gujarat urja vikas nigam ltd Management discussions

GUJARAT URJA VIKAS NIGAM LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS POWER REFORMS: Your Directors are pleased to inform you that the Power Reforms in the State of Gujarat have been successfully implemented pursuant to the enactment of the Electricity Act, 2003 and the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003. As you are aware,the implementation of the Restructuring in the Power Sector in the State of Gujarat was made vide various Notifications, Government Resolutions and Transfer Schemes for vesting of the assets, liabilities, proceedings and personnel from erstwhile Gujarat Electricity Board (GEB) to the Government of Gujarat (GoG) and then to revest the same into successor transferee Companies. Your Company was mainly incorporated to take over the assets, liabilities & personnel of the residual GEB in tune with the Schedule G of the Main Transfer Scheme Notification dt. 24th October, 2003. As the total share capital is held by H.E Governor of Gujarat, the Company is wholly owned Govt. Company. In terms of the Government of Gujarat Resolution, company is to carry out the residual functions (including power trading) of the erstwhile GEB. Other objects/functions of the Company apart from above include co-ordination of the activities of its subsidiaries to determine their physical and financial targets and to review their performance with a view to achieve optimum utilization of all resources placed at their disposal. INDUSTRY OVERVIEW: Quality power supply plays an important part in sustained development of any country. Although electricity generation has increased substantially in recent years, the demand for electricity in India is still substantially higher than the available supply. The data of Nation as a whole with respect to gap between demand and supply is given in following table. Fiscal Year Energy Requirement Energy AvailabilitY Energy Shortage (Million units) (Million units) (Million % Units 2003 545983 497890 48093 8.8 2004 559264 519398 39866 7.1 2005 591373 548115 43258 7.3 2006 631554 578819 52735 8.4 2007 572812 519656 53156 9.3 (Upto Jan. 07) Source: - Ministry of Power Annual Report 2006-07. SECTORIAL PERFORMANCE: This is the second financial year post operationalization of the Companies. The performance of GUVNL and its subsidiary companies (sector) as a whole is encouraging. The Sector continued various measures to improve the financial health as well as the internal efficiencies. As a result, the sector has been able to book a profit after tax of Rs.219.98 crores for the year 2006-07 as against profit of Rs.202.67 crores for the year 2005-06. A summarized sectoral performance is given hereunder: Sr. Particulars Rs. in lakhs Rs. in lakhs No. 2006-07 2005-06 1. Total Turnover 1412085 1205835 2. Total Expenditure 1387993 1183144 3. Profit before tax 24092 22691 4. Provision for income tax: Current 2635 1161 Fringe benefit 367 430 Wealth tax 76 2 5. Deferred Tax income 985 831 Profit after tax 21998 20267 OPERATIONS: In the process of unbundling of Gujarat Electricity Board (GEB) into seven different Companies, Gujarat Urja Vikas Nigam Limited (GUVNL) has been assigned the function of bulk purchase and bulk sale of power. GUVNL purchases power from various Independent Power Producers within the State including Gujarat State Electricity Corporation Limited (GSECL) which is the generating company of the unbundled GEB. The total generating capacity of the various sources at the beginning of the year 2006-07 was 9026 MW. The total installed power generating capacity in the State during the year 2006-07 is as under: GSECL Pvt. Central Addition during the Total Sector Sector year (Central Sect.) Gujarat Thermal 4179 890 829 133 6031 Gas 354 1516 424 0 2294 Nuclear 0 0 422 137 559 Hydro 547 0 200 32 779 Total 5080 2406 1875 302 9663 Power Purchase: GUVNL purchases power in bulk from various IPPs at the tariff governed by the power purchase agreements signed by GUVNL/erstwhile GEB. The power purchased from GSECL is governed by the Tariff Order issued by GERC against the tariff determination Petition filed by GSECL. The tariff for purchase of power from the Generating Stations owned by NTPC Ltd. is determined by the Honble Central Electricity Regulatory Commission and GUVNL accordingly pays for the purchase of such power at the tariff determined by CERC. The tariff for the Nuclear Power Generating Stations owned by the Nuclear Power Corporation of India Ltd. is decided by the Department of Atomic Energy, Government of India. In order to meet the shortages between demand and supply during peak seasons, GUVNL purchases power through short term agreement. The rates for such purchase of power are invited through Competitive bidding process. The total bulk purchase of power during the year 2006-07 from various sources is as under: Sr. Name of Agency MUs No. 1 NPC 2704 2 NTPC 9169 3 SSNNL 566 4 UI OVERDRAWAL 253 5 TOTAL CENT.SECTOR (1+4) 12692 6 OTHER IPPs 10089 7 GSECL 25063 8 TOTAL IPPs (6+7) 35152 9 BILATERAL PURCHASE 683 10 OTHERS 762 11 TOTAL POWER PURCHASE 49289 Sale of Power: GUVNL sells the purchased power to the four Distribution Companies (DISCOMs) formed as a result of the unbundling process. The tariff for such sale of power to DISCOMs is based on the tariff orders issued by GERC against the Petition for ARR filed by the DISCOMs. Power is also sold to three licensees of the State viz. (i) M/s. Torrent Power AEC Limited (ii) Torrent Power SEC Limited and (iii) Kandla Port Trust. The sale to Licensees is also governed by the tariff determined by GERC. Besides this some power is also sold/purchased through Unscheduled Interchange system based on the surplus/deficit of power in the State grid. During financial year 2006-07, GUVNL has exported 506 MUs amounting to Rs. 171 Crores at the average rate of Rs 3.38 per unit under Unscheduled Interchange arrangement. The details of power sold to various DISCOMs and Licensees during year 2006-07 are as follows: No. Name of Licensee Energy Sold in MUs 1 DGVCL 9525 2 UGVCL 11985 3 PGVCL 16984 4 MGVCL 5612 5 Torrent Power AEC 1104 6 Torrent Power SEC 2962 7 Kandla Port Trust 15 Total 48187 Sale of surplus power through short term sale agreements. GUVNL also sells surplus power whenever demand of DISCOMs is less than availability. During financial year 2006-07, on account of low load conditions and in order to achieve optimum utilization of resources, GUVNL has sold 236.08 MUs amounting to Rs. 73.53 Crores at the average realization rate of Rs 3.12 per unit through various traders to other States. The rates for sale of power are invited through Competitive bidding process. GUVNL is able to increase the quantum of sale of surplus power by way of appropriate planning and better load management. Also, the generating stations are utilized up to full generation capabilities so as to achieve maximum PLF. Transmission Charges: GUVNL also pays for the transmission of the power within the State to Gujarat Energy Transmission Corporation (GETCO) which is the Company responsible for transmission of power. The transmission tariff is again determined by GERC against the ARR Petition filed by GETCO. The transmission charges for transmission of power from the Central Sector Generating Stations through the Central Transmission Utility - PGCIL owned lines are determined by the Honble Central Electricity Regulatory Commission and GUVNL is sharing the transmission charges in accordance to the methodology specified by the CERC under the Regulations for Terms & Conditions of tariff as amended from time to time. JYOTI GRAM YOJANA (JGY): The Jyoti Gram Yojana, formulated and largely financed by the Government of Gujarat, is a special programme with the objective of improving the living standards of the rural population in the state and accelerating the rural development and economy by providing 24 hour 3 phase continuous power supply to Residential, commercial and Industrial consumers of all the villages in the State. The Government of Gujarat recognized the importance of rural electrification and even more importantly reliable supply, as driver of rural development. Therefore, improvement of rural supply has been a key focus area of reforms in the states power sector. With this objective, the Government of Gujarat and state power sector entities launched the Jyoti Gram Yojana in September 2003. Under this scheme, Special Design Transformer on Agriculture feeders takes care to cater single phase power supply to farmers and farm workers living in farms after the scheduled three phase power supply to Agriculture. The scheme is not only self sustaining but also has led to many positive spin-offs for the utility with improved billing efficiency and cash flows and thereby improving Financial position of the utility. Reduction in distribution loss and Transformer failure rate:- The table gives details of Reduction in distribution loss and Transformer failure rate: Sr. F.Y. 2005-06 2006-07 Total Gain No. 1 2 3 4 5 = (3+4) 1. Net gain in MUS 1764.616 1198.06 2962.65 2. Net gain in Amount in (Rs. Crs.) 527.62 358.21 885.83 3. Reduction in Dist loss (%) 4.88 3.74 - 4. Reduction in Transformer failure rate (%) 1.17 0.53 - Benefits of the Scheme: * Reduction in distribution loss and distribution transformer failure rate. * Promotion of industrial and commercial activities in villages leading to local employment generation; * Increased revenue through prevention of power theft; * Improved standards of living in rural areas on account of access to a wide variety of goods and instruments; * Enhanced exposure of rural population to different parts of the world through electronic media, leading of knowledge avenues; * Impact on quality of education; * Improved health services and sanitation facilities; * Reduction in migration from rural areas to urban areas. * Regulated but improved quality power supply to agriculture enabled efficient and optimum use of water, which in turn contributes to conservation of ground water resources. * Reduction in failure of motor sets of the farmer saving the maintenance cost. * Speedy restoration of power in natural calamity AWARDS/PRIZES: * Received India Tech Excellence Award (Power India Excellence Award) for two successive years for the most progressive State Govt. * Silver Medal awarded by CEA for 2005-06 to Subsidiary Co. GETCO for completion of 220/66KV Mathasur sub station in record time and Bronze Medal awarded to Subsidiary Co. UGVCL for outstanding performance in reduction in T&D losses and AT&C losses ,reduction in transformer failures, enhancement in revenue, improvement in power reliability and improved customer service. * Awarded Infraline Energy Execellence Award 2007 and Energy Sector Value Creator Award. * The papers of the Company on Jyoti Gram Yojana a Boost and Boon for the rural economy and Accelerated power development programme for the proposed world congress on urban infrastructure in developing countries organized by The Institution of Engineers (India) under the aegis of World Federation of Engineering Organizations held in New Delhi from 12-14th November, 2007 have been accepted for publication. E-Urja Project: End-to-End IT Solution for GUVNL and its Subsidiaries. During the year 2006-07, the First Phase for implementation of end-to-end ERP solution, consisting of Oracle 11 i E-Biz suite (ERP), e-Urja system made Go-Live in June 2006 at the Pilot sites of one Circle/Power station of each DISCOM/GETCO/GSECL Company and Tripple Point-Trading Module at GUVNL in October06. The e-Urja solution implemented in each of the seven companies includes various Modules such as: * Financials (AP, AR, Treasury, Fixed Assets) * Purchase (Inventory, Quality, Sourcing) * Human resources (Employee Self Service- ESS, MSS, Training) Projects * Enterprise Asset Management (EAM) * CRM * Legal * OPM/Fuel & Quality * Data base Administrator (DBA)/OCS Support The Second Phase of e-Urja project i.e. Roll-Out of implementation at remaining locations of each company was initiated in July 06, based on strategy finalized for each company, the demo of configured system was presented and required data collection templates were described with hands on training by TCS during the kick of meetings and subsequent training sessions. By March-2007, the roll-out was at the stage of go-live and complete Go-Live is expected in 2007-08. Following Milestones of the Project have been achieved during the year: * TCS Pay roll implemented, by February 07, at all Pilot corporate and circles/TPS offices. It is being rolled on, at remaining power stations/ DISCOM/GETCO Offices. * The parallel run of Broadline HT/LT Utility Billing started at pilot sites from February 07 and is scheduled to go live by Feb. 08 at all locations of DISCOMS. * Installed more than 8000 desktops and peripherals covering all Offices up to the sub-division level. * The work of providing WAN connectivity at more than 50% locations completed by BSNL out of about 610 Locations during the year. Remaining locations will be connected in next financial year. Additional 4500 Oracle- ERP Licenses procured in Nov.06 totaling to 10500 User Licenses for Urja System covering all companies. * In order to meet with the requirement of end users for the Post Go-Live support for live operations of e-Urja modules, the annual maintenance support from M/s. TCS assessed in detail and the same is proposed as per the original agreement * Arrangements finalized, with M/s. n(Code), to ensure a robust Security Management System and Assets Management for Central Datacenter and the Data, for the Organization wide Information Security Management System (ISMS) including maintenance for three years. The project will be implemented during the year 2007-08. * A study has been made regarding IT Security and vulnerability and a decision has been taken to introduce Information Security and Management System. GETRI ACTIVITIES: It was recognized that employees need to be imparted and equipped with necessary knowledge, skill & positive attitude to face the challenging task ahead in emerging power sector scenario. In view of this, Gujarat Energy Training Research Institute (GETRI) has been established for catering the training needs of GUVNL & all its subsidiary companies. For fulfilling the above objective, GETRI has been relentlessly pursuing its mission for developing competencies by designing & delivering programmes meeting the needs of professionals of new entities. GETRI prepares training calendar every year for each company. To facilitate the training activities, the Erstwhile GEB had established training centers at different locations to conduct various training programmes for improving efficiency and technical skill of engineers, operators, technicians, Line staff, as well as non-technical staff including senior and middle level officers. The aforesaid training programmes were conducted by the In-house faculties having adequate knowledge of the subject & aptitude for training. Similarly for specialized programmes, Sr.Officers are sent to outside well- known Training Institutions. The details of personnel trained during last year and during current year up to September-07 is as under: Year No. of training No. of Employees (Period April to March) programmes trained. 2006-07 672 17770 2007-08 200 (approx.) 8915 (up to Sept - 2007) GETRI has been accredited for conducting training programmes under DRUM project of MoP New Delhi. A total of 392 participants were imparted training at GETRI under DRUM project for the topic Financial Management of Distribution Business. Chintan Shibir was organized by inviting 40 Sr. Executives from each company during 28-29 Dec-06, at GETRI, Baroda. During the presentations, number of suggestions on different 12 themes have been received for improving efficiency and financial health of each company. Similarly a Chintan Shibir was also held in March-2007 for Vigilance & Police staff of all the companies. All endeavors are being made to cater the training needs of human capital of all new entities of erstwhile GEB to achieve the goal of GETRI-Training for Excellence. Benefits derived from these training programmes are: i) Improvement in Customer Relationship Management ii) Performance up-gradation by upgrading technical skill iii) Awareness increased in Team work. iv) Overall improvement in Attitude. HUMAN RESOURCES: The Human Resources being the most valuable asset the Company endeavors to provide an environment that each employee is motivated to contribute his/her best to achieve the Companys Goals/Objectives. The Company has taken series of proactive HR initiatives like HR Aap Ke Dwar, Training to Staff, Energy Conservation through peon, Suggestion Scheme on Transformer repairing, health check up,health club at Corporate office Study tours for employees, Training to peons and drivers, 5-S Activities etc. The series of HR initiatives have motivated the employees and the process of out of box thinking has started which will go a long way in attaining the goals of the Company. STAFF WELFARE ACTIVITIES: Employee welfare plays an important role in motivating the employees and to attain optimum efficiency utilization in every Organization The GUVNL has taken utmost care and given ample importance in the field of welfare activities. Apart from Statutory Welfare Provisions, the Company has given due importance to the non-statutory welfare activities. A good number of welfare activities have continued to be handled in GUVNL even for subsidiary companies for the sake of synergy, coordination and functional needs. The number of staff welfare activities were carried out during the year like Sports, AIESCB Tournaments, Grant to Employees Organization for cultural programmes, Inter Company Music Competition, Inter Company Drama Competition, Loans to Cooperative Society, Staff Voluntary Retirement Cum Death Benevolent Fund Scheme-II, Merit Awards to the employees and their family members for their bright performance in the field of Education, Sports and Fine Arts, Sports Complex at Vidyutnagar Colony, Vadodara, Gymnasium at corporate office, colony and GETRI etc. ABT REGIME: GERC has already issued order for implementation of Availability Based Tariff (ABT). The GUVNL and subsidiary Companies are preparing to implement the intra-state ABT. This should bring discipline in consumption and production of energy and help maintain the system discipline. Implementation of ABT will bring Grid Discipline and improved quality of supply when over drawl during low frequency is restricted. This should also help in facing the challenges of open access to be implemented shortly as per the GERC directives. No major Grid disturbance has occurred during the year under the review in the State of Gujarat.