Removing Roadblocks in
Generation – Towards 24 Hour
Power Supply
Association of Power Producers
19 Dec 2011
Several Initiatives to Improve Access of Electricity in
Rural Areas
• Electricity Act 2003 and National Electricity Policy
– decentralised distributed generation
• Rajiv Gandhi Grameen Vidyutikaran Yojana
However,
• 56% of rural households and 400 million people
without electricity access
• Per capita consumption of India @ 778 kwh as
compared to 2471 kwh of China
• Electrified rural areas get 6-8 hours of supply with
poor quality of service
24 hours supply appears to be a distant dream as long as basic power
generation issues are not tackled
2
Indian power sector is passing
through a very critical phase and the
current situation is the outcome of
inaction on the part of the Govt and
exuberance on part of some of the
private players
3
The major bottlenecks are
• Fuel – shortage of domestic coal and
pricing of imported coal and blended
power
• Land Acquisition Issues
• Environmental Issues
• Poor Financial Health of Distribution
Utilities
4
Biggest Challenge Being Faced by Developers - Fuel
300000
285,000 MW
250000
181,558 MW
Installed Capacity (MW)
200000
Rest Coal
62%
Rest Coal
54%
150000
Rest Coal
63%
100000
Rest Coal
62%
63,636 MW
105,045 MW
132,329 MW
Rest Coal
55%
85,795 MW
Rest Coal
59%
50000
42,584 MW Rest
Coal
65%
0
End of 6th Plan
End of 7th Plan
End of 8th Plan
End of 9th Plan
End of 10th Plan
As of Aug 2011 Anticipated end of
12th Plan
Coal has remained and is expected to remain the dominant fuel by far. With 74%
of the 12th Plan additions being based on coal, coal share of the total
generation portfolio is expected to be 62% by the end of 2017
5
Shortage of Domestic Coal
 Estimated domestic coal requirement for the power sector in FY 12 is 455 MT (as
per CEA) and availability is around 402 MT (including all sources). Therefore the
current deficit of coal is 53 MT for power sector in FY 12 leading to a stranded
capacity of ~13000 MW
Looking at the fact that 74%
of the 12th Plan capacity
addition (of 100,000 MW) is
based on coal, it is
estimated that the total coal
deficit will be 292 MT by the
end of 2017
6
How Is This Impeding Country’s Generation Portfolio
 Case I linkage coal based projects – At the time of bidding, tariff quoted by
developer was on the domestic linkage coal price and LOAs once issued assures
the holder of ‘100% of the quantity as per the normative requirement’ as per the
New Coal Distribution Policy. However, Coal India Ltd’s failure to meet its
commitments under LOA has resulted in Case I developers unable to meet their
obligations under PPA as there is no provision in PPA to provide for escalation in
case coal is arranged through e-auction or through imports.
 Case 2 linkage coal based projects – Same situation, however incase the
design specifications of the boilers limit the acceptance of imported coal beyond
10-15%, the developer would not be able to meet the normative capacity
availability requirement of 85%
 Imported coal based projects – Shortage of coal in India and China and the
resource nationalism exhibited by coal exporters such as Indonesia and Australia
has led to steep increases in coal prices on a global level.
Stranded assets post 2009: Ratnagiri (JSW), Babandh (Lanco), Amarkantak (Lanco), Tiroda
(Adani), Jhajjar (CLP), Bara (JP) etc
Projects based on Imported Coal: Mundra (Tata), Krishnapatnam (Reliance), Udupi (Lanco)
Projects based on Blended Coal: Aravali (NTPC JV), Sipat (NTPC)
7
Capacity Contracted Under Competitive Bidding
UMPP
(16000 MW)
Competitive Bidding
(Total Capacity
Contracted: 41615 MW)
Case – I
(15275 MW)
Captive Coal block based
(2330 MW)
2008 (1320 MW)
2010 (1010 MW)
Domestic Linkage Coal
Based (10045 MW)
2006 (2200 MW)
2007 (1841 MW)
2008 (2404 MW)
2009 (1000 MW)
2010 (2600 MW)
Imported Coal based
(2900 MW)
2006 (1000 MW)
2009 (300 MW)
2010 (1600 MW)
Case – II
(10340 MW)
Linkage Coal Based
(10340 MW)
Type of Bidding
Types of Projects
2006 (1100 MW)
2008 (4620 MW)
2009 (4620 MW)
PPAs signed in
the year
8
Is Imported Coal A Viable Option
Restrictions
on export,
additional
customs
and duties
etc
Resource Nationalization
– Indonesia, Australia,
South Africa
Forex Outgo – Coal
Import Bill could touch
Rs 150,000 Cr
Almost
1/3rd of
current
crude
import bill
Energy
Security
Distribution
utilities to get
exposed to
fluctuating
price risks
Price Volatility –
Global Coal
Markets
Logistical
Issues
Technical
Limitations –
Equipment
design
Most plants
can take up
to 28%
imported
coal max
9
Suggested Measures to Increase Domestic Coal
Short Term
• Diversion of e-coal
(12% ) to the stranded
projects
• Expedite decisions
related to mines in No
Go Areas/CEPI
• Expedite linkage for
12th Plan Projects and
make priority solely
based on project
preparedness criteria
• To make coal FSA
regime in accord with
New Coal Distribution
Policy (NCDP)
• Pricing of surplus
production from
captive mines
Medium Term
• E-auction of captive
coal blocks
• Setting up regulatory
body
• Linkage Optimization
Long Term
• Allow merchant mining
by private players
10
Land Acquisition Issues
 Draft Land Acquisition and Rehabilitation & Resettlement bill
introduced for public comments by GoI in July 2011
Requirement of 80% Consent
Acquisition by Private Companies for Public Purpose
Preparation of social impact assessment
Ban on Acquisition of irrigated multi crop land
Return of land after 5 years if not used
It is estimated that land will move up from a historical 5-8% of total project cost
to as high as 30% of total project cost
11
Activity Flow of the Land Acquisition Process Needs
Review
12 months
No timelines mentioned
Proposal Received by Govt
SIA conducted by Appropriate Govt
Public Hearing for SIA
Practically, the affected families cannot
give the consent unless the details of the
rehabilitation and resettlement benefits
are known
Appraisal of SIA Report by Expert Group
Verification of public purpose legitimacy and
80% consent, Approval of SIA Report
Publication of Preliminary Notification
Legitimacy of public purpose should be
identified at an early stage to avoid wastage
of effort
In case notification is not issued within 12
months, SIA will be deemed to have lapsed
12 months
Preparation of Draft R&R Scheme
Public Hearing
24 months
Draft Declaration and Publication of R&R
Scheme
The process as chalked out today is
cumbersome and creates
ambiguity. A review is needed to
ensure efficient implementation of
projects
Award
12
Environmental Issues
Issues
Regulatory
Framework
No-Go
Areas
Clearance
Process
CEPI
Notification
13
Precarious Position of Distribution Utilities
High
AT&C
Losses
Revenue
Gap
Precarious
Position
14
Losses
● AT&C losses at ~30% is amongst the highest in the world, when
compared to South East Asian nations which had 5-8% losses in 2007 and
Brazilian utilities which averaged 15% in 2005
● Reasons vary from combination of LT-HT lines and improper load
management to unmetered supplies, faulty meters and electricity theft

APDRP intended to reduce losses of
utilities to 15%, improve financial viability
of Discoms and improve quality of supply

Re-launched as R-APDRP in XI FYP, the
program focused on actual, demonstrable
performance in terms of sustained loss
reduction
At the current level the losses are likely to reach Rs 80,000 Cr by end of 2012 and Rs
116,000 Cr by end of 2015
15
Tariff Below Cost of Supply
● In most states, tariff increase has been
inadequate to cover the cost increases
witnessed by the utilities.
4.7
Rs/Kwh
● While the average cost of supply (all-India)
level increased from Rs. 2.64 per unit to Rs.
4.81 per unit i.e. an increase of 82%, the
increase in revenue has been only 56% (due
to low tariffs).
5.2
4.2
1.27
3.7
3.2
0.75
2.7
2.2
0.38
2006-07
State
Andhra Pradesh
Gujarat
Haryana
Karnataka
Madhya Pradesh
Maharashtra
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
2008-09
4.19
3.34
5.43
3.1
5.17
4.5
3.94
6.45
4.79
3.02
2009-10
4.05
4.32
5.72
4.09
5.7
4.66
4.09
7.23
4.92
4.68
0.48
2007-08
2008-09
2009-10
Years
● The revenue gap increased from 38 paise
per unit in 2006-07 to 127 paise per unit in
2009-10 implying losses for the utilities.
Cost of Supply (Rs/kwh)
Increasing
Revenue
Gap
Avg. Cost of Supply
Average Tariff w/o
subsidies (Rs/kwh)
2008-09
2009-10
2.60
2.77
4.09
3.97
3.14
3.29
3.60
3.94
3.40
3.70
4.04
4.32
2.76
2.66
3.19
3.03
2.91
2.90
2.60
3.06
Gap (Rs/kwh)
2008-09
-1.59
0.75
-2.29
0.50
-1.77
-0.46
-1.18
-3.26
-1.88
-0.42
2009-10
-1.28
-0.35
-2.43
-0.15
-2.00
-0.34
-1.43
-4.20
-2.02
-1.62
% hike vs Avg
tariff
46%
9%
74%
4%
54%
8%
54%
138%
70%
53%
Source: Report of High Level Panel on Financial Position of Distribution Utilities, Dec 2011
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