9th Five Year Plan (Vol-2)

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Energy || Power Sector || Oil and Natural Gas


6.49 Electricity is one of the key inputs for the overall socio-economic development of the country. The basic responsibility of the power supply industry is to provide adequate electricity at economic cost, while ensuring reliability and quality of the supply. Despite significant progress in capacity addition since Independence, the demand for electricity continues to outstrip the supply with the result that energy and peaking shortages continue to plague the economy. With the increasing pace of economic development facilitated by the reforms initiated by the Government, the demand for power in both rural and urban areas is likely to increase rapidly in the coming years. The major task of the power sector during the Ninth Plan will, therefore, be to ensure that the anticipated demand is met adequately and in a reliable and cost-effective manner. The capacity addition, both in the public as well as private sector, fell short of the levels envisaged in the Eighth Plan and the total addition has been lower than what had been achieved during the Seventh Plan. It is expected that the impediments to private sector participation in the power sector would have since been sorted out and the public sector investment would be adequately supplemented by capacity additions in the private sector during the Ninth Plan.

6.50 The Ninth Plan will lay emphasis on maximising benefits from the facilities already available in the power sector, through improvements in the operational efficiency of the power generation units, an overall reduction in system losses and enhancement in the efficiency of the end-use of electricity. Significant savings could accrue through integrated operations of the State and regional power systems and the Ninth Plan will lay stress on drawing up an active plan to move in that direction. The ongoing projects will be accelerated and completed at the earliest and , finally, the Ninth Plan will provide for advance action to be taken for the Tenth Plan projects with special emphasis on accelerating hydro development during the Tenth Plan onwards to ensure a balanced development of the power system in different regions.

6.51 The Public sector will continue to contribute significantly to capacity additions and substantially to transmission and distribution during the Ninth Plan. This would be made possible through reforms of power utilities, enabling them to mobilise adequate resources for funding their projects. Project implementation and management procedures will also have to be honed up for the power sector in the coming years to play a vital role.



6.52 The gross energy generation from utilities at the beginning of the Eighth Plan was 286.7 Billion Units (BU). The Eighth Plan envisaged a gross energy generation requirement of 418.2 BU from utilities in the terminal year of the Eighth Plan i.e 1996-97. As against this, the energy generation during the year 1996-97 was 394.5 BU. This works out to a compound growth rate of 6.59 % during the Eighth Plan. The slippage of 23.7 BU is mainly attributable to shortfall in generation in hydro and nuclear sectors.

Capacity Addition

6.53 The all -India installed generating capacity in Utilities at the beginning of the Eighth Plan was 69,065 MW. This comprised 19,194 MW of hydro, 48,086 MW of thermal (including 3095 MW of gas based capacity) and 1,785 MW of nuclear. The Eighth Plan programme envisaged a capacity addition of 30,538 MW. As against this, 16422.6 MW was added during the Eighth Plan. The details are shown in Table 6.14:

Table 6.14
Additions to Installed Capacity during the Eighth Plan Eighth  Plan (1992-97)
Type		  Target			   Achievement (MW)
------------------------------------------- -----------------------------------------------
	Central      State     Private    Total     Central     State     Private      Total
	Sector      Sector     Sector	            Sector      Sector      Sector
Hydro     3260        5860         162       9282       146       794.7       168   2427.7
Steam     5890        7050        2340      15280       4310       5098       500   9908.0
Gas       2608        1960         306       4876       1942      942.5      762.4  3646.9
Nuclear   1100            -	    -        1100        44         -          -      440.0
Total    12858       14870       2810       30538       8157      6835.2    1430.4  16422.6

6.54 The actual capacity addition of 16,422.6 MW during the Eighth Plan is about 46 percent less than the targeted addition and 23.26 percent less than the capacity added during the Seventh Plan. The slippages in the case of hydel capacity are as high as 73.8 percent of the target. The sector-wise percentage slippages are: Central 36.6 percent, State 54.0 percent and Private 49.4 percent. The achievement of 16422.6 MW during the Eighth Plan period represents an addition of 3284.6 MW per annum, compared to the targeted growth rate of 6108 MW per annum.

6.55 The main reasons for the shortfall in capacity addition are inadequate funding of the State as well as the Central sector projects, procedural delays mainly in land acquisition and environmental clearances, unresolved issues in fuel linkages, contractual failures, suspension of World Bank support and problems/delays in entrusting the projects to the executing agencies etc.

Power Supply Position

6.56 At the beginning of the Eighth Plan, the energy deficit was 7.8% and peak deficit of 18.8 percent. With the targeted capacity addition of 30538 MW the anticipated power supply position assessed by the Central Electricity Authority (CEA) indicated a peaking deficit of 20.7 percent and energy deficit of 9 percent. However, at the end of the Eighth Plan period, with the actual capacity addition of 16422 MW, the peak deficit was restricted to 18.0 percent and energy deficit to 11.5 percent mainly due to a marked improvement in Plant Load Factor (PLF) of the thermal plants.

Further Reduction in the Share of Hydro-Electricity

6.57 The share of hydel generation in the total generating capacity of the country has declined from 34 percent at the end of the Sixth Plan to 29 percent at the end of the Seventh Plan and further to 25.5 percent at the end of the Eighth Plan. The share is likely to decline even further unless suitable corrective measures are initiated immediately. Hydel power projects, with storage facilities, provide peak time support to the power system. Inadequate hydel support in some of the regions is adversely affecting the performance of the thermal power plants. In Western and Eastern regions, peaking power is being provided by thermal plants, some of which have to back down during off- peak hours.

Increase of Central Share in Total Installed Generation Capacity

6.58 The Central sector undertakings viz. the National Thermal Power Corporation (NTPC) and the National Hydro Electric Power Corporation (NHPC) continue to play an important role in adding new generation capacities in different parts of the country. The Central share in the total installed generation capacity increased from 25.6 percent at the end of the Seventh Plan to 31.9 percent at the end of the Eighth Plan. It is likely to be around the same level at the end of the Ninth Plan.

Performance of Thermal Power Plants

6.59 The performance of the thermal power plants in the country registered an overall improvement during the Eighth Plan. The all-India average Plant Load Factor (PLF) of the thermal power plants increased from 55.3 percent at the beginning of the Eighth Plan to 64.4 percent by the end of the Eighth Plan. This is largely attributable to the concerted efforts put in by the Ministry of Power, the Central Electricity Authority, the State Governments and the Utilities. The modernisation (Renovation and Modernisation) programme (Phase-I) undertaken in respect of some of the older generation units in different parts of the country contributed substantially to the overall improvement in generation during the last few years. The R and M programme (Phase-II) taken up during the Year 1990-91 covered 44 thermal power stations comprising 198 units, totaling up to a capacity of 20869 MW. The R and M programme specifically aimed at increasing the average PLF by about 4 to 5 percentage points. The progressive addition of larger sized units in the power system has also contributed to the overall improvement in the performance of the thermal power stations in the country. While this is the position at the national level, the thermal plants in certain regions and States continued to function below satisfactory levels. The best performance during the Eighth Plan was observed in the Southern region, followed closely by the Western and the Northern regions. The plant performance in the Eastern and the North Eastern regions continued to remain below satisfactory level.

Transmission and Distribution Facilities

6.60 The major portion of the 400 KV transmission network planned to be set up during the Eighth Plan was in the Central sector, while that of 220 KV in the State sector. The implementation of the transmission programme during the Eighth Plan has been by and large satisfactory. The details of the targets and achievements during the Eighth Plan in respect of major transmission projects are as in Table 6.15.

				Table 6.15
Targets  and  Achievements during the Eighth   Plan  in 
respect of major transmission lines. ------------------------------------------------------------------------------------- 400 KV (ckt.km) 220 KV (ckt.km)
Sector --------------------------------------------------------------------------- Target based Based Target on annual Achievement On annual Achievement programmes Programmes ____________________________________________________________________________________ Central 6126 5949 1896 1727 State 5159 5391 12824 13425 ------------------------------------------------------------------------------------- Total 11285 11340 14720 15152 -------------------------------------------------------------------------------------

In addition to these, 20 Km. of 800 KV transmission line was set up in the Central Sector during 1996-97 for the first time in the country.

Transmission and Distribution (T and D) Losses

6.61 The T and D losses in the power systems throughout the country continued to remain high during the Eighth Plan. The all-India average T and D losses during 1994-95 were reported as 20.85%, thereby achieving a reduction of about one percentage point from the level of 22% at the beginning of the Eighth Plan. However, in the absence of satisfactory metering arrangements for agricultural consumers, the level of losses indicated by the States could at best be an estimate of the energy not accounted for in the system including theft of power. The continuing high T and D losses could be partly attributed to the low investments made on T and D facilities in different States and the extensive low-voltage distribution network in rural and urban areas. These factors have also contributed to the poor quality of electricity supplies in many areas. There is a strong case for privatising distribution in order to reduce the present high level of theft and pilferages. A beginning can be made by mandatory privatisation of distribution in urban area with population of one million and above.

Policy Initiatives to Encourage Private Sector Participation in the Power Sector

6.62 Due to paucity of resources with the Central/State PSUs and SEBs and in order to bridge the gap between demand and availability of power, a policy to encourage private sector participation was initiated in 1991 with the objective of mobilising additional resources for power generation, transmission and distribution. The legislation governing the electricity sector was amended in 1991 to facilitate the raising of capital from domestic and foreign markets and to provide a more liberal, financial and legal environment to allow the private investors to set up generation capacities or operate as Licensee (Distribution) companies, which was hitherto a monopoly of the SEBs or public sector undertakings.

6.63 Private investors are now allowed to set up generation capacities which would supply power in bulk to the grid. These companies can also supply power directly to consumers with the concurrence of the State Governments. A two-part tariff notification governs the tariff for supply of power by the generating companies. The policy permits private developers to set up power projects of any capacity and of any type (coal, gas, wind or solar). The policy also allows liberal capital structuring and an attractive return on investment. Considering that the coal resources are concentrated in certain parts of the country, a policy has also been evolved to facilitate the setting up of large-sized power plants located at pitheads in the country, in order to derive the benefits of economies of scale. Mega projects, having a capacity of 1000MW and above and supplying power to more than one State, would be identified by CEA, the Feasibility Reports prepared by NTPC and POWERGRID would facilitate the selection of investors and finalisation of the transmission details.

6.64 The Government has been simplifying the procedures for clearances of the projects. A notification was issued in September, 1996 enhancing the limit of capital expenditure of schemes requiring the concurrence of the Central Electricity Authority from Rs. 400 crore to Rs.1000 crore in the case of generating station schemes to be set up by Independent Power Producers (IPPs) selected through the process of competitive bidding. In the case of projects on the MoU/LoI route, the Government has clarified that Engineering, Procurement, and Construction (EPC) contracts have to be finalised by the promoter on the basis of International Competitive Bidding. Further, two-stage clearance viz. `In principle' clearance, followed by techno-economic clearance (TEC), has been introduced. Administrative clearance has been a serious impediment in the implementation of the project. Such bottleneck, wherever exists, needs to be removed in order to expedite project completion.

6.65 Besides promoting conventional power projects, the ‘Private Power Policy ‘ addresses other possibilities of augmenting power generation through improved productivity and efficiency such as captive and co-generation plants, renovation and modernisation etc.

6.66 The Government of India has made competitive bidding mandatory for the development of new power projects. Though the process of bidding is quite complex and requires a lot of preparatory work to be done before bids can be initiated, it is encouraging to note that the State Governments have adapted to the needs of the bidding process quite well. In all, nearly 127 expressions of interest have been registered, aggregating to proposed investment of nearly Rs.250,000 crore for setting up over 69000 MW of installed capacity. Presently, there are about 14 projects (costing more than Rs.1000 crore) on the bidding route with proposed installed capacity of 9353 MW, involving an investment of about Rs. 30,917 crore. The progress of the private power projects on the negotiated routes has also been quite significant. Of the total 95 projects on the negotiated route, some projects require the Central Electricity Authority's techno-economic clearance (costing more than Rs.1000 crore). In all, 29 of these project proposals have been accorded techno-economic clearance by the CEA while 68 have been given `in principle' clearance, which include negotiated and bidding routes. Besides the projects requiring CEA's techno-economic clearance, there is a very large number of projects, both on the competitive bidding route and the MoU/LoI route (costing less than Rs.1000 crore) which are being processed at the State level.

6.67 The existing policy structure does not adequately address certain issues. For instance, there has been less than satisfactory response in the area of hydro power development. Only 29 expressions of interest for hydro power development of 12,780 MW capacity have been received. The lack of the desired level of response is believed to be mainly on account of hydrological and geological risks associated with hydro projects. The existing policy needs to be suitably modified to facilitate greater flow of investment in hydro, R and M and T and D. In addition the Ninth Plan should continue to lay emphasis on public sector investment in these areas.

Financial performance of the SEBs

6.68 There has been a significant improvement in the physical performance of the SEBs during the Eighth Plan period. While the PLF of the thermal plants under SEBs improved from 50.6 percent in 1991-92 to 60.3 percent in 1996-97 and the specific oil consumption declined from 7.8 ml/Kwh in 1992-93 to 5.8 ml/Kwh in 1996-97, the T and D losses continued to remain high during the Eighth Plan period. The financial performance of SEBs has also deteriorated over the period. This can be seen from the Table 6.16:

		Table 6.16
             Financial Performance of the SEBs 

       Year                       Commercial losses       ROR(%)	   Net I.R.
                                      (Rs. crore)			  (Rs. crore)
     1992-93 (Actual)              4560		       (-)12.7          (-) 161.5
     1993-94 (Actual)	           5888		       (-)13.3          (-)1036.5
     1994-95 (Actual)	           6643		       (-)14.4          (-) 103.2
     1995-96 (Actual)	           8324	               (-)15.1          (-) 735.7
     1996-97 (RE)	           9453	               (-)17.2          (-)2807.9
    Total (Anticipated)           34868		   	 	        (-)4844.8

6.69 The commercial losses without subsidy increased from Rs. 4117 crore at the beginning of the Eighth Plan to Rs. 9453 crore at the end of the Plan. The ROR for the year 1996-97 was (-)17.2 percent. The tariff charged on electricity on an average remained below the average cost of supply. The gap was 37 paise in 1996-97. Agriculture and domestic sectors continued to be subsidised heavily. The average tariff charged from these categories was 21 paise and 92 paise respectively in 1996-97, compared to an average supply cost of 186 paise. The hidden subsidy for the agriculture and domestic sector in 1996-97 according to the Revised Estimates was Rs.19,862 crore and is projected to further go up to Rs.23,010 crore in 1997-98. The subsidy for agricultural sector alone is Rs.15,628 crore in 1996-97(RE) and estimated to be Rs.18296 crore in 1997-98. If the agricultural tariff is increased to minimum of 50 paise per unit, the additional revenue mobilisation in 1997-98 would be of the order of Rs.2418 crore. On the other hand, industrial and commercial categories partly cross subsidise the losses on account of sales to agriculture and domestic categories.

Plan expenditure during the Eighth Five Year Plan

6.70 An analysis of the Plan expenditure on the basis of actuals for 1992-93, 1993-94 and 1994-95 (for Central/State and UTs) and the actual revised estimates for 1995-96 and 1996-97 for the Central sector and the revised estimates for the 1995-96 and 1996-97 for the State sector reveals the following:

Central Sector

6.71 The actual expenditure on power by the Central sector during the Eighth Plan accounted only for 76.21% of the approved Eighth Plan outlay at constant prices and 99.45% at current prices. The estimated Net Budgetary Support (GBS-External aid) during the Eighth Plan was Rs.4593.40 crore, which works out to about 102%, (at constant price) and about 134% (at current price) of the approved amount of Rs.3441 crore. The major shortfall in the Central sector was due to non-mobilisation of resources through I.R. and Bonds and delay in the clearance of projects such as Chamera II, Talcher II etc.

State Sector

6.72 The Plan expenditure for the State sector during the Eighth Plan was 71.26% of the ap oved outlay at constant prices and 93.08% at current prices. The major shortfalls were in the States of Assam, Bihar, Haryana, Meghalaya, Orissa and Uttar Pradesh. The areas most affected by the shortfalls were transmission and distribution.


6.73 The Ninth Plan priorities are as follows:

  • Accelerated completion of the ongoing projects and initiation of measures to facilitate investment in new projects.
  • Maximisation of benefits from the existing plants by improving their operational efficiency and capacity utilisation, improvement and augmentation of T and D network and dealing effectively with the problem of T and D losses and theft of power.
  • Facilitating the setting up of appropriate institutional and legislative mechanism for reforms and restructuring of the power sector which would act as a catalyst in improving the capabilities of power sector Utilities for undertaking long-term investments as well as leverage funds from the private sector for the development of the power sector. For this purpose long term funds in the national and international market will be accessed to for augmenting public expenditure to give a fresh impetus to growth.
  • Greater emphasis by both the public and the private undertakings in generation, transmission and distribution sectors for improving the reliability and quality of power supplies to the consumers in different parts of the country and for increasing access to electricity in rural areas. Special emphasis will be placed on accelerated electrification of the remaining villages with due attention to decentralised energy resources.
  • Undertaking advance action on hydel projects to improve the hydro-thermal mix by the end of the Tenth Plan and revamp the existing institutional structure and financing arrangements which are not presently conducive for hydro projects development. A suitable policy for development of hydro projects needs to be formulated. In addition hydel projects would require enhanced budgetary support from the Government.
  • Emphasis on the setting up of high capacity inter-regional transmission links to facilitate evacuation of power from pit-head Mega projects envisaged during the Ninth and the Tenth Plans.
  • Facilitating gradual shifting from the State/Regional grid-based operations to an integrated National Grid.
  • Simplification and streamlining of the procedures for clearances and investment decisions in the public sector.
  • Encouragement to captive and co-generation power plants to supplement the capacity addition programmes envisaged in the Ninth Plan.

Capacity Additions Required During the Ninth Plan

6.74 According to the 15th Electric Power Survey, the electricity requirement at busbar (utilities only) in 2001-02 will be as in Table 6.17.

				Table 6.17
      			Demand for power in 2001-02 as per 15th EPS
          Region		Energy Requirement                    Peak Load       
                                      (MKWh)                             (MW) 
  	 Northern                        181649			  31735
         Western			 176732			  28430
         Southern	          	 134671			  21975
         Eastern			  68243		  	  11846
         North-Eastern		           8148	      	           1722
         Andaman  and  Nicobar Isl.             180			     41  
         Lakshadweep		           27.4		            7.7
         All India			  569650		 95757

6.75 The methodology adopted in the 15th EPS report is partial end use method developed in CEA and is generally comprehensive and consistent with the available data base for projecting the power demands over short and medium time spans. End use technique has been adopted to forecast the electricity requirements where sufficient data regarding the programme for future is available such as all the major industrial and non-industrial loads with a demand of 1 MW and above and agricultural loads.

6.76 The Working Group Report on Power has envisaged a capacity addition requirement of 57734 MW during the Ninth Plan, comprising 11870 MW in Central sector, 17621 MW in State sector and 28244 MW in private sector.

6.77 The rate of capacity utilisation, of the total installed generation capacity in position, realised in 1996-97 was 4646 Kwh/KW. If this rate of utilisation of capacity is maintained during the Ninth Plan, the installed capacity requirement in 2002 works out to nearly 131726 MW. As on March 1997, the installed generation capacity in the country (utilities) is 85019.3 MW. Therefore, the capacity addition requirements during the Ninth Plan period, according to this, works out to about 46814 MW.

6.78 As against the above, keeping in view the status of the ongoing, sanctioned and newprojects in the pipeline, it is assessed that a capacity addition of the order of 40,245 MW wouldbe feasible during the Plan period as per the details indicated in Table 6.18.

					Table 6.18
Benefits from Sanctioned/CEA Cleared  and  New Schemes During Ninth Plan (MW)
       Source	     Ongoing/	                  CEA		       Total
    		     sanctioned	              Cleared/New	   
     	             schemes		      Schemes   
         Hydro	        9126.7		       693.0                  9819.7
         Thermal        12647.0		     16898.5                 29545.5
         Nuclear	  880.0		         -		       880.0
   	Total	        22653.7	             17591.5                 40245.2

6.79 Out of the total addition of 40,245 MW envisaged during the Plan period, 11,909 MW will be in the Central sector and 10,748 MW will be in the State sector which works out 29.6% and 26.7% of the capacity addition respectively. A capacity addition of 17588.5 MW, constituting about 43.7% of the capacity to be added during the Ninth Plan, is proposed to be in the private sector. The capacity addition proposed to be supplemented by the private sector, if it materialises fully, would be quite significant in the Ninth Plan period compared to earlier Plans and works out to 0.78 MW of capacity addition for every 1 MW capacity added in the Public sector.

6.80 The Common Minimum National Action Plan for the power sector has envisaged an improvement in the performance of thermal power stations as the "PLF of those thermal power stations having less than 40% PLF at present would be increased by 3% annually, by 2% in case of those plants with PLF between 40% and 60% and by 1% for those plants with PLF more than 60 percent". The overall PLF in the State sector in the country is expected to increase to a minimum of 65% and the national average to 70% by 2002 A.D. Realisation of these targets would further reduce the requirement of capacity addition and help meet the demand during the Ninth Plan period.

6.81 A major portion of the incremental capacity of 40,245 MW referred to above can materialise only during the later years of the Ninth Plan. This implies the likelihood of power shortages during the first three years of the Ninth Plan. To overcome this, at least partially, it is imperative that all-out efforts are made to operate the power system efficiently. In addition, it may also be necessary to take up short-gestation power projects based on naphtha/gas in a selective manner to tide over the situation, though this has substantial foreign exchange implications.

6.82 The capacity addition indicated above will be contingent upon fuel linkages being firmed up and early start of work on new projects. For the new projects in Public sector, particularly in the Central sector, it is essential that the procedure for input linkages/TEC/Investment clearance is streamlined and simplified. In the case of private sector projects, the clearance procedures have to be streamlined. It will also be necessary to set up a regulatory mechanism as envisaged in the Common Minimum National Action Plan for Power. Based on the above, the cumulative generation capacity in the country by the end of 2001-02 will be as in Table 6.19.

    						Table 6.19
Generating Capacity Anticipated at the end of the Ninth Plan (in MW)
                       Hydro       Thermal       Nuclear         Total 
     Capacity as						
     on 31.3.1997   21644.8        61149.5 	    225            85019.3 
 during Ninth Plan  9819.7        29545.5	    880            40245.2                  
  Total Capacity	
     on 31.3.2002  31464.5       90695.0	   3105           125264.5

6.83 The capacity addition of about 40245 MW as envisaged by the Planning Commission will fall short of the projected requirement. As already stated, to some extent the gap could be reduced by improving the performance of the existing power stations, reducing the T and D losses and adopting the Demand Side Management (DSM) measures.

Power Supply Position

6.84 At the beginning of the Ninth Plan the energy deficit was 11.5% and peaking deficit was 18.0 percent. With the capacity addition of 40245 MW during the Ninth Plan the anticipated power supply position in 2001-02, as assessed by CEA, indicates an energy deficit of 1.4% and peaking deficit of 11.6 percent.

Private Sector

6.85 The initial response of the domestic and foreign investors to the policy of private participation in power sector has been extremely encouraging. However, many projects have encountered unforeseen delays. There have been delays relating to finalisation of power purchase agreements, guarantees and counter-guarantees, environmental clearances, matching transmission networks and legally enforceable contracts for fuel supplies The shortfall in the private sector was due to the emergence of a number of constraints which were not anticipated at the time the policy was formulated. The most important is that lenders are not willing to finance large independent power projects, selling power to a monopoly buyer such as SEB, which is not financially sound because of the payment risk involved if SEBs do not pay for electricity generated by the IPP. Uncertainties about fuel supply arrangements and the difficulty in negotiating arrangements with public sector fuel suppliers, which concern penalties for non-performance, is another area of potential difficulty. It is important to resolve these difficulties and evolve a framework of policy which can ensure a reasonable distribution of risks which make power sector projects attractive and financeable (see Box).

Partners in Progress


The policy of inducting private investment into the power sector, initiated in 1992, was expected to add 2810 MW of power in the Eighth Plan. The actual achievement was 1430 MW which is only 51% of the target. The achievement ratio for the Central Sector was higher at 63% but the ratio for the State Sector was lower at 46%.

The shortfall in the private sector was due to the emergence of a number of constraints which were not anticipated at the time the policy was formulated. The most important is that lenders are not willing to finance large independent power projects, selling power to a monopoly buyer such as SEB, which is not financially sound because of the payment risk involved if SEBs do not pay for electricity generated by the IPP.

Some small projects were able to get financing because the payment risk was deemed to be acceptable. Five projects have received Central Government counter-guarantees and two more are eligible subject to resolution of other problems. The Central Government will not provide counter-guarantees for power projects in future. A number of private sector projects are seeking credit enhancement by escrowing certain receipts of the SEBs to assure payment of IPP dues. The scope for escrow arrangements is limited and in any case they do not increase the overall financial viability of the SEB. Rather, by earmarking part of the SEB’s existing receipts for new private sector projects, they reduce the viability of the rest of the system.

The ability to attract private investment into the power sector on a significant scale in future therefore depends crucially upon bringing about improvements in the financial condition of SEBs. This in turn depends upon the progress achieved in reforming the SEBs including especially reforms of the tariff structure and reform in distribution to reduce T and D losses. International experience suggests that privatisation of distribution is most likely to pave the way for a quicker induction of private investment into generation.

An important initiative could be to allow large users to buy power directly from generating companies with distribution companies being obliged to wheel the power to the user at a pace to be fixed by the SERC.

The progress of private sector power in India will also depend upon the ability of the IPPs to enter into reliable fuel supply and transport arrangements which incorporate suitable penalty clauses to compensate IPPs for non-delivery of fuel. Public sector generating stations have typically not sought such arrangements because of the expectation that problems on this account will be resolved through inter-ministerial mechanisms. Private sector investors are likely to want more contractually water tight arrangement.

Private Sector - Where we Stand !
Status of Private Power Projects
(As on 1st November, 1998)



Projects Techno-economically Cleared by CEA



Projects having in-principleClearance of CEA



Private power projects commissioned in last 5 years



Private power projects under construction



Private power projects with finances tied up with Indian Financial Institutions (IFIs)



Private power projects seeking financial tie up with IFIs



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