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    Power Sector In India

    BACKGROUND:

     

    The power sector in India has undergone significant progress after Independence. Energy is one of the key enablers for the country’s economic development. With the certainty in policy-level interventions, the economy is bound to proliferate and the demand for energy will inevitably surge. Other than economic growth, human developmental aspects like poverty reduction, employment generation, etc. are also considerably dependent on secure energy supply.

     

    Post India’s Independence the country had a power generating capacity of 1,362 MW. Hydro power and coal based thermal power have been the main sources of generating electricity. Generation and distribution of electrical power was carried out primarily by private utility companies. Notable amongst them and still in existence is Calcutta Electric. Power was available only in a few urban centres; rural areas and villages did not have electricity. After 1947, all new power generation, transmission and distribution in the rural sector and the urban centres (which was not served by private utilities) came under the purview of State and Central government agencies. State Electricity Boards (SEBs) were formed in all the states. Nuclear power development is at slower pace, which was introduced, in late sixties. The concept of operating power systems on a regional basis crossing the political boundaries of states was introduced in the early sixties. In spite of the overall development that has taken place, the power supply industry has been under constant pressure to bridge the gap between supply and demand.

     

    INTRODUCTION:

     

    Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.

     

    India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.

     

    OBJECTIVES OF THE STUDY

     

    vTostudythe current scenario of Power Sector in India vTounderstand the various challenges and risk in Power Sector vTosuggest solution and remedies to the various problems in Power Sector in India

     

     

     

     

     

     

     

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    Current status of power sector in India:

     

    Third largest producer and fourth largest consumer globally:

     

    With production of 1,278.91 TWh in 2015, India was the 3 rd largest producer & 4 th largest consumer of electricity in the world, with the installed power capacity reaching 305.55 GW by September 2016. The country also has the 5th largest installed capacity in the world.

     

    Large-scale government initiated expansion plans:

     

    1. The government targets capacity addition of 88.5 GW under the 12th Five-Year Plan (2012–17) and around 100 GW under the 13th Five-Year Plan (2017–22)

     

    1. Investments of around USD250 billion are planned for the power sector during the 12th Plan Five-Year Plan.

     

    Robust growth in renewables:

     

    1. India energy is estimated to contribute 60 GW, followed by solar power at 100 GW by 2022.
    2. The target for renewable energy has been increased to 175 GW by 2022.

     

    Favourable policy environment:

     

    100 per cent FDI is allowed under the automatic route in the power segment & renewable energy.

     

    Policy Initiatives / Decision Taken

     

    The energy sector in India has seen a transformational change with progressive policy-level changes and effective implementation of directives. These changes promise enormous opportunities for various stakeholders and market players.

     

    The Indian power sector has come a long way since the laying down of the basic framework in 1910 right up to the Electricity Act of 2003, which brought about necessary changes to an evolving sector. Electricity Act 2003 came into force from 15.06.2003. (Electricity Amendment Bill 2014 Under consideration).The proposed amendment will have a profound impact on the Indian power sector. It touches upon different aspects of the sector, right from segregation of carriage and content to renewable energy and open access to tariff rationalisation and so on

     

    Recent decisions:

     

    Aiming to empower villages through a hike in MGNREGA funds, poverty alleviation and 100 per cent electrification by May 2018, Finance Minister Arun Jaitley focussed on rural India.

     

    In the Budget speech, Finance Minister said 100 per cent electrification of villages will be achieved by May 1, 2018.

     

     

     

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    The government has allocated Rs 4,843 crore to electrify the rural areas under the Deendayal Upadhyaya Gram Jyoti Yojana in financial year 2017-18.

     

    The government Five-Year Plans (GW) is targeting capacity addition of around 88.54 GW under the 12th (2012–17) & around 100 GW under the 13th (2017–22) Five-Year Plan The expected investments in the power sector during the 12th Plan (2012–17) is USD250 billion There is a tangible shift in policy focus on the sources of power. The government is keen on promotion of hydro, renewable & gas-based projects, as well as adoption of clean coal technology In March 2017, Bhoruka Power Corp. announced its plans is to raise USD120 million, to increase their hydro & wind renewable energy capacity to 1 gigawatt by 2020

     

    Government Initiatives

     

    The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:

     

    vTheUnion Cabinet, Government of India has given its ex-post facto approval for signing of a Memorandum of Understanding (MoU) on Renewable Energy between India and Portugal, which will help strengthen the bilateral cooperation between the two countries.

     

    ?TheMinistry of New and Renewable Energy plans to introduce a fixed-cost component to the tariff for electricity generated from renewable energy sources like solar or wind, in a bid to promote a green economy.

     

    ?TheUnion Cabinet has approved the ratification of International Solar Alliance's (ISA) framework agreement by India, which will provide India a platform to showcase its solar programmes, and put it in a leadership role in climate and renewable energy issues globally.

     

    ?TheGovernment of India plans to introduce a scheme to encourage setting up of biomass plants across the country, which will generate electricity and also help dispose of agricultural waste in a carbon-neutral manner to help tackle growing pollution.

     

    ?TheGovernment of India plans to rationalise various categories of electricity consumers across states, which is expected to bring transparency and efficiency in billing, improve tariff collection and improve the health of distribution companies in the country.

     

    ?TheGovernment of India plans to set up a US$ 400 million fund, sourced from The World Bank, which would be used to protect renewable energy producers from payment delays by power distribution firms, while at the same time protecting the distribution firms from the shrinking market for conventional grid-connected power, caused by wider adoption of roof-top solar power generation.

     

    ?TheMinistry of Power plans to set up two funds of US$ 1 billion each, which would give investment support for stressed power assets and renewable energy projects in the country.

     

    ?MrPiyush Goyal, Minister of State with Independent Charge for Power, Coal, New and Renewable Energy and Mines, launched an online portal for star rating of mines, which will bring all mines to adopt sustainable practices, and thereby ensure compliance of environmental protection and social responsibility by the mining sector.

     

    ?TheMinistry of New and Renewable Energy (MNRE), which provides 30 per cent subsidy to most solar powered items such as solar lamps and solar heating systems, has further extended its subsidy scheme to solar-powered refrigeration units with a view to boost the use of solar-powered cold storages.

     

     

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    ?MrPiyush Goyal, Minister of State with Independent Charge for Power, Coal, New and Renewable Energy and Mines, inaugurated the Tarang (Transmission App for Real Time Monitoring & Growth) mobile app and web portal for electronic bidding for transmission projects, which is expected to enhance ease, accountability, transparency, and boost investor confidence in power transmission sector.

     

    ?TheMinistry of Shipping plans to install 160.64 MW of solar and wind based power systems at all the major ports across the country by 2017, thereby promoting the use of renewable energy sources and giving a fillip to government's Green Port Initiative.

     

    ?TheGovernment of India and the Government of the United Kingdom have signed an agreement to work together in the fields of Solar Energy and Nano Material Research, which is expected to yield high quality and high impact research outputs having industrial relevance, targeted towards addressing societal needs.

     

    ?TheMinistry of Petroleum and Natural Gas is seeking to enhance India's crude oil refining capacity through 2040 by setting up a high-level panel, which will work towards aligning India's energy portfolio with changing trends and transition towards cleaner sources of energy generation.

     

    ?TheGovernment of India plans to start as many as 10,000 solar, wind and biomass power projects in next five years, with an average capacity of 50 kilowatt per project, thereby adding 500 megawatt to the total installed capacity.

     

    ?MrPiyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy outlined Government of India’s goal to provide electricity to every home in India by 2020, while also focussing on ensuring the cost of power is affordable to everyone.

     

    ?Government of India has asked states to prepare action plans with year-wise targets to introduce renewable energy technologies and install solar rooftop panels so that the states complement government's works to achieve 175 GW of renewable power by 2022.

     

    • The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind

     

    energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects. ?UjwalDISCOM Assurance Yojana (UDAY) is the financial turnaround and revival package for

     

    electricity distribution companies of India (DISCOMs) initiated by the Government of India with the intent to find a permanent solution to the financial mess that the power distribution is in.It allows state governments, which own the discoms, to take over 75 percent of their debt as of September 30, 2015, and pay back lenders by selling bonds. Discoms are expected to issue bonds for the remaining 25 percent of their debt.

     

    FINANCING CHALLENGES

     

    Power financing faces the following major challenges:

     

    1. Power Sector Exposure Limit: Most banks have already reached their exposure limits in power sector set by them in pursuance of the RBI guidelines. In addition, there is continual asset liability mismatch due to the long term nature of power plant projects. These factors cause tightness in liquidity and borrowing costs. Refinancing of loans or take-out financing may mitigate asset liability mismatch.

     

     

     

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    1. Lack of Payment Security / SEB Health: Deteriorating financial health of the state utilities makes the lenders uncomfortable in financing state sponsored solar power projects. As a result lenders tend to place power projects in high risk categories and that increases cost of borrowing.

     

    The decision of the project promoter to go for the combination of equity and debt finance depends upon various factors such as availability of finance, fiscal incentives available and return on equity as also the cost of debt vis-a-vis equity. In case of foreign loan it is generally required that supplier’s credit is guaranteed by export credit agencies from the country of export. The export credit agencies, in turn, seek guarantee from Indian lenders (financial Institutions and 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 FINANCING OPTIONS AND RELATED CONSTRAINTS REMAIN AS FOLLOWS:

    EQUITY/ CAPITAL MARKET INSTRUMENTS:

     

    The government policy allows a debt equity ratio of 4:1. However, the lending institutions are comfortable with a debt equity ratio closer to 7:3 as a prudent measure for lending. The gap in the equity infusion needs to be filled up. It is imperative that some specialised infrastructure funding agencies and special purpose mutual funds are set up for this purpose to bridge the equity gap in large Power projects.

     

    1. Capital Market : Presently, interest rates are deregulated and credit rating is mandatory if the maturity of instrument exceeds 18 months debentures (convertible/ non-convertible)/bonds can be issued by power companies to augment the resources for power sector in the capital market. NCDs with option of buyback, debentures with equity warrants, floating rate bonds and deep discount bonds are some of the innovative instruments which can be floated in the capital market.

     

    1. Private placement: Rule 144 A allows for private placement of debt to financial institutions known as QIB, without the kind of stringent disclosure requirements needed for equity issues. Long tenure of bonds and less restrictive covenants make this proposition conducive for financing power projects.

     

    DEBT FINANCE :

     

    The capital intensive nature of power projects requires raising debt for longer tenor (more than 15 years) which can be supported by the life of the power project (around 25 years). However, banks face a difficulty in long term lending due to wide disparity between the maturity profiles of assets and liabilities of banks exposing them to Asset Liability Maturity mismatch (ALM).

     

    Accordingly, the longest term of debt available from any bank or financial institution is for 15 years (door-to-door) which creates mismatch in cash flow of the power project and sometimes affect the debt servicing.

     

     

     

     

     

     

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    Though maturity profiles of funds from insurance sector and pension funds are more suited to long gestation power projects, only a minuscule portion is deployed in power sector. Appropriate fiscal incentives need to be explored to channelize savings. New debt instruments and sources of funds, viz., Infrastructure Debt Fund, Special Energy Funds etc. may be identified for the purpose. Options like re-financing may be explored to make funds available for the power project for a long tenor.

     

    Syndicated Loans : Since the fund requirements for power sector are large and the gestation period is much longer , the loan syndication concept needs to be in place for closure of finance requirement. This also helps in sharing of risk among the lenders apart from saving on efforts and cost because appraisal can be done by only the lead institution.

     

    The constraints in syndicated loans are that all lenders are not comfortable with longer period repayment; specific to the requirements of the borrowers to suit their projects. The floating rate of interest is another concern for the project as this brings the element of uncertainty in project financials.

     

    Foreign Funding : Cost of Rupee funding is high as compared to foreign currency funding. In a competitive bidding scenario, higher cost of borrowing could adversely affect the profitability and debt servicing of loans. While raising debt for financing power projects, the cost of funds need to be at a low level so that the ultimate cost of electricity will be cheaper for the consumers.

     

    The need to tap international markets becomes inevitable which is characterized by longer tenure of maturities and availability of various modes of finances.

     

    Multilateral Institutions : Institutions like World Bank, IFC Washington, ADB, and Commonwealth Development Corporation (CDC) are tapped for financing infrastructure in developing countries. However usually the financing is available with restrictive covenants. The co-financing facility extended by some of the multilateral institutions are also a recourse. However in most of these loans, sovereign guarantee is solicited by the Lenders, which again requires government support.

     

    Export Credit Agencies (ECA) : ECAs can be important sources of bilateral funding. ECAs have a long history of providing finance for all types of power generating equipment. However, there are certain limitations in ECA financing like exposure limit, exchange risk transfer, guarantee requirements and cost of insurance etc. The fee for these services are quite expensive (levied on principal and future interest). 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.

     

    External Commercial Borrowing (ECB) : External Commercial Borrowings (ECBs) for power projects involves issues relating to tenor, hedging costs, exposure to foreign exchange risks etc. Project financing by multilateral agencies (World Bank, Asian Development Bank) has been low due to issues like soundness of power purchase agreements.

     

     

     

     

     

     

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    While bond offerings are a lower cost option to raise funds visà- vis syndicated loans, corporate bond market for project financing is virtually absent in India. The funds like Global Bonds, Yankee Bonds, Samurai Bonds, Euro Currency loan, UD 144A Private placement, Global Registered Notes (GRNs) can lend for large sized projects. However weak finances of the SEB’s remain a critical issue.

     

    The credit rating of the power projects being set up under SPV structure is generally lower than investment criterion of bond investors and there is a need for credit enhancement products. As a result of the credit enhancement, the SPV’s rating is expected to improve to AA, making it investment grade which is the minimum acceptable level for pension and insurance funds. With the participation of pension and insurance funds, the twin benefits of longer tenor and stable interest rate could accrue to power projects while the ALM issues of banks could also be resolved.

     

    RISKS AND MITIGATION MEASURES

     

    Despite excess demand for electricity, many existing and commissioned thermal power plants are operating well below designed capacity and/or are losing money. The reasons range from risks like excessive financial leverage at a higher than optimum rate of interest, power purchase agreements that are priced too low to leave a profit margin, under-utilisation due to inability to source domestic coal, and unavailability of finance at a low cost.

     

    Market risk: The market risk includes demand risk and price risk.

     

    Demand risk can be avoided by the ‘take or pay’ stipulation of the PPAs, according to which the SEB agrees to pay the power generator the ‘Availability rate’ regardless of the power purchased. Similarly, the price risk is avoided by the tariff structure in which all costs of producing power – fixed (interest, depreciation, O & M, insurance, taxes) and variable (fuel), plus a return on equity (ROE) are assured.

     

    Weak finances of SEBs: State Electricity Boards (SEB) are usually the sole purchasers of the power that a private sector generator generates. That being the case, the private sector runs the risk of not being paid by SEBs (who are in poor financial health). Risk can be mitigated as follows:

     

    i)An escrow account guaranteeing payment on behalf of the SEBs – Cash inflows of the SEB are deposited and to which the generating agency (say an independent power producer) would have first access in case of defaults by the SEB.

     

    1. An irrevocable letter of credit, favouring the IPP on certain conditions being met and issued by a highly rated bank/financial institution.

     

    • An agreement by which the IPP could supply electricity directly to buyers, through the existing lines.

     

    1. Counter guarantee from the central government. In fact this was sought from the central government and was eventually obtained in the case of six of the eight ‘fast-track’ projects.

     

    PPAs: The risks exposure of the private producers are usually sought to be addressed in the PPAs. But the power purchase agencies( Read SEBs) insist on a one-sided PPA agreement loaded in their favour.

     

    Fuel-supply risk: This is the risk of not obtaining timely supply of adequate quantity of fuel. To counter this risk, power generators may either sign long-term contracts with the public sector supplier or acquire a captive source (for example, a captive coal mine).

     

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    GST - Impact on Power Sector

     

    Power generation companies may see a rise in costs since all inputs are included in GST but electricity is not. Power generation companies can procure goods at a concessional rate of 2 percent, however the rate might go up to 12 percent or 18 percent and the cost might be passed on to the consumer if GST is implemented.

     

    The strong government thrust to promote power sector and ambitious target of achieving 175 GW of renewable energy capacity by 2022 with equal distribution across the country will be directly affected by impact of GST. It is necessary to rationalise the tax treatment under new tax reform for this sector.

     

    Reduced cost of projects will improve financial health of power sector and will encourage for new investment in this sector. Since electricity is one of the major inputs for manufacturing therefore any increase in cost of electricity will directly hit the cost of other products, which will result in overall inflation.

     

    Power Sector at a Glance ALL INDIA

     

    1.Total Installed Capacity:

     

     

     

     

     

     

     

     

     

     

     

     

     

    Fuel

    MW

     

    % of Total

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Thermal

    215,215

    68.2%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Coal

    189,048

    59.9%

     

     

     

     

     

     

     

     

     

     

     

     

    Gas

    25,329

    8.1%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Oil

    838

    0.3%

     

     

     

     

     

     

     

     

     

     

     

     

     

    Hydro (Renewable)

    44,413

    14.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Nuclear

    5,780

    1.8%

     

     

     

     

     

     

     

     

     

     

     

     

     

    RES** (MNRE)

    50,018

    15.9%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total

    315,426

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Renewable Energy Sources(RES) include SHP, BG, BP, U&I and Wind Energy SHP= Small Hydro Project ,BG= Biomass Gasifier ,BP= Biomass Power, U & I=Urban & Industrial Waste Power, RES=Renewable Energy Sources

     

    ELECTRICITY GENERATION PERFORMANCE

     

    Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

     

    Total installed capacity of power stations in India stood at 315,426.32 Megawatt (MW) as of February 28, 2017.

     

    The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity to be generated in the financial year 2017-18, which is 50 BU’s higher than the target for 2016-17. The annual growth rate in renewable energy generation has been estimated to be 27 per cent and 18 per cent for conventional energy.

     

    The Government has added 8.5 GW of conventional generation capacity during the April 2016-January 2017 period. Under the 12th Five Year Plan, the Government has added 93.5 GW of power generation capacity, thereby surpassing its target of 88.5 GW during the period.

     

     

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    Programme, actual achievement and growth in electricity generation in the country during 2009-10 to 2016-17 :-

     

    Year

    Energy Generation from Conventional Sources (BU)

    % of growth

     

     

     

    2009-10

    771.551

    6.6

     

     

     

    2010-11

    811.143

    5.56

     

     

     

    2011-12

    876.887

    8.11

     

     

     

    2012-13

    912.056

    4.01

     

     

     

    2013-14

    967.150

    6.04

     

     

     

    2014-15

    1048.673

    8.43

     

     

     

    2015-16

    1107.822

    5.64

     

     

     

    2016-17*

    1057.746

    4.69

     

     

     

     

    * Provisional (Upto February, 2017)

     

    The electricity generation target for the year 2016-17 was fixed at 1178 BU comprising of 999.000 BU thermal; 134.000 BU hydro; 40.000 nuclear; and 5.000 BU import from Bhutan.

     

    Plant Load Factor (PLF): The PLF in the country during 2009-10 to 2016-17 is as under:

     

     

    PLF

    Sector-wise PLF (%)

     

     

    Year

     

     

     

     

     

    %

    Central

     

    State

    Private

     

     

     

     

     

     

     

     

    2009-10

    77.5

    85.5

     

    70.9

    83.9

     

     

     

     

     

     

    2010-11

    75.1

    85.1

     

    66.7

    80.7

     

     

     

     

     

     

    2011-12

    73.3

    82.1

     

    68.0

    69.5

     

     

     

     

     

     

    2012-13

    69.9

    79.2

     

    65.6

    64.1

     

     

     

     

     

     

    2013-14

    65.60

    76.10

     

    59.10

    62.10

     

     

     

     

     

     

    2014-15

    64.46

    73.96

     

    59.83

    60.58

    2015-16

    62.29

    72.52

     

    55.41

    60.49

     

     

     

     

     

     

    2016-17*

    59.93

    71.26

     

    54.08

    56.55

     

     

     

     

     

     

     

    * Provisional (Upto February, 2017)

     

     

     

     

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    Power Supply Position

     

    The power supply position in the country during 2009-10 to 2016-17 :

     

     

     

    Energy

     

     

    Peak

     

     

     

     

     

     

     

     

     

     

     

     

     

    Requirement

    Availability

    Surplus(+)/Deficits(-)

    Peak

    Peak Met

    Surplus(+) / Deficts(-)

     

    Demand

    Year

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (MU)

    (MU)

    (MU)

    (%)

    (MW)

    (MW)

    (MW)

    (%)

     

     

     

     

     

     

     

     

     

     

     

     

     

    2009-10

    8,30,594

    7,46,644

    -83,950

    -10.1

    1,19,166

    1,04,009

    -15,157

    -12.7

     

     

     

     

     

     

     

     

     

     

     

    2010-11

    8,61,591

    7,88,355

    -73,236

    -8.5

    1,22,287

    1,10,256

    -12,031

    -9.8

     

     

     

     

     

     

     

     

     

     

     

    2011-12

    9,37,199

    8,57,886

    -79,313

    -8.5

    1,30,006

    1,16,191

    -13,815

    -10.6

     

     

     

     

     

     

     

     

     

     

     

    2012-13

    9,95,557

    9,08,652

    -86,905

    -8.7

    1,35,453

    1,23,294

    -12,159

    -9.0

     

     

     

     

     

     

     

     

     

     

     

    2013-14

    10,02,257

    9,59,829

    -42,428

    -4.2

    1,35,918

    1,29,815

    -6,103

    -4.5

     

     

     

     

     

     

     

     

     

     

     

    2014-15

    10,68,923

    10,30,785

    -38,138

    -3.6

    1,48,166

    1,41,160

    -7,006

    -4.7

     

     

     

     

     

     

     

     

     

     

     

    2015-16

    11,14,408

    10,90,850

    -23,558

    -2.1

    1,53,366

    1,48,463

    -4,903

    -3.2

     

     

     

     

     

     

     

     

     

     

     

    2016-17 *

    10,44,326

    10,37,165

    -7,160

    -0.7

    1,59,542

    1,56,934

    -2,608

    -1.6

     

     

     

     

     

     

     

     

     

     

     

     

    REMEDIES AND SOLUTIONS

     

    It is evident that the deficit in power availability in India is a significant impediment to the smooth development of the economy. In this context, bridging the gap in demand and supply has become critical and consequently, large projects are being undertaken in different segments of the sector; Generation, Transmission and Distribution. As India has not witnessed such a large scale of implementation before, there is a need to review and enhance project execution capabilities to help ensure targets are met. The table below summarizes the key implementation challenges and remedies and solutions for successfully achieving the implementation of power generation plans.

     

     

     

     

     

     

     

     

     

    32 | P a g e


    Power Sector in India

     

     

     

    SBS Wiki

     

     

     

     

     

     

    www.sbsandco.com/wiki

     

     

     

     

    Key Challenges

    Measures being adopted

    Resulting issues

    Solutions and Remedies

     

     

     

     

     

     

     

     

    Addition

    of  significant

    UMPP

     

    Technical

    and

    financial

    P r o j e c t  e x e c u t i o n

    generation capacity

     

     

    capability

    to

    execute

    C o s t s / C a s h

    f l o w

     

     

     

     

    such large projects

    management

     

     

     

     

     

     

     

     

     

     

     

     

    Risks increase manifold

    R i s k  M a n a g e m e n t

     

     

     

     

     

     

     

    strategy and planning

     

     

     

     

     

     

    Ensuring fuel availability

    P u r c h a s e

    a n d

    Risks  in

    operating  in

    R i s k  m a n a g e m e n t

    and quality

    development  of

    coal

    different

    geographies.

    t h r o u g h

    e f f e c t i v e

     

     

    mines abroad

     

    Eg. - political risks

    contracting,

    supply

     

     

     

     

     

     

     

    diversification, etc.

     

     

     

     

     

    Uncertainties in logistics

    Control  over

    supply

     

     

     

     

    operations

     

    infrastructure

     

     

     

     

     

     

     

     

    P l a n t

    e q u i p m e n t

    P ro c u r e m e n t

    f ro m

    Vendor reliability

    Robust  procurement

    shortage

     

    abroad

     

     

     

     

    management,

    vendor

     

     

     

     

     

     

     

    monitoring

     

     

     

     

     

     

     

     

     

     

    Setting up of new supply

    Execution timelines

    Project scheduling

     

     

     

    units

     

     

     

     

     

     

     

     

     

     

     

     

     

    Land  acquisition  and

    Speeding up processes

    I  n  a  d  e  q  u  a t e

    E n v i r o n m e n t

    a n d

    environment clearances

     

     

    communication  with

    stakeholder management

     

     

     

     

    stakeholders resulting in

     

     

     

     

     

     

     

     

    mismatch of expectations

     

     

     

     

     

     

     

     

    from  project

    affected

     

     

     

     

     

     

     

     

    persons

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Manpower shortage

    Enhance training

     

     

     

     

    Resource

    planning

    and

     

     

     

     

     

     

     

    management

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    This strongly necessitates employing a comprehensive project management structure to address the major challenges of the power sector projects and to be able to deliver them as per the planned targets. Historical records also indicate the presence of a weak project management structure which does not assess all the key project aspects leads to various issues and challenges. As discussed initially, the overall intent of this paper is to highlight the opportunities and challenges of the electricity sector, and the project management solutions and remedies that are required to address these challenges.

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