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Current Capacity And
Generation.
The installed
capacity at the end of FY99 stood at 91066MW. Thermal capacities
(including steam, gas, oil and wind) constituted 73%, while hydro
and nuclear constituted 24% and 3% respectively. A capacity of
4242MW was added in FY99. This comprised 542MW of hydro and 3700MW
of thermal. Of the capacity added, 1575MW came from private power
projects, while 1675MW were added by SEBs and 990MW were added by
Central Utilities.
The generation in
FY99 was 3,69,403mn units, which included 78% thermal generation,
19% hydro generation and 3% nuclear generation.
Developments On The IPP
Front
A. New
Projects Commissioned
In 1998-99, the
740MW gas-based Enron project at Dabhol was commissioned. The
project is currently running on naphtha, but will be switching to
gas after the commissioning of the gas terminal and pipeline. The
200MW DG-based power project of GMR Vasavi at Basin Bridge became
the first liquid fuel-based IPP to be commissioned in late 1998-99.
2 units of naphtha-based BSES-Kerala Power of 3X53MW have recently
gone on stream in FY00.
Earlier, the 205MW gas-based project of GVK Industries at
Jegurupadu, AP, earned the distinction of the first IPP to be
commissioned in 2 phases in 1997 and 1998. The other gas-based
projects to be commissioned were the 415MW Paguthan project of
Gujarat Torrent in 1997-98 and the 208MW Spectrum Power at
Kakinada.
B. Recent
Financial Closures – Implementation
Commenced
Projects which have
recently achieved financial closure include the 250MW lignite based
project of ST-CMS at Neyville, 1444MW gas-based Dabhol Phase II,
330MW gas-based PPN Power of Reddy, 355MW naphtha-based Kondapalli
project belonging to the Lanco group and 400MW Shree Maheshwara
hydel project of S. Kumar.
C. Projects
On The Verge Of Financial Closure
The 578MW
Birla-Powergen promoted Bina Power and 1070MW Daewoo project
promoted by Daewoo and ABB are expected to attain financial closure
in H2FY99. Both the projects have obtained escrow cover from MPSEB,
which has been challenged in the Supreme Court by other IPPs in the
state. With the escrow capacity of the MP government scaled down to
900MW, it looks as if at least one of these projects will not
qualify for escrow. The 1000MW Videocon power project at Chennai is
also expected to attain financial closure.
D. Mergers
and acquisitions
There has been a
flurry of acquisitions especially in projects which were in
advanced stages of development. Powergen acquired Torrent’s
40% stake in Paguthan for Rs11bn. Marathon has acquired Essar Power
for Rs7.2bn. The deal has however run into a controversy with the
GEB objecting to Marathon supplying power to Essar Steel at the
agreed tariffs. Australia’s Energy Equity Corporation bought a
25% stake in GMR Vasavi’s Basin Bridge Plant. El Paso bought
EEC’s 26% stake in PPN Power. Powergen bought 49% stake from
Tractabel’s 74%, for $42mn. National Power has bought 36%
stake in Videocon Power Project from Videocon. Powergen is buying
Spic’s 49% stake in the Tuticorin project
Policy
Initiatives
A. At The
Centre
The Electricity
Regulatory Commissions Act was passed in April 98 with a view to
providing for the establisment of the Central Electricity
Regulatory Commission (CERC) and State Electricity Regulatory
Commissions. (SERCs).
The CERC has been
constituted with the objective of regulating the tariff of
generating companies owned or controlled by the Central Government,
and inter-State transmission including tariff of the transmission
entities.
The Electricity Laws
(Amendment) Act 1998 was passed in 1998. It gives an independent
status to transmission activity. The concept of Central and State
transmission utilities has been introduced. While Powergrid
Corporation has been notified as the Central Transmission Utility
(CTU), the State Electricity Boards or their successor State
transmission companies would be the State transmission utilities.
It is mandated in the Act that CTU and STU would be Government
companies.
The participation by
Private Sector in the area of transmission would be limited to
construction and maintenance of transmission lines for operation
under the supervision and control of CTU/STU. The process would
involve identification of transmission lines by the CTU/STU to be
entrusted to Private Sector, issue of specifications, calling for
offers and selection of the private party. On selection of the
private company, the CTU/STU would recommend to the CERC/SERC for
issuance of a transmission licence to the private company. The
private company shall contract only with the CTU/STU for the entire
use of the transmission line(s) constructed by the company, and
shall be responsible for the maintenance of the lines. Transmission
charges payable to the company would be directly linked to the
availability of the lines. The guidelines for Private Sector
participation have been prepared.
The Mega Power
Project Policy (MPP) was formulated. An MPP is one with
capacity exceeding 1000MW and which will benefit more than 1 state.
The policy envisages the setting up of a Power Trading Corporation
which will buy power from the projects and sell it to concerned
SEBs. Security to the PTC will be provided by means of a Letter of
Credit and recourse to the State’s share of Centre’s plan
allocations. A pre-condition would be that the beneficiary States
should have constituted their Regulatory Commissions with full
powers to fix tariffs. They would also have to privatise
distribution in the cities having a population of more than one
million. Similar comforts would be given to public sector projects;
however, they would deal directly with the SEBs and not through the
PTC.
An MPP would be
entitled to duty free imports, tax holidays and exemption from
sales tax and local levies. Price preference of 15% would be given
for domestic bidders for the projects under public sector.
Powergrid will arrange for wheeling of power generated by these
mega projects and enter into separate agreement with the user
SEBs/States on Transmission Tariff. However, the developer would
have to enter into separate Power Purchase Agreements with the
purchasing States.
The prominent MPPs
identified are the 3860MW coal-based project at Hirma, 2000MW
Pipavav, 1500MW Kahalgaon and 2000MW Karanpura of NTPC. Power
trading and recourse to the State’s share of Central plan
allocations remain contentious issues.
B. State
Level initiatives
Each state shall
pass the Power Reforms Act and constitute a SERC. The
objective of the SERC will be to bring about SEB reforms by
rationalising tariffs in the state, providing transparency in the
provision of subsidies and overseeing privatisation of
distribution.
State governments
can now provide subsidies over and above that recommended by the
SERC only by providing additional budgetary support to the SEBs.
Formation of the SERC has been linked to benefits from mega power
projects and subsidised loans from PFC so that states have an
incentive to form the SERC at the earliest.
There are
apprehensions whether SERC will go the TRAI way, i.e. will it have
adequate teeth to set tariffs, given that tariffs to agricultural
consumers is a highly politically sensitive issue.
In view of the
urgent need to reduce T&D losses, facilitate higher investments
in system improvement and ensure availability of reliable power to
the consumers, reform of the distribution sector will be initiated
by establishing distribution companies in different regions
of each State. The entry of private investors will be
encouraged wherever feasible. To begin with, at least 25% of
the State will be taken up for distribution reform. The whole state
will be covered in 4 years. The State Governments have been urged
to take initiatives in this regard and also for the unbundling
of SEBs into separate activities for generation, transmission
and distribution by enactment of necessary laws. The model law in
this regard was circulated to all the States as a part of agenda
for the Chief Ministers Conference held on 18th Dec.,
1998.
State/Union
Territories have been urged to take steps to corporatise and
commercialise generating companies, transmission companies and
distribution companies so that they are able to operate on
commercial principles, generate the required resources and ensure
availability of reasonably priced power.
Having regard to the
large investments required to be undertaken by CPSUs for generation
and transmission projects, State/Union Territories will adopt
commercial arrangements such as opening of LCs of the
required amount for payment of power from generating and
transmission agencies and for prompt settlement of dues.
To enable CPSUs to
take up new projects for generation and transmission and in
accordance with the Government of India policy of securitization of
the outstanding debts of Central Public Sector Undertakings, State
Governments will take steps to facilitate orderly securitization of
such debts.
Next Chapter
Shilpa Krishnan
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