GE Power India Ltd Management Discussions.

Till January 2020, World Bank estimates were showing positive growth of global GDP. However, in the last quarter of the financial year 2019-20, the global situation has changed dramatically, due to the spread of COVID-19 pandemic worldwide.

There are millions who have got affected and the corona virus continues to spread rapidly across the world. Its tragic, that many human lives are lost due to this pandemic and global economic activities are getting severely affected. Many countries have adopted lockdown measures to restrict the spread of the corona virus and this is likely to have a strong impact on the global economic growth. Although countries are still gauging the COVID-19 impact on their economies and there are lot of uncertainties involved in assessing and predicting the COVID-19 impact, as per IMFs latest estimates, the global economy is projected to contract sharply by -3% in 2020.

If the COVID-19 pandemic fades later in the year, it is likely to allow for gradual release of containment efforts and is likely to normalize the economic activities once again to support the global economic growth. However, it is too early to estimate this and there are many uncertainties mainly-how the COVID -19 pandemic unfolds, effectiveness of the various containment efforts, extent of progress on cures-like vaccine/ therapy etc, extent of disruption in economic activities/ productivity losses, shift in consumer behaviours etc. Once we have a better understanding of these uncertainties, we will be able to estimate the proper growth estimates. However, till now its clear that global economies are likely to go into slump/ contraction.


India is one of the fastest growing trillion-dollar economy of the world. It has overtaken the UK and France in 2019 to become the 5th largest economy in the world. Compared on power purchasing parity, India ranks much higher at 3rd place only behind China and the USA. The Indian economy has become a dominant economic power globally.

Post-Independence, the journey of India, which began as an agrarian economy, has changed over the years and now emerged strongly as manufacturing and service sectors. In fact, the service sector is the fastest growing sector in the world, contributing to 60% to its economy and accounting to ~28% of the employment. Manufacturing has been an important sector with fillip being given to it by the government schemes such as "Make in India", coming out with domestic competitive bidding & public procurement norms with preference to local manufacturers.

The strength of the economy lies in its growing domestic market, limited dependence on exports, favourable demographics and rising middle class. The political situation in India is stable and the government has been re-elected in 2019 with full majority.

In the financial year 2019-20, there has been a decline in the GDP growth rate majorly due to poor manufacturing and construction sector performance. Also, towards the end of FY2019-20, there has been a sudden break in the economic momentum due to the nationwide lockdown, to tackle the COVID-19 spread. Although its quite uncertain and challenging to predict, when the economy would regain the growth momentum in the near future, although over longer-term, the prospects of Indian economy looks promising.

India aspires to be a $5 trillion economy by 2024 and steps are being planned or taken by the government in order to achieve this objective. There have been ambitious public infrastructure development plans such as Smart Cities, Housing for All, network of expressways, ports, airports, Bullet Trains, defence etc., that are likely to help the Indian economy to accelerate the growth momentum. With new Insolvency and Bankruptcy code-2016, faster resolution of stressed assets and boost in the private investment is expected to also give fillip to the growth momentum. The challenge shall remain to be how fast and effectively, India checks COVID-19 spread in the country and comes back to track of economic growth post the pandemic.


There has been an increase in the capacity addition to take the installed capacity to ~370GW, which has been led by capacity additions in renewables ~8.4GW, followed by ~6.2GW of thermal. Although conventional sources of energy (coal, gas, large hydro, nuclear) constitutes more than 3/4th of the installed capacity, there has been significant growth in renewables with ~22% CAGR growth in their capacity additions in last 5 years. (From 32GW in March 2015 to 87GW in March 2020)

However, the domestic power sector is seen to be impacted by the prevailing slowdown in the Indian economy. The Countrys power generation grew at the slowest pace in last 5 years. Per provisional data from CEA, for 11 months, the all India generation grew by 1.6% compared to 5.4% growth during previous FY for similar 11-month period. There are several factors which have contributed to this and these are- extended monsoons, lower than expected and subdued economic/ industrial activities and financial stress of the power DISCOMs. Power generation from conventional sources grew by 1.1.%, whereas, generation from renewables grew by 8.2% in the 11-month period in the FY.

A combination of subdued electricity demand and growth in the new build capacity additions, PLF of thermal power units has seen a decline of 56.4% for the period of April 2019 February 2020. This has been the lowest PLF seen in the country for a couple of decades. In fact, in October 2019 coal power plant PLF went down below 50%, the lowest recorded level. This softening of electricity demand has been weighing down on generating companies and their issues have been further compounded by growing overdues (>88 ‘000 Crore by January 2020) from DISCOMs. Further, in spite of all efforts the AT&C losses are still hovering @ 20% and poses a great challenge to the overall power ecosystem.

For growing electricity demand, the government has embarked upon giving access to electrical connections to houses/ villages through various schemes like Saubhagya, Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) etc. Also, railways are planning to electrify its routes up from current 58% to 100% in next 3 years. Electric vehicles are also being promoted to boost demand. On the other hand, efforts are being made to reduce wasteful electricity consumption through implementation of efficiency improvement schemes like distribution of large number of LED bulbs and PAT scheme for conservation of electricity / resources.

Also, many policy interventions were made by the government in FY20, to tackle the problems of power sector. As a payment security mechanism, DISCOMS are now required to furnish Letter of Credit (LC) for buying power from generating companies. This is likely to improve the cash flows and its predictability. Tariff caps on solar and wind power auctions were removed. The government also opened coal mining in the country for non-coal companies while removing restrictions on the end use of the fuel. This move is likely to help create an efficient energy market by creating competition. This shall boost the domestic coal production, reducing coal imports, also ending the monopoly of state-owned coal miners. Ultimately, this is likely to reduce the fuel cost and thereby the electricity cost to the end consumer.

In order to efficiently manage schedules and dispatches and optimize the costs, the power system operator POSOCO undertook a pilot project of doing SCED (Security Constrained Economic Dispatch) of all Inter State Generating Stations (ISGS) in FY20. As per this scheme, with generation company wise optimization, the lower cost generating stations got dispatched up to their maximum capacity before scheduling the costlier stations till the power requisitioned by all the beneficiaries is met. All the generation sources were pooled together to satisfy demand as per their individual PPA obligations, fully honouring the existing constraints. About 135 generating units (totalling ~58GW) participated in this pilot, which ran for 9 months. The pilot was implemented successfully with substantial cost savings of Rs. 845 Cr. (Avg. ~Rs.3.1Cr./day, ~1.5% reduction in overall electricity generation cost). Results of the pilot have been encouraging and such scheme is being recommended to be implemented across all India basis, covering all other state/ private units. Thus, this is likely to move in the direction of "One Nation-One Merit" order for the entire country in the future and reap greater cost benefits to the consumers. This is likely to drive healthy competition between utilities for a schedule that is expected to drive the need for the efficient generation and low generation cost operation.

With energy and peak deficit approaching almost zero, the focus now has been shifted towards making the electricity generation more affordable and cleaner. Hence, its seen in thelast few years ordering of FGDs for coal-based power plants to comply with new SOX emission norms has picked up further in FY20. Central utility enterprises such as NTPC, NLC, DVC and certain private utilities also placed orders for installation of FGDs in their power plants. Apart from FGD implementation, utilities and industries are taking up implementation /modifications of units for achieving NOX and SPM norms. In FY20, NTPC ordered 9.98GW of capacities for NOX reduction and many other central, state and private utilities are floating tenders for the implementation of FGDs and NOx reduction solutions in their units to meet new norms which are likely to be finalized FY21 and beyond. It is expected that ordering of FGDs/ NOx upgrade would pick up now as users approach the deadline of 2022 for implementation and meeting the norms.

The domestic power sector is also feeling the impact of the COVID-19 pandemic and resultant lockdown implemented across India. There has been further reduction in the load/ demand and electricity prices in the market. Although its early to estimate COVID-19 impact on the sector, these are likely to add further to the financial stress of Gencos and DISCOMs.


Indias energy consumption has almost doubled since the year 2000 and there is even more potential for further growth. Indias economy, already the worlds third largest by Purchasing Power Parity (PPP), is growing rapidly and has become the worlds fastest growing major economy. Riding on this rapid economic growth, coupled with population growth, which will make India the most populous country in the world in next 8 years, India is set to become a leading country contributing to 25% of the world energy demand till 2040. Indias power system is expected to almost quadruple in size by 2040 to catch up and keep pace with electricity demand and increases at almost 5% per year.

Power generation projects, like all other infrastructure projects, depend heavily on the governments policies and plans. At present, the power availability situation is quite comfortable in India, mainly due to large capacity addition in the last few years. However, long-term potential of the Indian power sector remains intact given the future energy growth needs of India. Although significant renewable capacity is planned to be added to the grid, coal shall remain in the forefront and one of the best options for meeting demand of electricity in India.

Due to comfortable power availability, the focus is likely to be shifted more towards making it cheaper and cleaner. On one side, push towards growing renewables is likely to continue and on the other hand, stricter implementation of new environmental norms, FGDs/ NOx and PM are likely to be followed. However, not all units are likely to be installed with FGDs/ NOx/ PM upgrades due to techno-commercial reasons, especially older ones and small-sized units, could be retired and or replaced. In fact, it is estimated that replacement could be the driving factor for new-built market for next few years. This market need is expected to intensify as the utilities near the target year of implementation, i.e. 2022.

For making electricity affordable, improving the system efficiencies are likely to be focused upon in the future. Reducing AT&C losses and optimizing generation schedule from existing assets by implementing ‘One Nation-One Merit" order is likely to be frontrunner focus areas.

With an increasing share of renewables comes the big challenge of integration of such variable energy sources into the grid while maintaining grid stability and reliability. There would be increased requirement of power for meeting, peaking and load balancing requirement. In absence of gas availability, limited hydro normal as well as PSP, - coal based power would remain the mainstay of Indian economy for decades to come. With many mid-range capacity units being available to support flexibility needs effectively, utilities are likely to adopt such units to work in flexible mode while utilizing large size supercritical units to run in the base load thereby optimizing the flexibility costs and emissions.

In the immediate short future, the primary focus is likely to be supporting the government in fighting the COVID-19 pandemic, supporting through lockdown and getting back to full economic activities. The entire power sector is fully geared up and committed to taking up this challenge. The timing and extent of future growth of the power sector shall depend upon rebound of the economic activities post COVID-19 restrictions in the country.


The summarized performance is as under:

(Rs in million)
Year ended 31 March 2020 Year ended 31 March 2019
Orders received 36,615 37,199
Sales 24,459 19,027
Orders in hand 73,975 76,570

This has been another great year in a row for Orders, mainly fuelled by the orders related to the new environmental norms for SOx and NOx emissions. Your Company was awarded four more contracts for installation of air quality control systems (using Wet Flue Gas Desulphurization (WFGD) technology) for a combined value of RS 30,210 million. The four orders are Jhajjar FGD (3*500 MW), Simhadri FGD (3*660 MW), Sipat (4*500 MW) and Unchahar (5*210 MW).

BHEL has awarded your Company, one order for the supply of pressure parts equipment for Bhusawal for a value of RS 980 million.

Orders for Polavaram and Ratle (together amounting to RS 15 billion) have been removed from the Orders in hand as at 31 March 2020.

The impact of COVID-19 has been felt by all businesses and your Company too has felt the brunt. Other than COVID -19 impact, the execution of the WFGD contracts acquired in the past years have been the engine of the years revenue accounting for RS 6,575 million in sales. The relative importance going up with the progression of each quarter. Your Company is cognizant of the fact that the discipline of execution in contracts that is to be the mainstay of the near future is of paramount importance. The sales in other businesses of the Company in the year have been in line with expectation as per the execution schedule of their orders in hand.



In the next few decades, coal will continue to play an important role in the countrys energy mix witRs 50% share, considering factors such as energy security and grid stability. Coal being the most cost-effective source of electricity is likely to remain the main source of electricity for meeting additional demand from the growing Indian economy. Apart from demand of additional electricity, replacement of currently operating older, inefficient and emission non-compliant units would present opportunities for new power generation units. Due to COVID-19, there is likely to be recalibration in the approach and some short-term delays/ postponement are expected, however, the long-term story looks positive.

Largest opportunities in the power sector would continue to come from implementing new environmental norms for thermal power generation units public utilities as well as captive units in India. Of all proposed norms, FGDs/ NOX and PM present a large market for OEMs. The Central Pollution Control Board has revised the implementation timeline for FGDs to 2022 providing enough time for installation. Ordering for FGDs has begun to pick pace, with NTPC leading the way. It is expected that significant ordering for FGDs would continue for next few years. DeNOx solutions too would present opportunities for power sector OEMs. Increasing share of power from renewables is expected to lead new retrofit and flexibility upgrade opportunities. With schedule dispatches that are likely to be governed by "One Nation-One Merit" order in the future, its expected that utilities would adopt efficiency improvement solutions/measures to reduce generation cost and undertake such retrofits on merits to stay ahead in the race. This provides opportunity for offering cost effective, relatively quick implementable efficiency retrofit solutions. As the industry expands scale, opportunities for deploying digital solutions for better asset utilization/ reliability/ efficient operation etc.

Your Company has been successfully demonstrating various FGD, NOX, efficiency improvement etc. projects in the country and is well placed to reap these upcoming opportunities in the Indian power sector. With COVID-19 presenting threat of disruption in the global material supply chain/ logistics etc., users are finding it difficult to get support from foreign OEMs and hence need for development of domestic local support system option, for such units are likely to grow. India has substantial Chinese OEM sourced units, and these are likely to have this need. With substantial locally developed supply chain, local manufacturing/repair facilities and extensive experience in serving such units of other OEMs, your company is well poised to respond to such needs in the future. This poses good service-related business opportunities for your company to support such units continue to maintain unit availability and sustainable efficient, reliable operation.

With focus of Governments on Renewable power specially Wind & Solar, more & more intermittent power supplies to Grid is increasing demand for Hydro Pumped Storage market. Hydro Pumped Storage with its unique technical capabilities and GEs experience in Pumped Storage over the years gives us an opportunity to address this market effectively.

Also, Gas business of the legal entity, being a Centre of Excellence, several global opportunities are being served and supported for execution of the projects globally for Engineering, procurement and construction resources.

Risks and Threats

Government of India (GoI) has taken several initiatives for cleaner and cheaper ‘Power for All, such as scaling up the renewable energy capacity addition target to 175GW by 2022. There is an oversupply situation in power generation. In such a scenario, the most important concern is lack of orders for new power projects. With many private developers stuck with stranded power assets, they are already in poor shape and have added to NPAs and strained the Indian banking sector. Although there has been some resolution in the sector through IBC, much more remains to be desired and achieved.

Indian Power sector is heavily indebted one with DISCOMs owing >90000 Cr. dues to generating companies as of March-2020 (Source: Financial health of DISCOMs is not good and situation of COVID is making it only worse due to falling demand, revenues & collections. Inability by DISCOMs to clear huge past dues, has created liquidity gap in the sector & impacts every element of the power value chain namely-Gencos Transcos & various vendors/ service providers of the sector. This potentially impacts their ability to buy fuel, meet debt repayments, other obligations &investment decisions. Although GOI has announced a 90000 Cr. Liquidity injection package for DISCOMs, it may take several months before the liquidity improves across the value chain and till such time, we can expect a cautious investment approach being adopted by all.

GOI has deployed Perform, Achieve and Trade (PAT) scheme for energy efficiency improvements across key energy intensive sectors, that includes Power and have made law for adopting new stricter pollution standard norms for SOx, NOx, PM, Hg and water consumption for thermal power plants in India. However, implementation of many of these measures has been a bit slow and lax. There is risk of shifting of such implementation plans beyond targets of 2022

For hydro, there are challenges in Pumped Storage Hydro, with respect to low tariffs, long schedules, implementation hurdles etc. are putting pressure on margins and changing customer profiles as well as change the risk profile being handled by the suppliers.

Further, with growth of COVID-19 in the country and subsequent lockdown measures being implemented by the government, the economic activities are likely to remain affected and muted for a considerable period. There is immense uncertainty around how fast and effectively the country would get some control over the COVID-19 situation and economic activities restart once again and achieve full scale of operation. COVID-19 impact and its related fallout presents single most challenging threat and it would be extremely crucial for the country to conquer over this challenge and rebound to growth at the earliest.


One of the key requirements of the Companies Act, 2013 is that companies should have adequate Internal Financial Controls (IFC) and that such controls should operate effectively.

Internal Financial Controls means the policies and procedures adopted by the company for ensuring orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

Your Company process of assessment ensures that not only does adequate control exist, but it can be evidenced by unambiguous documentation. The process involves scoping and planning to identify and map significant accounts and processes based on materiality. Thereafter risk is identified and their associated controls are mapped, else remediation is implemented. These controls are tested to assess operating effectiveness.

The auditor performs independent testing of controls. The Auditors Report is required to comment on whether the Company has adequate IFC system in place and such controls are operating effectively.

Your Companys Internal Control System is robust and well established. It includes documented rules and guidelines for conducting business. The environment and controls are periodically monitored through procedures/ processes set by the management, covering critical and important areas. These controls are periodically reviewed and updated to reflect the changes in the business and environment.

Management reviews actual performance of the business on a regular basis. In all about 60 key controls across the organisations units were identified to be tested in a systematic basis. Design gaps and weaknesses were identified to particular business and to specific process owners and followed through methodically for closure.

In line with the internal audit program, internal audit of five processes/ areas was done. The implementation of audit recommendations was followed through on a monitored and timebound plan.

The audit committee met 7 (seven) times during the year. The committee reviewed the adequacy and results of the testing of Internal Financial Controls and Internal Audit actions.

S.No. Particulars 2019-20 2018-19 Variance Reason for variance
(i) Debtors Turnover 2.1 2.0 7% -
(ii) Inventory Turnover 9.7 11.8 (18%) -
(iii) Interest Coverage Ratio Not applicable
(iv) Current Ratio 1.3 1.2 5% -
(v) Debt Equity Ratio Not applicable
(vi) Operating Profit Margin (%) 9.1 9.9 (8%) -
(vii) Net Profit Margin (%) 3.5 4 (13%) -
(viii) Return on net worth(%) 9.1 7.9 14% mainly due to net income for the year and dividend


The total number of permanent employees on the rolls of the Company stood at 1684 as on 31 March 2020.

Employees are the most important of all resources. Your Company in FY 2019-20 saw minimum external hiring. The focus was on inter business transfer of talents to drive efficiency levels

Industrial Relations

At your Companys factory in Durgapur, West Bengal as a result of strong harmonious labour relations no man days were lost on the shop floor. A total of 40 workmen were hired on permanent rolls to strengthen our production capacity at the factory. For Hydro business subsequent to the implementation of VRS and closure of factory operations, the factory license was not renewed in 2019. All employees moved from a factory establishment to Shops and Establishment.

Capability development is a key HR focus area where multiple initiatives were taken. A people leader tool kit is developed to provide managers with the necessary resources and tools to facilitate them in enhancing their roles as people managers. The launch of the "Upward People Leader Feedback Survey" enabling managers in eliciting objective feedback from their direct reportees. Your company has launched a Technical Training Academy, which focuses on building employee technical skills. The first series had 6 sessions focused on all power plant products covering 900+ employees. "Career Week", an effort to provide career enhancement opportunities for all employees was successfully conducted which was a week-long initiative covering career navigation, Individual Development Plans, speed coaching sessions with senior leadership, roundtables and skip levels. Your company also provided multiskilling and redeployment opportunities for 215 employees considering the changes in market dynamics. In order to offer job rotation and skill enhancement opportunities, bubble assignments and mission-based teams were created. For soft skill enhancement various trainings like Crotonville training, classroom and online sessions were conducted for employees across the organization. It also made sure to invest in leadership programs like Financial Management Program, Project Management Leadership program and Corporate Audit staff to build a strong talent pipeline.

The underlying fabric of all HR efforts of your company is in strengthening of an inclusive and performance driven organization culture. For which we established a strong people review rhythm in 2019, focused on differentiation and accountability. Bi-annual culture survey were conducted that saw increased employee participation of ~40%. Your company is strongly focused on diversity in employee demographics through inclusive hiring practices which resulted in inducting ~35% women apprentices at our Durgapur factory and 15+ in the Hydro office. Your company has also received the "Renewable CEO award" in 2019 for increasing gender diversity and strengthening its inclusive environment for its Hydro business. The "diversity and inclusion" culture was again encouraged through the "GE Womens Network" by engaging women employees in multiple platforms to engage with senior women leaders in the industry, thought leaders and peer network. Prevention of Sexual Harassment refresher trainings were conducted across the organization. No POSH cases were reported in 2019. The culture of driving a "Lean Mindset" is driven rigorously through trainings, workshops and breakout sessions across the organization.

Carrying on the culture of engagement with a focus on health and fitness various sessions of Zumba, yoga and dance are conducted across all sites three days a week and employees are encouraged to participate free of cost. Not only that employee talent shows,

Appreciation week and festive celebrations are a few of the highlights of employee engagement conducted by your company. Our continuous focus is to enable the business to meet the demand of today and tomorrow through a focused HR agenda.


Long-term demand for electricity in Indian market remains intact. However, the need for additional coal-based electricity is under severe stress. Given the requirement to balance the growing environmental concerns with the objective of providing affordable power to its citizens, it is important for India to manage coal plants with a holistic approach. There are cases where plants are strong candidates for an efficiency improvement or for flexible operations and for these cases, an integrated approach to address emissions with flexibility/ efficiency retrofit is an operationally and financially optimal solution. These solutions along with the latest digital technologies will ensure coal-based power plants continue to be the mainstay of Indias power system supplying affordable and reliable power to all Indian citizens and meeting the growth aspirations of Indian economy. The COVID-19 has impacted the industry immensely this year, affecting the global economy significantly. The situation of the virus still prevails challenging the world to bounce back at the earliest.


This report contains forward-looking statements, which may be identified by their use of words like ‘plans, ‘anticipate, ‘believe, ‘estimate, ‘expect, ‘intend, ‘will, ‘projects or other words of similar expressions as they relate to the Company or its business are intended to identity such forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to statements about the Companys strategy for growth, development, market position, expenditures, and financial results are forward looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company undertakes no obligations to publicly update or revise forward looking statements, whether as a result of new information, future event or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such statements. Therefore, as a matter of caution, undue reliance on the forward-looking statements should not be made as they speak only of their dates. The above discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

For and on behalf of the Board of Directors
Mahesh Shrikrishna Palashikar
Place : Gurugram Chairman & Non-Executive Director
Date : 22 June 2020 (DIN 02275903)