Indian Power System – Institutional Framework

1. LONG TERM GROWTHSTRATEGIES FOR POWERGRID BYK.Krishnakumar, S.K.Roy, T.Biswas, A.Patir, C.B.Samanta, A.K.Sharma(GMP –IIM , LUCKNOW)

2. Indian Power System – Institutional Framework • Electricity is a concurrent subject • POWERGRID, the Central Transmission Utility (CTU) – responsible for Grid Management, wheeling of power of central generating utilities , inter-state Mega IPPs and any other agency desiring so. • SEBs/STUs are responsible for – • Wheeling of power from state generating units and state level IPPs. • Power distribution in the state. • Few private distribution agencies operates as bulk licensee viz, CESC, Reliance, Tata Electric, AECo etc.

3. Evolution of Indian Power Grid • Phenomenal expansion since independence • Generation : 1349 MW 110,000 MW (in 1947) (in 2002) • Grid : Local grid – at the time of independence. State Grids – emerged in 1960s. Regional Grids – in 1970s. Five Regional Grids – Northern, Western, Southern, Eastern & North-eastern National Grid – under progress.

5. POWERGRID, AREAS OF OPERATION • Construction of Transmission System and its Operation & Maintenance • POWERGRID as the Central Transmission Utility (CTU) – responsible for transmission of power of central generating utilities , inter-state Mega IPPs and any other agency desiring so. • Operation of RLDCs and Grid Management • Consultany in the areas of • Transmission System (Construction and O&M) • Power distribution • Information Technology • Executing 27 consultancy jobs worth cost of around 1200 cr. And consultation fee of 155 cr. • Telecom

6. Track Record 1992-93 2002-03 Total Growth (%) Physical Growth No. of S/s 39 79 102 MVA capacity 13,200 44,834 240 Circuit kms 23,000 46,245 101 Inter-regional500 8,000 1500 transfer capacity(MW) Financial Growth (Rs crs.) Net profit 236 643 172 Turnover 634 2,533 300 No. of employees 5,725 6,923 21

7. Indian Power Scenario – by 2011-12 • Projected Peak Demand – 1,57,000 MW (As per 16th EPS) • Capacity addition envisaged • in 10th Plan – 41,000 MW • in 11th Plan – 45,000 MW

8. Objectives / Task Ahead • Development of Transmission System – commensurate with generation/ demand • Establishment of National Grid & its Operation/ Management • Efficient Operation / Maintenance to achieve maximum availability • Expansion of Consultancy Business • Economic use of existing infrastructure to Develop Telecom Business

9. Challenges • Fund Mobilisation for planned growth • Arranging ROW • Forest Clearance in view of awareness in Public, involvement of NGOs , and concern of apex courts • Maintain leadership in transmission business in the new environment (regulatory regime/new electricity act) • Technical Upgradation to meet future requirements • Increase profitability • Exploration of avenues for consultancy business • Vendor Development to meet huge requirement of Materials and Erection activities • Maintain availability of Telecom System

10. SWOT Analysis • Strength • Recognised as Miniratna Company • Proven Technical Expertise in Transmission System upto 800 KVAC & HVDC • Project Management right from concept to commissioning • Experienced work force in varied terrain all across the country • Expertise in design / Implementation of State of the art ULDC Projects • Proven Maintenance Practices using hot line & ERS • One of the largest / best Transmission utility in the world • Monopoly business & Govt. Protection • Won confidence of World Bank, ADB and other International Funding agencies. • Well defined quality policy & procedure ,Works & procurement Policy,developed web based Inspection system • Possess wide spread Infrastructure for diversification into other areas like Telecom

11. SWOT analysis contd… Weakness • High Capital Investment in Projects and heavy dependence on debt financing • Investment approvals required from GOI • Lessor redundancy in the system • Mismatch in Generation Project and Trans. System adversely affect financial Strength • Limited Capability of indigenous manufacturers and construction agencies to cater to huge expansion envisaged • Ageing Transmission System and work force • Lack of Profit centre concept at regional level

12. SWOT analysis contd • Opportunities • Technical expertise to fetch Consultancy business at National / International level • Existing Infrastructure for diversification into telecom • Venture into Distribution Area, vertical integration • Introduction of Private Sector participants to induct Financial resources

13. SWOT analysis contd… • Threats • Poor health of Consumers(SEBs) • Uncertainty in addition of planned generating capacity • System susceptible to vagaries of Nature • Serious ROW Problems & growing Environment concern • Lack of commensurate long term Funds to meet Trans. Requirement • Erosion of Knowledge base due to greener pastures outside • Possibility of losing monopoly status in times to come and subsequent competition • Cost dependency on Exchange rate variation • Law & order Problem in NER/ J&K etc. • Working in Regulatory regime • Stiff competition in Telecom sector

14. National Grid: Cost-benefit analysis Cost • Investment required  Rs. 23,000 crores Benefits • Reduction in capacity addition requirement by about 13000 MW--- hence saving on investment of Rs. 52,000 crore (due to peak time diversity and saving in spinning reserve) • Transmission highway would enable setting up of large size pit head stations having lower cost of energy • Savings on account of this –Rs. 9000 crores per annum . • In addition, Nation’s investment towards fuel transportation infrastructure could be avoided. • Better overall hydro-thermal mix • Very low for ER and WR ( ER – 15 : 85, WR - 17 : 83 ) – affecting grid operation • With National Grid, it would become 33 : 67 on all India basis. .

15. Major Challenges & Perceived Solutions Mobilisation of Funds • Considerable investment required for creation of Transmission Infrastructure • Investment requirement in : US $ 16 billion (Rs. 76,000 Central transmission sector Cr.) (including National Grid) by the year 2011-12 • Investment by POWERGRID : US $ 12 billion (Rs. 56,000 Cr) • Investment by Private Sector : US $ 4 billion (Rs. 20,000 Cr)

16. Attracting Private Sector Participation Mobilisation of Funds through two routes namely : Joint Venture Route (JV) • Project specific Shell company for obtaining statutory approvals to offer bankable projects to private sector • Proposed equity participation to the tune of 25% to 49% • Has already setup joint venture with Tata Power for specific transmission lines associated with Tala Hydro Electric project Independent Power Transmission Company Route (IPTC) • Selection of the promoter through two stages (RfQ & RfP) ICB based on Transmission Service Charges (TSC) • International consultant appointed under the technical assistance(TA) of ADB • Transmission licensee to establish the project under BOOT • Pilot projects being taken up

17. Major Challenges & Perceived Solutions Realisation of Investment • Realisation of investment by POWERGRID is made from SEBs on fixed transmission charges basis. • As National Grid is planned on long term basis, its utilisation in initial period will be less ---- hence, transmission charges would be on higher side. SEBs generally reluctant to pay higher transmission charges --- due to their poor financial health. • Poor recovery can affect health of POWERGRID --- hence future development of transmission system. Perceived Solution:Special methodology need to be adopted for recovery of tr. charges of Transmission highways.

18. Major Challenges & Perceived Solutions • National Grid to be established through Govt. support as basic infrastructure ---- similar to National Road Highways. • GOI can extend support in following way : • Alt-I : GOI provides funds, and POWERGRID execute the system on deposit work basis. • Realisation through rational tariff based on allocation of power. • Alt-II : GOI provides interest free loan to POWERGRID with extended repayment period --- so that tariff payable by SEBs would be reduced. • Alt-III : GOI provides fund for Equity portion ( 20% of cost). Balance to be arranged by POWERGRID through loan. • SEBs to pay fixed transmission charges for debt-servicing for initial period --- thereafter commercial charge.

19. Major Challenges & Perceived Solutions Proper Load Despatch & Communication Facilities (ULDC) • Implementing/implemented ULDC schemes in all five regions with state-of-art- SCADA, EMS etc. comprising 3 hierarchical level • An investment to the tune of US $ 425 million (Rs. 2000 Cr.) • Achieved distinctive feat by implementing world’s largest ULDC scheme in Northern and Southern Region Establishment of National Load Despatch Centre (NLDC) by interconnecting all the regions. Integrated Grid Operation • Strict adherence to grid discipline for maintenance of voltage and frequency parameters in the desired range • Operation of generating units in free governor mode. • Implementation of “Availability Tariff” having provision of penalties and incentives to encourage grid discipline.

20. Major Challenges & Perceived Solutions • For extending benefit to National Grid, development of sub-transmission and distribution is vital – responsibility lies with states. • POWERGRID, time-to-time undertakes critical state schemes – which are vital for entire grid. • To make distribution system effective and efficient – • 350 distribution circles all over the country are made profit centres • Total investment envisaged – US $ 10 billion • GOI launched Accelerated Power Development Program (APDP), with an outlay of Rs. 1000 crores in 2000-01. • Rs. 3500 Crore has been allocated for 2002-03. • Assigned responsibility develop 55 circles in 16 states as a role model and centre of profit under APDRP Scheme • Powergrid is implementing Sub-transmission system in Bihar, Goa and doing studies for states like UP, Rajasthan

21. Major Challenges & Perceived Solutions Uncertainty in Generation Addition • Big gap between planned and actual generation addition programme. • Uncertainty more in private sector projects. • Development of optimal transmission plan hampered. Perceived Solution: Creation of tr. Highways from resource-rich pockets to load centres, without linking them to a particular generation project

22. Major Challenges & Perceived Solutions Delay in Finalisation of Inter-regional Links There is invariable delay in finalisation/ clearance of inter-regional lines due to • Question on firm availability of surplus power on long-term basis • Commitment of firm allocation of power • Commitment of SEBs to pay transmission charges towards investment in inter-regional schemes

23. Major Challenges & Percieved Solutions Environmental/Social Issues • Construct/maintain grid with least impact on environment . • Take all measures according to the guidelines issued by MOEF from time to time • Using high rise towers , multi-circuit towers and existing corridors to protectenvironment • To address the social aspect in a systemized manner POWERGRID developed Environment policy called –ESPP (Environmental social policy & Procedures) in consultation with WB / ADB / environment concerned agencies and covers Social economic survey, identification of PAPs, PAFs to finalise benefit schemes

24. Conclusion To summarize we can put POWERGRID strategy in following way • Growth Strategy • Improve sources of revenue through consultancy business in the country (exploit unbundling era in SEBs) • Explore avenues in other developing countries and utilise its rich experience in the field of design / Project Management • Add sources of revenue by diversifying into Distribution area • Explore business in Quality/ Inspection area • Use of existing infrastructure for Telecom business • Customer Perspective • Solve customer problem through advice and consultation • Identify potential / Profitable customers • Help SEBs in developing infrastructure at distribution level, through consultancy/Forming Joint ventures • Help States during Crisis/ disaster

25. Conclusion • Operational Strategy • Better Asset utilization by increasing capacity of existing infrastructure by Reconductoring /Sereis compensation / FACT/ Operation of lines at higher Temperatures etc. • Intensive use of IT effectively for areas like inventory/ surplus material management , Improve productivity of Human resources • Introduce reward / Penalty for performance by vendors in major schemes • Internal Process Perspective • Maintain relationship with MOP / MOF/ MOEF/CEA/ Multilateral Funding agencies etc. • Grow environment awareness in employees • Technological upgradation through innovations in design , construction and O&M techniques • Develop Inforamation & Knowledge management system • Minimise Cost / Time Over runs • Maintain Quality Standards in all areas • Introduce reward and penalty scheme to increase productivity

26. Thank You