GMR Infrastructure Limited - BSE

Indian power sector continues to be in the demand supply
deficit regime with the peak deficit and energy deficit for
Financial Year 11 being 10.3 % and 7.5 % respectively. As
evident from the graph below, the situation has however
improved in Financial Year 11 with the deficit levels
decreasing when compared with the same in Financial Year
10. On the back of faster capacity addition in the coming
years it is expected that deficit levels will further come down.
Deficit (%)
18
16
14
12
10
8
6
4
2
0
13.5
16.6
9.9 9.8
12
11
13.3
11.7
10.3
2006-07 2007-08 2008-09 2009-10 2010-11
7.5
Peak Deficit (MW) (%) Energy Deficit (MU) (%)
Even in the reducing deficit scenario, the sector provides
huge business opportunities. If we were to achieve the much
talked about 10 % GDP growth number, power sector will
be one of the major enablers which can help us in achieving
this growth.
It would be pertinent to be conscious of certain ground
realities which pose a risk to the reducing deficit scenario-
Delays in capacity addition – In all the Five Year Plans till
now, the actual capacity additions have always fallen short
of targets. In the current Five Year plan too, the actual
capacity addition is expected to be lower than the targeted
addition of 78,000 MW.
Availability of Fuel –Coal linkage has not been awarded to
several power projects which will be ready for commissioning
in the first half of Twelfth Five Year Plan (by 2014-2015). This
delay is a potential threat to the planned capacity coming
upon time. This will affect timely completion of some critical
stages of the Project Implementation Process such as grant of
key approvals & clearances such as Environmental Clearance,
Consent to Establish & Financial Closure.
During fiscal year 2011, the shortage of coal impacted power
generation. As per CEA, only 92.6 % of the total requirement
of coal was available during the year, leading to a loss of
generation of about 7 billion units. The situation continued
to be grim towards the end of the year because as on March
31, 2011, 29 power stations had critical stock including 13
stations with super critical stock i.e. stock for less than 4 days.
Regulatory changes –The important regulations which came
out during the year were:
• y Sharing of Inter State Transmission Charges and Losses
Regulations, 2010 – The new regulations are expected
to bring more efficient transmission pricing regimes. The
“Point of Connection method of sharing the cost of interstate
transmission services” under the new regulations
would replace the present method of regional “Postage
stamp pricing.”
• y All future requirement of power should be procured
competitively by distribution licenses: This regulation
from CEA which has come into effect since January 5,
2011 is expected to end the cost plus regime of tariff
determination enhancing competition in the sector.
The Power trading industry has grown considerably over the
past few years. As evident from the graph below, volume of
electricity traded has more than doubled during the period
FYs 06- 11.
35
30
25
20
15
10
5
0
14.19 15.02
2005-06
Volume of Electricity transacted
through Traders and PX’s (BU)
20.96
* Includes Provisional data for Mar’11
Source: CERC Market Monitoring
21.92
26.82
29.59
2006-07 2007-08 2008-09 2009-10 2010-11*
Urban Infrastructure & Highways Sector
India has the second-largest road network in the world,
aggregating 3.34 million kilometers. Roads carry about 65
% of the freight and 80 % of the passenger traffic. While
national highways / expressways constitute only about
71,134 Km (2 % of total roads), they carry 40 % of the road
traffic. Also, the number of vehicles has been growing at an
average rate of 10.16 % per annum over the last five years.
This signifies the huge potential for highways development
in the country.
Out of the total Indian Road Network of 3.34 million
kilometers, National highways constitute 70,934 Km while
Expressways are around 200 Km. Currently, about 30 % of
the total NH network is still single-laned, 53 % double-laned
and 17 % four/six/eight-laned. According to the Planning
Commission report, the road freight industry will be growing
at a compounded annual growth rate (CAGR) of 9.9% from
2007-08 to 2011-12. A target of 1,231 billion ton kilometer
(BTK) has been put on road freight volumes for 2011-12.
(Source: Planning Commission reports).
The Government of India has taken several initiatives to
encourage private investment in roads. Some of the key
initiatives are:
• y NHAI has introduced a scheme for annual prequalification
of bidders. This major initiative would be
helpful in cutting short the bidding process of highway
projects
• y All NHAI tenders after August 2011 will be through
e-Tendering
• y Government of India to carry out initial preparatory
work including land acquisition and utility removal.
Rights of way to be made available to concessionaries
free from all encumbrances
• y Government to bear the cost of the project feasibility
48 | GMR Infrastructure Limited | 15 th Annual Report 2010-11