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India's Leading Infrastructur Companies 2013

 
 

An important constituent of the infrastructure industry, the power sector plays a pivotal role in driving the country’s socio-economic growth and development. It is broadly classified into generation, transmission, and distribution.

According to the US Energy Information Administration (EIA), India is the fourth largest energy consumer in the world after the US, China, and Russia as on March 2013. As per EIA, the power sector in India is one of the fastest growing areas of energy demand, growing from 23% to 38% of total energy consumption during 1990-2009. Coal is India’s primary source of energy and India has the world’s fifth largest coal reserves. The power sector makes up for the majority of coal consumption.

According to EIA, In 2010 India accounted for 4.1% of the worlds installed electric capacity and 4.47% of the world’s total electricity generation. The all India per capita consumption of electricity has grown at 5.2% CAGR during FY08-FY12 and stood at 879.22 kWH in FY12.

However, India faces severe shortages of electricity. An EIA 2012 report estimates that 25% of the Indian population lack basic access to electricity, while electrified areas suffer from rolling electricity blackouts. In FY13, India suffered a power deficit of 8.7% and peak demand deficit of 9%. During FY13, the growth in IIP in power sector has decelerated to 4% as against 8% in FY12 and 5.7% in FY11, owing to shortages in coal supply, delays in capacity addition, regulatory approvals, land acquisition, and a delayed and skewed monsoon.

Realizing the importance of the power sector in driving economic growth, the government of India has undertaken several initiatives and implemented various policies to enhance generating capacity, to develop transmission and distribution network, and to ensure that power reaches all, especially the poor and vulnerable sections. As per the International Energy Outlook 2011 report, EIA estimates India and China to account for the maximum share of growth in Asian energy demand until 2035. 

I. Power Generation

As on Aug 31, 2013, India’s installed generating capacity stood at 227,356.7 MW, including 154,768.99 MW of installed generating capacity of thermal power plants, 4,780 MW of nuclear energy, 39,623.40 MW of hydro plants, and 28,184.35 MW of renewable energy sources (RES). 

As on Aug 31, 2013, the state government accounted for the highest share of 39.22% in India’s installed generating capacity followed by the central government and the private players with a share of 31.92% and 28.86% respectively. As on Aug 31, 2013, the western region accounted for the highest share of 34.63% in India’s installed generating capacity followed by the northern region and the southern region with a share of 26.81% and 24.71% respectively.

India’s power sector has grown significantly over the years with demand growing at a rapid rate. There is a need to increase the power generating capacity in the country as well as to ensure power availability to all across geographical boundaries to meet the growing needs and to drive economic growth. 

The table below depicts growth in installed generating capacity in India since the sixth five-year plan until the first year of twelfth five-year plan: 

India’s installed generating capacity has grown continuously registering CAGR of 10.8% during FY09-FY13. Capacity for thermal power generation has grown at CAGR of 12.8% during FY09- FY13 whereas the power generating capacity of nuclear, hydro, and other renewable sources’ has grown at a CAGR of 3.8%, 1.7%, and 20.1% respectively during the same period. 

However, India’s total installed generating capacity has registered decelerated growth of 11.74% YoY in FY13 compared with 15.12% in FY12, owing to issues such as shortage of fuel supply(coal), delays in regulatory sanctions, environmental clearances, and land acquisition delays, etc. 

Further, thermal energy contributes to majority of the total installed generating capacity of the country which has grown from 63.3% in FY09 to 67.8% in FY13, followed by hydro with a share of 17.7% in India’s installed generating capacity in FY13 which has dropped from 24.9% in FY09. The share of renewable energy sources has grown from 8.9% in FY09 to 12.3% in FY13. 

Electricity generation in India has grown from 723.29 BU in FY09 to 911.65 BU in FY13, clocking CAGR of 5.9% during FY09-FY13. Electricity generation in India saw decelerated growth of 4% in FY13 compared with 8.1% in FY12, mainly because of shortage in coal supply and delays in regulatory approvals among others. 

Thermal power plants, the conventional energy source, account for the highest share in India’s total electricity generation, generating 83.4% of India’s total electricity generation in FY13 compared with 81.5% share in FY09. Hydro-electricity accounted for 12.5% of electricity generation in FY13 compared with a share of 15.6% in FY08. Further, nuclear energy generated 3.6% of electricity during FY13 against 2.03% in FY08. 

In FY13, the central sector generated the most at 375.85 BU of energy followed by the state and private sector companies, which generated 347.05 BU and 183.96 BU of energy respectively. In FY13, of the total energy generated, the central sector accounted for 41.2% followed by the state and private sector companies with 38.1% and 20.2% share respectively. During FY13, 98.03% of the target for planned electricity generation was achieved. 

Power sector measures utilization of installed capacity by using the Plant Load Factor (PLF) indicating operational efficiency. Higher load factor indicates greater total output and lower price per unit. As on Mar 31, 2013, the sectors’ PLF stood at 69.95% against 73.32% in FY12 indicating decline in productivity and scope for improvement. The table below shows PLF achieved by different sectors in FY13. 

The demand-supply mismatch in the power sector has led to power deficit in the country, and the country saw power deficit of 8.7% during FY13 and peak deficit of 9%. 

In FY13, 911.2 BU of power was supplied as against demand of 998.1 BU whereas peak power met stood at 123294 MW as against peak demand of 135453 MW. In FY13, growth of 6.5% in energy requirement outpaced growth of 6.2% in energy availability leading to a higher deficit of 8.7% in FY13 against 8.5% in FY12. On the contrary, peak met grew at a faster rate of 6.1% compared with 4.2% growth in peak demand leading to a lesser deficit of 9% in FY13 compared with 10.6% in FY12. 

All regions in the country continued to see a mismatch of energy demand and supply as well as peak demand and supply. In FY13, the southern region posted the highest power and peak deficit of 15.5% and 18.5% respectively followed by the northern region with power deficit of 9.2% and peak deficit of 8.9%. 

During FY09-FY13, power supply and peak met saw a faster CAGR of 7.2% and 6.2% respectively compared with CAGR of 6.5% and 5.4% in power demand and peak demand respectively. However, there is an urgent requirement to enhance power supply in the country, as the demand for power is growing at a rapid rate. India suffers from major shortage of electricity due to deficit in capacity addition in the past, shortages of fuel supply, and sourcing of costlier sources of power by many state-owned distribution utilities. In order to reduce the demand-supply mismatch, the country needs to utilize the current installed generating capacity optimally, enhance the power-generating capacity, and maximize power generation in a cost effective manner through renovation and modernisation of existing power plants. 

II. Power Transmission

Transmission of electricity is defined as bulk transfer of power over a long distance at a high voltage, generally of 132 KV and above. Transmission network comprises a transmission line and a transmission sub-station through which the generator transmits electricity to the distributor. India has segregated transmission systems into five regions - North, North East, East, South, and West. The interconnected transmission system within each region is also called the regional grid. Transmission planning over the years has adopted a new approach of integrated system planning to meet the challenges of uneven distribution of generation capacities in India. The regional grid interconnects the regions and aids in power supply. The regions are synchronously interconnected and transfer energy from regions with surplus power to regions having deficit power supply. Four regional grids are synchronously connected as a single system, however, only the southern grid is yet to be connected to the rest of the system. Power grid is working towards the planned establishment and operation of national power grid to facilitate transfer of power within different regions in the country, as the focus has moved away from regional self-sufficiency to optimal utilization of resources across the country for sustainable development. 

The following table states growth of the power transmission sector since the sixth five-year plan until the first year of the twelfth five-year plan:

 

The twelfth plan estimates an addition of about 107,440 ckm of transmission lines, AC transformer capacity of 270,000 MVA, and HVDC systems of 12,750 MW. 

III. Power Distribution

The power distribution segment plays an important role in the value chain of the power sector, as it is the end-customer interface, which affects the financial viability of the entire value chain. Thus, the financial performance of the power distribution segment is crucial. Given the importance of the segment, the working group on power has envisaged a total investment requirement of approximately Rs 3060 bn for the power distribution sector during 2012-17.

In the past, State Electricity Boards (SEBs) carried out all operations of the distribution segment. However, post initiatives such as unbundling of the power sector the power sector in India was segregated into generation, transmission, and distribution (discoms) segments. The government has privatised power distribution in some regions although the SEBs continue to handle a major part of power distribution. 

The power distribution sector faces high T&D losses and aggregate technical and commercial (AT&C) losses, which reduce the average revenue realised. T&D losses stood at 23.97% in FY11, which came down from 25.39% in FY10 and 31.25% in FY05. Despite the decline, T&D losses are higher compared with global averages. AT&C losses were introduced to capture the difference between the billing and collection, as T&D losses did not capture all losses, non-realisation of payments. An AT&C loss is the difference between units input into the system and the units for which the payment is collected. 

As on Mar 31, 2013, as per the CDR cell, 18 cases from the power industry have been referred for corporate debt restructuring (CDR) and debt of Rs 184.6 bn have been repackaged under the CDR norms against nine cases with approved debt of Rs 48.38 bn in FY12. 

To address the issue of distribution losses, the government had introduced the Accelerated Power Development Reforms Programme (APDRP) scheme in FY03 to fund the modernization of sub-transmission and distribution networks to decrease AT&C losses to 15%. However, this programme was not effective in reducing losses. 

Restructured APDRP

The government announced a restructured APDRP in 2008 with a total outlay of Rs 515.77 bn during the eleventh plan period to decrease AT&C losses. The coverage of the programme includes urban regions (towns and cities) with a population of more than 30,000 (10,000 for special category states). Private distribution utilities are not covered under the programme. 

Projects under the R-APDRP scheme are divided into two parts. Part A focuses on developing dependable and automated system for sustained collection of precise baseline information and the adoption of IT in the field of energy accounting and auditing and consumer-based services. Part B comprises projects to make the distribution system stronger. 

As on Nov 30, 2012, under Part A (IT), projects totaling Rs 51.96 bn covering the eligible 1,402 towns in 29 states/union territories (UTs), and under supervisory control and data acquisition and projects totaling Rs 14.42 bn covering 63 towns in 15 states have been covered. Under Part B, 1,132 projects totaling Rs 256.84 bn in 20 states have been sanctioned. On an aggregate, Rs 63.04 bn as on Nov 30, 2012 has been disbursed under the R-APDRP for implementation of sanctioned projects. 

Rural Electrification

Rural electrification is an important programme for socio-economic development of rural areas. As on July 31, 2013, a total of 593,732 villages were electrified, compared with 3,207 villages electrified in 1997-98. The government has introduced many programmes for electrification of rural areas in India including Rajiv Gandhi Grameen Vidyutikaran Yojana among others. 

Power Trading

Power trading refers to buying electricity for further resale whereas a power trading exchange is an organized electronic platform encouraging competition in power markets. Power trading exchange offers an organized platform for fair and robust price discovery. 

Power trading exchanges are in a nascent phase of development in India. They enhance generation resources by assisting trade and supply of electricity in India. It has benefitted in sale of surplus power by distributing utilities and captive power plants and purchase of surplus power by deficit utilities to meet the sudden rise in demand. The short-term markets also offer generators with an option to sell power besides through long-term power purchase agreements (PPAs). Indian Energy Exchange Ltd (IEX) and Power Exchange India Ltd (PXIL) are the two operational power exchanges in India. The CERC has granted 61 inter-state trading licenses, 45 of which were in existence as on Nov 30, 2012. 

During FY12, electricity transacted through power exchanges has marginally grown from 15.52 BU in FY11 to 15.54 BU in FY12 and electricity transacted through trading licensees has grown from 27.70 BU in FY11 to 35.84 BU in FY12. Electricity transacted through trading licensees and power exchanges accounted for 54.37% in FY12 of total short-term transactions of electricity compared with 51.45% in FY11. In 2012, the government has allowed FDI of up to 26% and foreign institutional investments of up to 23% in power exchanges segment to aid growth in Indian power trading segment. 

Future Projections

Power is one of the important components, which will boost India’s infrastructure growth. It is vital for India’s power sector to achieve its targets for capacity addition and decrease power deficits by availing power to all to drive the country’s GDP growth. 

The government has taken several initiatives for the growth and development of the sector such as permitting 100% FDI through the automatic route, setting up of ultra-mega power projects, encouraging private sector participation through PPPs, and rural electrification program. Further, the government has allowed foreign investments up to a limit of 49% in power trading. The government also promotes increasing use of renewable energy sources for sustainable development. According to the twelfth five-year plan, the proportion of renewable energy sources in electricity generated is estimated to rise from 6% in 2012 to 9% in 2017 and 16% in 2030. The Indian power sector is going through an evolution phase with scope for many developments. 

Despite the significant capacity additions over the years, growth in demand for power has outpaced generating capacity expansion. According to the working group report for twelfth five-year plan on the power sector, demand for power is estimated to increase to 1,403 BU by 2016-17 while the peak load is estimated to grow to 197,686 MW by 2016-17. 

The working group on power has targeted a capacity addition of 88,537 MW to meet the growing demand of power. The contribution of the private sector in the additional capacity will be 53%, against a target of 19% in the eleventh plan. Further, the power generation need is estimated at 1,463 BU. The forecasted growth rate in power generation is 9.8%. 

The following is the projected investment in power sector during the twelfth plan: