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					       Hydro Sector
    Development in India
Growth & Investment Opportunities

              R.V. SHAHI
              SECRETARY
          MINISTRY OF POWER    Montreal (Canada)
         GOVERNMENT OF INDIA       June 19, 2003
                                               1
            Indian Power Sector

Ø Power in Concurrent List :

  •   Both Central & State Governments have jurisdiction

Ø Power Sector in States

  •   Vertically integrated State Electricity Boards

                               (being restructured)

Ø Central Public Sector Undertakings

  •   Own 30% of the capacity

                                                           2
 Power Infrastructure in India                    (May ‘03)
Ø Generating Capacity   Hydro     27,010 MW
                        Thermal   76,607 MW
                        Nuclear    2,720 MW
                        Wind       1,870 MW
                                  108,207 MW * * In addition Captive
                                                   capacity of about
                                                   25,000 MW




                                                                       3
                                                        Contd...
 Power Infrastructure in India                 (May ‘03)
                                                     Cont...
Ø Sectorwise Installed Capacity
              Central             32,816 MW
              State               63,291 MW
              Private             12,100 MW
                                  108,207 MW




                                                           4
Power Supply position in the country




                                       5
                  The target ahead
 Power development - projections for next ten years :
 Ø Target to add more than 100,000 MW by year 2012
   • 41,000 MW planned by 2007


     Peak
requirement in
    (MW)



    Energy
 requirement in
     (BUs)

                    (act.)
                                                        6
       Hydro development : Rationale



Fuel
Mix




                  Years




                                       7
  Hydro - A good power source

§ Clean power
§ Cost effective option in the long term
§ Meets peaking requirements
§ Development of underdeveloped areas
§ Optimum use - Drinking water, Power and
                Irrigation



                                            8
       Hydro development in the country
   •    Plans based on five year period block
   •    At present 10th five year Plan : 2002-07                       (actuals in MW)



               Act      Tar.




 Plans
(end Mar’.) (‘74)    (‘79)     (‘85)   (‘90)   (‘97)   (‘02)   (‘07)        (‘12)

             VI to IX Five Year Plans              - 13,666 MW
               (20 years)

             X Five Year Plan                      - 14,393 MW
                                                                                     9
                                                                        Contd...
           Hydro development ……..                          Cont...

Ø 10th Plan target - 14,393 MW
  •    Capacity under execution 12,000 MW
                 Central 7,800 MW
                 State 3,500 MW
                 Private 700 MW
Ø Another 12,000 MW in Central Sector under Stage I & II
  development
  •   Stage I covers    Survey & Investigations /
                        F.R. preparation
  •   Stage II covers   Detailed investigations /
                        DPR preparation and
                        Infrastructure development
                                                                 10
   Thrust on hydro development
              The Selection Process

      Potential
     assessed                         150,000 MW
(845 Schemes)

 Ranking Study
of unharnessed                   107,000 MW
   399 schemes


Hydro Initiative
(162 schemes)            50,000 MW

                                                   11
     50,000 MW Hydroelectric Initiative
Ø   Initiative launched in May 2003
Ø   Consultants identified to undertake Feasibility Studies
•   Preparation of Preliminary
    Feasibility Reports          - Dec.’03 - Sep.’04

Ø Detailed Project Reports       - Jan.’04 - Jan.’06
    For promising projects, depending on PFRs results
    • DPR preparation also through reputed International
      Consultants
    • Process of selection of Consultants for DPR of large
      projects through ICB
                                                                  12
                                                       Contd...
50,000 MW Hydroelectric ……..                         Contd…...



 Ø   Clearances / sanctions   - Sep.’04 - Jul. ‘06


 Ø   Implementation           - 2007 - 2017


     •   An enormous task requiring huge investments
         -   to be undertaken through Central / State
             undertakings and Private Investments



                                                                 13
                The Opportunities
Ø Consultancy firms having expertise in planning and
  design of hydro projects : Preparation of DPRs

•   Selection through a transparent              process    of
    International Competitive Bidding.

Ø EPC/ Construction companies

•   Implementation of the projects through Central and
    State PSUs and Private promotors.

    -   Contracts to be finalised through ICB.


                                                                  14
                                                       Contd...
    The Opportunities           ……..             Contd. ….

Ø Investment firms/ Project Developers

-    In consultation with the State Govts., projects to be
     implemented through the IPP/ Joint Venture route

-    Projects upto 100 MW can be awarded by State Govts.
     through the MOU route               (being reviewed)

-    Larger projects to be awarded through a transparent
     process of ICB




                                                             15
        Areas of Concern & Focus
          in hydro development

Ø   Quality & Reliability of Investigations

Ø   Optimizing inputs for reducing cost

Ø   Compressing Construction cycle time

Ø   Setting bench marks in Project Management

Ø   State of Art Technology during construction


                                                  16
  Facilitating measures for investment
              in hydro sector

Ø 100% foreign equity participation
Ø Investment policy made attractive
   Debt : Equity ratio up to 4 : 1
Ø Liberalized rates of depreciation in respect of assets
Ø Customs Duty & Excise exemption for Mega projects
                                    (500 MW & above)
Ø 16% Rate of Return on equity
Ø Two part tariff

                                                              17
                                                   Contd...
    Facilitating measures ……                    Contd. …...



Ø   Softer norms for incentive for hydro stations
    • Availability factor threshold reduced from 90% to 85%
Ø   Ceiling limits for TEC for hydro projects revised :
    • 53 million US$ for projects awarded through MOU
      route
    • 213 million US$ for projects awarded through
      competitive bidding
    • 532 million US$ for projects where tariff is determined
      by CERC/ SERC.



                                                                     18
                                                          Contd...
    Facilitating measures ……                     Contd. …...



Electricity Act 2003 notified 10th June ‘03
#   Objectives
    • Accelerate reform process
    • Harmonize the provisions in existing law
    • Obviates need for individual States to enact their own
      reforms laws
    • Introduce competition
    • Power for all areas
    • Consumer interests : the focal point
                                                                   19
                                                        Contd...
      Facilitating measures ……                     Contd. …...

Ø   Main features of the Electricity Act 2003 :
    • Creates liberal framework for power development
    • Facilitates private investment
    • Delicenses generation : Captive further liberalised
    • Multiple licencess in Distribution
    • Creates competitive environment
    • Stringent provisions for controlling theft of electricity
    • Empowers States to restructure Electricity Boards
    • Mandates creation of Regulatory Commissions
    • Open access on Transmission & Distribution
    • Power marketing / trading
                                                                     20
                                                          Contd...
 Facilitating measures ……                       Contd. …...

Distribution Reforms
Commercially viable Distribution Business alone can lead
to sustainable investment in Generation, Transmission &
Distribution


Distribution Reforms – Three Dimensional Challenge
•   Governance
•   Technology Upgradation
•   Tariff Rationalisation



                                                                21
                                                     Contd...
Facilitating measures ……                     Contd. …...


Distribution Reforms to focus on :
Ø System upgradation
Ø Loss reduction
Ø Theft control
Ø Consumer orientation.
Ø Commercialization
Ø Decentralized distributed generation and supply for
  rural areas.
Ø Introducing competition.
Ø I.T. to replace human interfaces

                                                           22
                                                Contd...
     Facilitating measures ……                   Contd. …...


Distribution Reforms through
Accelerated Power Development & Reform Programme
(APDRP) :
            A strong instrument for effecting improvement &
            reforms in sub-transmission & distribution
#     APDRP has two components
i.    Improve Distribution Network / system
ii. Incentivise Loss Reduction

                                                               23
                                                    Contd...
    Facilitating measures ……                   Contd. …...


Ø Turnaround plan for State Utilities : APDRP funding :
•    During five years period, plan to invest more than
     8500 million US$ :
     50% for upgradation of system and 50% to be given as
     incentives for loss reduction
#    Aggregate Technical & Commercial (AT&C) losses in
     majority of identified circles have started showing
     reduction
#    Stringent provisions in Electricity Act 2003 for
     controlling theft of electricity

                                                             24
                                                  Contd...
Facilitating measures ……                        Contd. …...

 Payment Security / Assurance
 Ø Power Purchase Agreement
 Ø Letter of credit
 Ø Escrow cover
 Ø State Government guarantee
 Ø Open access :
    •   Third party sale to consumers allowed
    •   Direct sale to Distribution utilities
  Commercially viable Distribution is the best payment
  security
                                                              25
WITH SUCCESSFUL REFORMS UNDERWAY, THE
REQUIRED TURNAROUND IN INDIAN POWER SECTOR
HAS BEGUN


THE OPPORTUNITIES OFFER GROWTH AND PROSPERITY
FOR ALL STAKEHOLDERS
    •    CONSULTANTS
    •    EPC AGENCIES
    •    CONTRACTORS
    •    INVESTORS
    •    LENDERS
                                                26
Thank you
    Ministry of Power
         Website
  http://powermin.nic.in

                           27

				
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