The power sector in India has entered into the growth stage since 2003. With a production of 1,006 TWh, India is the fifth largest producer and consumer of electricity in the world after Russia. The sector is also witnessing robust growth in renewable sources of energy with wind and solar energy estimated to contribute 15GW and 10GW respectively, during the next five year plan. The government passed the National Tariff Policy in 2006 that ensured adequate ROI to companies engaged in power generation, transmission and distribution and assured the consumers affordable rates.

1. Industry Analysis
Indian Power Sector
Arjun Yadav
IIM Indore, Mumbai

2. Key Success Factors
• Market Position: The company with strong operating
performance and favorable terms of services can position itself
better in the industry.
• Regulation: Since the industry is highly regulated, companies must
be able to comply with the regulations and be flexible to changes.
• Cost and Operation Management: Managing costs is an
important concern as selling prices are not flexible and fuel prices
are irregular. Downstream efficiencies for better transmission and
distribution. Operational success will lead to efficiency.
• Diversification: Companies need to diversify its market segments,
type of generation plants and location, in order to keep their
business sustainable.

3. PESTEL and Industry analysis
Political / Government policies Analysis:
• The low allocation of budget in power sector hampered the
rural & urban electrification, and power generation capacity.
• The different pricing regimes and distribution policies of state
governments further aggravated the power situation.
• As the state government paid these subsidies irregularly, the
SEBs did not plan any long term project implementation i.e.
capacity expansion, network extension, regular maintenance
and system improvement. This also affected the T&D losses of
SEBs.

4. PESTEL and Industry analysis
Economic Analysis:
• Multiple drivers (industrial expansion, growing per-capita
incomes) leading to growth in power demand - this is set to
continue in the future.
• During FY10–15, GDP growth is likely to average 8.0–8.5 %
• India set to become a global manufacturing hub with
investments across the value chain
• Power consumption estimated to increase from 821.2 TWh in
2013 to 1,433.2 TWh by 2022
• India’s power demand expected to rise up to 1,915 TWh by
FY22

5. PESTEL and Industry analysis
Technological Analysis:
• India to face significant challenges in achieving high
CO2 reduction in power generation, while also meeting the
predicted growth in demand and supply.
• Accelerated exploitation of natural resources and more trans
mission and distribution (T&D) capacity are essential to ove
rcome the current problems.
• Increased competition, additional equipment supply capacity
and other actions to involve the private sector can help to acc
elerate investments.

6. PESTEL and Industry analysis
Environmental Analysis:
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Openness towards renewable energy
Effect on flora and fauna
Air and Water pollution
Social Analysis:
Waste Management
• Poor health level
Environment Laws
• Food insecurity
Poor health level
• Homelessness
• Loss of assets
• Landlessness
• Joblessness

7. PESTEL and Industry analysis
Legal & Regulatory Analysis:
• If government doesn’t own sufficient resources to develop
power projects, it has option to issue the license to others for
these projects.
• There is legal frame work for laying down wires and other
works but there was no regulation regarding the tariff, power
generation, and infrastructure development.
• There are some provisions to maintain the relationship
between licensee and consumer but there was no regulation
for efficiency of power plant, tariff, environmental issues, and
infrastructure development.

8. The value chain of the industry
Prior to 2003, the market was vertically integrated with state
owned boards, causing monopoly and price regulation.
• The value chain starts from the producers.
• Forwarded to generation facilities where they are converted
to power.
• Generators pass it on to the distributors.
• Supplied to the consumers over the network.

9. Market Leader
• NTPC has a significant
presence in the value chain of
power generation business.
• Current generating capacity
of 30,144 MW - plans to
become a 75,000 MW
company by 2017.
• NTPC has 18.79% of the total national capacity it contributes
28.60% of total power generation due to its focus on high
efficiency.
• NTPC thus became a listed company in November 2004 with
the government holding 89.5% of the equity share capital.

10. Second Largest Player
• Presence in all the segments of the power sector Generation (thermal, hydro, solar and wind),
Transmission, Distribution and Trading. It is one of the
largest renewable energy players in India.
• Its international presence includes strategic
investments and collaborations in other countries.
• With its track record of technology leadership, project
execution excellence, world class safety processes,
customer care and driving green initiatives, Tata Power
is poised for a multi-fold growth.