Madhya Pradesh: Means Business

1. Madhya Pradesh: Means Business Power

2. Overview Overview Madhya Pradesh (MP) – State that means business • MP is the second largest State in the Country stretching over 308,000 sq kms. • The State is blessed with large mineral resources of coal, diamond, limestone, methane etc. • MP is among the top 4 states of the Country for industrial investments. Economic Snapshot Madhya Pradesh is emerging as a key growth center for the Country • Per capita GSDP USD 369** • Manufacturing sector USD 8.5 bn** (Registered & Unregistered) • Gross state domestic product (GSDP) USD 23,983.63 Mn** • Average growth rate 5.5% per annum Advantage MP Madhya Pradesh has one of the upcoming industrial base in India • The State is centrally located • Investor friendly Government policies • Total electricity generation capacity 6,449.25 MW* • India’s first greenfield SEZ Indore SEZ • Industrial Centers 8 Power Electricity generation capacity at present is 6,449.25 MW and estimated to rise to a surplus in 2008-09 • MP is rich in low grade coal suitable for power generation. • Potential of hydro-energy generation. • Installed power capacity (MP’s share) • Hydel Power Generation: 852.7 MW* • Thermal Power Generation: 2,147.5 MW* *Ministry of Power (powermin.nic.in) **Source: Indiastat.com (as on 23 Feb 2006)

3. Enabling Infrastructure • The State is well connected with the rest of India with almost 425 trains passing through the State on a daily basis. Of these 175 trains pass through the State capital Bhopal alone. MP IS CENTRALLY LOCATED AND WELL CONNECTED WITH ALL MAJOR CITIES IN INDIA RAILWAY NETWORK • 25 airstrips.** • Convenient air links from key Indian cities like Delhi & Mumbai to Bhopal, Jabalpur, Gwalior, Indore and Khajuraho. • 5 operational airports. • Indore airport has the capability of handling international cargo. • An international airport proposed in Bhopal. GWALIOR KHAJURAHO AIRPORTS INDORE BHOPAL JABALPUR • The total length of roads spanning MP is 67,600 kms.** • National highways of 5,200 kms run through the State.* • 18 National highways including trunk routes of Delhi-Mumbai, Delhi-Chennai, Delhi-Bangalore, Delhi- Hyderabad. • The total length of State highways in the State is 9,885 kms.** • Convenient linkages to western ports i.e. Kandla Port, Jawahar Nehru Port Trust. ROAD NETWORK *Source: Department of Road Transport & Shipping (morth.nic.in) **Source: www.destinationmadhyapradesh.com

4. Madhya Pradesh: A Preferred Investment Destination 31% of the State under forest cover with a largely unexploited species of rare, valuable medicinal- herbal plants Over 2,000 kms of roads being developed with Private Partnership (BOT) Offers diverse tourists destinations catering to various segments of tourism such as religious (Bhojpur), eco/ adventure (Panchmari), heritage (Sanchi, Khajuraho) tourism etc. India’s 1st operational Greenfield SEZ at Indore Third largest producer of cement in India* Over 100 agricultural farms with an area of over 20,000 acres is available on lease to investor Favourable climatic conditions for cotton and over 40,000 power-looms are driving the textile industry Various blocks available for power, cement, iron and steel units Largest producer of pulses and oilseeds in the Country (~75% of soyabean production) Over 18,000 technical graduates and 230,000 graduates add to workforce each year 12 blocks with reserves totalling 2,585 million tons of coal has been identified Over 144 BCM of coal bed methane reserves available Availability of coal and natural gas (G.A.I.L pipeline) along with support from Government to make investment in Thermal Power Plants lucrative *Source: www.mpsidc.org & Brochure: MP Means Business

5. Delhi (740 Kms) (MPV - 789.5) Ahmedabad (570 Kms) (MPV - 220.63) Kolkata (1350 Kms) (MPV - 613.19) Mumbai (780 Kms) (MPV - 1000) Pune (800 Kms) (MPV - 206.51) Hyderabad (840 Kms) (MPV - 257.9) Key Markets (Distance From Bhopal) MPV – Market Potential Value Chennai (1430 Kms) (MPV - 362.84) Bangalore (1400 Kms) (MPV - 254.52) MP: The Right Place with the Right Environment Savings in Office Space Rates (A comparison of rates in Central Business Districts) DESTINATION MADHYA PRADESH Fastest mover* in overall performance among the big States in the Country. Fastest mover in agriculture Fastest mover in infrastructure development. Bhopal and Indore have substantial cost advantages, even when compared to other Tier III and IV cities. Savings in Land Cost Ranks 2nd in terms of governance. (Estimated Values for Multi-product SEZs) Ranks 3rd in terms of law & order Cost of skilled labour is USD 2.4/day vis-a-vis USD 3.5 – USD 4.0/day in metros The cost of land is one of the lowest in the Country. Even central hubs such as Indore and Bhopal fare well against other cities in terms of low land cost. MP is centrally located. The State is at an easy distance from all the key consumer markets in the Country. * Fastest mover is the State where the rate of improvement between 2003 & 2006 was greater than that between 1991 & 2003 **Source: India Today (September ‘06 Issue) - Distances rounded off Source: (Reference: RK Swamy)

6. Industrial Policy: Catalyst for the Investments • The Government of MP has devised an investor friendly industrial policy, which is aimed at achieving global competitiveness. The policy emphasizes on industrial growth in the state through adopting cluster approach, establishing specialized infrastructure and offering favourable incentives. • The main thrust of this policy is: • Establishment of a Madhya Pradesh Trade and Investment Facilitation Corporation which would take decisions about rationalization of taxes, facilities of mega projects and other related matters. • Enacting an Industrial Facilitation Act and to change the rules of business with a view to make single window system decisive and result oriented. • Developing infrastructure for supporting the identified industrial clusters • Reviving closed down/ sick industrial units by granting special packages. • Attractive incentive schemes. SPECIAL INCENTIVES • Special package for Mega Projects on project basis by apex level investment promotion empowered committee headed by the Chief Minister. • Industrial investment promotion assistance – 50% to 75% of commercial tax for 3-10 years • Concessional registration charges and stamp duty exemption for Term Loans. • Interest subsidy on term loan for 5 – years @ 3% to 5%. • For thrust sector industries, 25% capital subsidy would be provided limiting up to a maximum of USD 56,000 • Land on 75% concessive rate for Mega Projects limited to USD 4.4 million. • Entry tax exemption for 5 years. • 5 years electricity duty exemption on captive power generation • 15% capital subsidy to SSI up to USD 33,000 in backward areas • Infrastructure grant up to USD 0.22 million crore for developing private sector industrial parks • Partial reimbursement for Project report, ISO Certification, Patent and Technology Purchase cost • CLUSTER APPROACH • Indore – Pharmaceutical, Textile, Food Processing, IT, Auto Components • Bhopal– Engineering, Biotechnology, Herbal, IT, Food Processing • Jabalpur– Garment, Mineral, Forest & Herbal, Food Processing • Gwalior– Electronics, IT, FMCG, Engineering, Food Processing • Rewa– Refractories, Lime Stone, Forest Based • Sagar– Mineral Processing SPECIALIZED INFRASTRUCTURE

7. Doing Business Made Easy Through MPAKVN In a bid to build a competitive environment; industries and their ancillaries would be promoted in clusters based on the availability of raw materials, skilled labour andmarket potential. Under this Industrial Policy through Madhya Pradesh Audyogik Kendra Vikas Nigam Ltd (MPAKVNs) scheme, the State Government, has identified industrial clusters. Many of the industrial giants have their establishments in these areas, however 44% of developed area is still untapped and open for investment. Area Developed: 2,262 Hectares Allotted: 800 Hectares Units established: 326 Major Groups: JK, Surya Roshini, Godrej, Grasim, Cadbury, Hotline, Crompton Greaves Special Infrastructure: ICD, Food Park Area Developed: 790 Hectares Allotted: 125 Hectares Units established: 52 Major Groups: Raymond, Hindustan Petroleum, PBM, Ayur Special Infrastructure: Stone Park, Food Park Area Developed: 273 Hectares Allotted: 115 Hectares Units established: 121 Major Groups: Birla, Jaypee Special Infrastructure: Integrated infrastructure development centres (IIDC) Area Developed: 1,330 Hectares Allotted: 618 Hectares Units established: 286 Major Groups:HEG, Crompton Greaves, P&G, Godrej, Lupin, IFB, Oswal, Nahar Special Infrastructure: ICD, Food Park JABALPUR AKVN REWA AKVN GWALIOR AKVN BHOPAL AKVN Area Developed: 2,492 Hectares Allotted: 1431 Hectares Units established: 575 Major Groups: Tata, Ranbaxy, Eicher, Bridgestone, Hindustan Motors, Kinetic, SRF, S Kumars, Gajra, Nicholas Piramal, Indorama, IPCA, Bhilwara Special Infrastructure: SEZ, Crystal IT Park, Food Park, Apparel Park Malanpur, Malanpur Phase II, Banmore, Chainpura, Siddhgawan, Pratappura Rewa, Waidhan INDORE AKVN Mandideep, Pillukhedi, Mandideep Phase II Borgaon, Maneri, Purena Pithampur, Kheda, Dewas, Maksi, Megh Nagar Source: MPSIDC

8. Power Industry in Madhya Pradesh

9. Sector Profile: Power

10. India’s power industry is growing faster as compared to most of the other countries. In the last decade with substantial capacity addition, India has moved to 5th rank from 8th in terms of generation capacity globally. The country has installed generation capacity of 126 GW as on July 2006 , and a transmission & distribution network of more than 6.3 million circuit kms (2004). India consumes about 3.7% of the world’s commercial energy and is ranked 5th largest consumer of energy in the world. India’s power generation is largely coal dependent with 55% share in the total capacity mix. With India’s booming economy and vibrant industrial scenario, per capita consumption of power had almost doubled from 350 units in 1998 to over 600 units in 2005 and is further expected to reach 1000 units in 2012. (source: IBEF) With the targeted GDP growth rate of over 8%, energy demand is expected to grow at the rate of 5.2% annually. To support this the power supply of the country needs to be augmented by 10% annually. The mismatch in energy demand and supply in the country had resulted in the increased energy shortage from 27 BU in 1995 to 80 BU in 2005. Peak demand is expected to increase by 77% to 157,107 MW by 2012. Also the energy requirement is expected to increase by 274% to 975,222 MU by 2012. Power : Backbone of Indian Economy Energy Generation Bn KWh 2005 Fact Sheet Primary Energy Consumption mtoe 3rd Largest Consumer in Terms of Energy Demand Installed Capacity Mix Source: IBEF Report, Ministry of Power (CEA)

11. The Government envisages to provide power to all the households under its ambitious plan “Electricity for all villages by 2007” and “ Power for all by 2012”. The mission aims at enhancing the installed capacity upto 200,000 MW by 2012, accompanied by an increase in transmission and distribution network. The investment required in this regard in the sector is estimated to be over USD 200 bn. Almost 50% of this amount would be required for generation projects alone. The scale of investment required in power sector along with the need of advanced technical inputs, has carved out a significant role for private players in power sector. Nearly 5000 MW has already been added by the private sector under the 10th five year plan. It is expected to contribute 11,912 MW during the 11th plan from 2007-12. Government has initiated a string of reforms by enactment of Electricity Act, 2003 to attract foreign and private investment in the power sector. From allowing FDI upto 100% via the automatic route in all the segments (generation, transmission and retail distribution), to extending tax holiday for mega power projects, the government is keen to create an investor’s friendly environment. 200000 MW 126838 MW Projected Generation Capacity 2012 2006 India’s Power Sector - Opportunities Abound Opportunities for Private Investors Generation Share Mix Generation Share Mix Capacity Addition Plan Period Given the projected demand scenario coupled with favorable investment policies, the sector offers huge opportunities for foreign and private players. Source: Ministry of Power (CEA)

12. Key Policy Initiatives

13. MP: The Power House of India Overview: • M.P. has nearly 5% of the total installed capacity of India with 6449.25 MW as on July 2006 including the Central, State and private sector. The sources of power generation in the State includes thermal, hydel, wind power, methane gas etc. • The State’s share in the installed capacity was about 3000.2 MW in the year 2005-06. Out of which ~72% is thermal power and remaining is hydel power. • The total energy availability in the State has increased from 26,606 MUs to 29,237 MUs during 2001-02 to 2005-06 at a CAGR of 2.68%, wherein power purchase of the State has outgrown the own generation of the State. • The State is witnessing rapid industrialisation which would lead to very high increase in energy demand in coming years. Further, the installed capacity is also expected to increase in the coming years, with new projects coming in the State. • The State Government has taken necessary policy initiatives to facilitate the power sector reforms in the State. Installed Capacity of Power in M.P. (M.P.’s share) Energy Shortages & Peak Deficit in M.P. The increasing energy shortages and peak deficit indicates a need for rapid increase in power generation capacity of the State. Further, the new Government reforms, and presence of necessary resources makes the power sector very attractive for the private investors to set-up their plants in the state. Source: Annual Report (MPERC)- Tariff petition 2006, Ministry of Power

14. MP: Power House of India • Agriculture sector is one of the main energy consumers in the State. The HT consumers such as railway traction, coal mines, HT industrial and non-industrial activities etc. together accounted for 6549 MU of sales followed by domestic consumers in the year 2005-06. • The State has various organisations (mostly public undertakings) in the areas of power generation, transmission and distribution. These organisations are presented in the schematic below. • The Private sector has a very insignificant presence as of now with their major presence only in non-renewable resources and captive plants. However, various major companies are contemplating to set-up their units in M.P. Category-wise Energy Consumption in M.P. * * HT Consumers include traction, coal mines, industrial, irrigation, township, residential etc Source: Annual Report (MPERC)- Tariff petition 2006

15. Location Analysis • The State has following power generation units: Power Generation Stations in M.P.

16. Advantage MP M.P. Offers following Advantages to Power Industry Potential to be Energy Hub for Power Generation Established Infrastructure Government Support

17. MP: An Investment Destination With the growing industrialisation in the State along with the Rural Electrification Programme initiated by the Government, the demand for electricity would increase manifolds in the State. Industry Drivers in M.P. Energy Demand Projections in MP • The demand for energy in the State is estimated to increase by 45% by the year 2011-12. • M.P. is likely to face the energy deficit in the next five years and its energy deficit in 2011-12 is expected to be as high as 10.5% (source: MPSEB) • The natural resources available in M.P such as thermal, hydel, wind power and coal bed methane has the potential to generate 15000 MW of power in next 5-10 years. An increase of 45% is projected by 2011-12 Government Initiatives • The thermal and hydel power plants set-up in the State will receive incentives from the Central as well as State Government(mentioned in prior slide). • The State Government offers various incentives for organisations installing power generation unit utilising non-conventional feed stocks. These incentives include electricity duty exemption, sales tax benefits, land incentives etc. These investors have the option of using the power themselves as captive power and selling it to the MPEB @ USD 0.05 per unit (source: MPERC) • Government also provides incentives for setting-up captive plants in the State.

18. MP: An Investment Destination Major private players such as Reliance, Essar and Jaypee Group have acknowledged the potential of M.P. and have proposed investment plans in the State. Ultra Mega Project in M.P. • The central government is setting up Ultra Mega Power Projects 5 locations in the country. • The project is first initiated in MP and is at an advanced stage of establishment. • Sasan in M.P., a pithead location based on domestic coal availability (while other proposed plants would be imported fuel based) is identified for setting up this project. • It is a large project of 4000 MW at a single location thereby ensuring economies of scale. • Project would require an investment of about USD 3.3 billion. • The project would utilize super critical technology to ensure higher efficiency and lower CO2 emissions • The projects would be awarded to developer through tariff based competitive bidding to ensure cheaper power.

19. MP: Way Forward With the increasing demand for power in the State and State’s objective to provide power to all by the year 2008, there lies several opportunities for public-private partnership in the sector. Opportunities across the value-chain Power Transmission Power Trading & Distribution Power Generation Power generation plants based on: • Coal reserves • Hydel power • Biomass • Coal bed methane • Wind • The Transmission could be taken through Joint Venture or Independent Private Transmission Company (ITPC) route. • 400 KV Bina-Nagda-Dehgam D/C line in Western Region has been taken up as a pilot project by POWERGRID and would be awarded to private party soon. • This activity could be taken independently or under joint venture by private players under public-private partnership in the State.

20. Connecting Further Madhya Pradesh State Electricity Board www.mp.nic.in/energy/mpseb Madhya Pradesh Electricity Regulatory Commission www. www.mperc.org www.mptransco.nic.in Madhya Pradesh Power Transmission Corporation Ltd. www.mppkvvcl.nic.in Madhya Pradesh Paschim Kshetra Vidyut Vitran Company Ltd. www.mpmkvvcl.nic.in Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Ltd. www.mpez-electricity-discom.nic.in/ Madhya Pradesh Poorv Kshetra Vidyut Vitran Company Ltd. www.mprenewable.org Madhya Pradesh Urja Vikas Nigam Ltd. www.mpsidc.com Madhya Pradesh State Industrial Development Corporation www.mpgovt.nic.in Government of Madhya Pradesh