Power Report.doc

Embed Size (px)

Text of Power Report.doc

  • 8/9/2019 Power Report.doc


    An Analytical Report on



    1| P a g e

  • 8/9/2019 Power Report.doc



    India is one of those few countries which are largely self-serving energy centres with minimum

    import of power (about 23%). The ower !ector has always played an eminent role in shaping

    the economy and has become the bac"bone of growth in the industrial and manufacturing

    sectors. #owever$ even after its massive impact$ power sector itself$ relies heavily on Thermal

    source of production which uses oal and &atural 'as as its raw material. The recent fuel

    supply problems and price escalations have posed a severe challenge before the sector to meet

    the eponentially growing demand and fulfil its stated obectives of *providing reliable$

    affordable and +uality power for all by 2,2. It will be interesting to see how India counters

    these supply side challenges in the thermal fuel sources as it will decide the future shifts in the

    operating domain of ower !ector industries. This report focuses on studying the current issuesfaced by the Indian ower !ector in respect of the recent fuel crisis and its long term

    implications on the power sector industries.

    [174 words]

    2| P a g e

  • 8/9/2019 Power Report.doc



    Overview. 4

    Introduction to Sector. 5

    Fuel Resources.6

    Current Issues..7

    Imported Col !sed "ro#ects..$

    "ro#ects %vin& letter o' ssurnce ()O*+ !ut inde,ute col suppl-...$

    "ro#ects %vin& col!loc/s in no&o res..0





    2%i!it 114

    2%i!it ..14

    2%i!it 3..15

    2%i!it 4..16

    2%i!it 5..16


    3| P a g e

  • 8/9/2019 Power Report.doc



    / spectre of acute fuel shortage looms large on the ower !ector. /bout 0,$,,, 1 of

    operating and upcoming power capacity would be impacted8. 9%ese words o' :r. *s%o/

    ;%urn< =irector >enerl< *ssocition o' "ower "roducers (comprisin& seventeen vitl powerproducin& compnies o' Indi+< ptl- sum up t%e current 'uel crisis sitution o' Indi. It

    cnvsses t%e dul spects o' nonvil!ilit- s well s t%e price %i/e component o' t%e m#or

    'uel sources comprisin& o' col nd nturl &s.

    9%e "ower sector is one o' t%e criticl components o' t%e Indin econom- nd n importnt

    in&redient needed to ensure st!le &rowt% in &ross domestic product (>="+. ?owever< t%e recent

    escltions in 'uel price ccompnied !- scnt- supplies nd 're,uent impediments in

    environmentl clernces %ve stlled its &rowt%. *ll o' t%is %s come t crunc% time w%enIndi is recoverin& 'rom t%e in'ltionr- pressures nd consistentl- tr-in& to pus% up t%e &rowt%

    rte in t%e industril nd mnu'cturin& sectors. 9%e demnd 'or power %s !een consistentl-

    risin& wit% t%e economic epnsion< 'or domestic s well s industril consumption (ig. +.

    Indi %s lred- !een 'ound s%ort (ig. 2)o' t%e demnd ,untit- in terms o' power &enertion

    in spite o' t%e incresin& num!er o' privte pl-ers in t%e industr-. 9%ese recent dverse

    developments %ve succeeded in ddin& to t%e woes. )et us loo/ into t%e cuses nd

    repercussions o' suc% developments nd tr- to !uild %-pot%esis o' %ow t%e 'uture stnds 'or t%e

    "ower sector industries< t%rou&% detiled nl-sis o' t%is sector in recent times.

    ig. =istri!ution o' 9otl "ower Consumption ig. 2=emnd *vil!ilit- >p

    4| P a g e

  • 8/9/2019 Power Report.doc



    Since independence< t%e power sector %s c%ie'l- remined in t%e %nds o' centrl nd stte

    &overnments. 9%e 2lectricit- Suppl- *ct[1] (104$+< mde t%e Centrl nd Stte 2lectricit-

    @ords ([email protected]+ s t%e sole licensees o' 'or power &enertion< trnsmission nd distri!ution.

    ?owever wit% t%e &rowt% in popultion< t%e demnd &rew vi&orousl- t n ver&e rte o'

    1.3A. Conse,uentl- t%e per'ormnce o' Stte 2lectricit- @ords strted to deteriorte wit% time

    nd t%e- !e&n runnin& into %u&e losses (4hibit-).9%us t%e Stte llowed privte pl-ers to

    step in !- issuin& licenses< to !rid&e t%e de'icit nd !rin& opertionl e''iciencies. Since t%enroup< 9orrent

    "ower< etc. %ve si&ni'icntl- contri!uted to meetin& t%e demnd s%ort'll (ig. 3).

    ig. 3"ower "rovider Se&menttion

    In Indi< t%e power sector mostl- relies on 9%erml power plnts 'or demnd 'ul'illment since

    col is in !undnce nd provides c%ep production. 9%erml power plnts ccount 'or nerl-

    65A o' totl electricit- produced per nnum. ?-droelectric power plnts< one o' t%e m#or

    renew!le sources ccount 'or onl- A w%eres nucler ener&- cters to 3A o' demnd.

    9%erml power itsel' depends %evil- upon t%e vil!ilit- o' Col ($6A+ nd nturl &s (13A+.

    Recentl-< t%e "rivte pl-ers %ve lso epnded t%eir port'olio in t%e t%erml power division

    nd %ve t%us !ecome %evil- dependent upon t%e vil!ilit- o' domestic nd imported col.

    *prt 'rom t%ese< severl industries %ve come up wit% t%eir own plnts 'or 'ul'illin& indi&enous

    ener&- re,uirements. Col (47.1A+ nd Bturl >s (17A+ 'orm m#or prt o' t%ese so clled

    captive plants[] lso. 9%is cptive power cpcit- supplies onet%ird o' t%e totl industril

    electricit- demnd nd is incresin& t %elt%- rte o' 57A w%en compred to n ver&e o'

    41A in t%e cse o' pu!lic sector cpcit-. Bucler power sources re nticipted to ttin

    5| P a g e

  • 8/9/2019 Power Report.doc


    si&ni'icnt onus in power &enertion in t%e due course o' time !ut currentl- nd 'or some -ers

    in 'uture< it will remin in its in'nc-. In suc% scenrio< it is not possi!le 'or Indi to run w-

    'rom t%e insecurities o' t%e t%erml power plnts nd %ence< possi!le solution needs to !e

    ,uic/l- determined.


    @- virtue o' its &eo&rp%-< Indi %s !een &i'ted wit% col reserves. Indi %olds t%e sit% lr&est

    reserves o' indi&enous col in t%e world ccountin& 'or 6.7A o' totl &lo!l vil!ilit-. It %s

    more t%n 5$ !illion tonnes o' indi&enous col nd produces nerl- 40 tonnes o' %rd co/in&

    col. ?owever< t%is is insu''icient to 'ul'ill t%e current demnd ,ulittivel- s well s

    ,untittivel- (4hibit52).Indin col contins lr&e mount o' s% (15A 45A+ nd %ence

    o''ers low e''icienc- o' 34A. Indi imports col 'rom Indonesi nd *ustrli (round 5A o'

    totl col demnd+ w%ic% %ve superior vrieties o' col< %vin& %i&% clori'ic vlue o'

    5$/cl/& (http677en.wi"ipedia.org7wi"i78lac"9coal9e+uivalent). In Indi< t%e col reserves re

    mostl- 'ound in t%e sttes o' Oriss< D%r/%nd< Eest @en&l< C%%ttis&r%< :d%- "rdes% nd

    *nd%r "rdes%. 9%e production o' Col is lr&el- controlled !- Col Indi )imited (CI)+ wit%

    $ A s%re in t%e col mr/et. 9%is monopol- %s 'iled to /eep !rest wit% t%e demnd 'or

    indi&enous col (4hibit-3).It %s resulted in s%i'tin& t%e suppl- side d-nmics towrds import

    o' col 'or t%e ultr me&power pro#ects (:""+ comin& up on t%e est nd west costs.

    Bturl &s strted 'eturin& in production post 100 er nd currentl- ccounts 'or nerl- 13A

    o' totl t%erml power production. Currentl-< Indi produces 65 !cm (billion cubic metres+ o'

    nturl &s. 9%is demnded is epected to escalate to the levels of 2, bcm by year 2,3, and the

    rate of its use for electricity generation is also epected to increase to : bcm per year. 9%e

    nturl &s reserves in Indi re minl- con'ined to t%e o''s%ore :um!iCm!- !sin lon&

    wit% t%e recent eplortions t t%e ;ris%n>odvri !sin. :et%ne nd S%le &s %ve lso

    !een 'ound to !e o' 'ir economic vlue !ut t%eir potentil reserves still need to !e ssessedproperl-. @esides indi&enous &s suppl- Indi lso imports li,ue'ied nturl &s ()B>+ t%rou&%

    its two importin& terminls on t%e west cost. >s *ut%orit- o' Indi )imited (>*I)+ is lso

    comin& up wit% renew!le li,ue'ied nturl &s (R)B>+ terminl to provide uninterrupted &s

    suppl-. 9wo more import terminls re in t%e pipeline (ig. 0).

    6| P a g e

  • 8/9/2019 Power Report.doc


    ig. 0* di&rm depictin& t%e contri!ution o' di''erent sources to totl power


    9%e -er 11 sw n outstndin& per'ormnce !- t%e Indin power sector. 9%e domin o'

    conventionl power &enertion %d cpcit- ddition o' round 1

  • 8/9/2019 Power Report.doc


    In t%e words o' :r. *nil Srdn< mn&in& director o' 9t "ower Co. )td< IndiGs lr&est

    independent power producer !- cpcit-< The acute shortage of domestic coal in the country

    has become a maor concern?. It has led to apprehensions that the ambitious capacity addition

    target of :,-,, gigawatts in the upcoming 2th [email protected] lan period may not be met and also

    cause avoidable stress on assets already built or committed by many private sector players8. *s

    discussed !e'ore< col contri!utes 55A to IndiGs 9%erml power< nd conse,uentl- t%e col

    !sed pro#ects re t%e worst ''ected !- escltin& 'uel costs nd suppl- uncertinties. 9%ese

    plnts cn !e !rodl- clssi'ied into t%ree cte&ories.

    I!porte" coal #a$e" pro%ect$::n- power pro#ects re dependent on imported col w%ic% is

    o' %i&%er &rde. Indonesi w%ic% is m#or source recentl- introduced new col pricin&

    re&ultion w%ic% %s led to increse in t%e lnded price o' 'uel. 9%e new polic- stipultions stte

    t%t col prices !e !enc%mr/ed &inst set o' interntionl nd domestic indices[3].

    Conse,uentl- ll eistin& col contrcts would %ve to !e modi'ied. 9%is implies t%t n- lon&

    term contrcts !sed on discounts or 'lt pricin& will no lon&er !e %onoured. 9%is will directl-

    impct !out 17 :E o' Indin pro#ects (4hibit-0). *not%er m#or source< *ustrli is

    plnnin& to lev- cr!on t[4] w%ic% mi&%t !e 'ollowed !- ot%er col eportin& countries lso.

    Pro%ect$ &a'in( letter o) a$$*rance +LOA, #*t ina"e-*ate coal $*pply:Col Indi )imited

    (CI)+< t%e !i&&est domestic producer o' col %s provided )O*s to some opertin& pro#ects< !ut

    is -et to si&n t%e 'uel suppl- &reement[5] (FS*+. In 'ct< CI) %s not si&ned n- FS*s since

    *pril< 0. =urin& 111< IA set a target of 0>,.B million tonnes but had a shortfall of

    2:.C million tonnes. 9%is %s creted lot o' discontent in t%e sector.

    *IA is an instrument of the state and should honour its commitment< sid :r. *s%o/ ;%urnO:+ nd t%e :o2F. 9%e process 'or &rntin& clernce

    must !e epedited. "ower plnts w%ic% re lred- under opertion s%ould not !e prevented 'rom

    'unctionin& due to re&ultions w%ic% %ve recentl- come into e''ect. Insted !etter pproc%

    would !e to promote ''oresttion drives to miti&te t%e dm&e cused< nd ensure t%t in 'uture

    environmentl concerns re properl- ddressed.

    Eit% re&rd to procurement o' col< vrious mesures cn !e implemented to !rin& !out cost

    minimiHtion. 9rnsporttion 'cilities suc% s rodw-s< ril routes nd ports %ve to !e

    stren&t%ened to remove ine''iciencies in col trnsit nd reduce !ot% trnsit time nd costs. Ot%er

    in'rstructure nd !ureucrtic !ottlenec/s %ve to !e removed. )in/&es !etween col sources

    nd power plnts cn lso !e improved !- proper lloction o' cptive mines nd selectin&

    optiml loctions 'or new pro#ects.

    )stl- steps must !e t/en to improve t%e 'inncil %elt% o' t%e stte run power distri!utors.

    Currentl- mn- !n/s re'use to provide line o' credit to t%ese compnies owin& to t%e

    uncertinties wit% re&rds to resources nd cost o' opertions< s well s previousl- unpid lons.

    *s result t%e- 'ce di''iculties in meetin& t%eir cpitl re,uirements. * rdicl de!t

    restructurin& inititive is re,uired to !rin& t%ese compnies !c/ on trc/. 9%e &overnment could

    lso ct s &urntor to promote con'idence mon& t%e lenders. 9%us t%ere is need 'or

    coordinted ction !etween t%e :inistr- o' "ower< t%e :inistr- o' Finnce nd t%e Reserve @n/

    o' Indi< s t%e !n/in& re&ultor< to put n end to t%e 'inncil crisis nd promote st!ilit- in t%e

    lon& run.


    9%e Indin econom- is !e&innin& to recover 'rom t%e recessionr- p%se t%t %s &ripped t%e

    entire world. 9%e new er o' >=" &rowt% re,uires consider!le investment in t%e power sector

    w%ic% 'orms t%e !c/!one o' t%e Indin econom-. ?istoricll- Indi %s !een c%rcteriHed !-

    11| P a g e

  • 8/9/2019 Power Report.doc


    ppreci!le s%ort'll !etween t%e demnd nd vil!le suppl- o' power. In recent -ers severl

    m!itious pro#ects %ve !een commissioned !- t%e &overnment to 'ul'ill its tr&et o' 'ull power

    sustin!ilit-. Conse,uentl- t%e power sector %s witnessed ccelerted &rowt% cpped !- t%e

    %i&%est recorded cpcit- ddition in t%e current 'iscl -er. ?owever t%e spectre o' uncertint-

    in t%e suppl- o' 'uel s well s risin& 'uel costs looms lr&e. * prt o' it cn !e ttri!uted to t%e

    %ev- dependenc- o' t%e sector on 'ossiliHed 'uels suc% s col nd nturl &s. 2ven t%ou&%

    Indi possesses su''icient mounts o' col reserves< lc/ o' proper development s well s

    utiliHtion issues %ve led to &rowin& dependenc- on imported sources. Risin& prices in t%e

    interntionl mr/et coupled wit% low returns 'rom domestic suppliers li/e CI) %ve pus%ed

    power suppliers into corner. 9%e pro!lems re 'urt%er compounded !- t%e 'iin& o' low tri''s

    nd t%e prevlent 'inncil stru&&les o' t%e stte run power distri!utors.

    >oin& 'orwrd it is essentil 'or t%e &overnment to !rin& !out c%n&es in t%e re&ultions w%ic%

    'cilitte !etter s%rin& o' t%e cost !urden mon& di''erent st/e%olders. =omestic suppl- o' col

    needs to !e u&mented nd &encies li/e CI) need to meet t%eir tr&ets to reduce s%ort'lls. *

    structured s-stem o' pricin& wit% re&rd to imported col needs to !e implemented. In t%e lon&

    run !etter plnnin& wit% re&rd to lloction o' cptive mines nd prospective loctions o' new

    pro#ects would !e %i&%l- !ene'icil. In conclusion< t%e Indin power sector is &oin& to eperience

    %u&e sur&e in t%e comin& -ers nd !uildin& t%e in'rstructure to mn&e t%e sur&e is t%e need

    o' t%e %our.

    [3135 words]

    12| P a g e

  • 8/9/2019 Power Report.doc



    . *The !tate 4lectricity !upply /ct$ :0C provided the basis for the ta"eover of most

    electricity generation and distribution by the !tate 4lectricity 8oards constituted under

    it. Its provisions mainly govern the constitution of the entral 4lectricity /uthority$ !tate4lectricity 8oards$ 'enerating ompanies$ onsultative ouncils and local /dvisory

    ommittees$ their statutory powers and functions.

    2. *The 4lectricity /ct$ 2,,3 was passed to transform the power sector in India by inviting

    participation of private players in the generation$ transmission and distribution of


    3. */ captive power plant () is any generating station set up by an organisation to meet

    its own power re+uirement. The s cater to the electricity re+uirement of industrial

    units in a large scale. The captive power generation capacity in India is :$B,:.0: 1

    (/pr 2,,C).

    0. *The Indonesian government has$ in an order$ decided to lin" the price of coal eported

    from the country with a benchmar" based on international prices of coal. The new coal

    price benchmar" is an average of monthly prices from four coal indices that include the

    Indonesian oal-price Inde or II$ the 'lobal coal &ewcastle Inde$ the &ewcastle

    4port Inde and the latts- Inde.

    B. */ carbon ta is anenvironmental talevied on the carboncontent offuels. It is a form

    of carbon pricing. /ustralia passed the carbon ta /ct in 2, and it will come into effect

    in 2,2$ increasing the price of coal for the countries importing coal from /ustralia.

    >. *The uel !upply /greement is a long-term pact between coal producers and consumers

    aimed at ensuring a dedicated supply of fuel. Trigger level is the minimum assured level

    of coal supply and off-ta"e$ failing which both the parties attract penalty.

    E0HIBIT 1

    13| P a g e

  • 8/9/2019 Power Report.doc



    (Sourceower sector reform6 / case study in restructuring+

    E0HIBIT 4

    14| P a g e

    3ear Lo$$e$


    003 73

    0304 71

    0405 0$5

    0506 1165

    0607 4344

    070$ 7$0

    0$00 1356

    00 140

  • 8/9/2019 Power Report.doc


    ariation in De!an" an" Pro"*ction o) Coal in recent year$ (SourceInfraline4nergy+



    Target(BE) Actual Production

    Rate ofgrowth of



    460.5 457.082 6.1


    497.29 492.757 7.8


    532.33 532.042 8


    572.37 533.076 0.2


    554 118.914 (up to 06-11)

    E0HIBIT 5

    S&ort to Me"i*! Ter! De!an" )or Coal )or Po6er 7eneration

    (Source=eport 5 the epert committee on roadmap for coal sector reforms+










    on +BU,









    on +Mt,

    A"%*$t!ent )or

    -*ality o)


    Coal +Mt,



    nt )or





    34 64$ 7.45 3$1.1 .60 63.0 60.1

    45 674$ 7.67 300.45 .603 76.00 $5.10

    56 643$ 74.07 4.45 .607 04.37 5.6 3.11

    67 77$ 71.$ 45.$4 .71 317.3 $.5 31.$

    7$ 740$ 76.67 53.1 .75 354.75 17.6 35.40

    $0 7$0$ 77.14 57.74 .7$ 373.74 1$.30 371.35

    01 $$ 76.1 5$7.51 .77 415.07 4 40.37

    111 065 74.7$ 63.16 .77 446.04 $.5$ 43$.36

    111 14 74.66 6$.1 .77 4$.01 31.$ 471.63


    Li$t o) a))ecte" i!porte" coal #a$e" pro%ect$ (Source T/T/ E4=+

    15| P a g e

  • 8/9/2019 Power Report.doc


    Bo. Bme Cpcit- (:E+

    1 9t "ower :undr :"" 4.

    *dni "ower :undr 46.

    3 *dni "ower 9irod 10$.

    4 )nco In'rtec% dipi 57.5

    5 DSE 2ner&- Rtn&iri 3.

    Li$t o) pro%ect$ )acin( $&ort)all in $*pply )ro! CIL

    Bo. Bme Re,uirement sourced

    1 )nco In'rtec% *mr/nt/ I nd II 65A

    Relince "ower Ros 6A

    Ot%er impcted pro#ects include B9"C Fr//< ;S; Erd% nd )nco In'rtec% *npr.

    Li$t o) pro%ect$ &a'in( capti'e !ine$ in no/(o area$

    Bo. Bme Cpcit- (:E+

    1 B9"C =uln& 16

    Oriss "ower >enertion Corportion @ed!%l



    3 IFFCO C%ttis&r% 66

    E0HIBIT ;

    A'aila#ility o) Coal )or Po6er Sector "*rin( 4

  • 8/9/2019 Power Report.doc


    CCI. (11+.E4= /&F 4&4='@ I&F


    =eep< I. ($+./ny solution for IndiaGs power crisisHRetrieved Dnur- 6< 1< 'rom 9oostep


    >d&il< :.< K =tt< *. (11< =ecem!er 3+.uel$ finance crunch to haunt energy sector.

    Retrieved Dnur- 6< 1< 'rom livemint


    Indin "ower :r/et. (11< :- 3+.Indian ower 1ar"et. Retrieved Dnur- 7< 1< 'rom

    Indin "ower Sector * snps%ot %ttpwww.indinpowermr/et.com115indin


    In'rline2ner&-. (11< =ecem!er 1+./vailability of oal for ower !ector as on &ovember

    2, . Retrieved Dnur- 7< 1< 'rom In'rline2ner&-



    In'rline2ner&-. (11< =ecem!er 0+.uel woes hit power sector. Retrieved Dnur- 7< 1enertion nd Suppl-+ "owerin& t%e >rowt% o' Indin

    2conom-+ %ttpstoc/s%str.mone-wor/s4me.comindinpowersectornl-sis


    "ill-< *. (1< Fe!rur- 4+. !teep rise in coal imports re+uired to power India. Retrieved

    Dnur- 6< 1< 'rom mone-li'e %ttpwww.mone-li'e.inrticle$3$0.%tml

    Ro< =. B. (6< Dune+.Aow on fuel6 risis ahead . Retrieved Dnur- 6< 1< 'rom

    in'oc%n&e %ttpin'oc%n&eindi.or&&endener&-vsenvironmentlowon'uelcrisis


    Remme< .< 9rudeu< B.< >rcH-/< =.< K 9-lor< ". (11< Fe! 6+. Technology Fevelopment

    rospects for the Indian ower !ector.Retrieved Dnur- 7< 1< 'rom Interntionl

    2ner&- *&enc- %ttpwww.ie.or&ppers11tec%nolo&-JdevelopmentJindi.pd'

    9t "ower. (11< Septem!er 6+.uel risis Feepens. Retrieved Dnur- 6< 1< 'rom

    9t"ower %ttpwww.ttpower.commedicornerpressreportspress6sep11.pd'

    Ei/ipedi. (11+.4lectricity sector in India. Retrieved Dnur- 6< 1< 'rom Ei/ipedi


    18| P a g e