Increased Role of Finance Professionals
in Power Sector – 12th Plan & beyond
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Er. A. K. Bohra,
Director, NESCO, WESCO, SOUTHCO
and CEO, Central Services Office
Context
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India had set its eyes ten years back on the all round
development of infrastructure and basic amenities
The Power Sector has been considered for major investments
beginning from Generation (setting up UMPPs), Transmission
(intra-State lines & express corridors between North to South)
and Distribution (Rural Electrification, Strengthening
Infrastructure Backbone & Automation - RAPDRP)
The present Government has rolled the activities on fast track
to attain the mandate of Inclusive Development
The Union Government estimates investment of $1 trillion
towards infrastructure development in the 12th plan period
Potential Ahead; Power Sector
At one end “Make in India” like campaign programmed and on
the other hand various legislatures are in offing to create
favorable atmosphere for investment
12th Plan period- Power Sector
 Generation capacity addition targets 88,537 MW, comprising
26,182 MW in the central sector, 15,530 MW in the state sector,
and 46,825 MW in the private sector respectively
 In order to meet this capacity addition in 12th Plan, an addition
of 90,000 ckm of 765-220 kV lines, 154,000 MVA of Substation
capacity and 27,350 MW of national grid capacity is required
which would attract an investment of USD 35 billion
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Potential Ahead; Power Sector
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In the Distribution Sector, focus is laid not only on the addition of
the lines & Sub-stations and energization of villages & households
but separate investment is planned for strengthening and
reinforcement the existing network
As per erstwhile planning commission’s estimation, the Distribution
sector requires an investment of Rs. 3.06 lakh Cr. towards building
6.95 lakh Kms of primary network & 6.1 lakh Kms of LV system
Whereas the 12th Plan RGGVY scheme, now subsumed with
DDUGJY (Deen Dayal Upadhyay Gram Jyoti Yojana), focuses on
the extension of Distribution network to achieve the goal of “Power
for All”, the newly launched DDUGJY & IPDS schemes targets on
the strengthening of existing infrastructure and modernization
Potential Ahead; Power Sector
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The plan outlay of DDUGJY is Rs. 43K Crore and in IPDS Rs.
33.6K Cr. R-APDRP balance funds is Rs.16K Cr. and RGGVY
Phase-II funding is Rs.39K Cr.
Besides above States are also extending Budgetary support for
Power Sector infrastructure development
Odisha so far has achieved electrification target of 75% and
have old & fragile backbone distribution network and expects
around 5% share from the above Schemes
The proper resource planning and timely execution of works to
accomplish the above referred investment targets require
synergy of financial & technical skills
Insight of Regulated Distribution
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After the Reforms undertaken a decade back, the Power
Distribution has been a Regulated Entity
The Power purchase is regulated & consequential revenue and
expenses are also regulated
On an average a Distribution Utility in a State has a Turnover of
Rs. 500 – 1000 Cr. out of which the Power purchase cost covers
nearly 75%, Employee cost 10 – 12% and balance is R&M, A&G,
Depreciation, Interests, RoE etc.
The improper Tariff setting by the Regulators and leaving the
Revenue gap or creation of Regulatory Assets has caused majority
of the Utilities in financial distress in spite of receipt of subvention
from respective State Govt.
Insight of Regulated Distribution
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To bail out Distribution Utilities specifically in Govt. possession
or controlled, Central Govt. launched Financial Restructuring
Plan (FRP) and National Electricity Fund (NEF) two years back
but still it has not been of great help to many Utilities for varied
reasons
It is a fact that, in spite of all these efforts, the nationwide average
AT&C loss is still remaining as high as 25%, Odisha has 37%
It is essential that, every Utility is sustainable at its own
This can only be possible through adopting prudent financial
policies, resource management and high degree of skill sets along
with efficient performance
Increased Role of Finance Professionals
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The recent Electricity Act Amendment Bill placed in the
Parliament, proposes segregation of the wired (Carriage) & supply
(Content) Business which necessitates segregation of Assets &
Liabilities between the two Entities
The exercise becomes more complex when multiple Supply
agencies are licensed in a single area of operation
This would require a perfect Asset valuation and identification of
receivables from consumers
In segregated Entities the Distribution Assets would remain with
Distribution/Wires Utility and Receivables likely to be parked
with the Supply Licensee along with the past dues of Power
purchase
Increased Role of Finance Professionals
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As the many Entities would be involved in the Power sale,
purchase, wheel & supply of power to millions of consumers,
lot of reconciliations on regular basis would be required along
with intensive Auditing
As competition will be generated in the Supply business
through a flexible Tariff, the cost control would also attain
paramount importance
This casts more responsibility on the Finance professionals
The involvement of online Accounting, implementation of
ERP, Inventory management & Financial planning through IT
intervention would now be most essential
Increased Role of Finance Professionals
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To get geared up, immediate action required for up-gradation
of the existing finance and accounting System, so that before
the proposed amendment in Act is promulgated, the Utilities
are equipped to implement it properly
Recently amended Companies Act also mandates for intensive
Auditing even in the Private controlled Utilities
This creates abundance of opportunities for the Finance
professional to prove their skill set and help Power Distribution
Sector (Wire as well as Supply) turning to a Viable Proposition
Thank You
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