2. 1 Hydro Sector Development in India Growth & Investment Opportunities R.V. SHAHI SECRETARY MINISTRY OF POWER GOVERNMENT OF INDIA Montreal (Canada) June 19, 2003

3. 2 Indian Power Sector Power in Concurrent List : Both Central & State Governments have jurisdiction Power Sector in States Vertically integrated State Electricity Boards (being restructured) Central Public Sector Undertakings Own 30% of the capacity

4. 3 Power Infrastructure in India (May 03) Generating Capacity Hydro 27,010 MW Thermal 76,607 MW Nuclear 2,720 MW Wind 1,870 MW 108,207 MW * * In addition Captive capacity of about 25,000 MW Contd...

5. 4 Sectorwise Installed Capacity Central 32,816 MW State 63,291 MW Private 12,100 MW 108,207 MW Cont... Power Infrastructure in India (May 03)

6. 5 Power Supply position in the country

7. 6 The target ahead Peak requirement in (MW) Energy requirement in (BUs) Power development - projections for next ten years : Target to add more than 100,000 MW by year 2012 41,000 MW planned by 2007 (act.)

8. 7 Hydro development : Rationale Fuel Mix Years

9. 8 Hydro - A good power source Clean power Cost effective option in the long term Meets peaking requirements Development of underdeveloped areas Optimum use - Drinking water, Power and Irrigation

10. 9 (actuals in MW) Plans Contd... Hydro development in the country VI to IX Five Year Plans - 13,666 MW (20 years) X Five Year Plan - 14,393 MW Act Tar. Plans based on five year period block At present 10 th five year Plan : 2002-07 (end Mar.)(74)(79)(85)(90)(97)(02)(07)(12)

11. 10 10 th Plan target - 14,393 MW Capacity under execution 12,000 MW Central 7,800 MW State 3,500 MW Private 700 MW Another 12,000 MW in Central Sector under Stage I & II development Stage I coversSurvey & Investigations / F.R. preparation Stage II coversDetailed investigations / DPR preparation and Infrastructure development Hydro development …….. Cont...

12. 11 Thrust on hydro development Potential assessed (845 Schemes) Ranking Study of unharnessed 399 schemes Hydro Initiative (162 schemes) 50,000 MW 107,000 MW 150,000 MW The Selection Process

13. 12 50,000 MW Hydroelectric Initiative Initiative launched in May 2003 Preparation of Preliminary Feasibility Reports - Dec.03 - Sep.04 Detailed Project Reports - Jan.04 - Jan.06 For promising projects, depending on PFRs results DPR preparation also through reputed International Consultants Process of selection of Consultants for DPR of large projects through ICB Contd... Consultants identified to undertake Feasibility Studies

14. 13 Implementation - 2007 - 2017 Clearances / sanctions - Sep.04 - Jul. 06 An enormous task requiring huge investments - to be undertaken through Central / State undertakings and Private Investments 50,000 MW Hydroelectric …….. Contd…...

15. 14 The Opportunities Consultancy firms having expertise in planning and design of hydro projects : Preparation of DPRs Selection through a transparent process of International Competitive Bidding. EPC/ Construction companies Implementation of the projects through Central and State PSUs and Private promotors. -Contracts to be finalised through ICB. Contd...

16. 15 The Opportunities …….. Contd. …. Investment firms/ Project Developers -In consultation with the State Govts., projects to be implemented through the IPP/ Joint Venture route -Projects upto 100 MW can be awarded by State Govts. through the MOU route (being reviewed) -Larger projects to be awarded through a transparent process of ICB

17. 16 Areas of Concern & Focus in hydro development Quality & Reliability of Investigations Optimizing inputs for reducing cost Compressing Construction cycle time Setting bench marks in Project Management State of Art Technology during construction

18. 17 100% foreign equity participation Investment policy made attractive Debt : Equity ratio up to 4 : 1 Liberalized rates of depreciation in respect of assets Customs Duty & Excise exemption for Mega projects (500 MW & above) 16% Rate of Return on equity Two part tariff Facilitating measures for investment in hydro sector Contd...

19. 18 Facilitating measures …… Contd. …... Softer norms for incentive for hydro stations Availability factor threshold reduced from 90% to 85% Ceiling limits for TEC for hydro projects revised : 53 million US$ for projects awarded through MOU route 213 million US$ for projects awarded through competitive bidding 532 million US$ for projects where tariff is determined by CERC/ SERC. Contd...

20. 19 Facilitating measures …… Contd. …... Electricity Act 2003 notified 10 th June 03 # Objectives Accelerate reform process Harmonize the provisions in existing law Obviates need for individual States to enact their own reforms laws Introduce competition Power for all areas Consumer interests : the focal point Contd...

21. 20 Main features of the Electricity Act 2003 : Creates liberal framework for power development Facilitates private investment Delicenses generation : Captive further liberalised Multiple licencess in Distribution Creates competitive environment Stringent provisions for controlling theft of electricity Empowers States to restructure Electricity Boards Mandates creation of Regulatory Commissions Open access on Transmission & Distribution Power marketing / trading Facilitating measures …… Contd. …... Contd...

22. 21 Distribution Reforms – Three Dimensional Challenge Governance Technology Upgradation Tariff Rationalisation Distribution Reforms Commercially viable Distribution Business alone can lead to sustainable investment in Generation, Transmission & Distribution Facilitating measures …… Contd. …... Contd...

23. 22 Distribution Reforms to focus on : System upgradation Loss reduction Theft control Consumer orientation. Commercialization Decentralized distributed generation and supply for rural areas. Introducing competition. I.T. to replace human interfaces Facilitating measures …… Contd. …... Contd...

24. 23 Distribution Reforms through Accelerated Power Development & Reform Programme (APDRP) : A strong instrument for effecting improvement & reforms in sub-transmission & distribution #APDRP has two components i. Improve Distribution Network / system ii. Incentivise Loss Reduction Facilitating measures …… Contd. …... Contd...

25. 24 Turnaround plan for State Utilities : APDRP funding : During five years period, plan to invest more than 8500 million US$ : 50% for upgradation of system and 50% to be given as incentives for loss reduction #Aggregate Technical & Commercial (AT&C) losses in majority of identified circles have started showing reduction #Stringent provisions in Electricity Act 2003 for controlling theft of electricity Facilitating measures …… Contd. …... Contd...

26. 25 Payment Security / Assurance Power Purchase Agreement Letter of credit Escrow cover State Government guarantee Open access : Third party sale to consumers allowed Direct sale to Distribution utilities Facilitating measures …… Contd. …... Commercially viable Distribution is the best payment security

27. 26 WITH SUCCESSFUL REFORMS UNDERWAY, THE REQUIRED TURNAROUND IN INDIAN POWER SECTOR HAS BEGUN THE OPPORTUNITIES OFFER GROWTH AND PROSPERITY FOR ALL STAKEHOLDERS CONSULTANTSCONSULTANTS EPC AGENCIESEPC AGENCIES CONTRACTORSCONTRACTORS INVESTORSINVESTORS LENDERSLENDERS

28. 27 Thank you Ministry of Power Website http://powermin.nic.in