to various destinations in the Northeast, limestone for
cement plants, petroleum products from Numaligarh refinery, bitumen
from Haldia, and food grains from Kolkata to various destinations in the
Northeast for the Food Corporation of India Ltd.

5. River Brahmaputra as National Waterway-II
Brahmaputra is the life line of NER. It was declared as National Waterway-
2 in 1988 for a distance of 891 km from Dhubri to Sadia. Inland
Waterways Authority of India maintains navigational channel of minimum
45 m width and 2.5 m depth is in NW.2 between Dhubri – Neamati, 2.0 m
between Neamati- Dibrugarh and 1.5 m between Dibrugarh – Sadiya
(Presntly the channel is maintained between Dibrugarh – Oriumghat
instead of Dibrugarh – Sadiya due to the ongoing porcupine work by
Brahmaputra Board near Sadiya. Necessary aids for facilitating 24 hour
navigation is maintained between Dhubri and Silghat while day navigation
marks are provided in further upper sections of the river. Terminal
facilities for loading and unloading of cargo is being maintained by IWAI
at strategic locations like Dhubri, Jogighopa, Pandu, Silghat, Neamati and
Dibrugarh. Pandu (Guwahati) is being developed as a multi modal
transport hub which can serve the entire N.E Region. A permanent
terminal at Dhubri, Assam is under construction with all facilities at an
approx cost of Rs. 46.68 Cr. Dhubri is the first important terminal on the
Brahmaputra. The existing temporary IWT terminal at Jogighopa is
proposed to be upgraded to a bulk cargo handling terminal for products
like Meghalaya coal, with rail connectivity up to the terminal.
4

6. Declaration of River Barak as National Waterway
River Barak between Bhanga to Lakhipur (121 kms) in Assam will be
declared as National Waterway after Bill is passed by Parliament.
5
Issues
The North East Region being riverine, offers immense scope for
development of Inland Water Transport. IWT has not received its due
importance in the scheme of transport planning, fund allocation and policy
priority after Independence.
Why IWT suitable for NER? Feasibility of IWT as a transport option can be
optimised with the following issues:
1. Plans and investment for IWT has to be anchored within a multi-modal
transport plan. As multi-modal transport planning is yet to
take off in NER, IWT's full potential has not been leveraged.

7. 2. Benefits of IWT in terms of low cost, high volume, low fuel
expenditure and shortest land distance between North Eastern
Region and rest of the country has to be disseminated amongst
policy makers and users.
3. Undivided Bengal and the North Eastern Region were an integrated
economic market prior to Independence where the riverine transport
system was intensively used for movement of cargo and
passengers. The present challenge is to recreate those routes by
combining both investment and multi-modal planning.
4. IWT has a natural fit with the bulk commodities that the North
Eastern Region imports and exports from rest of India – tea, oil,
cement and coal are exported. Food-grains, fertilizers, petroleum
products are imported. All these commodities being non-perishable
and high volume are suitable for transportation by IWT. It would be
cheaper than road or rail but slower. Fast transportation is not
required for these commodities.
5. Investment on waterways can provide alternative routes for
movement of bulk cargo for Nagaland and Manipur which would be a
cheaper option and will not face blockages and similar exigencies.
6. However, any serious development of IWT requires active and
positive participation by Bangladesh. Therefore, IWT arrangements
should be devised in such a manner that stakeholders, both in India
and Bangladesh, derive value from developing and using IWT.
7. The Inland Waterways Authority of India is mandated to develop
and maintain National Waterways-II on the Brahmaputra between
Dhubri and Sadia. Reasonably good terminals are now available in
NER. More investment are in the pipeline for NW-II. IWAI is also
working to declare Barak river as National Waterways-VI. It is likely
to be done in the immediate to near future. There are well-developed
terminals in Barak also. Hence, investments to develop
infrastructure of IWT on the National Waterways-II and National
Waterways-VI (proposed) do not pose any serious bottlenecks.
6

8. 8. As IWT has not received its due importance in policy and
investments so far (investment wise things look promising for the
future), operators with required fleet size of vessels has not
emerged either in private or in public sector. This is the major
bottleneck in the promotion of IWT. Brahmaputra and Barak rivers
have not been fully commercially exploited for transportation
purposes. IWAI is not an operator. The public sector, Central
Inland Water Transport Corporation Ltd (CIWTC) is sick. The
private sector, either in India or in Bangladesh, has not emerged
due to various policy reasons. Therefore, the challenge here is to
create a policy regime that will promote investment in appropriate
fleet of vessels in both public and private sectors.
9. Optimal development of IWT will happen when there is meeting of
7
purposes among:
a. IWAI for creation of infrastructure on the waterways
b. Stakeholders such as the Food Corporation of India and the oil
companies, tea industry, cement industry.
c. Owners of fleet of vessels of the right size
d. The goodwill of Bangladesh and their participation
e. Multi-modal transport planning
10. Optimal use of IWT for transportation of bulk commodities will
open up the narrow chicken's neck corridor linking North East to
rest of India for transportation of passengers through fast moving
rail connections, evacuation of power, telecommunication links, etc.
11. Tourism is also a potential user of IWT.
12. Transport of Over Dimensional Cargo (ODC) for hydro power
development in the North East essentially requires IWT as there are
limitations on hill roads.
Kaladan Multimodal Transit Transport Project.

9. Ministry of External Affairs (MEA), Govt. of India entered into a
Framework Agreement with the Govt. of Myanmar in April 2008 to
facilitate implementation of the project. The Framework Agreement is
based on a Detailed Project Report (DPR) for development of the
Multimodal Transit Transport system to the North Eastern states through
Myanmar prepared by Indian Consultant M/s RITES during 2003. The
transit route envisaged between Kolkata (nearest Indian port / commercial
hub) and Mizoram as per the current implementation programme (after
revision of the DPR for Port & Inland Water Transport components by
Inland Waterways Authority of India in 2009) comprises of following
segments.
Stretch Mode Distance
Kolkata to Sittwe port
Shipping 539 Km
in Myanmar
8
Sittwe to Paletwa
(River Kaladan)
Inland Water Transport 158 Km
Paletwa to Indo-
Myanmar Border
(in Myanmar)
Road 110 Km
Border to NH.54
(Lawngtlai)
(in India)
Road 100 Km
The connectivity between mainland India and Sittwe (Myanmar) could as
well be with any other port on the Indian coast.
Inland Waterways Authority of India (IWAI) is the Project Development
Consultant (PDC) appointed by the MEA in March 2009 for implementation

10. of the Port & IWT components - the stretch (2) mentioned in para.1
above. M/s Essar Projects India Limited, Mumbai is the main Contractor
for these components appointed by MEA in April 2010. The Contract value
is Rs. 342 crores. Agreement was signed in the month of May 2010.
9
PRINCIPAL PROJECT COMPONENTS
Port & IWT components
1. Construction of an integrated Port & Inland Water Transport (IWT)
terminal at Sittwe including Dredging.
2. Development of navigational channel along river Kaladan from
Sittwe to Paletwa (158 km).
3. Construction of an IWT - Highway transhipment terminal at Paletwa.
4. Construction of 6 IWT barges (300 Ton capacity) for transportation
of cargo between Sittwe and Paletwa.
Highway component
Construction of a highway from Paletwa to India-Myanmar border for 110
kms. [Agency (M/s. IRCON) to execute Road component being arranged
by MEA]
IMPLEMENTATION FRAMEWORK
 MEA is the nodal agency on Indian side
 Ministry of Foreign Affairs (MFA) is the nodal agency on the
Myanmar side.
 Framework Agreement and two protocols (Protocol on Transit
Transport and Protocol on maintenance) signed by the two sides on
2nd April 2008.

11.  Article 4 of the Framework Agreement provides for appointment of a
Project Development Consultant (PDC).
 Inland Waterways Authority of India (IWAI) has been appointed as
the PDC vide agreement dated 19.3.2009 between MEA and IWAI.
The responsibility of IWAI as PDC is at present for implementation
of the Port & IWT components.
10
RESPONSIBILITIES OF PDC
 Preparation for selection of main contractor for Port & IWT
components (Agency to execute Road component being arranged by
MEA)
 Construction supervision and overall project management of Port &
IWT components.
 Co-ordination / Liaison between nodal agencies and Contractors for
Port & IWT component
Construction of integrated Port cum IWT jetty at Sittwe is substantially
completed. IWAI is performing the overall project management and
quality control for which it has also engaged M/s URS Scott Wilson India
Pvt. Ltd, Gurgaon as its Supervision Consultant (appointed by IWAI
through tendering). The item wise present physical progress are
mentioned below:-
Sittwe :-
 Reclamation of land for backup facilities – 96% completed
 Construction of Rubble mounted Dyke -85% completed.
 The Approach Jetty for both the Port & IWT Jetty – 100%
completed..
 Main Jetty piling work for both the Port & IWT – 100% completed
 Pre-cast concrete works for IWT & Port Jetty at Sittwe - 100%
completed.

12.  Quantity of 10.6 Lakhs Cu.m.( Total quantity 12.0 lakhs Cu.m),
which is about 90% of the dredging at Sittwe port area has been
completed.
 Construction of backup facilities structures (Port Office, IWT Office,
Covered Storage, Electrical & Generator room, Canteen/rest room
etc.) is in progress.
 Construction of 6 Nos. of Barges 300 T capacity each has started in
March 2013 and is in progress at Yangon through IWT, Govt. of
Myanmar, who is the sub- contractor for this component.
 Construction of Drain (additional item) – 100% completed.
Paletwa :-
 Construction work of IWT terminal has started in April 2013
 Major part of earthwork & excavation work is completed.
 The Approach Jetty pile work – 100% completed
 Main Jetty piling work – 100 % completed
 Backup facility works is in progress.
 Pre-Dredging survey work for 3 Nos. of Shoal area (Total 6 Nos. of
Shoals) was completed in October 2013.
 CSD Dredgers of M/s. DWIR, Govt. of Myanmar (Sub-contractor for
River dredging work) was Mobilised in the month of February 2014 and
Dredging at Paletwa Shoal is under progress
The construction activities at Sittwe in Myanmar started in December
2010. As on date, the physical progress achieved is 79% (approx.) and
financial progress is 65% (approx.) i.e Rs. 224 crores has been recorded
till date. Original time schedule for completion of this component was till
June 2013 which has now been extended till June 2014 due to delay in
handing over of land at Sittwe & Paletwa, custom clearances & other
approvals by Govt. of Myanmar. All items of works under this component
are progressing well.
11

13. The construction of stretch / component of road in Myanmar is being
arranged by MEA and it will have a separate Project Development
Consultant. The Border to NH.54 (Lawngtlai) Road on Indian side in
Mizoram is in progress and under the overall control of Ministry of Road
Transport and Highways, Govt. of India.
PORTS PAN INDIA INFRASTRUCTURE
12
Sector Overview
India has a long coastline of about 7,517 km along the western and eastern shelves
of the mainland. With 12 major ports and 187 minor ports, India ranks 16th among
maritime countries and has one of the largest merchant shipping fleets in the world.
According to the Ministry of Shipping, approximately 95% of the country’s trade by
volume and 70% by value moves through maritime transport, highlighting the
importance of ports and their contribution in sustaining the growth and development
of the Indian economy.
“The increasing trend of Western countries moving their manufacturing functions to
low-cost countries, and the likely prospect of India emerging as a manufacturing

14. outsourcing hub, is expected to contribute to the growth of the country’s marine
industry,” according to an Ernst & Young-NMDC report titled Indian Coastline—A
New Opportunity. In terms of volume, cargo traffic at Indian ports increased to 883
million tonnes in 2010–11 from 850 million tonnes in 2009–10, according to the
Ministry of Shipping.
During the 12th Five-Year Plan (2012–2017) about Rs 1,80,626.23 crore is expected
to be invested in the ports sector, according to revised estimates of the Planning
Commission of India. The ports sector received foreign direct investment (FDI)
worth USD 1,635.08 million between April 2000 and July 2011, which was 1.13% of
the total FDI inflows into India, according to the Department of Industrial Policy and
Promotion (DIPP), which is a part of the Ministry of Commerce and Industry and
which formulates FDI policy in India.
The major ports are Chennai, Ennore and Tuticorn (in Tamil Nadu); Cochin (in
Kerala); Kandla (in Gujarat); Kolkata (in West Bengal); Mumbai Port and Jawaharlal
Nehru Port Trust (in Maharashtra); Mormugao (in Goa); New Mangalore (in
Karnataka); Paradip (in Orissa); Vishakhapatnam (in Andhra Pradesh); and Port Blair
(in the Andaman & Nicobar Islands).
Among the major ports, Kandla in Gujarat leads in terms of cargo volumes (82
million tonnes in 2010–11) followed by Vishakhapatnam in Andhra Pradesh (68
million tonnes). Cargo volumes at all major ports increased in 2010–11. Among the
non-major ports, Mundra Port and Special Economic Zone Limited (MSEZL), in
Gujarat, was the largest operator (52 million tonnes in 2010–11), followed by Essar
Ports (40 million tonnes), which has two facilities at Vadinar and Hazira, both located
in the state of Gujarat.
The Government of India has undertaken several projects in recent years to upgrade
the quality of the ports sector. For example, the year 2010 saw the completion of
the first phase of some major projects, including the mega container transshipment
terminal at Vallarpadam (Kochi) and bulk terminals at Dahej, Mundra and Hazira (all
13

15. in Gujarat). The first phase at Dhamra (Orissa), a greenfield port, was completed in
May 2011.
All the major ports in the country have good road and rail connectivity. Moreover,
the capacity and quality of the existing connectivity is being further strengthened to
facilitate the smooth flow of cargo. The report of a Committee of Secretaries on rail-road
connectivity of major ports suggests each major port should be connected by a
14
four-lane road.
Policy and Promotion
The Ministry of Shipping, the nodal agency for ports, encompasses the shipping and
port sectors, including shipbuilding and ship repair, major ports and inland water
transport. As per government policy, 100% FDI is allowed in port development
projects. As way of incentive, 100% income tax exemption from income tax is
extended to companies investing in port infrastructure. Further, a 10-year tax
holiday has been given to enterprises engaged in the business of developing,
maintaining and operating ports, inland waterways and inland ports.
A major promotional initiative of the ministry is the National Maritime Development
Programme (NMDP), an initiative to develop the maritime sector, with an outlay of
USD 11.8 billion. The policy lists measures for enhancing private investment,
improving service quality and promoting competitiveness to meet medium- and long-term
objectives. With this objective, the Department of Shipping has finalized the list
of projects to be taken up in major ports under the NMDP up to 2011–12. These
projects will involve a total investment of Rs. 55,804 crore. The programme will be
implemented through public/private partnership in two phases.
Besides the NMDP, the government has initiated two more notable regulatory and
policy initiatives to ensure the holistic development of the Indian port sector — the
National Maritime Agenda 2010–20 and the Draft Port Regulatory Authority Bill,
2011.

16. The National Maritime Agenda 2010–20 outlines the framework for the development
of the port sector with a target capacity of over 3 billion tonnes by 2020, largely
through private sector participation. The agenda envisages a cumulative investment
of around Rs. 2,774 billion in the port sector between 2010 and 2020 in three
phases. The non-major ports are expected to account for 61% of the proposed
investment and the major ports for the rest.
The agenda also suggests policy-related initiatives to improve the operating
efficiency and competitiveness of Indian ports. These include major ports to be
turned into landlord ports by 2020 with their role being to provide the port
infrastructure, while operations and services would be provided by the private sector
participants.
The Draft Port Regulatory Authority Bill, 2011, provides for the establishment of a
regulatory authority to regulate rates for facilities and services provided at the ports
and to monitor the performance standards of port facilities and services. The
regulatory authority will be tasked with the job of framing guidelines for port
authorities and private operators on rates that will be charged for various services.
Further, the authority will also lay down performance norms and quality standards to
be met by port authorities and private operators, besides monitoring their
performance. Port authorities and private operators running facilities with a cargo-handling
capacity of less than 5 million tonnes a year will be outside the purview of
15
the authority.
Major Players
Significant investment is being done on BOT basis by foreign players. Some of these
foreign players are Maersk (JNPT, Mumbai), P&O Ports (JNPT, Mumbai and
Chennai), Dubai Ports International (Cochin and Vishakhapatnam) and PSA
Singapore (Tuticorin).

17. Some of the prominent Indian port companies include Mundra Port and Special
Economic Zone Limited, Ennore Port Limited, Mormugao Port Trust, Kakinada
Seaports Limited, Krishnapatnam Port Company Limited, Dhamra Port Company
Limited and Adani Petronet (Dahej) Port Private Limited. There are several port
terminal operators too, with some of the big companies being TM International
Logistics Limited, Chennai International Terminals Private Limited, Nhava Sheva
International Container Terminal Private Limited, Chennai Container Terminal Private
Limited, Mundra International Container Terminal Private Limited, Sical Iron Ore
Terminals Limited, International Seaports Haldia Private Limited, Vizag Seaports
Limited and Ennore Tank Terminals Private Limited.
Major companies that operate as port service providers are Ocean Sparkle Limited,
Seabird Marine Services Private Limited, Sealion Sparkle Maritime Services Limited,
Sealion Sparkle Port & Terminal Services (Dahej) Limited, IMC Limited, Polestar
Maritime Limited, TM Harbour Services Private Limited, International Seaport
Dredging Limited, Adani Logistics Limited, Navkar Corporation Limited, Pipavav
Railway Corporation Limited, Saurashtra Containers Private Limited and Triway
Container Freight Station Private Limited.
16
Sector Outlook
According to estimates by the Ministry of Shipping, cargo volumes in India are
expected to breach the 1-billion tonne mark in the 2011–12; the 2-billion tonne mark
by 2016–17; and 2.4 billion tonnes by 2019–20. A report on the Indian port sector
(ICRA Rating feature, September 2011), released by consultancy firm ICRA, states
that the prospects for cargo growth over the medium- to long-term remain positive
based on the level of activities in the key end-user industries.
Going forward, growth of traffic at Indian ports is expected to be driven mainly by
higher volumes of coal (to meet requirements of the large number of current and
proposed thermal power projects based on imported coal); containers (given the

18. market under-penetration and potential for cost savings); crude oil and POL (large
upcoming refinery capacity); fertilizers (strong domestic demand and low self-sufficiency);
and steel (mega projects proposed in the eastern part of the country).
Most of the expected traffic growth in India is based on domestic demand drivers,
which are expected to spur growth in various port-related logistics and service
activities, although competitive pressures in these business lines would remain high.
For private players investing in the ports sector, another positive trend is the
increasing adoption of the landlord/asset ownership model for major ports; this
model allows the private sector a dominant role in capacity additions, and port
services and operations. The Gujarat Maritime Board (GMB) has identified 10
greenfield sites to develop all-weather direct berthing ports under the build-own-operate-
transfer (BOOT) mechanism. These ports will be transferred back to GMB
after the completion of 30 years of operations under the BOOT mechanism.
A new Joint Venture (JV) company namely Royal Logistics (Ship) Ltd has
been incorporated with equity participation of IWAI and M/s. SKS
Logistics Ltd. Share Holders Agreement (SHA) for this company was
signed at Noida on 3.4.08 between IWAI and M/s. SKS Logistics Ltd.
Under this JV, six inland barrages of 2000 DWT each are envisaged to be
constructed and operated between Kolkata and Pandu. The total cost of
the project was estimated as Rs 33.00 cr. For this JV, the equity of M/s.
SKS Logistics Ltd will be 70% and that of IWAI – 30%.
Another JV company namely Vivada Logistics Pvt Ltd has also been
incorporated with equity participation of IWAI and M/s. Vivada Inland
Waterways Ltd Kolkata. SHA for this company was signed at Noida on
13.5.08. Under this JV two inland barrages of 1500 DWT each are
envisaged to be constructed and operated between Kolkata and Dhubri.
The total cost of the project was estimated as Rs 10.00 cr. For this JV, the
equity of M/s. Vivada Inland Waterways will be 70% and that of IWAI –
30%.
17

19. One more JV company namely SKS Waterways Ltd has been incorporated
with equity participation of IWAI and M/s. SKS Logistics Ltd. SHA for this
company was signed at Noida on 12.6.08 between IWAI and M/s. SKS
Logistics Ltd. Under this JV, eight inland barrages of 2000 DWT each are
envisaged to be constructed and operated between Kolkata and Mongla
(Bangladesh). The total cost of the project was estimated as Rs 44.00 cr.
For this JV, the equity of M/s. SKS Logistics Ltd will be 70% and that of
IWAI – 30%.
IWAI had also signed a MoU for incorporation of another JV company with
M/s. ICM (I) Pvt Ltd, Kolkata. However, SHA for this company is yet to be
signed. The main purpose for formation of this company was setting up
and operation on 3 floating jetties in West Bengal for handling of flyash
being export to Bangladesh. The total cost of this project was estimated
as Rs 2.70 cr. Equity of IWAI for this JV was to be 10% and that of M/s.
ICM (I) Pvt Ltd as 90%.
18

20. POWER SECTOR
19
Sector Overview
India has the world’s fifth-largest electricity generation capacity and demand is
expected to surge in the coming years owing to growth in the economy. According
to the Ministry of Power, the total installed capacity of power is 181,558 MW in
India. Out of this, state sector, Central sector and private sector contribute 83,314
MW, 56,573 MW and 41,672 MW, respectively. The electricity generation target for
the year 2010–2011 was fixed at 830.757 billion units (BU) and, in 2009–10,
electricity generation was at 771.6 BUs of power, according to the ministry.
India has abundant sources of power production. Thermal power in India accounts
for roughly two-thirds of the power generated in India which includes gas, liquid fuel
and coal. Reserves for thermal power generation include 59 billion tonnes of
mineable coal, 775 million metric tonnes of oil reserves and natural gas reserves of
1,074 billion cubic metres. Other prominent and fast-growing sources of power are
hydro, wind, solar, nuclear, biomass and industrial waste, etc. Presently, out of the
total power being generated, 54.8% is coal based, 9.75% is gas based and 0.66% is
oil based, hydro contributes for 21% of power, while nuclear production is 2.63%
and the rest 11.1% is collectively produced by renewable energy sources such as
small hydro project, biomass gasifier, biomass power, urban and industrial waste
power and wind energy.
For nuclear power, India has one of the world’s largest reserves of nuclear fuel
thorium. According to the Ministry of Atomic Energy, nuclear power generation in
2009–10 was estimated at 13,543 million units. The government has targeted an
installed nuclear power capacity of 20 GW by 2020 and 63 GW by 2032. For water-based
power, India has an untapped hydro potential worth 150,000 MW, only 25%

21. of which has been harnessed until now. Similarly, solar power, biomass and wind
power too have high potential for future development.
India has the world’s fourth-largest number of wind energy installations. According
to the Ministry of New and Renewable Energy (MNRE), wind energy is one of the
fastest-growing renewable energy sectors in the country. With a cumulative
deployment of over 13,000 MW, wind energy accounts for nearly 70% of the
installed capacity in the renewable energy sector in the country.
In July 2009, India unveiled a USD 19 billion plan to produce 20,000 MW of solar
power by 2022. The first Indian solar thermal power project (2 X 50 MW) is in
progress in Phalodi in the state of Rajasthan. According to MNRE, the share of
renewable-based capacity is 10.9% (excluding large hydro) of the total installed
capacity of 170 GW in the country, up from 2% at the start of the 10th plan period
(2002–07). This includes 13,065.78 MW of wind, 2,939 MW of small hydro power,
1,562 MW of (bagasse-based) cogeneration, 997 MW of biomass, 73.46 MW of
waste-to-power and 17.80 MW of solar PV for grid connected renewables at the end
of 2010.
According to the Ministry of Power, the scope for investments in the Indian power
sector stands at USD 300 billion.
20
Policy and Promotion
Foreign direct investment (FDI) up to 100% is permitted under the automatic route
for:
 Generation and transmission of electric energy produced in hydro electric,
coal/lignite-based thermal, and oil- and gas-based thermal power plants
 Non-conventional energy generation and distribution

22.  Distribution of electric energy to households, industrial, commercial and other
21
users
 Power trading
There is no requirement of licenses to set up new power plants, though FDI is not
allowed in the nuclear segment. The power sector received FDI worth USD 6,545
million between April 2000 and July 2011, which was 5% of the total FDI inflows
achieved, according to the Department of Industrial Policy and Promotion, which
formulates the country’s FDI policy and is part of the Ministry of Commerce and
Industry. An income tax holiday for 10 years in the first 15 years of operation and
waiver of capital goods’ import duties on mega power projects, above 1,000 MW
generation capacity, is provided as incentive for investing in the sector.
Power procurement is permitted through a transparent bidding process. There is no
customs duty on the import of capital goods for mega power projects. The state
electricity boards (SEBs) generate, transmit and distribute electricity in coordination
with private/Centrally-owned generating companies or other relevant agencies.
The Central Electricity Authority (CEA), constituted under the Electricity Supply Act
2003, is responsible for developing a sound, adequate, and uniform policy for the
control and utilisation of national power resources. It is also responsible for the
techno-economic appraisal of the project reports for the proposed power plants,
including those in the private sector. MNRE is responsible for developing renewable
power, for which the funding agency is the Indian Renewable Energy Development
Agency Ltd (IREDA). The Government of India has also constituted independent
regulatory commissions in 22 states. Distribution reforms have been initiated with
distribution being privatized in a few states such as Mumbai, Orissa and Delhi.
The government has also taken up some ambitious programmes such as the Ultra
Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY)
and Accelerated Rural Electrification Programme to rapidly increase installed
capacity. A working group was formed in 2011 by the Planning Commission on
power to review capacity addition during the 11th Plan and formulate a strategy for

23. the next plan period. It will also recommend an optimal mix of additional generation
capacity during the 12th plan period on the basis of different fuels. It will also
explore avenues for purchase of power from neighboring countries through joint
venture schemes.
Some of the other measures initiated by the government to provide a boost to the
power sector include the following:
 For the year 2011–12, tax-free bonds for Rs. 30,000 crore (USD 5.71 billion)
were announced for financing infrastructure projects, of which Rs. 10,000 crore
(USD 1.90 billion) were allocated for the power sector.
 In order to provide low-cost funds to some infrastructure sectors including
power, the rate of withholding tax on interest payments on external commercial
borrowings (ECBs) is proposed to be reduced from 20% to 5% for three years.
ECBs to part-finance rupee debts of existing power projects has also been
proposed to set up a powerloom mega cluster in Ichalkaranji in Maharashtra with
a budget allocation of Rs. 70 crore (USD 13.32 million).
 For the power sector, besides access to low-cost funds, the Ministry of Finance
has also proposed extension of the sunset date by one year for power sector
undertakings so that they can be set up on or before March 31, 2013, for
claiming 100% deduction of profits for 10 years.
As per the financial budget for 2011–12, tax-free bonds for Rs. 30,000 crore (USD
5.71billion) were announced for financing infrastructure projects, of which Rs 10,000
crore (USD 1.90 billion) were allocated for the power sector.
49% FDI & FII: Under the Power Sector’s investment policy, 49 % FDI & FII is
permissible for Power Exchanges. FDI investment will be subject to the government
approval.
22
Other conditions:

24. 1. Such foreign investment would be subject to an FDI limit of 26% and an FII
limit of 23% of the paid-up capital;
2. FII investments would be permitted under the automatic route and FDI would
be permitted under the government approval route;
3. FII purchases shall be restricted to secondary market only
4. No non-resident investor/entity, including persons acting in concert, will bold
more than 5% of the equity in these companies; and
5. The foreign investment would be in compliance with SEBI Regulations; other
applicable laws/regulations; security and other conditionalities.
For more information, kindly visit
http://dipp.nic.in/English/Policies/FDI_Circular_01_2013.pdf, Page no. 80-81
23
Major Players
Foreign players have teamed up with Indian partners to set up base in India.
Hinduja Energy India has formed a joint venture with Steag Energy Services (India)
for operation and maintenance of power projects. Another player, Toshiba JSW
Turbine & Generator Pvt. Ltd., will supply turbines for a Rs. 10,000 crore (USD 1.90
billion) thermal power plant in Karnataka. The Kudgi project is National Thermal
Power Corporation’s (NTPC) first in Karnataka. The total value of the contract is
around Rs. 2,300 crore (USD 437.76 million). Neyveli Lignite Corporation Ltd (NLC)
plans to set up a 2,000 MW coal-fired power unit in Odisha through a JV with a state
government-owned PSU. The proposed investment is of around Rs. 10,000 crore
(USD 1.90 billion).
Major public sector companies involved in the generation of electricity include NTPC,
Damodar Valley Corporation (DVC), National Hydroelectric Power Corporation
(NHPC), Nuclear Power Corporation of India (NPCI), Andhra Pradesh Power
Generation Corporation (APGENCO), Tamil Nadu Electricity Board (TNEB),
Maharashtra State Electricity Board (MSEB), Kerala State Electricity Board (KSEB), in

25. Gujarat (MGVCL, PGVCL, DGVCL, UGVCL — the four distribution companies — one
controlling body GUVNL, one generation company GSECL and one transmission
company GETCO). The Power Grid Corporation of India is responsible for the inter-state
transmission of electricity and the development of the national grid.
Some of the other prominent players in the Indian power sector include Tata Power,
Reliance Energy Ltd., CESC Ltd., Power Finance Corporation, Bharat Heavy
Electricals Ltd., Andhra Pradesh Power Generation Corporation Ltd., National
Hydroelectric Power Corporation Ltd. and Suzlon Energy, etc.
24
Sector Outlook
According to industry experts, the total demand for electricity will be above 950,000
MW by 2030. India has taken all the steps needed to provide energy from renewable
sources such as wind and solar power. In March 2011, the capacity of wind power in
India stood at around 12,000 MW.
Opportunities are coming up in power generation, transmission, distribution and
equipment and servicing with capacity additions for power generation, captive power
plants being set up, government promoting private sector participation in
transmission and distribution, transmission projects being awarded on tariff-based
bidding, privatization of distribution franchisees, scope for rural electrification, more
focus on improving efficiency and introducing advanced technology and greater need
for operational and maintenance services.
Entry Modes
To do business in India, following options are available to foreign companies:
Setting up a non-corporate entity

26. Liaison office: A liaison or a representative office can be opened in India subject to
approval by Reserve Bank of India. Such an office can undertake liaison activities on
its company’s behalf. A liaison office can also undertake:
 Representing parent/group companies in India
 Promoting import/export in India
 Promoting technical/financial collaborations on parent company/group’s behalf
 Coordinating communications between parent/group companies and Indian
25
companies
Branch Office: Foreign companies can conduct their business in India through its
branch office which can be opened after obtaining a specific approval from Reserve
Bank of India. A branch office can undertake following activities:
 Import & export of goods
 Rendering professional or consultancy services
 Carrying out research work in area which its parent company is engaged
 Promoting technical/financial collaborations on behalf of parent company/
overseas group company
 Representing parent/group companies in India and acting as buying/selling agent
in India
 Providing IT services and developing software in India
 Providing technical support for products supplied by parent company/group
Project office: If a foreign company is engaged by an Indian company to execute
a project in India, it may set up a project office without obtaining approval from
Reserve Bank of India subject to prescribed reporting compliances. As applicable in
case of a branch office, a project office is treated as an extension of foreign
company and is taxed at the rate applicable to foreign companies.

27. 26
Setting up a corporate entity
Wholly owned subsidiary: Foreign companies can set up wholly owned subsidiary
companies in India in form of private companies subject to FDI guidelines. A wholly
owned or a subsidiary company has the maximum flexibility to conduct business in
India when compared with a liaison or branch office and has following salient
features:
 Funding can be done via equity, debt (foreign as well as local) and internal
accruals
 Indian transfer pricing regulations apply
 Repatriation of dividends is allowed without approvals
Joint Venture with Indian partner: Foreign companies can also set up joint
venture with Indian or foreign companies in India. There are no separate laws for
joint ventures in India and laws governing domestics companies apply equally to
joint ventures.
Foreign Institutional Investors: FII’s can invest in India in financial markets
such as pension funds, mutual funds, investment trusts and asset management
companies or their power of attorney holders. FII’s can invest in all securities in
primary and secondary markets including the equity and other instruments of
companies which are listed or are to be listed on stock exchanges of India.
Entry Procedure
Set up process
Liaison office: Setting up of a liaison office requires prior approval from Reserve
Bank of India (RBI). Approval is usually granted for a period of three years and can
be renewed thereafter.

28. Branch office: A prior approval from RBI is required. RBI closely examines the
proposed activities to be carried out in India. Subsequently, a certificate of
establishing place of business in India is required to be obtained from Registrar of
Companies.
Project office: In specified cases, a project office is allowed to be set up under
automatic route otherwise a prior approval is required from RBI. As in case of
branch office, a certificate of establishing place of business in India is required to be
obtained from Registrar of Companies.
27
Incorporation of a company
For registration and incorporation, an application has to be filed with Registrar of
Companies. Once a company has been registered and incorporated in India, it is
subject to laws and regulations as applicable to other domestic companies in India.
There two types of companies which can be incorporated:
Private company: A private company is a company which has minimum of two
members and a minimum paid up capital of Rs. 100,000 or a higher paid up capital
as may be prescribed. By its articles, a private company has to:
 Restrict rights to transfer its shares, if any
 Limit its shareholders to a number of fifty
 Prohibit any invitation to public to subscribe any of its shares or debentures of
the company
 Prohibit any invitation to acceptance of deposits from any person other than its
members, directors or their relatives
Public company: A public company is defined as a company which is not a private
company. A subsidiary of a public company is also treated as a public company. A

29. public company is required to have a minimum paid up capital of Rs. 500,000 with a
minimum seven members and three directors. Maximum number of directors is 12
but can be increased subject to government approval.
28
Incorporation procedure:
Following steps are required to incorporate a company:
 Obtaining DIN (Director Identification Number)
 Applying for name availability
 Drafting Memorandum of Understanding (MOU) and Articles of Association (AOA)
 Court stamping of MOU and AOA
 Signing of MOU and AOA by first subscribers
 Filing with Registrar of Companies (ROC)
 Vetting of MOU and AOA by ROC
 Obtaining certificate of incorporation
Immediate Business compliances:
Following registrations would be required to be done, depending on nature of
business:
 PAN (Permanent Account Number): All income tax payers are required to obtain
an income tax registration number i.e. PAN
 TAN (Tax Deduction Account Number): While running a business, certain
payments will require the payee to withhold tax. A new business is required to
obtain Tan from income tax department.
 Service tax: A person/company providing specified services needs to obtain
service tax registration within 30 days of providing the services.
 VAT (Value Added Tax): VAT is levied on sale of goods. Any business proposing
to carry out a works contract or trade in goods needs to register for VAT.

30.  Excise registration: Excise is an indirect tax levy on manufacture of goods.
 FRRO (Foreigners Regional registration Office): Foreigners coming to India on
employment need to register with FRRO within 14 days of their arrival.
 IEC (Import Export Code): Prior to carrying out any export or import activities, it
is mandatory to obtain an IEC from Directorate General of Foreign Trade.i
29
Contact Persons:
Mrs Sushila Ram Varma
Chief Legal Consultant
Ph: +91 98111 91142, +91 99492 78548
Email - sushilaram@theindianlawyer.in, contact@theindianlawyer.in ,
sushilaram@gmail.com
Mogli S.V
Business Consultant
Ph: +91 78933 37474
Email – msv@theindianlawyer.in
i Sources
 http://www.ibef.org/industry/indian-oil-and-gas-industry-analysis-presentation
 http://petroleum.nic.in/
 http://oidb.gov.in/
 http://pcra.org/
 http://ppac.org.in/
 http://dipp.nic.in/English/default.aspx
 http://www.investindia.com
 http://www.makeinindia.com

31.  http://www.mdoner.gov.in/
 http://www.mdoner.gov.in/content/icc
 http://www.indianchamber.org/northeast/NorthEastIndustrialandInvestmentPromotionPolicy.p
30
df
 http://investinmanipur.nic.in/why_invest1.htm
 http://www.investinassam.com/
 http://investinmanipur.nic.in/
 http://mizoram.nic.in/welcome.html
 http://www.investinindia.com/state/assam/invest-assam