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ANNEX XIII:ADVANCED FOSSIL FUEL-BASED POWERGENERATION – FINANCING CHALLENGESByMr. Subhranshu PatnaikSenior Director (Partner)Deloitte Touche Tohmatsu India Private LimitedGurgaon, Haryana, IndiaA. Sector overviewThe deficit situation has improved in financial year 2010-11, partly on account of lowergrowth in demand and partly on account of underutilization of existing capacity andtransmission and distribution (T&D) losses (Table 3-12). During 2010-11 energy availabilityincreased by 5.6 per cent over the previous year and peak met increased by 6per cent. Peak demand has grown at an average rate of 7.1 per cent in the last fiveyears till 2009-10 (9 per cent in 2009-10). During the same period, energy consumptiongrew at an average of 6.3 per cent (10 per cent in FY 2006-07). In addition, the installedcapacity has grown at an average of 6.9 per cent in the last six years.Table 3-12: Power supply position in 2010-2011 (actual) and 2011-2012 (provisional)Component 2010-11 2011-12Energy (MU) Peak (MU) Energy (MU) Peak (MU)Requirement 861,591 122,287 933,741 136,193Availability 788,355 110,256 837,374 118,676Shortage 73,236 12,031 96,367 17,517Percentage 8.5 9.8 10.3 12.9In the Five-Year Plan (FYP) periods from 8 th to 10 th – i.e. 15 years – only 56,000 MWwas added. However, the 11 th FYP period achieved 54,000 MW. Private playerscontributed only 13 per cent to the capacity added in the 10 th FYP, but contributed to32 per cent addition till 2010-11 in the 11 th FYP. Delay in engineering, procurement andconstruction (EPC) was the main reason for failing to achieve the target in the 10 th FYPperiod. A shortfall of around 14,000 MW in the 11 th FYP period was on account of EPCdelay; coal availability has been the other reason for delay (likely to be more acute inthe 12 th FYP period).Guided by Section 63 of Electricity Act, 2003, the National Tariff Policy mandates theutilities to procure power through competitive bidding route. Before 6 January 2006,approval of power purchase agreement (PPA) was governed through individual StateRegulatory Acts, and was on a cost plus basis and offered a regulated return of only 14per cent. There was lack of clarity on the basis for approval of PPA and the scope fornegotiations on almost every cost item resulted in long-drawn processes. Since6 January 2006, however, the National Tariff Policy mandates that the power procurement123