Hydro Sector Development in India Growth & Investment Opportunities
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Hydro Sector Development in India
Growth & Investment Opportunities
R.V. SHAHISECRETARY
MINISTRY OF POWERGOVERNMENT OF INDIA
Montreal (Canada) June 19, 2003
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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
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Power Infrastructure in India (May ‘03) Generating Capacity Hydro 27,010 MW
Thermal 76,607 MWNuclear 2,720 MWWind 1,870 MW
108,207 MW *
Hydro 25.0%
Thermal70.8%
Nuclear 2.5%
Wind 1.7%
* In addition Captive capacity of about 25,000 MW
Contd...
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Sectorwise Installed Capacity Central 32,816 MWState 63,291 MWPrivate 12,100 MW
108,207 MW
Central Sector 30%
State Sector 59%
Private Sector 11%
Cont...Power Infrastructure in India (May ‘03)
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7.3
11.5
7.8 8.8
12.213.0
18.020.5
1992-93 1996-97 2000-01 2002-03
Power Shortages (%) Peak Shortages (%)
Power Supply position in the country
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The target ahead
545719
975
Mar.'03 Mar.'07 Mar.'12
157107115705
81492
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.)
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Hydro development : Rationale
25%29%40%46%41%33%
75%71%60%54%59%67%
'50 '60 '70 '80 '90 2003
Hydro Thermal + Others
Fuel Mix
Years
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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
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10573812 2873 3828
24274538
14393
20000 +
IV V VI VII VIII IX X XI
(actuals in MW)
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 10th five year Plan : 2002-07
(end Mar’.)Plans
(‘74) (‘79) (‘85) (‘90) (‘97) (‘02) (‘07) (‘12)
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10th Plan target - 14,393 MW
• Capacity under execution 12,000 MW
Central 7,800 MW State 3,500 MWPrivate 700 MW
Another 12,000 MW in Central Sector under Stage I & II development
• Stage I covers Survey & Investigations / F.R. preparation
• Stage II covers Detailed investigations / DPR preparation and Infrastructure development
Hydro development …….. Cont...
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Thrust on hydro development
Ranking Study
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
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50,000 MW Hydroelectric Initiative50,000 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
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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 ……..50,000 MW Hydroelectric …….. Contd…...Contd…...
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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...
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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
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Areas of Concern & Focus Areas of Concern & Focus in hydro development 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
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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...
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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...
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Facilitating measures …… Contd. …...
Electricity Act 2003 notified 10th 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...
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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...
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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...
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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...
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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...
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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...
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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
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WITH SUCCESSFUL REFORMS UNDERWAY, THE REQUIRED WITH SUCCESSFUL REFORMS UNDERWAY, THE REQUIRED
TURNAROUND IN INDIAN POWER SECTOR HAS BEGUNTURNAROUND IN INDIAN POWER SECTOR HAS BEGUN
THE OPPORTUNITIES OFFER GROWTH AND PROSPERITY FOR ALL THE OPPORTUNITIES OFFER GROWTH AND PROSPERITY FOR ALL
STAKEHOLDERSSTAKEHOLDERS
•• CONSULTANTSCONSULTANTS
•• EPC AGENCIES EPC AGENCIES
•• CONTRACTORSCONTRACTORS
•• INVESTORS INVESTORS
•• LENDERS LENDERS
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Thank youMinistry of Power
Website
http://powermin.nic.in
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