PTChronicle - October 2012 - PTC India Limited

NOT FOR SALE
October 2012
Journal from PTC India Limited
Regional
Energy Trade
An answer for energy security ?
OCTOBER 2012 | PTC INDIA LIMITED | 1

2 | PTCHRONICLE | OCTOBER 2012

From the
Chairman’s Desk
“A developed India by 2020, or even earlier, is not a dream. It
need not be a mere vision in the minds of many Indians. It is a
mission we can all take up – and succeed” –
Dr. A P J Abdul Kalam, Former President of India
Post the economic reforms initiated in the 90’s, the Indian
economy has been pacing ahead with an unprecedented
economic growth, projecting India to be one the leading economic
stalwart by 2020. However, one of the primary bottlenecks in
achieving such sustained growth is the nation’s concern for
energy security. The wavering energy crisis ails India's economic
prowess and may prove detrimental to the country's growth.
FOREWORD
Promotion of Regional Energy Trade, allowing adjacent nations
to utilize and optimize the energy resources available within the
region, is one such initiative that needs to be recognized by the
Indian Subcontinent. The growing power trading market in India
is now encouraging investments in countries of Bhutan and
Nepal allowing the surplus power from these projects, to flow in
this market. The possibilities just don’t limit to these regions, but
could be extended to the entirety of South Asia. Sharing of energy
resources will help in meeting the energy demand in the region
and also catalyze economic or financial growth in the region.
This edition of PTChronicle emphasizes on Regional Power Trade
as a prime solution for grid and energy security, and throws light
on the recent grid failures those that brought nation wide outages.
Editorial Team:
Lavjit Singh, Nirmita Singh, Anupum Vadehra, Varun Sethi,
S C Shukla
Editorial Address:
PTC India Ltd., 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place,
New Delhi 110066
PTChronicle takes no responsibility in case of any unsolicited
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of this publication or any part of the contents thereof may be
reproduced, stored in a retrieval system, or transmitted in any
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Design & Printing by:
Colour Bar Communications, New Delhi
Millions of lives had been daily affected owing to these outages
and the shortfall of energy supply, and yet the question on energy
security still lingers across the corridors of ministries, market
regulators, state commission offices, load schedulers and local
substations. The reason for the largest blackout in the world
was accounted to overdrawal of power by Northen Utilities as
the delay in monsoon triggered higher agrarian demand from
Northern States. From all what was witnessed, there needs to
be effective mechanisms in place for better grid coordination,
frequency monitoring, load forecasting and real time supply for
reducing such grid failures.
This fourth edition of PTChronicle also includes our maket
analysis and coverage for the past quarter, section reasoning
grid failures, supply chain model for solar renewable industry and
possible reforms brooming the clogs of our energy sector.
We would like to thank all our readers, authors and critics those
providing valuable feedbacks and continued support in helping
us publish yet another resourceful edition for the pleasure and
senses of our esteemed readers.
Wishing you a valuable read
Tantra Narayan Thakur
Chairman & Managing Director
PTC India Limited
OCTOBER 2012 | PTC INDIA LIMITED | 3

C O N T E N T
POWER SECTOR OUTLOOK 6
CMD of PTC India Limited
Shri T N Thakur
MARKET WATCH 10
Corporate Development Team
PTC India Limited
REGIONAL POWER TRADING 12
Connecting the Lines
Director Finance of PTC India Limited
Deepak Amitabh
THE POWER BITES 18
Quarterly Sector Coverage
Your feedback is valuable to us. Kindly share them at marketing@ptcindia.com
4 | PTCHRONICLE | OCTOBER 2012

CHARGE OF THE LIGHT BRIGADE 24
Former Union Power Minister
Suresh Prabhu
Power Parlance 27
HIGHLIGHTS OF
CERC ANNUAL MARKET
MONITORING REPORT 36
LEARNING FROM TELECOM 38
Supply Chain, R&D key to growth of renewable energy
Assoiate Director TERI
Shahid Hasan
THE NORTH EAST AIDE 29
Summarising Indo-Bhutan & Indo-Nepal
Cross Border Power Trade
Executive Vice President, PTC India Limited
Harish Saran
THE BLACK OUT 33
Need for a Vibrant Power Market to Avoid
Grid Disturbance
Executive Director, PTC India Limited
Dr. Rajiv Kumar Mishra
FINANCING POWER PROJECTS 40
Professor of Economics & Energy, MDI
Dr. Atmanand
DISTRIBUTION TARIFF REFORM 44
Missing Link
President- Strategy and Corporate Affairs,
Moser Baer Power Projects Pvt Ltd
Dr. Harish K. Ahuja
All the contents of PTChronicle are only for general information and/or use. Such contents do not constitute advice and should not be relied upon
in making (or refraining from making) any decision. Any specific advice or replies to queries in any part of the journal is/are the personal opinion
of such experts/consultants/persons and are not subscribed to by PTC India. PTChronicle has employed due care and caution in compilation of
data for preparing this journal. The information or data of photographs have been compiled from various sources including newspapers, websites,
etc. PTChronicle does not guarantee the accuracy, adequacy or completeness of any data/information that was furnished by external reports and
is not responsible for any error or omission or for the results obtained from the use of such data/ information.
OCTOBER 2012 | PTC INDIA LIMITED | 5

6 | PTCHRONICLE | OCTOBER 2012

Opinion
Sh. Tantra Narayan Thakur
Chairman & Managing Director, PTC Group
Power
Sector
Outlook
Last year i.e. FY2011-12 was the terminal year of 11th plan.
Generation capacity added during the year was highest ever for
any financial year. Today we have crossed the remarkable figure of
200 GW installed capacity in the country. A large proportion of this
addition came from private sector – 58% in FY12 and 41% in 11th
plan. They have raised the bar of performance by bringing projects
on fast track and efficiently. Private sector initiative in hydro sector
also saw achievement close to the targeted capacity.
In general, power market is growing. Short-term power market
grew by 16% YoY and now constitutes 11% of the total generation
in the country (including Unscheduled Interchange (UI)). Bilateral
segment has shown comparatively higher growth when compared
to power exchanges which shows buyers preference for certainty
and longer visibility. Due to frequency band reduction by CERC,
there has been pressure on UI and it has reduced YoY which is
a positive sign. However, there is a need for further tightening of
UI frequency regime to achieve discipline and avoid kind of grid
disturbances that the country faced on 30th July and 31st July 2012.
Transmission sector has also grown with construction of many new
transmission lines. Inter-regional transfer capacity has now increased
to 28000 MW. Power Grid has also undertaken development of 11
High Capacity Transmission Corridors to facilitate power transfer
from various upcoming power generation projects near resource
centers.
Renewable Energy (RE) sector’s growth has been prominent in past
few years. Introduction of Renewable Purchase Obligation (RPO)
and Renewable Energy Certificates (RECs) to meet the same has
provided a definite spur in the growth of RE in India. Developers have
There is a need
for further
tightening of
UI frequency
regime to
achieve
discipline
and avoid
kind of grid
disturbances
that the
country faced
on 30th July
and 31st July
of 2012
power sector outlook
OCTOBER 2012 | PTC INDIA LIMITED | 7

RECs are
presently
allowed to be
traded only
on power
exchanges,
which is acting
as a barrier in
utilizing the
full potential
of REC
mechanism
started to come up for power projects banking
their investments on REC mechanism. However
RECs are presently allowed to be traded only on
power exchanges, which is acting as a barrier in
utilizing the full potential of REC mechanism.
Cutting-edge technological interventions, under
the umbrella of Smart Grid solutions, have also
started to take shape. Government has finalized
8 new smart grid pilot projects worth nearly INR
500 crore to be undertaken over the next year and
half.
Despite all these progressive developments,
shortages in the country (both energy as well
as peak) are still high – to the tune of 10%. This
shows that demand growth is outpacing new
capacity additions. It is a challenge before all of
us to bridge this demand-supply gap, optimally
use our energy resources and ensure quality
power for all.
Present Bottlenecks
Scarcity of fuel is a major bottleneck in the
progress of power sector. Apart from coal, output
of domestic gas has been less than what was
projected earlier which was the basis of viability of
many gas based power plants. International prices
for LNG have increased owing to the demand
in Japan, Korea etc. as they have reduced their
dependence on nuclear power after Fukushima
disaster. In India, there is a problem in absorbing
the power produced from gas based plants as it
is perceived costly.
Due to gas unavailability, many power plants are
running at sub-standard PLFs. This is a colossal
waste of assets of national importance as we are
not able to utilize them fully.
Finances of distribution utilities is another major
roadblock haunting the sector. Though tariff
revisions have happened in many States in past
couple of years, these have to be sustained in
future to pull the utilities out of red.
Experience of procurement of power through
case-1 bidding has not been satisfactory so far.
Whole process of bidding is mired with issues
like renegotiations, counter offers, cancellation
of bidding processes etc. This has created
uncertainty in the market for IPP projects already
established or are coming in near future.
Due to these issues, overall market sentiment is
low currently. We have to ensure that the good
work done in past few years towards development
of the sector doesn’t get undone. Government
is aiming at more participation from private
sector. But if the bottlenecks of the sector are not
removed, sustained interest from private sector is
at risk. And once lost, it will be very difficult to
bring them on board again and plans may go
haywire.
The Path ahead
Overall outlook is challenging because of the
magnitude of issues in the sector.
Increasing production by CIL to tackle coal
shortage is not easy. It will require more manpower
and state of the art equipments. A wise step
would be to have Joint Ventures (JV) with strong
international partners who will bring their expertise
and equipments for increasing the production.
International coal is available but prices have
increased over the past few years forcing many
developers to put their plans of imported coal
based plants on hold. Also basic infrastructure
capacity for fuel transportation like ports, roads
and railways is not commensurate with the
demand.
In distribution sector, tariff revisions have
happened but it will take a while to realize the
results of those hikes. Moreover, if these turn out
be one time hike only, buyers’ paying capacity
cannot be enhanced. Losses in the distribution
sector (for many States) have been very high since
years. Government bodies including Planning
Commission should devise strategies on how to
bring the losses down in a sustained manner.
Government has made it mandatory to procure
power in short-term also through bidding
procedure. Without removing difficulties in the
long-term procurement (case-1), it may be a
challenge for all the players to make short-term
bidding process successful.
So the next couple of years will be critical for
power sector and will lay the foundation of its
long-term growth.
Overcoming persisting challenges
Since we are a largely coal dependent country,
scarcity of coal is a bigger issue among fuels.
8 | PTCHRONICLE | OCTOBER 2012

And to ensure sufficient coal, opening of the sector is very
important. There have been talks going on about a Coal
Regulator but it has not been operationalized yet. Coal
regulator is urgently required to lay down norms of private
participation in coal sector.
Coal production needs to be ramped up which is not
easy as pointed out earlier and it can’t happen overnight.
More manpower (skilled as well as unskilled) coupled with
proper training will be the first step towards increasing the
production.
If we look at China, there is glaring difference in the way
we produce coal. More than 80% of the mines in India
are open cast mines while it is opposite in case of China.
It is imperative for us to go towards underground mining
(long wall technique) which is environmentally friendlier,
will improve yield and result in better recovery of assets.
It will also help in getting environment clearances faster.
Focus on other types of fuels should also be increased
to relieve pressure from coal. Focus on nuclear power is
a good step. The issue of Nuclear liability clause should
be addressed immediately on the lines of international
liability laws to attract foreign nuclear project developers.
Our country has 5th largest hydro potential in the world
(~150 GW) but the success has not been up to the mark.
Hydro power should be given its due focus from 12th plan
and beyond. Pumped storage schemes should also be
developed to cater to peaking power requirements and
other emergency services.
We have seen increased focus towards Renewable
Energy (RE) sources lately which is a progressive move
considering our high dependence on imported oil & gas
and huge RE potential in the country. Grid parity has
already been achieved in case of wind power and solar
power is also moving in that direction. Distributed solar
generation including rooftops is particularly helpful for
rural areas where grid supply has not been provided yet
and will prove to be a boon for rural development.
Reforms for solution
Tariff revisions should be reflective of cost of supply.
Consumers need to be sensitized about higher tariffs. Also
the revisions should happen regularly to avoid sudden
tariff shocks to the consumers.
Adequate infrastructure should be built to arrest
Aggregate Technical & Commercial (AT&C) losses. Focus
should be given on automation wherever necessary and
redeployment of unskilled labor which has been neglected
so far. State utilities have to make efforts for and ensure
reliable and efficient supply to the consumers.
Regulatory procedures and scrutiny should also be
revisited. The regulators should be exposed to world’s
best practices. Focus should not only be on approving
Annual Revenue Requirement (ARR) but on ensuring
universal obligation of discoms to supply, quality of power
to the consumers etc.
Many a times, State utilities want to build their own power
plants with a view to ensure supply and reduce costs.
However, managing a power plant is totally a different ball
game. There are many private projects coming up which
can cater to utility’s demand at competitive prices. So,
utilities should focus on efficient procurement process
rather than deploying their limited resources on setting up/
managing a power plant.
OCTOBER 2012 | PTC INDIA LIMITED | 9

MARKET
WATCH
Max. Price : 7.04 Min. Price : 1.91 Avg. Price : 3.76
Daily Prices - Indian Energy Exchange (IEX)
Weighted Average Prices 2012 (June - August)
Max. Price : 7.17 Min. Price : 1.49 Avg. Price : 3.75
Daily Prices - Power Exchange India Limited (PXIL)
• OTC prices were lower than IEX and PXIL prices in June and
July of 2012. This is because of higher prices discovered in
Power Exchanges for Southern Region over congestion in
tranmsission corridors.
• OTC prices were slightly higher than IEX and PXIL prices in
August of 2012 - a premium for certainty in OTC contracts
• Short-term contract volume for June 2012 was 2234.09
MUs, 636.55 MUs in July 2012 and for the month of
August 2012, 1932.83 MUs.
• Out of the total volume for the period of June-August of
2012, 56.5% (2712.67 MUs) was contracted above Rs.
4.00/kWh.
• Banking transactions are increasing in the market
predominantly due to the poor paying capability of
discoms.
Total Short Term Contract Volume 2012 (June - August)
• The market has prefered shorter duration contracts
for the period June-August of 2012 due to prevailing
uncertainties.
• Over the period from June-August of 2012, PTC has led
the market by undertaking 206 contracts (53% of total
market contracts)
Contributed by Coorporate Development Team
PTC India Limited
10 | PTCHRONICLE | OCTOBER 2012

Total Volume Traded in Short Term vs Total Generation 2012
(May - July)
Volume of Unscheduled Interchange 2012
(May - July)
Top 5 Sellers GUJARAT KHARCHAM WANGTOO Jindal Power Sterlite Energy JAMMU & KASHMIR
Top 5 Buyers
PUNJAB DELHI MAHARASHTRA Haryana WEST BENGAL
• Poor financial health of the buyers make them buy from Power
Exchange only during acute distress.
• Banking transactions have risen as they are cashless
transactions.
• Bilateral (direct) has been increasing as generators do not see
effective payment security with majority of traders.
(Excluding UI)
Percentage of Different Segments in Short Term Market 2012
(May - July)
REC
Price Trends
Non-Solar RECs Volume Details 2012 (June - August)
• Solar RECs commenced trading from May 2012 with volumes yet insignificant
• So far, 910 Solar RECs have been traded over both IEX and PXIL, with prices
ranging from Rs.12500 per REC to Rs.13000 per REC
Source:
CERC Market Monitoring Report
REC Registry India
Indian Energy Exchange
Power Exchange India Ltd.
Non-Solar RECs Price Trend - PXIL (July 2011 - August 2012)
Non-Solar RECs Price Trend - IEX (July 2011 - August 2012)
Market Outlook
OCTOBER 2012 | PTC INDIA LIMITED | 11

Regional Power Trading
connecting the lines
India is aiming to emerge as a major economy in the world - in
growth, size and purchasing power parity (PPP) terms. Surge in
private investments and increase in economic activities are streaming
the business potential of India to global scales. However, the wavering
energy crisis ails India's economic prowess and may prove detrimental
to the country's growth.
Deepak Amitabh
Director (Finance), PTC India Limited
“Sh. Deepak Amitabh would be
taking charge as
Chairman and Managing Director
of PTC Group with effect from
11th October, 2012”
The recent nation wide outages, also the largest power outages in
the world, are indicative of the present weak energy scenario in India.
The power supply position is characterized by shortages, unreliability
and higher prices. India's dependence on oil imports touched 70%
in FY 2011 and imports further surged by 45% in FY 2012. Wriggled
by constraints, the energy security in India depicts a bleak potential
that may further cause decline in economic growth. Unless corrective
reforms are urgently initiated and implemented to revive the energy
security in India, it may be challenging to sustain the unprecedented
economic growth the nation has achieved in recent years.
The prime requisite for sustaining an effective economic growth is an
adequate infrastrucutre, predominantly of the energy sector. Yet, there
remains a severe acuity in the energy sector of major economies in the
subcontinent region – that includes India, Pakistan and Bangladesh.
Unless the region co-operates and coordinates towards achieving
12 | PTCHRONICLE | OCTOBER 2012

a sustainable and secured energy supply, the energy
insecurity will prove a major constraint in the growth of
these economies.
Promotion of Regional Energy Trade, allowing adjacent
nations to utilise and optimize the energy resources
available within the region, is one such initiative that needs
to be recognized by the Indian Subcontinent. Regional
Energy Trade shall prove beneficial in fostering energy
security and increasing diversification of energy resources.
The energy trade shall also aim to curb shortages, meet
deficits and improve the inadequate generation, adding
significant support to the power supply position.
Adjacent countries including Nepal, Bhutan and Tajikistan
have energy resources far in excess of their demand for
energy. Whereas India, Pakistan, Bangladesh and Sri
Lanka have an energy demand growth far outstripping
domestic supply. Sharing of excess energy resources
will help in meeting the energy demand on both sides
and achieve certain optimization in same. The initiative
would resolve the issue of India’s energy security as well
as pull the prices of energy down through reliance on
competitive hydro reserves. Also, reducing our domestic
energy constraints, such energy trades would also prove
beneficial by contributing to the GDP growth of relatively
smaller economies like Nepal and Bhutan.
Presently, the cross border electricity trade and
interconnections are insignificant, except for trade
prevailing between India-Bhutan and India-Nepal.
(i) The Kingdom of Bhutan has capitalised on such
opportunity, exporting surplus power (excess power
available after domestic consumption) of around
1200 MW to 1400 MW to India. During the year 2010-
11, more than 5 Billion units of energy were exported
to India, resulting in revenue earning of Rs. 10 Billion.
(ii) Indo-Nepal power trade began in the year 1971 with
exchange of mere 5 MW of power. The same grew to
100-150 MW by the year 2001-02. Nepal is reported
to have a hydropower potential of 83,000 MW, of
which about 42,000 MW is considered economically
feasible to develop. Currently, Nepal’s installed
generation capacity is about 650 MW, which is 2% of
the total hydro potential. Nepal may export their hydro
power potential to finance its economic and social
transformation.
(iii) Afghanistan has imported 430 GWh from Iran,
Turkmenistan, Uzbekistan and Tajikistan
(iv) Pakistan has imported 25 MW of power from Iran to
the isolated grid of Baluchistan near Gwadar deep
sea port.
(Source: World Bank Report 2008 on South Asia Regional Trade)
Notwithstanding the roles played by the Governments,
the bilateral development between these countries has
been possible by cross-border trading arrangements, and
the available sector policies and structure. However, to
sustain such trade and enable the development of a wider
integrated regional energy market (just not including the
Indian Sub-continent), there is a need for enhancement of
capacity building and effective sector reforms.
The Opportunity of Regional Trade
An effective Power Market is yet to develop in India, as the
inate energy market is at a nascent stage of growth, where
currently just 11% of total generated electricity is traded.
With Government of India introducing Power Trading
Corporation of India (now, PTC India Limited) in 1999,
there has been significant development in the power
sector in India. PTC India played a pivotal role in creating
a bilateral power market in the country by 2005, and later
introduced Spot Market in the country by promoting the
Indian Energy Exchange (India’s first Power Exchange).
With Power Exchange kicking-off Day-Ahead spot
contracts, promising more products (derivative-driven) in
future, the inter-play of demand-supply and competitive
supply-procurement is much visible today. However, there
still exists the need to learn lessons from the experience
of already developed power markets, such as Nordic
Power Market – the world’s first international commodity
for electrical power, in organizing trade with standard
physical and financial power contracts both in spot and
derivative markets.
The Integrated Energy Policy presented by the Planning
Commission of India indicates the import of hydro power
from Nepal and Bhutan (eliciting the combined potential
of about 55000 MW) as possibly the major source of
energy security for India. As a sub-regional approach,
providing access in future to hydro power generators in
Bhutan and Nepal for operating through Power Exchange,
and subsequently promoting the integration of SAARC
region could add more market participants in the regional
trade and rapid growth, in liquidity as well, of the regional
market.
The World Bank has speculated an increase of 7% annually
in peak power demand of India through FY 2006 to FY
REGIONAL POWER TRADING
OCTOBER 2012 | PTC INDIA LIMITED | 13

Weak crossborder
links
and infra
have been
preventing the
exchange of
power between
the regional
Nations
2032. The Integrated Energy Policy has envisaged
import of hydropowers from Bhutan and Nepal.
Some of the key opportunities available with India
for trade of energy are listed below:-
(i) India and Bhutan
Bhutan’s unexploited hydropower potential
exceeds 30,000 MW, with easily accessible sites
estimated at 10,000 MW with 60% load factor.
The evolution of the power trading market in India
has encouraged investments in Bhutan, allowing
India’s demand pattern to be matched by Bhutan’s
supply pattern. Both the nations are committed
to cooperate in the field of hydroelectric power
through public and private sector participation
and promoting regional energy trade. India is
expecting to import 10000 MW surplus power
from Bhutan by the year 2020.
(ii) Hydropower exports from Nepal
Also, Nepal’s unexploited hydropotential exceeds
43,000 MW and government is continuing to invite
RFPs for investing in Hydro Power Projects. Again,
the investors are drawing confidence in these
projects on account of an effective power trading
market available in India. Recently, PTC India
too has signed an Memorandum of Agreement
with GMR Group for a 600 MW Marsyangdi HE
Project and a similar agreement with Brass Power
International Engineering for purchase of 248 MW
from Lower Arjun project for 25 years. India is also
planning to supply coal based 150 MW power
to Nepal for next 25 years to meet their interim
requirement till Nepal is in a position to generate
surplus capacity for export.
(iii) India and Bangladesh
The Government of Bangladesh has recently
agreed to purchase 500 MW of electricity from
India by 2013. They are also contemplating to
import another 500 MW through north-west route
by 2018. Apart from these, Bangladesh is also
eyeing the North-Eastern states of India for some
potential capacity of 2000 MW in near future. In
January 2012, Bangladesh Power Development
Board and NTPC signed an agreement to set up
a Joint Venture for the establishment of a 1320
MW coal based power plant in Bagerhat district,
Khulna at an estimated cost of $ 1.5 Billion and is
expected to be commissioned by 2016.
However, though Bangladesh has undertaken an
ambitious plan to augment the energy starved
nation through import of an approximate 4500 MW
of electricity by 2030, this can be only possible
with construction of an interconnected regional
power grid. Such integrated grid spanning the
large region is extensive in proposition, but is a
necessary solution for providing energy security
to the entire region.
Bangladesh has current generation capacity of
7000 MW and has deficit of 1200 MW in peak
hours. HVDC (high-voltage-direct-current) power
link with 500 MW capacity is being setup between
Bheramara in Bangladesh to Baharampur in India,
which is expected to be commissioned by 2014.
(iv) India and Sri Lanka
Indian Government has signed a MoU with
Ceylon Electricity Board (CEB) of Sri Lanka for
establishment of HVDC bi-pole interconnection
between the countries. The line would have an
initial transfer capability of 500 MW and later
another 500 MW would be added. Power trading
between the two countries is likely to start from
2015-16 after the completion of the line between
Madurai and New Anuradhapura substation of
385 km in length including a 50 km submarine
cable.
(v) India and Pakistan
Faced with a serious power crisis, Pakistan is
keen to draw power from India. A proposal aimed
at setting up transmission infrastructure on a
joint-ownership basis to facilitate the wheeling
of around 500 MW of electricity via Amritsar is
being considered by the two sides. HDVC power
link, as being proposed for Bangladesh, is being
considered for enhancing the gird interconnection
at the borders. At present, no transmission link
exists between India and Pakistan.
(vi) India and Myanmar
Myanmar has unexploited hydro potential of about
39,000 MW and is developing about 10,400 MW
of new capacity through joint ventures with Thai
and Chinese developers and utilities mainly for
export of power to Thailand and China. Indian and
Myanmar governments are collaborating in the
design and formulation of Tamanti multipurpose
project located near the Indian border, initially with
14 | PTCHRONICLE | OCTOBER 2012

a power component of 1,200 MW, essentially for export
to India. This is likely to be developed as a joint venture
between Myanmar and Indian power entities.
The Challenges in Regional Trading
Even amid political instabilities and insecurities, and
wavering economic prowess, possibilities of regional
energy trade have come a long way.
Also, weak cross-border transmission links and
infrastructure have been preventing the exchange
of power between the regional nations. The internal
transmission and distribution infrastructure of South Asian
countries too are crippled by high AT&C losses and ailing
inefficiencies. Pervasive state ownership of the utilities,
their poor earnings, and their inadequate internal cash
generation to finance their own domestic needs—let alone
the investments for export infrastructure—proved a major
handicap for the development of regional trade.
Overcoming the Challenges
Liberalization of the Indian economy proved a major
positive mood swing for the Indian economy. The
economies realized it was the time to augment power
supply and strengthen distribution for sustaining national
growth.
- Transmission organizations in Indian Subcontinent
have realized the importance of increasing interregional
transmission systems. There is an imperative
need to mitigate the risk of power insecurity and
could only be achieved if individual nations cooperate
in coordinating their demand supply patters among
each other. In India, the transfer capacities today
have touched an estimate 25000 MW. The 400 kV
transmission link between eastern and western
regions of India (enabling the absorption of Bhutan
power imports) has been constructed by a joint
venture between a private develepor and the Power
Grid Corporation of India.
- The framing of the Electricity Act 2003 has led to an
emergance of a National and Regional power market
in South Asia. Non-discriminating Open Access and
introducing Power Trading as a distinct activity, Indian
Power Market took a major leap for evolving to more
organized markets.
- In India, generation capcacity has crossed the
OCTOBER 2012 | PTC INDIA LIMITED | 15

200000 MW mark. This has been possible on account
of surging private investments. The distribution
systems are beginning to get reformed through
distribution franchisees and privatization.
- Commercialization across the entire value chain
is inevitable, though there needs to be a strong
expedition of the same.
- A credible development in South Asian regional power
market is delineating the power sector and placing
generation, transmission and distribution as distinct
functions. The development has been led by India
and is followed suit by other regional countries.
- With national movements, political cooperations,
international interventions and strenghtening treaties
and agreements, there is increasing interest in
discussing energy-related cooperation, cross-border
energy investments and trade possibilities in a range
of regional cooperation organizations such as SAARC,
ECO, and BIMSTEC.
Conclusion
India has played a centrestage role in reviving the regional
power market in South Asia. The economic policies and
restructural developments have introduced possibilities of
strong regional integration. Bilateral energy trade between
India and its neighbors is a key building block of the
integrated regional energy market.
Notwithstanding other stakeholders promoting regional
trade, the pace of regional integration will be in large
part determined by the pace of development of energy
trade with India, especially on the eastern side of the
region. In this context, it is very encouraging to see the
reforms gradually taking place in the Indian energy sector
alongside efforts in strengthening the national electricity
transmission grid. ‘One Nation, One Grid’ is going to be
realized in the near future.
It is also encouraging to see that similar reforms are
either under way or being planned in other countries in
the region. The rising interest, translating to a necessity,
among the regional nations in jointly promoting regional
trade, shall prove beneficial for the region of South Asia.
16 | PTCHRONICLE | OCTOBER 2012

OCTOBER 2012 | PTC INDIA LIMITED | 17

The Power
Bites
20 states plunge into darkness
In the country’s worst electricity crisis ever, three of the five regional transmission grids collapsed this July. The grid
failure threw more than 60 per cent of the country’s population in the dark and left several essential services, including
railways, hospitals and water supply, paralysed. The other two grids - western and southern - remained unaffected. While
the exact cause of the incident was yet to be ascertained, heavy overdrawing of power from the grid by a few states,
including Uttar Pradesh, Punjab and Haryana, appeared to be the main reason.
Business Standard, 01 August, 2012
MSMEs demand open power access
The micro, small and medium enterprises (MSMEs) have
urged the government to strengthen power reforms and
facilitate open access to power for industrial clusters.
The MSMEs face production losses and decline in profit
margin due to severe power crisis. Small entrepreneurs
want an open access to power at a threshold of 1 MW
and easing of licensing norms to facilitate electricity
distribution in industrial clusters and MSME collectives
such as cooperatives and associations
Hindustan Times, 09 July, 2012
Indo-Nepal cross border power line
to come to life by 2015
With commercially viable potential of 42,000MW
hydropower in hand, Himalayan Country Nepal has
become a Tantalus cup facing almost 12 hr power cut a
day. A new Indo-Nepal cross border power transmission
line, now expected to be on life by 2015, is to bring the
country out of its trouble in newer future while opening up
new opportunity for Indian hydropower companies.
According to Nepal Electricity Authority (NEA) records,
with around 700 MW installed capacity against peak hour
demand of 900 MW, Hydropower dependent Nepal faces
power cut of even 12 hr a day at places which may go up
to 18 hours next dry winter season.
Economic Times, 12 September, 2012
The Power
Bites
18 | PTCHRONICLE | OCTOBER 2012

3 States oppose coal pricing formula of CEA
The Central Electricity Authority’s proposal on a price pooling formula for blending domestic and imported coal has
run into rough weather with three States — West Bengal, Jharkhand and Orissa — opposing it on the grounds that
it will help coastal power plants and lead to a rise in electricity tariffs. For coastal power stations (up to 300 km from
coast), the Central Electricity Authority (CEA) had suggested that a blend of imported coal up to 20 per cent be allowed
of committed coal quantity. For non-coastal and non-pithead power stations (equidistant from mine-head and port),
it has proposed a blend of imported coal up to 15 per cent of its committed quantity. For pit-head stations, where
transportation of indigenous coal is a major constraint, it has suggested blend of imported coal up to 15 per cent of its
committed coal quantity.
However, the West Bengal government has opposed the proposal and did not attend the meeting held by the CEA on
coal pool pricing as a mark of protest. The Coal and Railways Ministries also did not take part in the meeting. Jharkhand
and Orissa have also shown their dissent against the proposal, and are of the view that electricity tariff will rise if it were to
come into effect. These states have also questioned the authority of the CEA to decide issues related to pricing of coal.
Hindu Business Line, 08 August, 2012
CoalMin wants captive block holders
to sell power through bidding
The coal ministry has asked power companies having
coal block allocations to participate in the bids for sale
of power from end-use projects in line with the guidelines
from the ministry of power. Else, they face cancellation of
their coal blocks. The coal ministry has also threatened
to cancel allocation of coal blocks of power companies
that are selling power in the short-term market at lucrative
rates, and has asked them to enter into power purchase
agreements (PPAs) on the basis of competitive bidding
The coal ministry has also asked the companies to take
necessary steps accordingly and file compliance report
to it, along with ministry of power and the coal controller.
The directive has incorporated it as a condition in the
allocation letter even for already allotted coal blocks for
power sector IPPs.
Dip in Indonesian coal prices brings
cheer to Indian importers
A sharp fall in spot prices of Indonesian thermal-coal,
during July, brought cheers among Indian importers.
According to importers, market conditions were expected
to remain weak for at least another three months.
According to importers, the crash was triggered by refusal
of contracted cargoes by a number of Chinese buyers
beginning early June. The rupee has also remained
relatively stable during the period, which benefited Indian
buyers.
Indian end users generally enter into rupee denominated
term contracts – for a maximum period of three months
– with importers. The meltdown in coal prices, therefore,
may reflect on the balance sheets of Indian companies.
Hindu Business Line, 19 July, 2012
Business Standard, 06 July, 2012
OCTOBER 2012 | PTC INDIA LIMITED | 19

The Power
Bites
State keen to tap full hydel potential
The Jammu & Kashmir State government has decided to come up with micro hydroelectric projects in remote areas of
the state where there is no electricity distribution network or where it is economically not viable to serve from a network.
Although a number of micro hydel projects already exist in the state, the authorities have decided to go in for more such
units as they usually demand minimal reservoirs and civil construction work. They are seen as having a relatively low
impact on the environment as compared to large hydel projects.
The Tribune, 17 July, 2012
38,000 MW produced from garbage
The Okhla waste to energy plant has produced a total
of 38,138 MW energy from 2,22,000 tonnes of garbage
since its inception. The plant was installed by the
erstwhile Municipal Corporation of Delhi in coordination
with the Okhla Waste Management Company. According
to the agreement, 1,500 metric tonnes of solid waste is
provided by the corporation to the plant which disposes
of it through boiler maintaining the temperature above
850° C to generate 16 MW of energy daily.
Tribune, 02 August, 2012
Plans afoot to develop offshore wind
energy
The Government is gearing up to prepare a time-bound
action plan for development of offshore wind energy
especially in the coastal states of Tamil Nadu, Andhra
Pradesh, Maharashtra and Karnataka. At a meeting of
the sub-committee for preparation of the draft policy
guidelines for development of offshore wind energy
projects of the Ministry for New and Renewable Energy,
Tamil Nadu Electricity Board chairman, Rajeev Ranjan,
who is also chairman of the sub-committee, said it was
high time that policy guidelines are formulated to attract
investment into the sector. It was felt that that since
resource assessment is a time consuming affair, projects
at the sites where initial assessment has already been
carried out could be taken up initially.
The Hindu, 17 July, 2012
20 | PTCHRONICLE | OCTOBER 2012

DERC to introduce new power tariff
system
In a major reform initiative, Delhi's power regulator
DERC has decided to introduce a new system under
which tariff will be charged according to electricity
consumption in peak and off peak hours. The proposed
mechanism -- aimed at encouraging consumers to
limit their power consumption in peak hours -- will be
introduced on a pilot basis, officials in Delhi Regulatory
Electricity Commission said. The system, known
as Time of Day (TOD) metering, is also expected to
discourage commercial users from consuming more
power during peak hours and result in minimising load
shedding in residential areas when the demand goes
up substantially. If implemented Delhi will be the first
state in the country to have such a metering system,
which, experts said, would benefit everybody including
the consumers. The power distribution companies
often have to procure additional power from the market
at very high cost to meet the demand at the peak hours
from 6:00 PM to 11:00 PM.The power demand in the
city registered an all-time high of 5,642 MW on July 6,
breaking all previous records
Economics Times, 22 July, 2012
Debt recast package for SEBs soon
The much-awaited debt recast package for state
electricity boards (SEBs) may soon receive government
approval. “We have worked out some financial
package and also a debt restructuring package that
will be approved by the Cabinet in a week or two,”
power minister M. Veerappa Moily told reporters on
the sidelines of a Confederation of Indian Industry (CII)
corporate governance summit in Mumbai on Tuesday.
Moily said the government had devised the package in
consultation with the states and distribution companies
(discoms). Speaking separately to reporters at the state
guest house in Mumbai on Tuesday, he also assured
that “the recent cancellations of coal blocks will not
affect power generation in the country”. State utilities,
which buy power from the generation companies and
distribute them, are caught in a vicious trap as political
pressure often prevents them from raising electricity
tariffs even though they have to buy power at a higher
price. Having accumulated losses for years now,
they have emerged as a huge counter-party risk for
banks that have provided them loans and for power
producers, which depend on them for offtake.
Live Mint, September 18
Punjab power tariff hiked 12%; ind
furious
Power consumers in the state will have to shell out
more, with regulator Punjab State Electricity Regulatory
Commission (PSERC) announcing an average tariff
hike of 12.08 per cent. The hike, the second highest
increase in the last five years, will be applicable to all
categories of consumers for the financial year 2012-
13. Apart from this, a 10 paise per unit tariff has also
been levied for the first time on continuous process
industry including textile, spinning, casting which will
be applicable from November 1, this year. Besides, a 4
paise fuel surcharge for metered category and Rs 2 per
BHP on unmetered category (Agriculture Pumpsets)
will also be levied on all categories on account of 20
per cent rise in fuel cost. Notably, the actual outgo for
power consumers will be higher as Punjab government
also levies electricity duty of 13 per cent and 10 paise
per unit as octroi on energy consumption which is
exclusive of tariff rates.
Banks ask state power boards to
raise rates
Bankers have asked state electricity boards to increase
power rates and cut leakages. The direction was given
to ensure that the power distribution companies, which
have requested banks to restructure their debts, are
able to generate surplus revenues to repay the loans.
Banks have also sought state governments’ guarantees
on these loans to avoid slippages in the restructured
loans.
Business Standard, 10 July, 2012
Indian Express, 16 July, 2012
OCTOBER 2012 | PTC INDIA LIMITED | 21

The Power
Bites
Power loans cross `6 lakh cr, now over 6% of GDP
Outstanding debt of state power utilities have grown to a staggering `6 lakh crore or 6% of the GDP, according to data
gathered by FE from various sources. Roughly a third of these are loans taken to fund past losses which cannot be
serviced through tariff hikes and, hence, are being considered for a benign restructuring by the Centre. Needless to say,
the extreme indebtedness of these utilities is attributable to state governments that don’t let regulators increase tariffs in
tandem with rising costs, leading to a constantly widening revenue-expenditure gap at the utilities. This undermines their
ability to invest and thwarts India’s ambitious plan to multiply its power generation capacity and create a competitive
power market.
Financial Express, 08 August, 2012
RBI tightens norms for securitisation
of loans by NBFCs
Reserve Bank of India (RBI) on Tuesday tightened the nonbanking
finance company (NBFC) securitisation norms
by stipulating that a non-banking finance company will
have to retain at least 5 per cent of the loan being sold to
another entity. The revised guidelines, issued by the RBI
also stipulate that NBFC cannot sell or securitise a loan
unless three monthly instalments have been paid by the
borrower. These stipulations, the central bank said are
aimed at checking "unhealthy practices" and distributing
risk to a wide spectrum of investors.
Sebi grants MCX-SX equity trading
licence
The capital market regulator allowed MCX Stock
Exchange Ltd (MCX-SX) to become a full-fledged
bourse, ending a two-year-long tussle that saw the two
sides lock horns in court over ownership rules governing
such bourses. The exchange can start trading in equities,
equity derivatives and other asset classes like its rivals
BSE and the National Stock Exchange (NSE).
Live Mint, 11 July, 2012
Business Standard, 22 August, 2012
22 | PTCHRONICLE | OCTOBER 2012

Power failure: Panel for smart grids, special protection plan
Implementation of smart grids and Special Protection Schemes (SPSs) are the long-term solutions recommended by the
panel headed by A.S. Bakshi, Chairman of Central Electricity Authority. The panel was set up to look into the massive
grid failure that left the entire North, East and North-East in dark for more than six hours on July 30-31. Meanwhile, the
National Load Despatch Centre (NLDC) has filed a petition with the Central Electricity Regulatory Commission (CERC)
against some of the Northern States for not maintaining grid discipline, another reason being cited for the failure. At
CERC’s first hearing last week, the States are understood have deposed that the wide gap between demand and the
allotment led to the overdrawal from the grid.
Hindu Business Line, 21 August, 2012
Environment ministry for clearance
to infra projects on case-by-case
basis
The environment ministry is veering towards considering
forest clearance for coal, mining and other infrastructure
projects on a case-by-case basis. This move comes as
an alternative to the "go/no-go" classification of forests
and would take at least two to three years to put in place.
In the meantime, the pressure to clear infrastructure
projects, which are crucial to propel economic growth
and industrialisation, is mounting.
Economic Times, 11 July, 2012
PowerMin may intervene to make
regulators perform
The Union Power Ministry, in a bid to provide some
relief to cash-strapped distribution utilities, is firming
up the strategy of statutory intervention to make power
regulators perform better. This is aimed at holding
regulators accountable so that distribution utilities should
not face troubles for lack of adequate revenue streams.
The ministry proposes to put in place a mechanism
whereby the appointments of regulators and their
performance would be reviewed.
Business Standard, 05 July, 2012
OCTOBER 2012 | PTC INDIA LIMITED | 23

24 | PTCHRONICLE | OCTOBER 2012

Charge of the
Light Brigade
power reforms
“Charge of the light brigade”, was published in
Times Crest on 4 August 2012 and is authored by
Sh. Suresh Prabhu, Former Union Power Minister
The future isn't black. India needs to up power generation,
acquire global fuel assets, and focus on renewable energy.
For two consecutive days last week, north India suffered
spectacular outages, rated the worst in the world. The East and
North-East suffered as well the second day. While 70 crore Indians
struggled with the challenge of total power collapse, the 50 crore
who live in western and southern India didn't know if they should
celebrate being spared or brace for their turn. This brings us to an
important issue - how do we make India power sufficient? It isn't
just a question of generating power but also of dealing with the
challenges of environment and energy security.
At a per capita consumption of just 700 Kwh, we have the
dubious distinction of being one of the lowest per capita users of
electricity in the world. In fact, 44 per cent of Indian households
still don't have power. A big percentage of the rest have to make
do with erratic supply for not more than a few hours of the day.
If you live in rural or semi rural areas, 24-hour power supply is a
distant dream.
To deal with this supply gap, we need to increase the generation
of electricity to 30, 000-40, 000 MW each year for at least the
next 30 years. We have now a comprehensive policy framework
for this in the form of the Electricity Act which I had introduced in
the Parliament. The success of this law is there for all to see - we
generated 55, 000 MW of power in the last five years, more than
double the quantity we ever produced in the same period earlier.
The substantial private sector investment that made this happen
was possible only due to the new law.
OCTOBER 2012 | PTC INDIA LIMITED | 25

We need
to support
Indian power
companies,
both
government
owned and
private, in
their quest to
acquire fuel
assets globally
Now there is huge interest in investing in the
power sector but fuel remains a big problem area.
Coal, gas and even water have to be tied up by a
very high powered group as soon as investment
decisions are finalised. The import of fuel needs a
special regime to ensure smooth landing.
We need to support Indian power companies, both
government-owned and private, in their quest to
acquire fuel assets globally. China puts the entire
might of the state behind overseas investment by
its companies. Could all our foreign missions and
the external affairs ministry not stand behind our
endeavours similarly ? Could we not ensure that
we work collaboratively in alien markets for this
rather than compete?
It's also time for us to revisit our fuel mix. Indian
coal will not be as available as we believe. Most
of our coal reserves are in tribal areas which are
also host to some our best forests. We cannot
neglect social and ecological issues in our haste
to become self-sufficient in power. We can't
afford to depend on imports as it affects our
energy security. Our wind potential is now at least
6 lakh MW. Solar power can easily be generated
in a country that has more than 300 days of
sunshine with very good radiation to harness it
in electricity. We need to put more renewables in
our grids to address our environmental concerns.
The climate change threat can be mitigated only
by shifting to non-fossil sources. And we need
to harness the huge potential offered by our 7,
800-km-long coast to become a hub for oceanic
energy. Our 1. 2 billion people produce so much
household waste that we would need indigenous
technology to convert it into energy. We need to
invest in R&D for storage of electricity as well.
We need a national grid connecting all our
regional grids. For this we need a grid code which
can't be violated at any cost. Let's now also focus
more on the Smart Grid concept to catch up with
the best in the world. This could help in better
load as well as demand management. Our subtransmission
and distribution segment can be
revamped with ICT solutions. To this end, I had
got Nandan Nilekani to chair a group to prepare
a plan. All these measures can help us avoid
theft and address power quality issues and make
redundant inverters, diesel operated gensets and
voltage stabilisers.
We now think of distributed generation wherein
we will generate electricity for a cluster of villages
and distribute it through gram panchayats,
cooperatives and so on. We have telecom towers
in most of villages which operate on diesel. These
could be used as hubs of renewables generation
and the excess could be sold to nearby villages.
We can reach universal electrification and still be
locally accountable with ICT to track abuse and
theft.
I had created the Bureau of Energy Efficiency
(BEE) for conservation of energy. We must
focus on this idea more. We can save as much
as 23 per cent of the power we consume
through conservation. We must have more
inventive demand management. For instance,
differential tariffs encouraging lower energy use
in metropolitan areas is a good idea. We can also
replace the energy guzzling agriculture pumps
and introduce dedicated feeders for agriculture
consumption.
As per the law, regulators are mandatory for all
states. Now let's focus on their appointment,
training and so on to make them a truly formidable
and autonomous body which is sensitive to both
consumers as well as producers. It's critical that
we have a separate route to select regulators who
are so crucial for the progress of the power sector.
Late starters have the advantage of being able
to avoid the problems faced by pioneers. Let's
seize this advantage by integrating new concerns
of climate change and self reliance with the old
challenges of power shortages.
All this needs a pliable political economy. Political
will can't be bought off the shelf. I used to meet
political leaders, chief ministers, trade unions
and other stake holders regularly to ensure that
the effort is based on partnership. We need to
realise we can't get off the ground a project that
is not shared but pushed only by the Centre. Let's
launch a national mission headed by PM himself
with all CMs as members. They must meet once
in three months and review operational obstacles.
There is no bigger priority than this because
drinking water, agriculture, jobs, manufacturing,
transportation and even peace are dependent on
adequate power supply.
26 | PTCHRONICLE | OCTOBER 2012

POWER
PARLANCE
The government would
discuss the proposed
amendment to the
Electricity Act
Dr. M Veerappa Moily
Hon’ble Minister of Power, GOI
Economic Times, 28 August, 2012
Relying too much on
imported fuel will hit
power sector
Shri Sushil Kumar Shinde
Former Union Power Minister
Hindu Business Line, 17 July, 2012
Please do not buy cheap
stuff from China for making
a quick buck
Dr. Farooq Abdullah
Minister of New & Renewable Energy
Economic Times, 23 August, 2012
Accumulated losses
of state distribution
companies have crossed
Rs 92,000 crore
K C Venugopal
Union Minister of State for Power
Economic Times, 27 August, 2012
Power regulator can regulate
and revise electricity tariffs
irrespective of the contracts
signed by power producers with
distribution companies
Goolam E Vahanvati
Attorney General of India
Economic Times, 28 August, 2012
OCTOBER 2012 | PTC INDIA LIMITED | 27

the North East aide
Summarising Indo-Bhutan & Indo-Nepal Cross Border Power Trade
India has always envisaged and envisioned
multi-faceted relations with its neighbouring
counterparts in the Indian subcontinent by
promoting social, cultural and economic
cooperations. The Indo-Bhutan and Indo-Nepal
relations have strengthened over the recent past
with all endeavoring to achieve a sustainable
growth through Regional cooperation. The
Government of India on consistent pursuance for
meeting the energy security of the region has been
working to develop mutually beneficial projects
and supply strategies with both Bhutan and Nepal,
enabling them to earn through exports to power
trading market in India and allowing India to meet
its ever increasing demand for power.
The demand for energy in India has been on the
rise with the economy propelling to sustain growth
rate of 8-10%. The domestic energy resources
post power reforms in early 2000s are yet short
and inadequate in meeting power requirement of
the nation. Today, an established rationale exists
for reducing India’s reliance on thermal power
and increasing diversification of energy resources.
However, the share of hydro resources is declining
in the generation mix offered by generators in
India. This is a matter of concern as the Indian
subcontinent has a huge potential of hydro
resources that remains untapped. Also, India
needs to lead environment stewardship in South
Asian region by using cleaner sources of energy.
Recent commitments for cooperating in the
field of hydroelectric power through public and
private sector participation have encouraged
private investments in generation in Bhutan.
Nepal and India are also improving the interregional
transmission capacities through grid
augmentation. India aims to import 10000 MW
from Bhutan by 2020 withstanding the support in
cooperating with the latter in developing renewable
energy projects under CDM.
India is vying for opportunities in Bhutan and
Nepal for development of hydro projects under
joint ventures or public private partnerships or
wholly private participation. The Government of
India, Ministry of Power and Ministry of External
Affairs have authorized PTC as Nodal Agency for
Cross- Border trade in Electricity with Bhutan and
Nepal. Since the year 2002 of trade, PTC has been
playing this role with alacrity to the full satisfaction
of all stake holders. E-transfer of funds, guaranteed
payments, prompt handling of reconciliation and
other services offered to Bhutan are so far very
smooth and has not raised any issue of dispute.
For better understanding of the regional trade
between Indo-Bhutan and Indo-Nepal, one needs
to look at the milestones achieved so far.
Hydropower Exports from Bhutan
Bhutan and India are connected at varying voltage
levels from 11 KV to 400 KV transmission networks.
India has been purchasing power from Tala (1020
MW), Chhukha (336 MW) and Kurichhu (60 MW)
Hydro Plants, through PTC India Limited via
respective Long Term Power Purchase Agreement.
The total capacity of hydro developed so far in
Bhutan is about 1500 MW, which is less than 5% of
the total potential.
The table below details the energy export to
India (MUs)
Year Energy Exports to India (MUs)
2003-04 1751
2004-05 1735
2005-06 1762
2006-07 2963
2007-08 5234
2008-09 5883
2009-10 5334
2010-11 5569
2011-12 5275
Bhutan’s unexploited hydropower potential
exceeds 30,000 MW, with easily accessible sites
estimated at 10,000 MW with 60% load factor.
28 | PTCHRONICLE | OCTOBER 2012

Harish Saran
Executive Vice President, PTC India Limited
The evolution of the power trading market in India
has encouraged investments in Bhutan, allowing
India’s demand pattern to be matched by Bhutan’s
supply pattern. The electricity trade with India has
been the largest revenue earner for Bhutan in
exports. The cumulative energy import by India
from Bhutan has been about 36 BUs till 31st
March’2012.
The development of hydro projects in Bhutan is
fostering on account of smoother environmental
clearances, lesser rehabilitation and resettlement
issues, easier ‘Right of Way’ for transmission and
comparatively easier land acquisition for projects.
Some Important Hydro Projects proposed for
development are:
• Run-of-the River
• Bunakha : 180 MW
• Wangchu : 900 MW
• Punatsangchhu-I : 1095 MW
• Punatsangchhu-II : 1000 MW
• Mangdechhu : 600 MW
• Reservoir Type
• Sankosh : 4000 MW
• Manas I
: 1000 MW
• Manas II : 1800 MW
The above projects are being developed under
Government to Government or Public Private
Partnership models.
OCTOBER 2012 | | PTC INDIA LIMITED | | 29

Hydropower exports from Nepal
Indo-Nepal power trade has been modest when compared
to Indo-Bhutan trade. The primary reason for low level of
electricity trade is the weak grid interconnection between
India and Nepal. Nepal’s power system is interconnected
with the power systems of the states of Uttar Pradesh and
Bihar in India by only two 132 kV line, eleven 33 kV lines,
and one 11 kV line, which are presently operational.
Existing transmission system between India and Nepal
is in the process of upgradation, allowing the privately
owned IIPs in Nepal to export their surplus power to
India. Power Grid Corporation of India Limited and PTC,
along with IL&FS, are together playing a catalytic role
towards development of 400 kV Double Circuit Dhalkebar-
Muzaffarpur transmission line.
Also, Nepal’s unexploited hydropotential exceeds 43,000
MW and Nepal is continuing to invite RFPs for investing in
Hydro Power Projects in the country. Again, the investors
are drawing confidence in these projects on account of an
effective power trading market available in India. Recently,
PTC has also signed a PPA with Nepal Electricity Authority
(NEA) for sale of power through the proposed 400 KV link.
PTC is also supplying power to NEA during dry seasons
every year through the existing links so as to meet some
shortages of power in Nepal. This transaction is being
carried out on purely commercial principles.
Conclusion
India needs to continue endeavor in jointly developing
hydro projects with Bhutan and Nepal, encouraging the
latter nations to sell their power in the trading market
of India, either on long term basis or the surplus power
through the short term market. The rapid expansion of the
interregional transfer capacity in India, the development
of real-time balancing using availability-based tariffs, and
UI charges in the national grid should greatly improve the
chances of the Bhutan power being absorbed in any part of
the national grid, whose requirement matches the supply
pattern from Bhutan. Nepal and Bhutan policy documents
prominently consider hydropower export as an important
source of income for their economies and a major driver
of their economic growth, and both shall continue pursing
the same by maintaining their novel stance in assisting the
region for provision of energy security.
30 | PTCHRONICLE | OCTOBER 2012

OCTOBER 2012 | PTC INDIA LIMITED | 31

32 | PTCHRONICLE | OCTOBER 2012
THE BLACKOUT
Need for a Vibrant Power Market to Avoid Grid Disturbance

The county witnessed a major grid disturbance in
Northern Region at 02.33 hrs on 30-07-2012. The
expert committee has submitted the report but still there
are several unanswered questions. Any Grid disturbance
by and large is preceded by some major system faults,
line-trippings, equipment malfunctioning, generation
outages and load throw-offs. System operator for the
sake of lucidity classifies the condition of the grid in terms
of normal, critical or alert depending upon the vulnerability
of the system. On that eventful day the parameters of the
Grid i.e. frequency and load in MW were within limits and
system was not on alert mode. The northern Regional
Grid load was carrying about 36,000 MW at the time of
disturbance.
The grid was restored back to normal in record time after
continuous hard work for hours by CTU officials and the
SO, but unfortunately there was another grid disturbance
on the very next day at 13.00 hrs on 31-07-2012 resulting in
collapse of Northern, Eastern and North-Eastern regional
grids. The total load of about 48,000 MW was affected in
this black out. On both the days, few pockets survived
from black out. It was a dreadful day for the power sector
in India.
It is worth mentioning that the Indian Transmission network
is one of the latest, technologically superior, robust and
designed with sufficient factor of safety. The infrastructure
created in last two decades for wheeling of power in the
country is truly world-class. As a result of these efforts,
in the last twelve years we have not witnessed any major
grid disturbance. But on the flip side of it, perhaps it might
have created a sense of complacency for the operator. It
was really unfortunate that the entire world watched on
BBC and CNN, the Nation fighting for hours without power
and emerging economy reeling under after effects of Grid
Collapse. The consequence of Grid collapse was plunging
half the nation in complete darkness, halting hundreds of
trains, stranding miners, blacking out traffic signals and
affecting supply to hospitals. About half of the 1.2 billion
people in India were affected July 31 as the three grids
of western, eastern and northern regions tripped after
alleged overdrawing of power from grids by some states.
The affected states on Tuesday were 19, including Punjab,
Haryana, Delhi, Uttarakhand, Himachal Pradesh, Odisha,
Jharkhand, Bihar besides West Bengal and Sikkim. India
has 28 states. The CTU was in action to restore it as early
as possible but prompt restoration and speedy recovery
could not prevent the dent on the impeccable records.
Initial reports suggested that the overdrawl by some of
the northern states have played havoc and resulted in
the collapse. But any power engineer worth its salt won’t
accept it as the frequency profile was not corroborating the
depictions. Moreover the timing of the incident which was
well past midnight was also not supporting the argument
of overdrawl. However from the very beginning it was clear
that there was lack of grid discipline. It is easier to analyse
now as the enquiry committee has submitted it report. The
key features of the report are as under;
Factors that led to the initiation of the Grid Disturbance
on 30th July, 2012
Weak Inter-regional Corridors due to multiple outages:
The system was weakened by multiple outages of
transmission lines in the WR-NR interface. Effectively, 400
kV Bina-Gwalior-Agra (one circuit) was the only main AC
circuit available between WR-NR interface prior to the grid
disturbance. Loss of 400 kV Bina-Gwalior link: Since the
interregional interface was very weak, tripping of 400 kV
Bina-Gwalior line on zone-3 protection of distance relay
caused the NR system to separate from the WR. This
happened due to load encroachment (high loading of
line resulting in high line current and low bus voltage).
However, there was no fault observed in the system.
b. High Loading on 400 kV Bina-Gwalior-Agra link:
The overdrawal by some of the NR utilities, utilizing
Unscheduled Interchange (UI), contributed to high
loading on this tie line.
c. Inadequate response by SLDCs to the instructions of
RLDCs to reduce overdrawal by the NR utilities and
underdrawal /excess generation by the WR utilities.
Factors that led to the initiation of the Grid Disturbance
on 31st July, 2012
The system was weakened by multiple outages of
transmission lines in the NR-WR interface and the ER
network near the ER-WR interface. On this day also,
effectively 400 KV Bina-Gwalior-Agra (one circuit) was
GRID FAILURE
OCTOBER 2012 | PTC INDIA LIMITED | 33

the only main circuit available between WR-NR. High
Loading on 400 kV Bina-Gwalior-Agra link: The overdrwal
by NR utilities, utilizing Unscheduled Interchange (UI),
contributed to high loading on this tie line. Although
real power flow in this line was relatively lower than on
30th July, 2012, the reactive power flow in the line was
higher, resulting in lower voltage at Bina end. There was
inadequate Response by SLDCs
Brief Sequence of Events leading to the Grid Collapse
on 30th and 31st July 2012
(i) On 30th July, 2012, after NR got separated from WR
due to tripping of 400 kV Bina-Gwalior line, the NR
loads were met through WR-ER-NR route, which
caused power swing in the system. Since the center of
swing was in the NR-ER interface, the corresponding
tie lines tripped, isolating the NR system from the rest
of the NEW grid system. The NR grid system collapsed
due to under frequency and further power swing within
the region.
(ii) On 31st July, 2012, after NR got separated from the
WR due to tripping of 400 kV Bina-Gwalior line, the
NR loads were met through WR-ER-NR route, which
caused power swing in the system. On this day the
center of swing was in the ER, near ER-WR interface,
and, hence, after tripping of lines in the ER itself, a
small part of ER (Ranchi and Rourkela), along with WR,
got isolated from the rest of the NEW grid.
The committee set up by the power ministry to probe the
recent grid collapse, has recommended phasing out of the
unscheduled interchange (UI) mechanism which allows
state utilities to overdraw power from the grid by paying
small fines. The UI mechanism has virtually developed a
parallel power market for state electricity boards which
use the facility to meet power requirements beyond their
allocated quotas. As per the central electricity regulator’s
tightened grid code, the permissible frequency band for
grid operations is 49.5-50.2Hz. The UI rates range from 16
paise per MWh for frequencies above 50 Hz to Rs. 9 per
MWh when frequency drops to 49.5 Hz, the lower end of
the band. As FE reported earlier, states don’t even care
to pay UI charges in time and most of them have huge
unpaid UI balances.
The panel said adherence to the grid code should be
made mandatory with provisions for tough punitive
measures for deviations. “A review of the UI mechanism
should be carried out in view of its impact on recent
grid disturbances. Frequency control through UI may
be phased out in a time-bound manner and generation
reserves/ancillary services may be used for frequency
control. An appropriate regulatory mechanism needs to
be put in place for this purpose,” the report said. It also
suggested amending the Electricity Act to strengthen
penal action for violating the grid code and misusing the
UI mechanism.
The panel has suggested that frequency control should
be undertaken through generation reserves/ancillary
services which eliminate the chance of states overdrawing
from the grid as frequency is kept stable through system
controls. It said this needs to be adopted as the current
UI mechanism is sometimes ‘endangering grid security’.
CERC chairperson Pramod Deo is also in favour of
winding up the UI mechanism.
On maintaining frequency stability, the committee
proposed reducing the frequency band from the present
48.5-50.2 Hz range to closer to 50 Hz to check variations
and prevent overdrawals. It also suggested modernising
transmission lines, especially at the level of states, to
manage congestion in the system better. It said audit of
devices such as HVDC, TCSC, SVC and PSS should be
done immediately to ensure their stability features are
enabled.
Proposed steps to avoid Grid Collapse in Future:
The tendency to draw power on UI by states and avoiding
the legitimate route of sourcing the short-term power
requirement either through bilateral or through energy
exchange has created an unprecedented pressure on
system operators. The unhealthy trend has given rise to
unplanned operation putting pressure on all stakeholders
and threatening stability of the grid. However the basics to
avert grid disturbance remains same and are listed below:
1. Under-frequency relays must be installed at all
important Regional transaction points, if it is already
installed the testing and functioning may be ensured.
This would lead to islanding in case of major grid
disturbance and faster recovery.
2. UI mechanism has outlived its relevance and at the
present panel rates it is an incentive rather than penalty
for overdrawing states. The mechanism is also being
used as an alternative to the Power market.
3. The shut down planning for the critical corridors must
be better planned to avoid contingencies similar to
one faced on the eventful day.
4. The PMU (phasor measurement units) at regional
intersection points must be installed for better
monitoring and to avoid power swings as it happened
on day 2.
34 | PTCHRONICLE | OCTOBER 2012

5. Power market need to be strengthened and tariff need
to be revised regularly to bring it to cost reflective
level. Any grid indiscipline is result of price imbalance.
6. POSOCO without any legal and statutory authority
is toothless and repeated instruction to erring states
have hardly heeded to their instructions in past. The
organisation structure must be reviewed for POSOCO.
Committee also favoured implementing islanding
schemes for essential services like rail and hospitals
so that even during a blackout, power supply could be
maintained in these islands. “As the national grid is on
the horizon, homogenising system operation philosophy
is the need of the hour. The present organisational set-up
of load dispatch centres needs to be reviewed. System
operation needs to be entrusted to an independent system
operator. In addition, SLDCs should be reinforced and
ring-fenced for ensuring functional autonomy,” the panel
has said. The committee has found bad communication
set up between transmission utilities at central and state
levels as a possible reason why grid discipline is often
ignored. It has said setting up a dedicated telecom
network between stations as mandatory condition before
any new transmission network is approved by states.
A new cyber protection cell has also been proposed to
prevent the grid from any future cyber attack.
Conclusion
Indian Grid has exponentially grown in size and NEW
integrated grid in to one of the largest grids in the world.
North, East and Western regional grids are already
connected and the balance South would join the national
grid on synchronous mode within a year or so. The Grid
consists of 765KV AC and HVDC links with enormous
capacities to wheel power within and across the regions.
The RLDCs and NLDC is equipped with state of art SCADA
/ EMS system for efficient grid management. There are
two exchanges operating and encouraging ten-percent of
the power generated being transacted on bilateral shortterm
sales or Power-exchanges. But the grid collapse has
raised the question of optimally procuring and availing
the power available through traders and Exchanges vis. a
vis. overdrawing power through UI mechanism which not
only defers the payment for Utilities / SEBs but also gives
a scope of shirking responsibilities in terms of avoiding
decisions for procurement of deficit power. There are
few states utilities which have preferred to cancel the
existing agreements for power procurement on shortterm
market and instead draw on UI. It has not only
adversely affected the economics of power procurement
but also led to undue pressure on system leading to Grid
collapse. Crux of all the solution lies in estimating the
shortages in advance, planning for procurement in time
and utilise the resources to balance the demand supply
gap. The national grid is made up of smaller area, state
and regional grids. The load balancing is required to be
done at the lowest hierarchy. If some utilities are violating
the instructions once or twice it is indiscipline but if it
done each day for months, it is aberrations which need
immediate corrections with strong steps.
OCTOBER 2012 | PTC INDIA LIMITED | 35

yearly short term volume
94.51
Billion Units
traded in FY 2012 16%
YOY
38%
11%
of total
generated
volume
16%
17%
29%
Bilateral
Traders
Bilateral
Direct
Power
Exchange
Unscheduled
Interchange
2% 4% 5% 3%
increase in bilateral
traders volume
increase in bilateral
direct volume
reduction in UI
Volumes
reduction in
exchange volume
15,000 13%
Crores Bilateral Traders
Market Size
Total size of market excluding direct
bilateral and UI was Rs.20532 Crores
92%
5,553 13%
Crores Power Exchange
Market Size
8%
CERC
Annual Market
Monitoring Report 2012
Central Electricity Regulatory Commission (CERC), a key regulator of power sector in India, is
a statutory body functioning with quasi-judicial status under sec - 76 of the Electricity Act 2003.
IEX
PXIL
36 | PTCHRONICLE | OCTOBER 2012

“Short-term transactions of electricity” refers to contracts of less than one year period for electricity transacted under
bilateral transactions through Inter-State Trading Licensees (only inter-state part) and directly by the Distribution
Licensees (also referred as Distribution Companies or DISCOMs), Power Exchanges (Indian Energy Exchange Ltd (IEX)
and Power Exchange India Ltd (PXIL)), and Unscheduled Interchange (UI)
3.57
10 p/unit yoy
4.18
61 p/unit yoy
Rs/KWh
Rs/KWh
Average Power Exchange Price
Average Bilateral Traders Price
PEN ACESS CONSUMERS
traded 6.6 Billion Units over Power Exchanges
15% 73% 3.06
Transmission
Congestion
Volume of Exchange
below Rs. 4/KWh
Rs/KWh
Average Price for
Industries at Exchange
Electricity Prices in Southern Region were higher due to high demand
for electricity and congestion between NEW Grid and SR Grid
Leading
Traders
The market share does not include volumes
33% 17% 10%
from cross border and inter state trade PTC India NVVN TATA
Major Sellers
Lanco (Andhra Pradesh)
Sterlite Energy (Orissa)
Himachal Pradesh
Jindal Power (Chattisgarh)
Adani Power (Gujarat)
Major Buyers
Uttar Pradesh
Tamil Nadu
Punjab
Andhra Pradesh
Bihar
Contributed by Coorporate Development Team
PTC India Limited
OCTOBER 2012 | PTC INDIA LIMITED | 37

“
There is no doubt that we will be successful in harnessing the sun's energy. If sunbeams were
weapons of war, we would have had solar energy centuries ago - Anonymous
”
38 | | PTCHRONICLE | | OCTOBER 2012

Shahid Hasan
Associate Director, TERI
Rural Inida has witnessed tremendous growth in the
use of mobile phones in the last five years. Expanding
connectivity and dropping handset prices apart, a key
reason for this has been the presence of local supply
chains. A prepaid coupon or handset is available in nearly
shops. this is not a uniquely Indian story. Countries like
Papua New Guinea, Rwanda, and Timo-Leste (earlier
East Timor) have seen more than a ten-fold increase in
teledensity since 2006.
According to International Finance Corporation, The
private sector lending arm of the World Bank, the number
of African mobile users was expected to overtake the
number of households connected to the electrical grid
in 2011. Back in India, youcan also easily locate a shop
selling irrigation pump-sets and its accessories in rural
Inida but not solar panels and its components. The
message is clear, local needs and accessibility are crucial
for driving the demand.
Despite impressive cost reducetions in the average cost
of solar power due to advancements in technology and
market-building policies, the current cost of solar power
is prohibitive to many. It calls for further technology
innovations and faster deployment.The bulk of research
& development (R&D) work in India is taking place only
in public sector organisations. Even there, the budget for
R&D is low.
R&D spending a percentage of the GDP in all sectors
collectively in India is only 0.8% compared to china's
1.23%. DEveloped countries have R&D expenditures of up
to 3 % of their GDP. It is, therfore, important to encourage
public-private partnership for mobilising larger funds for
R&D.
Catalysing finance and technology innovation is crucial for
harnessing renewable energy. Assessment of policies and
in centives in tune with industry concerns is also crucial.
However, without creating demand and setting up a supply
Learning from Telecom
Supply Chain, R&D key to growth of renewable energy
chain, these may not deliver the desired results. India is
proudly at the fifth place in terms of renewable energy
capacity (17 GW) and tenth in investment ($2.3billion), but
the absence of coordinated efforts in creating demand
and supporting services delivery model could see that
rankings slip downwards.
Externalities in terms of health and environmental hazards
associated with extraction,transportation, processing
and combustion of coal are huge, and costs billions (or
trillions) of dollars annually to the public across the world.
However, this is not counted while selecting energy options.
If externalities are accounted for, renewable energy is a
clear winner, even after excluding incentives given to
make them competitive or at parity with other conventional
resources. If a portion of the cost of externalities is investes
indeveloping new and more efficient tchnologies, it could
change the landscope for renewable energy in times to
come.
Grid interactive power
generation capacity
Thermal 1,37,936
Hydro 39,291
Nuclear 4,780
Wind 1,7351
Small Hydro 3,411
Solar 1,152
Other RES 2,737
renewable energy
OCTOBER 2012 | PTC INDIA LIMITED | 39

Financing
Power Projects
Critical evaluation of risks and opportunities
Dr. Atmanand
Professor of Economics & Energy
Management Development Institute, Gurgaon
Among all the infrastructure activities, power is the most
vital and highly capital intensive. In the power sector,
the huge capital requirement is on account of a massive
expansion of the order of 68,000 MW which has been
planned. The fund requirement for the power sector in the
11th Plan is a staggering figure of Rs. 10,31,600 crores of
which Rs 4,10,896 crores is meant for generation projects
alone. One of the major issues in the power sector is,
"raising of funds for carrying out the operations" to meet the
demand & supply gap. The companies in the power sector
finance their outlay through both the internal as well as
external sources. They plough back own profits to finance
their outlay. They also enter into agreements with various
multilateral agencies for financial support. Considering
the fund crunch being faced by State Electricity Boards,
private promoters should turn to Indian and foreign
financial institutions. Joint ventures should be formed with
40 | PTCHRONICLE | OCTOBER 2012

power finance
100 percent equity holdings shared by both the Indian and
foreign promoters. The equity requirement is 11 percent of
the project cost as required by the Government of India.
In case of foreign loan it would be required that supplier's
credit is guaranteed by Export Credit Agencies from the
country of export. These export Credit Agencies would,
in turn, have to seek guarantee from Financial Institutions
and Indian banks since foreign banks and credit
institutions continue to be unwilling to take the credit risk
in view of the weak financial condition of State Electricity
Boards. The promoters must take into consideration that
the loan provided by the ECAs will be supported by the
IFIs. The fee for this service generally varies between 1.5
percent to 3 percent of principal and future interest. This
fee rate is generally arrived at on the basis of discussions
between such institutions as ICICI, PFC and IDBI. Apart
from interest costs and guarantee fees, other costs of
financing are the lenders upfront fee, a fee for amount
committed but remained unused, third party assessment
and closing fees. In most cases upfront and unused fees
are calculated on the committed amount and not on the
total drawn amount. Third party costs include legal and
consultancy fees.
Government policy allows a debt equity ratio of 4:1;
however, the lending institutions advocate a Debt Equity
ratio closer to 7:3 as a prudent measure for lending.
Specialized infrastructure and mutual funds have come
up to bridge the equity gap in mega projects such as
Global Power investment of GE Caps, the AIG Asian
Infrastructure Fund, the Asian Infrastructure Fund of
Peregrine Capital Ltd. and ICICI-Power promoted by ICICI
Mutual Fund. In raising debt for financing power projects,
the cost of funds should be the lowest so that the ultimate
cost of electricity will be cheaper for the consumers. The
OCTOBER 2012 | PTC INDIA LIMITED | 41

In most
states now a
realization is
growing that
a long term
solution to
the problem
could be only
commercial
viability and
enhancement
of credit
worthiness of
the SEBs
decision of the project promoter to go for equity or
debt finance depends upon various factors such
as government guidelines for power projects,
incentives available and return on equity as also
the cost of debt vis-a-vis equity. Debentures
(convertible/ non-convertible)/bonds are issued
by Central/ State Govt. PSUs and public/ private
Ltd. companies to augment the resources for
power sector in the capital market. Presently,
internal rates are deregulated and credit rating is
mandatory if the maturity of instrument exceeds
18 months. NCDs with option of buyback,
debentures with equity warrants, floating rate
bonds and deep discount bonds are some of the
innovative instruments offered in the market.
The area of project financing in the Indian context,
is mainly limited to Indian term lending institutions
like IDBI, IFCI, ICICI, SCICI, SIDBI, UTI, PFC, LIC
and GIC. In addition, a large number of state
level institutions and smaller size commercial
banks also participate in term loans to a limited
extent, besides meeting the working capital
requirements. Disbursements made by PFC
are to state utilities like SEBs/SGCs, whereas
disbursements by other FIs were mainly to private
power projects. Due to limited domestic finance
available for power projects, the need to tap
international markets becomes inevitable which
is characterized by long tenure of maturities and
availability of various modes of finances. One of
the most important sources of finance is internal
resource generated through the projects. There
are two aspects of this issue. One the funds
already invested but not yielding results need to
be put to use. Second, the projects should be
made to be cost effective so that projects are
able to generate enough resources from within
the project.
There is an urgent need to address the fundamental
problems associated with the power sector. In the
medium term, private investment would be critical
for meeting resource requirements. Several
short term and long term measures have been
taken toward risk mitigation in the power sector.
Today most of the State Electricity Boards (SEBs)
and State governments have come forward
with the mechanism of letter of credit which
will be a tripartite document among the project
developer, the SEB and the concerned bank,
Escrow mechanism and the State Government
guarantee. Escrow capability of the SEBs after
meeting their own working capital requirement
would be limited. Accordingly, in most states now
a realization is growing that a long term solution
to the problem could be only commercial viability
and enhancement of credit worthiness of the
SEBs.
Another issue which needs risk mitigation is fuel
risk. In the past power projects in India have
been developed based on confirmation of the
fuel linkage by the state controlled Coal India and
Ministry of coal. The Government of India has
decided that power project developers could have
the associated coal or lignite mine developed by
themselves or through joint venture arrangement
on captive basis. A number of State Governments
have issued tender notices for development of
ports by private sector. Once these ports are
developed, it would be easier to import fuels like
coal, naphtha or gas handled easily and to that
extent the transportation risk in respect of fuel for
power projects will be mitigated. So far as power
evacuation risk is concerned, the measures taken
by the government include confirmation by the
Power Grid that they will create transmission
network to evacuate power. The Government
is also opening up the transmission sector for
private investment. In case of operation and
maintenance risks, it has been possible for the
developers to tie up with the equipment supplier
for proper performance guarantees.
As we are aware that the Government of India
has withdrawn the facility of providing counter
guarantees which are available only for the eight
fast track projects. In view of expectations of
lenders a large number of State Governments
and SEBs have provided the facility of guarantees
for payment obligations. To further enhance the
level of comfort the SEBs have also agreed
to implement Escrow account mechanism.
But Escrow mechanism has limited scope for
expansion of the power industry through private
sector route.
In view of the above, the right solution to the
issue of bankability of the power projects is the
removal of doubts about the credit worthiness of
the electricity distribution agency. In the present
framework of SEBs in most cases, if not in all
cases, this problem may remain unresolved
and the ultimate solution appears to be tariff
rationalization through regulatory mechanism,
restructuring of power industry through
privatization of distribution and transmission,
privatization of mine development and collection
mechanism.
42 | PTCHRONICLE | OCTOBER 2012

Energy
Efficiency
Services
PTC has been continuously making strides in the direction of Energy Efficiency
Management. PTC's engagement with Bureau of Energy Efficiency (BEE)
under Ministry of Power has been extended for a further period of 5 years
to undertake Energy efficiency projects and also to seize emerging
opportunities such as perform, achieve, and trade (PAT).
• Prestigious Projects undertaken :
- Presidential Estate
- AIIMS
- Safdarjung Hospital
- IGESIC (Rohini)
- Dr. Ram Manohar Lohia Hospital
- ESIC Hospital (Jhilmil)
- National Archives
• MoU with Bureau of Energy
Efficiency
• Conducting Investment Grade
Energy Audits & preparing DPRs
• Implementing Energy Efficiency
solutions through ESCO model
PTC India Limited
2nd Floor, NBCC Tower, 15 Bhikaji Cama Place,
New Delhi - 110066
OCTOBER 2012 | PTC INDIA LIMITED | 43

44 | | PTCHRONICLE | | OCTOBER 2012

DISTRIBUTION TARIFF REFORM
MISSING LINK
Dr. Harish K Ahuja
President- Strategy and Corporate Affairs,
Moser Baer Power Projects Pvt Ltd
In an exclusive guest insight for Metis, Dr Harish K.
Ahuja, President- Strategy and Corporate Affairs,
Moser Baer Power Projects Pvt Ltd has highlighted the
focal points which need to be acted upon by Electricity
Regulatory Commissions, discoms and consumers to
make distribution reforms a success.
The recent tariff hikes by Delhi Electricity Regulatory
Commission (DERC) is being seen more like “Regulatory
Capture than Regulatory Activism”.
The debate on increasing
electricity tariff does not seem
meaningful if we simply start
seeing the reality and treat
electricity as a commercial good
rather than a politico economic
perception created so far of it
as a public good. Similar to any
other commercial good, paying
true cost of energy should be
acceptable to customers provided
rates are determined based
on supply and demand forces
operating transparently in the market. Keeping in view the
ability to pay, being an advocate of affordable prices for
poor category of consumers it is desirable to have lifeline
subsidies but that too only through direct allocation to
beneficiaries by the government.
The electricity prices across the countries are paid based
on the true cost of energy. The table below captures the
electricity prices in some major countries.
Though there are certain other countries such as China,
Iran, Saudi Arab, Russia etc who also offer huge amount
of subsidy on all sources of energy. However, most
of these countries offering subsidies are blessed with
abundant energy resources and can afford to throwaway
such precious resources. However when looking towards
energy deficient India, no such correlation between
highly subsidized energy goods and indigenous energy
resources could be substantiated. Our overreliance on
imports while meeting our energy
requirements i.e. 80 percent for
oil, 16 percent for coal and 35
percent for natural gas seems to
testimony this harsh reality.
In the medium to long term such
populist measures distort the
energy markets and ultimately
lead to a detrimental impact on
the economy. The recognition
of this fact is evident when the
kingdom of Saudi Arabia recently
decided to invest $109 billion
for setting up 41 GW solar capacity within next 20 years
to displace its oil run power plants (62% of installed
capacity in Saudi Arab is oil based electricity plant) and
consequently save precious crude oil resources the prices
of which is touching $100 per barrel in the peak oil era.
Post the recent revision, the average tariff in Delhi would
be 12 cents per kwh very close to Finland where more then
50% power is traded on spot and prices are determined
OCTOBER 2012 | PTC INDIA LIMITED | 45

Surprisingly in India on account of inbuilt subsidies, the average tariff is very low and still is in the range
of US 7-8 cents per unit in spite of our coupling with global energy value-chain in terms of dependence
on imports. Further the tariff recovered from industrial/commercial consumers is much higher vis-a-vis
domestic consumers. In other countries industrial consumers pay lesser than domestic consumers.
Electricity Prices in Selected Countries
2011 Rank Country Cost in US Cents/kWh
1 Canada 7.98
2 South Africa 8.55
3 United States 9.48
4 France 9.61
5 Australia 10.02
6 Poland 11.87
7 Sweden 11.94
8 Finland 12.11
9 Portugal 13.51
10 Netherlands 14.37
11 Austria 14.58
12 United Kingdom 15.10
13 Belgium 15.23
14 Spain 15.37
15 Germany 18.56
16 Italy 19.70
based on supply and demand forces in day ahead
markets. Where as in India, the electricity tariffs are fixed
by regulatory commissions in accordance with Electricity
Act and other statutory policies.
Without going much in to the merit of recent tariff hikes
what can be observed that in spite of its best intentions
DERC have not been able to convey the message that
they are equally concerned about consumer interests.
Though, DERC is on its path to implement Time of Day,
Demand Side Management and aggressive performance
standards to equip customer to control their electricity
demand and expect more from monopoly private discoms.
However certain rights which customers inherit from the
Electricity Act 2003 & National Tariff Policy such as
a) Choice of suppliers to create competition among
discoms
b) Compliance to strict performance standards by
discoms
c) Active renewable energy portfolio
d) Advanced hourly metering for all major consumers
e) Transparent billing etc does not seem to be in place
despite DERC sincere wish to do so.
Delhi Discoms have already achieved a) adequate
distribution network by incurring capex b) solid customer
base & c) low A T & C losses. Therefore now after securing
DERC's approval for sustainable tariff and periodic power
purchase cost adjustment, Discoms should look forward
to public list their companies in national stock Exchanges
to raise additional equity. This would not only bring desired
level of transparency in their financial and commercial
operations on account of SEBI regulations in this regard
but also not burden Delhi government to infuse any more
equity.
Customers would prefer to see public listed discoms
competing in open power market to offer them best
services that too in transparent environment of financial
disclosure both before SEBI & DERC. Sooner or later
Delhi has to follow this proven path of reforms working
brilliantly in other countries.
46 | | PTCHRONICLE | | OCTOBER 2012

"The journal is rich with content pertaining
to power market development"
Jayant Deo
Managing Director & CEO
"The journal is extremely useful to to
those who want to know about the power
sector in general. The journal addresses
the challenges faced by the power sector
today"
S N Swaroop
Member of International Centre Excellence
to promote South-South Cooperation
"The journal is an excellent endeavor. It
brings people closer to the sector"
Prabir Neogi
CEO, New Initiatives on Fuel & Power Distribution and
Director, Training Institute of CESC Limited at CESC Limited.
Dear Readers,
Thank you for the kind response. We hope we continue receiving your
valuable feedback at marketing@ptcindia.com.
PTC India Limited
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OCTOBER 2012 | PTC INDIA LIMITED | 47

48 | PTCHRONICLE | OCTOBER 2012