Powering The Future

Power plays a vital role in all economic activities leading to a better quality of life. The Ministry of Power has set a goal to provide "Power for all" by 2012.

A comprehensive blueprint for power sector development has been prepared encompassing an integrated strategy for its development with many significant objectives. These include - sufficient power to achieve a GDP growth rate of 8 per cent, reliable and quality power at optimum cost while ensuring commercial viability of power industry and availability of power for all.

To achieve these objectives, the Ministry has come up with an integrated power sector development plan with focused areas of action. The Power Generation strategy focuses on low cost generation, optimization of capacity utilization and fuel mix, controlling the input cost, technology up gradation and utilization of non-conventional energy sources. The transmission strategy gives a thrust on development of the national grid including inter-State connections, technology up gradation and optimization of transmission cost. The distribution strategy is meant to achieve distribution reforms. The focus is on system up gradation, loss reduction, theft control, consumer service orientation, quality power supply, commercialization, decentralized distribution generation and supply for rural areas.

The regulation strategy is aimed at protecting consumer interests and making the sector commercially viable while financing strategy helps generate resources for the required growth of the power sector. To optimize the utilization of electricity the conservation strategy focuses on the demand side and load management. The technology up gradation is intended to provide energy efficient equipment and gadgets.

The Last but not the least, is the communication strategy to strive for political consensus with media support to enhance the general public awareness.The power sector has only recently begun to receive much needed attention of the government and private players have begun to elicit interest in entering into this core utility sector. Private enterprise has dramatically improved the quality of power with a higher degree of responsiveness and accountability endearing customers to it. The Indo US Congress nuclear deal that recently received the approval of Congress is also set to spur the promising power sector in India. The deal proposes to permit the sale of American-made nuclear reactors and fuel to India. This coupled with a transfer of technology is set to revolutionize the Industry. It is contended that the civilian nuclear pact will expand electricity generation in India and open up billions of dollars in trade and increase bottom lines for the likes of BHEL, Reliance Power, Tata Power, Siemens, L&T, and ABB etc

The power sector has only recently begun to receive much needed attention of the government and private players have begun to elicit interest in entering into this core utility sector. Private enterprise has dramatically improved the quality of power with a higher degree of responsiveness and accountability endearing customers to it. The Indo US Congress nuclear deal that recently received the approval of Congress is also set to spur the promising power sector in India. The deal proposes to permit the sale of American-made nuclear reactors and fuel to India. This coupled with a transfer of technology is set to revolutionize the Industry. It is contended that the civilian nuclear pact will expand electricity generation in India and open up billions of dollars in trade and increase bottom lines for the likes of BHEL, Reliance Power, Tata Power, Siemens, L&T, and ABB etc


The Electricity Regulatory Commission Act, 1998

fulfills the commitment of providing statutory bodies like the Central Electricity Regulatory Commission (CERC) and the States Electricity Regulatory Commissions (SERCs) to rationalize electricity tariff and transparent policies regarding subsidies for regulation of inter-State transmission of energy and promotion of efficiency and environmentally benign policies. The CERC has been set up by Central Government and many States have also initiated action to set up their regulatory mechanisms.

The Electricity Act, 2003 has been enacted in June’03.

The Act covers features on National Electricity Policy, rural electrification, open access in transmission, mandatory SERCs, license-free generation and distribution, subsidy to be phased out and if so to be paid through budget, free power trading, mandatory metering and stringent penalties for theft of electricity.

The Energy Conservation Act, 2001 primarily ensures energy efficiency in consumption

and, consequently, the Demand Side Management (DSM) for reducing the need for installing new capacity. The Bureau of Energy Efficiency (BEE) has been set up for formulating norms for processes, consumption standards, testing, certification and labeling procedures. The Act facilitates the State government to enforce an efficient use of energy and its conservation. It also stipulates penalties and adjudication. Besides, it has prepared an Action Plan for implementation of Energy Conservation Act. Besides, it has also undertaken energy audit of government buildings to reduce consumption in major offices in New Delhi.

FDI up to 100% is allowed

under automatic approval route in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. No limit on the project cost and quantum of FDI. The category which would qualify for such approval is: (i) Hydroelectric power plants (ii) Coal / Lignite based thermal power plants (iii) Oil /Gas based thermal power plants.

Certain fiscal concessions given to mega power projects to make the tariff cheaper,

like duty free import of capital goods, deemed export benefit and Income Tax holiday for 10 years.

Ten years tax holiday out of fifteen years under Section 80 IA

of IT Act w.e.f. 01.04.2002, for:

(a)An industrial undertaking for the generation or generation and distribution of power beginning from 01.04.1993 and ending on 31.03.2006.

(b) An industrial undertaking which starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning 01.04.1999 and ending on 31.03.2006.

Import of Naphtha by actual user Power Project without any import restriction allowed. Fuel policy encouraging use of other alternative fuels announced. The policy guidelines for the private sector participation in Renovation and Modernization, details out various options like Lease, Rehabilitate, Operate and Transfer (LROT), sale of plant and joint venture between SEBs and private companies The Captive Power Development policy has already been circulated to all the States and UTs. In fresh capacity approvals, the CEA has accorded techno economic clearance to more than 38,000 MW of generating projects and 11,000 km of transmission schemes during the period.

In the Central Sector 6,695 MW of generation projects costing Rs. 29,915 crore and transmission schemes of Rs. 11,692 core have been approved during the last five years.

The Ministry of Power has planned to set up a national grid by 2012 which would economies the use of resources and simultaneously help in inter regional transfer of 30,000 MW power from the surplus to deficit areas. The inter-regional transfer capacity has now gone up to 8000 MW.

Private participation is also being encouraged through joint ventures in implementing the progamme.

A Consistent improvement in performance has been seen in undertakings under the Ministry of Power. The net profits appreciated on an average by 16.5 per cent annually while the turnover increased by 14.5 per cent average annually between 1997-98 and 2002-03.


The Power industry is capital-intensive having long gestation period. Electricity is a commodity that can not be stored in the grid where demand and supply have to be continuously balanced. The Power sector turnover in India is around $35 Billion p.a. with generation ownership of approximately 20% by private participation, 25% Central and the rest by state government involvement. Each stage from Generation to transmission and distribution involves a whole host of parameters.

It is estimated that around $200 billion is required for India's power sector development over the next 10 years. While lst half of this would be for generation projects, the other half is needed for transmission and distribution and rural electrification projects.

Strong political commitment and sector reforms are needed to attract such levels of investment and many such reforms are being implemented in earnest.


Given the legacy of India’s economic policy inadequacy in power generation has characterized power sector operations, with power plants operating at typically 65% load factors. The Government of India has only recently initiated several reform measures to create a favorable environment for addition of new generating capacity in the country. The Electricity Act 2003 has put in place a highly liberal framework for generation, doing away with the requirement of licensing or techno-economic clearance of CEA for generation. Captive generation has also been freed from all controls. To provide availability of over 1000 units of per capita electricity by year 2012 it had been estimated that need based capacity addition of more than 1,00,000 MW would be required during the period 2002-12, providing for a huge opportunity for private participation in this sector.


This typically comes from the potential energy of dammed water driving a water turbine and generator. The energy extracted from water depends not only on the volume but on the difference in height between the source and the water’s outflow called the head.

1. Renewable source
2. Ancillary benefits (irrigation, flood control)

1. Large command area required
2. Large displacement involved
3. Capital expenditure high
4. Large scale silting of reservoirs
5. Ecological concerns


In thermal power plants the fuel is primarily from burning fuels that are Coal, Naphtha and LNG based. While the country has adequate coal deposits are quality is inferior. The projected thermal power generation addition in the XI plan is 53,333 MW.Considering an investment need of Rs 45 million/MW for generation and about 1.3 times this cost for T&D (transmission and distribution), the total funds required for generation and distribution of thermal power alone will be Rs 5,520,000 million. The additional coal requirement for this capacity requirement by 2012 will be 263 million tones.

1. Cheaper Energy source
2. Smaller plant size
3. Sale of carbon credits
1. Low quality Fuel
2. Lack of sufficient fuel
3. Capital expenditure high
4. Green house gas emission problems.


Nuclear power is the controlled use of nuclear reactions to release energy for the generation of electricity. Nuclear power is used to power 7% of the world’s energy and 15.7% of the world’s electricity. India has a largely indigenous nuclear power program which was patronized by the former Soviet Union. Its fuels sources are modest with mining carried out by the Uranium Corporation of India. The generation of nuclear power has been the exclusive preserve of the government, though it is expected that the nuclear establishment may be opened up to foreign participants after the signing of the Indo US nuclear deal. Already a host of nuclear power companies like General Electric Co. and Westinghouse Electric Corp had been included in a recent US trade mission to India held in early Nov 2006.

1. Cheaper Energy source
2. Sustainable energy source
1. Low locally mined fuel reserves
2. Environmental issues in radioactive waste disposal
3. Political and social concerns
4. Higher capital expenditure


Most modern wind power is generated in the form of electricity by converting the rotation of turbine blades into electrical current by means of an electrical generator. Today’s its cost of generation has dropped even below that of thermal power. Other forms of non conventional energy include bio-gas based fuels, solar energy farms etc. Today foreign investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and also for setting up of renewable energy based power generation projects, aimed at facilitating foreign investment and transfer of technology through joint ventures. It is possible that the system of Power Tax Credits (PTC’s) presently in use in the US and other developed economies could be introduced as an incentive for this sector.

1. Cheap Energy source
2. Sustainable energy source
3. Ecologically friendly
1. Large wind Farms required
2. Sew viable sites available


Captive generation is the generation of electricity by power plants specially set up to cater to a particular category of users. The Electricity Act, 2003 provides for the setting up of captive power plant has made it possible in securing reliable, quality and cost effective power by enabling small and medium industries or other consumers that may not individually be in a position to set up plant of optimal size in a cost effective manner. A large number of captive and standby generating stations in India have surplus capacity that could be supplied to the grid continuously or during certain time periods. These plants offer a sizeable and potentially competitive capacity that could be harnessed for meeting demand for power. Most major industrial hubs already have captive power plants so as to ensure quality and continuous power.


In India the Transmission & Distribution losses are in the region of 30%, which is more than double of that in developed countries. Even investment in transmission sector that should have been equal to that in generation but the ratio is 1:3 in favor of generating capacity. The Transmission System requires adequate and timely investments and also efficient and coordinated action to develop a robust and integrated power system for the country. Keeping in view the massive increase planned in generation and also for development of power market, there is ample opportunity for private participants to partake in augmenting transmission capacity. The country’s transmission perspective plan for tenth and eleventh plan focuses on the creation of a National Grid in a phased manner by adding over 60,000 ckm of Transmission Network by 2012. This integrated grid is expected to evacuate additional 1, 00,000 MW by the year 2012 and carry 60% of the power generated in the country. The existing inter-regional power transfer capacity is 9,000 MW, which is to be further enhanced to 30,000 MW by 2012 through creation of “Transmission Super Highways”. For creation of such a grid, an investment of Rs. 71,000 Crore is envisaged, with, Rs. 50,000 Crore to be mobilized by Powergrid and remaining Rs. 21000 Crore through private sector participation.


Distribution is the most critical segment of the industry and a shadowed by Electricity boards, which were bled dry on account of under recoveries and un-viable tariff structure, foisted on them. Power theft and waiver of power bills has lead to a precarious balance sheet position, leading to huge losses in the revenues and reduction in the future expansion of capacity by SEBs. For achieving efficiency gains proper restructuring and adequate transition financing support of distribution utilities is essential. Such support should be arranged linked to attainment of predetermined efficiency improvements and reduction in cash losses and putting in place appropriate governance structure for insulating the service providers from extraneous interference while at the same time ensuring transparency and accountability. For ensuring financial viability and sustainability, State Governments would need to restructure the liabilities of the State Electricity Boards to ensure that the successor companies are not burdened with past liabilities. Private participation has only just begun, with a conducive business environment in terms of adequate returns and suitable transitional model with predetermined improvements in efficiency parameters in distribution business attracting investments in distribution. Introduction of a Multi-Year Tariff (MYT) framework is an important structural incentive to minimize risks for utilities and consumers, promote efficiency and rapid reduction of system losses.

It would serve public interest through economic efficiency and improved service quality. It would also bring greater predictability to consumer tariffs by restricting tariff adjustments to known indicators such as power purchase prices and inflation indices.


The Indian Railway is planning to electrify the 1800 km route in the tenth plan (which is on track) & 3500 km route in the eleventh plan. Currently Indian Railway electrified 17,800 km of its track which is some of 27% of total railway network.

Over the last 25 years, India’s power capacity has risen at the rate of 5.87% per annum. The total supply of electricity has risen at the rate of 7.14% over the same period. In 2004-05 the average plant load factor (PLF) was 74.8%. Power shortage and low quality of power continue to plague the country. For the country as whole, aggregate technical and commercial losses, which include theft, billing & collection inefficiency, transmission and distribution losses, exceeds 40%. The Ministry of Power has set a target of adding a 100,000 MW of generation capacity by 2012. This capacity addition programme includes the 41,110 MW proposed to be added in the 10th Five Year Plan (2002-07). During 2004-05, the Central Electricity Authority completed preparations of the pre-feasibility reports of schemes with an aggregate installed capacity of over 47000 MW under the 50000 MW hydroelectric initiatives. Nuclear power contributes a very nominal percent of energy to the total energy mix. But the latest deal with the US will help India gain international market access to uranium for its energy programme.

To meet the future demand Indian electricity sector has to grow at a continuous growth rate of over 7% per annum. As per the table given below, if we grow at a continuous growth rate of 7% by the end of 15th plan, the capacity requirement would be 7, 62,000 mw.