Business Portal of India : Industry and Services : Industries : Power

Electricity is a key driver of rapid economic growth and industrialization in the country. It is one of the critical infrastructure on which development of several economic sectors depend. India is the world's sixth largest energy consumer accounting for about 3.5% of the world's total annual energy consumption. Availability of reliable and quality power at competitive rates to Indian industry is necessary to make it globally competitive and to enable it to exploit the tremendous potential of employment generation. Over the years, Indian power industry has shown considerable growth. Foreign direct investment (FDI) upto 100 percent has been permitted through automatic route in generation, transmission and distribution segments.

The 'Ministry of Power' is the main authority for the overall development of electrical energy in the country. It is responsible for planning and policy formulation; processing of projects for investment decision; monitoring and implementation of power projects; as well as administration and enactment of legislation in regard to power generation, transmission and distribution.

In order to encourage greater investment into power industry, several policy reforms and initiatives have been undertaken from time to time. The most important being, the enactment of 'Electricity Act, 2003', which aims to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity; promote competition in the power sector; and supply electricity to all areas. It seeks to rationalise electricity tariffs, promote efficient and environmentally benign policies, provide stringent penalties in case of theft of electricity, etc. Under the Act, the Central Government has prepared the 'National Electricity Policy' and the 'National Electricity Plan'.

The National Electricity Policy aims at laying guidelines for accelerated development of the power sector and protecting interests of consumers and other stakeholders, keeping in view availability of energy resources, technology, economics of generation and energy security issues. Central Electricity Authority frames a National Electricity Plan once in five years and revise the same from time to time in accordance with the policy. The plan involves forecasting short-term and long term demand for different regions as well as suggesting areas/locations for capacity additions in generation and transmission.

However, the Electricity (Amendment) Act, 2007 has been announced to amend certain provisions of the Electricity Act, 2003. The main features of the amendment Act are:-

Central Government, jointly with State Governments, to endeavour to provide access to electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households.
No license required for sale from captive units.
Deletion of the provisions for elimination of cross subsidies. The provisions for reduction of cross subsidies would continue.
Definition of theft expanded to cover use of tampered meters and use for unauthorized purpose. Theft made explicitly cognisable and non-bailable.

The opportunities in the power sector lies in the regulation and development of following thrust areas, namely:-

Electricity Generation

The thermal, hydro and nuclear energy are the major sources of generation of electricity in India. The total installed power generation capacity has been 1,47,402.81 MW (as on December 31, 2008), consisting of 93,392.64 MW (thermal); 36,647.76 MW (hydro); 4,120 MW (nuclear); and 13,242.41 MW (renewable energy sources). The All India Thermal Plant Load Factor (PLF) during 2008-09 (upto December 2008) has been 75.13 per cent (provisional).

Maximum emphasis has been laid on full development of the feasible hydro potential in the country. Hydroelectricity is a clean and renewable source of energy. The Ministry has undertaken several steps to accelerate capacity addition from hydro-electric projects. For instance:- higher budgetary allocation for the hydel sector; investment approval of new hydro-electric projects; promoting State sector projects which were languishing or could not progress due to Inter-State disputes; simplification of procedure for transfer of clearance; etc.

Imported coal based thermal power stations, particularly at coastal locations, are being encouraged based on their economic viability. Use of gas as a fuel for power generation depends upon its availability at reasonable prices. Natural gas is being used in Gas Turbine /Combined Cycle Gas Turbine (GT/CCGT) stations. A national gas grid covering various parts of the country as well as Imported LNG based power plants act as a potential source of electricity. Nuclear power plants are also being set up at different locations to meet base load demand. Both public and private sector investments are needed to step up for creating nuclear generation capacity in the country. Moreover, investment by foreign investors for manufacturing of renewable energy systems and devices are based on:- Wind, Solar Photo-voltaic, Solar Thermal, Small Hydro, Biomass, Co-generation, Geothermal, Tidal and Urban and Industrial Wastes based power projects.

To provide availability of over 1000 units of per capita electricity by year 2012, it has been estimated that need based capacity addition of more than 1,00,000 MW would be required during the period 2002-12. To fulfill the objectives of NEP, a capacity addition of 78,577 MW has been proposed for the 11th plan. This is expected to provide a growth of 9.5% to the power sector.

The Ministry has initiated several reform measures to create a favourable environment for addition of new generating capacity in the country. For instance, development of 'Ultra Mega Power Projects (UMPPs)' has been identified as a thrust area. These are very large sized coal-based projects in India, each with a capacity of 4000 MW or above. These projects will meet the power needs of a number of States/ distribution companies located in these States, and are being developed on a Build, Own, and Operate (BOO) basis.
Electricity Transmission

Transmission of electricity is defined as bulk transfer of power over a long distance at a high voltage, generally of 132 kV and above. A well planned and strong transmission network ensures optimal utilization of transmission capacities and generation facilities. The entire country has been divided into five regions for transmission systems, namely Northern Region, North Eastern Region, Eastern Region, Southern Region and Western Region. The interconnected transmission system within each region is called the regional grid. Formation of strong 'National Power Grid' has been recognised as a major initiative for facilitating the development of power industry and fulfilling the objective of 'electricity to all' at affordable rates.

The Central Transmission Utility (CTU) is responsible for the national and regional transmission system planning and development and is also providing Open Access on its inter-State transmission system. While, the State Transmission Utility (STU) is responsible for planning and development of the intra-state transmission system. The Power Grid Corporation of India Limited (PGCIL)/ Power Grid has been set up for establishment and operation of regional and national power grids, in order to facilitate transfer of power within and across the regions with reliability, security and economy, on sound commercial principles.

The country’s transmission perspective plan for XIth plan focuses on the strengthening of National Power Grid through addition of over 60,000 MW of transmission network by 2012. Such an integrated grid shall carry 60% of the power generated in the country. The existing inter-regional power transfer capacity is 17,000 MW, which is to be further enhanced to about 37,700 MW by 2012 through creation of 'Transmission Super Highways'. Based on the expected generation capacity addition in XI plan, an investment of about 75,000 crore is envisaged in Central sector and Rs. 65,000 crore is envisaged in the State sector.

Government of India has issued guidelines for mobilising resources from private sector. These guidelines envisage two distinct routes for private sector participation in transmission, namely:- (i) Joint Venture (JV) Route, wherein the CTU/STU shall own at least 26% equity and the balance shall be contributed by the Joint Venture Partner (JVP); and (ii) Independent Private Transmission Company (IPTC) Route, wherein 100 percent equity shall be owned by the private entity.

As on November 2007, POWERGRID is operating around 64,300 ckt kms of transmission lines along with 108 sub-stations with transformation capacity of about 66,000 MVA . About 45 per cent of total power generated in the country is being transferred over POWERGRID's transmission network. In North-Eastern Region (NER), POWERGRID’s transmission system consists of about 5,070 ckt. kms of transmission lines including 864 ckt. km of inter-regional lines between NER and ER and 14 sub-stations.
Electricity Distribution

Distribution is the most critical segment of the electricity business chain. The Ministry of Power has been undertaking various initiatives and policy measures for bringing about improvement in the power distribution network of the country. For instance, the 'Accelerated Power Development and Reforms Programme (APDRP)' has been launched with the following objectives:-
- Improve financial viability of State Power Utilities;
- Improve commercial viability of State Electricity Boards;
- Reduce aggregate technical and commercial (AT&C) losses to around 10%;
- Iimprove customer satisfaction; and
- Increase reliability and quality of power supply.
APDRP has two components, namely:- (i) Investment component - for strengthening and up gradation of the sub-transmission and distribution system in densely electrified zones in the urban and industrial areas. It includes central assistance to the tune of 25% and 90% of the project cost in the form of grant to Non-special category and special category States respectively. Balance amount to be arranged from Financial Institutions/ own resources; and (ii) Incentive component - for encouraging/ motivating utilities to reduce cash losses, which are calculated net of subsidy and receivables. The year 2000-01 has been adopted as the base year.
Rural Electrification

Rural electricity involves supply of energy for various production oriented activities like minor irrigation, rural industries etc. as well as for electrification of villages. A village is declared to be electrified if:- (i) basic infrastructure such as Distribution Transformer and Distribution lines are provided in the inhabited locality within the revenue boundary of the village, including atleast one Dalit Basti/ hamlet as applicable; (ii) electricity is provided on demand to public places like schools, panchayat office, health centres, dispensaries, community centers, etc; (iii) the ratings of distribution transformer and LT lines to be provided in the village would be finalized as per the anticipated number of connections decided in consultation with the Panchayat/Zila Parishad/District Administration who will also issue the necessary certificate of village electrification on completion of the works; and (iv) the number of households electrified are at least 10% of the total number of households in the village.

'Rural Electrification' has been regarded as a vital programme for socioeconomic development of rural areas. It aims to trigger economic growth and generate employment by providing electricity as an input for productive uses in agriculture and rural industries. Accordingly, both the Central Government and the State Governments are making all efforts to secure electricity access to all rural households and to ensure that it reaches poor and marginal sections of the society at reasonable rates.

Rural Electrification Corporation of India (REC) is the nodal agency at Central level to achieve the goal set by National Common Minimum Programme of giving access to electricity to all the households in next five years. It has been set up with the objective of financing and promoting rural electrification projects all over the country. The projects cover electrification of villages, including tribal villages and Dalit Bastis, energisation of pump sets, provision of power for small, agro-based and rural industries, lighting of rural households and street lighting.

Several programmes has been launched, from time to time, for electrification of rural areas. Some of them are:-
- Pradhan Mantri Gramodya Yojana (PMGY)
- Kutir Jyoti Scheme
- Accelerated Rural Electrification Programme
- Accelerated Electrification of One lakh Villages and One Crore Households
- Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
All States except Delhi and Goa have signed agreements under RGGVY. In 2007-08, 5691 unelectrified villages have been electrified (as on 11.01.2008). The continuation of RGGVY has been approved by the Government in the 11th Plan for attaining the goal of providing access to electricity to all households, electrification of about 1.15 lakh un-electrified villages and electricity connections to 2.34 crore BPL households.
Ongoing projects for power development in North-Eastern region, which are likely to yield benefits during the XI plan, are:-
1. Central Sector Projects
2. State Sector Projects
3. Private Sector Projects

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