Evolving Perspectives in the Development of Indian Infrastructutre

EVOLVING PERSPECTIVES IN THE DEVELOPMENT OFINDIAN INFRASTRUCTURE

EVOLVING PERSPECTIVES IN THEDEVELOPMENT OF INDIAN INFRASTRUCTURE

Volume 1

Infrastructure Development Finance Company Limited

ORIENT BLACKSWAN PRIVATE LIMITED

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Infrastructure Development Finance Company Limited 2012First published 2012

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CONTENTS

List of Tables, Figures and Boxes vii

Foreword by Rajiv B. Lall xv

Acknowledgements xvii

Introduction xix

List of Abbreviations xxiii

ENERGY 1 Power Sector Reform: Policy Decisions in Distribution 3

2 Power Sector in India: A Summary Description 13

3 Power Sector Reform in Argentina: A Summary Description 22

4 Orissa Power Sector Reform: A Brief Overview of the Process 31

5 Power Sector Financing: A Note on Conditionalities 40

6 Six Steps to Accelerated Privatisation of Electricity Distribution 52

7 Regulation of Petroleum Product Pipelines 70

8 Incentives, Ownership and Performance inPower Sector: The Case of UP 108

9 Discussion Paper on Developing Power Markets 124

10 Captive Coal Mining by Private Power Developers:Issues and the Road Ahead 143

11 Power Distribution Reforms in Andhra Pradesh 163

12 Power Distribution Reforms in Maharashtra 181

13 Power Distribution Reforms in Gujarat 202

14 Barriers to Development of Renewable Energy inIndia and Proposed Recommendations: A Discussion Paper 222

15 Power Distribution Reforms in Delhi 273

16 Power Distribution: Being Driven toInsolvency by a Governance Crisis 290

17 India Solar Policy: Elements Casting Shadow onHarnessing the Potential 334

TELECOMMUNICATIONS18 Telecom Sector Reform: Restructuring

Telecommunications as if the Future Mattered 363

19 Transitioning from Administrative Allocation ofSpectrum to a Market-based Approach 372

LIST OF TABLES, FIGURES AND BOXES

Tables

Table 3.1 Total production of electricity and the share ofdifferent types of generation 22

Table 6.1 Timeline for accelerated privatisation of distribution 68

Table 7.1 Supply/demandpetroleum products (in mmt) 74

Table 7.2 Supply/demandnatural gas (in mmscmd) 76

Table 7.3 Gas demand estimates of different government agencies 78

Table 7.4 Total gas supply potentialTenth Plan (in mmscmd) 79

Table 7.5 Total gas supply potential post KG Basin find (in mmscmd) 80

Table 7.6 Projections for POL consumption 20012008(in 000 metric tonnes) 97

Table 7.7 List of LNG terminals 97

Table 7.8 List of crude pipelines 98

Table 7.9 List of gas pipelines 98

Table 7.10 List of refineries 99

Table 7.11 List of oil product pipelines 99

Table 7.12 List of ports handling oil/petroleum products 100

Table 8.1 Cumulative commercial losses of consolidated UPPCL 111

Table 8.2 Performance parameters 112

Table 8.3 Performance of UPRVUNL generating stations 114

Table 8.4 Reduction of AT&C loss in North Delhi Power Ltd 117

Table 8.5 Collection efficiency (%)governmental andnon-governmental categories 119

Table 9.1 Recommended loan conditions 132

Table 9.2 Trading margins 136

Table 10.1 Coal blocks identified for the power sector 144

Table 10.2 Criteria for allocation of coal blocks 146

Table 10.3 Pre-production approvals for allottees of coal blocks 147

Table 10.4 Comparison of mining leases in Australia, Canada and India 151

Table 10.5 Normative time limit ceilings as provided in guidelinesfor allocation of captive blocks and conditions of allotmentthrough the screening committee, Ministry of Coal 156

Table 10.6 Minimum time frame of process 159

Table 11.1 Steps taken for power sector reforms in Andhra Pradesh 168

Table 11.2 Investment in infrastructure 172

Table 11.3 AT&C losses (%) of distribution companies 174

Table 11.4 Collection efficiency (%) of distribution companies 175

Table 11.5 Subsidy received 175

Table 11.6 Profit with and without subsidy 176

Table 11.7 Peak deficit and energy deficit in AP 177

Table 11.8 Subsidy received by distribution companies 178

Table 11.9 Sales mix (%) of distribution companies 179

Table 11.10 Revenue mix (%) of distribution companies 179

Table 11.11 Expenses as (%) of total cost for distribution companies 179

Table 12.1 Progress of Single Phasing Scheme 188

Table 12.2 Power scenario in Bhiwandibefore and after franchising 192

Table 12.3 Profits of MSEDCL 196

Table 12.4 MSEDCLs arrears 196

Table 12.5 Sales mix (as percentage of total units sold) 200

Table 12.6 Revenue mix (as percentage of total revenue) 200

Table 12.7 Expenses as percentage of total expense 201

Table 13.1 AT&C losses for distribution companies 213

Table 13.2 Distribution losses of discoms 213

Table 13.3 Collection efficiency of distribution companies 214

Table 13.4 Subsidy received by distribution companies 215

Table 13.5 Gap between ARR and ACS for distributioncompanies without subsidy 216

Table 13.6 Profits of distribution companies without subsidy 216

Table 13.7 Profits of distribution companies with subsidy 216

Table 13.8 Gujarat state peak deficit and energy deficit 217

Table 13.9 Quality of Service parameters for discoms 218

Table 13.10 Sales mix of distribution companies 219

Table 13.11 Revenue mix of distribution companies 219

viii | Indian Infrastructure: Evolving Perspectives

Table 13.12 Expenses as percentage of total cost fordistribution companies 219

Table 14.1 RE potential and target cumulative capacity addition (in MWeq) 225

Table 14.2 Mismatch between RE capacity envisaged under policy and capacityaddition targeted 229

Table 14.3 Policy instruments for promotion of RE 232

Table 14.4 Regulatory framework for promotion of RE 234

Table 14.5 Penalties for non-achievement of RPO 235

Table 14.6 Status of RPO across Maharashtra 235

Table 14.7 RET capacity added across states with tariff orders/FiTs 236

Table 14.8 Year-wise wind power capacity addition inAndhra Pradesh (in MW) 236

Table 14.9 Salient features of the schemes proposed under the solar powerpurchase policy of JNNSM 248

Table 14.10 Summary of RPOs at state level for select states 264

Table 14.11 FiTs for wind energy and assumptions for FiTs across states 266

Table 14.12 FiITs for solar power across states 267

Table 14.13 FiTs for SHP and assumptions for FiTs across states 268

Table 14.14 FiTs for biomass and bagasse and assumptions for FiTs across states 269

Table 15.1 Accepted bid loss rejection trajectory; minimumbid loss rejection trajectory 276

Table 15.2 Profits 280

Table 15.3 QoS parameters 281

Table 15.4 Peak and energy deficit 282

Table 15.5 Loan to Transco 282

Table 15.6 Expenses break-up of discoms 284

Table 15.7 Capital expenditure by discoms 287

Table 15.8 AT&C loss reduction by discoms 287

Table 15.9 Sales and revenue mix 288

Table 16.1 States exhibiting increases in losses from distribution business 292

Table 16.2 States exhibiting profits or decrease in lossesfrom distribution losses 293

List of Tables, Figures and Boxes | ix

Table 16.3 Most utilities have shown considerable reduction in AT&C lossesbetween 200506 and 200809 294

Table 16.4 Agricultural consumption continues to remain unmeteredstatusin select states 296

Table 16.5 Level of agricultural consumption in select states in 200809 297

Table 16.6 Status of implementation of select distribution reform initiativesas of April 2010 298

Table 16.7 Cost recovery in 200809 301

Table 16.8 Status of tariff revision in states/union territoriesat the end of 2009 307

Table 16.9 Increase in revenue gap without subsidy for utilitiesbetween 200506 and 200809 309

Table 16.10 Consumer tariffs as percentage of Average Cost of Supply approvedby SERCs in FY 200809 311

Table 16.11 Funding of revenue gap of utilities in Uttar Pradesh 315

Table 16.12 Means of financing the revenue deficits of utilities (indicative) 318

Table 16.13 Outstanding bank loans and government guaranteesin select states (Rs crore) 320

Table 16.14 Interest expenses disallowed by ERCs primarily on accountof short-term loans taken by distribution utilities 323

Table 16.15 Estimated financial losses of utilities in 201213 325

Table 16.16 Tariff trends in UMPP bids 327

Table 17.1 Projected deployment of funds in SPSA 340

Table 17.2 List of projects selected under migration scheme of JNNSM 353

Table 17.3 List of projects selected under JNNSM for bundling scheme 354

Table 17.4 Allotment of solar capacities in Gujarat 356

Table 19.1 International experience in spectrum trading 379

Table 19.2 Example of spectrum trading with revenue share payments 384

Table 19.3 Example of revenue neutral differential pricing between SSUs 386

Table 19.4 Allocation of spectrum in other countries 388

Table 19.5 Allocation of spectrum in Indian telecom circles 389

Table 19.6 Public spectrum registryexample of contents 390

x | Indian Infrastructure: Evolving Perspectives

Figures

Figure 2.1 Institutional structure of the Indian power sector 14

Figure 3.1 Restructuring of the Argentine electricity industry(federal assets) 24

Figure 3.2 Estimate medium monomial contract price in the market 26

Figure 3.3 Argentinas transmission system 27

Figure 3.4 Evolution of capacity and energy prices 28

Figure 3.5 Outages as a per cent of energy demand 29

Figure 7.1 Growth of GDP versus POL consumption 75

Figure 7.2 Aggregate supply/demand POL 200102 76

Figure 7.3 Main consumers of natural gas 77

Figure 7.4 LNG prices, US gas prices and crude oil prices 81

Figure 7.5 Comparative transportation costs for road,rail and pipeline modes 84

Figure 7.6 Influence of amortization for a 12 diameter pipeline 85

Figure 7.7 OPEC supply/price dynamics 101

Figure 10.1 PERT chart for coal mine development 149

Figure 10.2 Flowchart of mining proposal approval process 158

Figure 11.1 Cost of power supply, average tariff and gap 164

Figure 11.2 Power sector: Structure pre- and post-reforms 169

Figure 11.3 AT&C losses 173

Figure 11.4 Collection efficiency 174

Figure 11.5 Subsidy received 175

Figure 11.6 ACS, ARR (without subsidy) and gap over the years 177

Figure 12.1 Average cost and realization of power in 200001 182

Figure 12.2 Restructuring of MSEB 185


Figure 12.4 Collection efficiency 195

Figure 12.5 Subsidy from state 195

List of Tables, Figures and Boxes | xi

Figure 12.6 Average revenue realised (ARR), average cost of supply (ACS)

and the gap between them over the years for Maharashtra 196

Figure 12.7 Average revenue realised (ARR) without subsidy, average cost

of supply (ACS) and the gap between them over the years

for Maharashtra post-reforms 197

Figure 12.8 SAIFI 197

Figure 12.9 SAIDI 198

Figure 12.10 CAIDI 198

Figure 13.1 Average revenue realisation in Rs/kWh for

various consumer categories 203

Figure 13.2 Restructuring of GEB 205

Figure 13.3 Improvement in cash collections over the years 210


Figure 13.5 Subsidy received 214

Figure 13.6 ARR, ACS and gap between them over the years 215

Figure 14.1 Role of RE in Indias power generation capacity

as on 31 March 2009 223

Figure 14.2 Technology-wise grid-interactive RE capacity in India

as on 31 October 2009 224

Figure 14.3 Events influencing RE development and

RE capacity addition 228

Figure 14.4 Bundling mechanism for sale of solar

power under JNNSM 247

Figure 14.5 Time frame for completion of migration scheme

under solar power purchase policy of JNNSM 247

Figure 14.6 Time frame for completion of scheme for new

projects under solar power purchase policy of JNNSM 247

Figure 15.1 T&D losses and commercial losses pre-reforms 274


Figure 15.3 ARR & ACS 281

Figure 16.1 Losses without subsidy for distribution utilities

have risen sharply in 200809 291

xii | Indian Infrastructure: Evolving Perspectives

Figure 16.2 Cash losses before subsidy received for distribution

utilities have trebled between 200506 and 200809 291

Figure 16.3 All-India AT&C losses are below 30% 295

Figure 16.4 Gap between ARR (without subsidy) and ACS at

the all-India level has increased 300

Figure 16.5 In recent years, tariff increase has not kept pace

with increasing ACS 302

Figure 16.6 Power purchase costs have increased 303

Figure 16.7 Procurement of short term power is increasing 303

Figure 16.8 Short-term power prices have shot up 304

Figure 16.9 Peak and energy deficit in India 304

Figure 16.10 Purchase of short-term power in select states (MU) 305

Figure 16.11 Coal imports for power plants have doubled

between 200506 and 200809 306

Figure 16.12 Trends in price of imported coal 306

Figure 16.13 Increase in employee costs for distribution utilities in India 307

Figure 16.14 Subsidies booked by distribution utilities are rising

but payment by state governments is inadequate 312

Figure 16.15 Top 10 states exhibiting the maximum increase

in subsidy booked 312

Figure 16.16 States not paying full amount of subsidy to utilities 313

Figure 16.17 Distribution losses in Punjab 316

Figure 16.18 Distribution losses in Madhya Pradesh 316

Figure 16.19 Employee costs of PSEB 317

Figure 16.20 Debtors for sale/transmission of power for state-owned

generation, trading and transmission companies 323

Figure 16.21 Private sector will lead future capacity addition in India 326

Figure 19.1 Variations in use of spectrum across circles and operators 378

Figure 19.2 Example of standard spectrum unit 381

List of Tables, Figures and Boxes | xiii

Boxes

Box 1.1 Take-or-pay in Indonesia 4

Box 1.2 Power sector reform in Argentina 9

Box 3.1 Objectives of CAMMESA 25

Box 3.2 Objectives of ENRE 25

Box 4.1 Timeline of key events in power sector reforms in Orissa 38

Box 6.1 Privatisation of generation assets of SEBs 56

Box 6.2 Limitations of the mixed-zone structure 57

Box 6.3 Disadvantages of the single-buyer model 62

Box 7.1 New Exploration Licensing Policy 71

Box 7.2 Definition of petroleum products 73

Box 7.3 Impact of OCC on oil product prices 88

Box 7.4 Contract carrier versus common carriage carrier 90

Box 7.5 Main conversions used in the petroleum industry 102

Box 8.1 Memorandum of Understanding with GOI 113

Box 8.2 Noida Power Company (NPCL)

a successful distribution company 120

Box 8.3 KESCO privatization 121

Box 11.1 APSEBs performance review 164

Box 12.1 MSEBs performance review 183

Box 12.2 White paper on Maharashtra power sector reforms 184

Box 12.3 Load management 187

Box 14.1 Salient features of JNNSM 246

Box 14.2 Urjankur Nidhi Fund in Maharashtra 262

Box 14.3 Detailed provisions of National Solar Mission 271

Box 15.1 Computation and treatment of over/under

achievement of target AT&C loss levels 275

Box 17.1 Solar Power: International Experience 348

Box 19.1 The spectrum is finally attached to the licence 374

Box 19.2 Defining spectrum trading units in Australia 381

Box 19.3 Ofcoms proposed process for transacting a spectrum trade 382

xiv | Indian Infrastructure: Evolving Perspectives

FOREWORDInfrastructure Development Finance Company Limited (IDFC) was set up at the initiativeof the Government of India with the mandate to lead private capital to commercially viableinfrastructure projects in India. Over the fifteen years of our existence, we have witnessedthe share of private capital grow from an insignificant proportion to the current levels ofalmost 40 per cent of the total infrastructure investment. In the Twelfth Plan, the share ofthe private sector is expected to grow even further to 50 per cent of the investment. Allthrough this period, IDFC has been actively engaged with governments, independentregulators, private developers, banks, financial investors and other stakeholders in the processof advocating and developing appropriate policy, and legal and regulatory frameworks forthis purpose. We would, therefore, celebrate our fifteenth anniversary, later this year, with agreat deal of satisfaction, now that private investment has become an important mode ofinvestment across various infrastructure sectors.

From the beginning, the role envisaged for IDFC was not limited merely to funding, but tolead private investment to this sector. In any case, there were very few private sector projects tofinance in 1997. Leading capital to projects required intense preparatory work and activeengagement with the government in policy formulation, in the preparation of legal andregulatory frameworks, and in the development of transparent procurement processes, objectiveevaluation criteria and equitable concession documents. IDFC, both through its policy advocacyand advisory services teams, provided inputs through a series of interventions. Some of theseinputs were through specific advisory services transactions, for instance, in major ports andnational highways. In power and telecom, inputs were often provided in response to theconsultative process initiated by the regulator or government but were also through notes andopinions conveyed on specific issues. We believe that IDFCs role was very useful and oftenpivotal in shaping opinion and in leading private investment to infrastructure.

In fulfilment of its mandate to develop infrastructure, a large body of written material hasbeen prepared over the years. These include sector studies, policy recommendations forresolving some of the difficult issues, overviews of emerging trends, outlines of good practicesand issues in financing. Some of these find a place in the thematic India Infrastructure Reportthat is published every year. A few others have been published elsewhere, covered in IDFCsquarterly policy reviews, or released as occasional papers. Many have remained in privatedomain. This publication is an anthology of some of the papers prepared by IDFC over thelast fifteen years, and reflects its emerging views in the quest of nation building. It is arepresentative collection and not an exhaustive one.

Last year we set up IDFC Foundation under Section 25 of the Companies Act 1956, as awholly owned subsidiary of IDFC. IDFCs development agenda is now being carried outthrough the IDFC Foundation. It is fitting that on the first anniversary of the Foundation,we are able to release this publication as a testament of IDFCs contribution to infrastructuredevelopment in India.

RAJIV B. LALLMarch 2012 Managing Director and CEO

ACKNOWLEDGEMENTSIt is always difficult to acknowledge all those who have contributed to a publication of thisnature, which includes papers and notes written over a fifteen-year period. All the papershave received inputs of different kinds from various sources. The inputs include views,opinions, critical feedback, discussions, encouragement and sometimes just the opportunityto share ideas. In that sense, it would be impossible to acknowledge all the contributors.

At the outset, it would only be fitting to acknowledge the Government of India and thevarious state governments that have, over the years, used IDFC as a sounding board forpolicy and regulatory advice. Within the organisation, at a strategic level, we would first ofall acknowledge the encouragement and support of Deepak Parekh, Chairman, IDFC, RakeshMohan, who briefly served as Vice-Chairman, and its first two Managing Directors,D. J. Balaji Rao and Nasser Munjee. This support has been strongly continued by Rajiv B.Lall, the present Managing Director and CEO of IDFC, under whose stewardship the IDFCFoundation was set up. Acknowledgements are also due to Anil Baijal, Chairman, IDFCFoundation; Urjit R. Patel, who headed the policy group at IDFC for the first ten years; andRitu Anand, who oversees it at present. The inputs received from the various members ofIDFCs Policy Advisory Boards from time to time, have certainly helped to clarify perspectivesand shape policy opinions. For this, we thank each and every one of them.

Where the papers already include the names of the authors, credits have been given at theend of the respective papers. Nevertheless, the following writers, too, need to be acknowledged:Rajiv B. Lall, Urjit R. Patel, Ritu Anand, Cherian Thomas, Partha Mukhopadhyay, SrikumarTadimala, Anupam Rastogi, Nirmal Mohanty, P. V. Ravi, Saugata Bhattacharya, PiyushTiwari, Sambit Basu, Shishir Mathur, Manisha Gulati, Kaushik Deb, Sunaina Kilachand,Aditi Jagtiani, Kunal Katara, Neeraj Sansanwal, Bhagyathej Reddy, Ashish Agarwal,Pritika Hingorani and Ranesh Nair. Their valuable contributions have gone into thecompilation of these volumes, which provide both historical and current perspectives andcould be useful points of reference in all our future efforts at nation building.

Our thanks are due also to Orient BlackSwan, the publishers of this volume, who have beenconsistent in maintaining quality while accommodating the sometimes exacting demandsmade on them.

Finally, we would like to thank all our colleagues at IDFC, past and present, whose consistentfeedback and varying perspectives on the various themes have been of immense value. Whilewe have taken care to include everyone who helped us in compiling this report, any omissionsare unintentional and we hope that they would be construed as such.

INTRODUCTIONEvolving Perspectives in the Development of Indian Infrastructure (in two volumes) is acompilation of several papers written by IDFC over the last fifteen years on the themes ofinfrastructure development and financing. It is not an exhaustive summary of all of IDFCswork in infrastructure policy and regulation during this period. Much of IDFCs policycontribution has been through inputs provided to the many task forces, working groupsand high-level committees constituted by central and state governments from time to time,in which IDFCs officials have been (or are being) represented. In many other instances,recommendations have been provided to governments and regulators as part of theconsultative process followed while seeking views of stakeholders in these sectors. Some ofIDFCs development work has also been through specific outputs in the form of reports anddocuments prepared as part of advisory service transactions for governments. Another visibleoutput that is published year after year is the India Infrastructure Reporta thematic reportthat discusses issues of contemporary concern across the infrastructure space. In some ways,this anthology captures some of IDFCs emerging views over this period, which may bereflected in its recommendations and inputs in the activities listed above.

This publication consists of two volumes. The first volume has two sectionsenergy andtelecommunications. The second volume deals with transport, urban and other infrastructure,and infrastructure development and financing. It comprises 45 papers on a range of topicson various aspects of policy and financing. These cover the period from May 1998 toJanuary 2012. The papers are of varying lengths, depending on the specific context in whichthey were written and the need sought to be addressed. Some of the issues debated in theearlier papers and the recommendations may still be relevant in the current context, andthese volumes would have more than a historical significance. The power sector, notsurprisingly, has the most number of paperssince it is the biggest of the infrastructuresectorsand these papers are reflective of the various emerging issues in the sector. A section-wise summary of the two volumes is set out below.

The initial papers in the power sector (written 19982001) set out the issues and challengesfor private investment in the sector. Drawing from international experiences in Argentinaand Indonesia, right from the outset, IDFC highlighted the need to focus on reforms and onrestructuring the sector with a view to increase efficiency and reduce losses. The suggestionsfor creating a more competitive market structure conducive to private sector participationunbundling the monolithic electricity boards and creating independent regulatory authorities,separating network business from supply, and establishing power trading as a separate licensedactivitywere forerunners to many subsequent changes, such as the introduction of openaccess. Equally noteworthy are the suggestions for private sector investment in powerdistribution, initially through franchising dense urban areas. The relative success of thefranchisee model (in Bhiwandi and other places) in improving distribution efficiencies andcollections reflect the merits of this suggestion. The separation of urban and non-urbanareas and the development of a transparent mechanism for payment of subsidies will continueto be issues that engage us as the reform process in the sector moves ahead.

Some of the papers review the reforms and progress of the sector in the states of Orissa(February 2000), Uttar Pradesh (February 2005), Andhra Pradesh, Delhi, Maharashtra andGujarat. The review includes an assessment of the gains made so far, as well as theshortcomings and the challenges ahead for each of these states. The most recent paper onthe power distribution sector clearly highlights the severity of the losses in power distribution,the looming risk of insolvency of these utilities, and the urgent need for good governance toenable future capacity addition and to restore the overall health of the financial system.The wide gamut of subjects covered include the regulation of petroleum product pipelines,the conditionalities in power sector lending, and the challenges in implementing the captivecoal mining policy. The section also includes a discussion paper on renewable energy and aspecific paper on solar energy.

The telecom section is rather small since much of the policy input was provided by IDFC aspart of the consultative process in this sector with the government and the regulator. Theinitial paper on the sector (December 1998) set out some of the sectoral challenges, keepingin mind the new telecom policy that was to be announced. The second paper covered theprinciples for allocation of spectrum and also the issue of spectrum trading. The wisdom ofusing the market-based approach has been clearly vindicated by the subsequent events thathave overtaken the sector.

The second volume begins with a section on issues related to the transport sector. Much ofthe work done by IDFC in the transport sector was as Secretariat to the Task Force onInfrastructure and through specific advisory assignments in major ports and nationalhighways sectors, in the initial years. The paper on ports sector reforms (December 1999)argued that there is little need for immediate additional public investment in the sector, butsuggested a focus on efficiency in port services by private providers subject to competitivepressures. It also recommended a push to reform port labour, the need for strengtheninghinterland connectivity, and that of putting in place a pro-competitive and stable regulatorysystem. All these represent a continuing agenda in the sector. A subsequent paper(November 2000) highlighted the need to integrate coastal shipping with the surfacetransport network. This is a challenge that has largely been ignored for several decadesand could assume increasing importance given the enormous environmental benefits andlower transport costs that could accrue from increased coastal movement of goods.A paper on railways sets out the opportunities for publicprivate partnerships in the sector,and includes the experience of the HassanMangalore railway project in Karnataka. Paperson the roads sector include a status note on the National Highway DevelopmentProgramme (NHDP), a review of the challenges of financing highways, and, the mostrecent one, on the challenges for NHAI in financing the NHDP.

The first paper in the urban sector covers the water sector. The paper (March 2001)highlighted the need for independent regulation, rational tariff setting and the appropriaterole of the private sector. This is followed by a paper on special economic zones (SEZs)which argued that SEZs are more in the nature of band aid fixes and that the focus of thepolicy should move from augmenting infrastructure facilities for export production to anoverall focus on higher-quality infrastructure, growth and employment. A selection of papers

xx | Indian Infrastructure: Evolving Perspectives

from IDFC policy quarterly research notes covers the issues of land pooling, bus rapid transitsystems, green buildings, sewage water recycling for industrial use, and municipal borrowingsusing pooled finance mechanisms. The base note prepared on urban financing (for the HighPowered Expert Committee) provides a comprehensive review of the financing for urbaninfrastructure. A paper on private healthcare in India (December 2002) broadly reviewedthe key challenges of the sector at that point and identified a few business models for healthcareinvestment in future.

The last section of the second volume includes papers on various cross-cutting issues ininfrastructure development and financing. The earliest paper (May 1999) briefly reviewedthe challenges of reforming the debt market in India, some of which still remain.A detailed paper on competitive bidding (August 2000) argued that competitive biddingprovides the most efficient and cost effective method for procurement of infrastructureservicesa lesson that has become systematised practice over the last decade across sectors.Two papers deal with the issue of regulation. The January 2005 paper reviews regulationacross sectors and argues that regulation is one piece of the infrastructure puzzle and has tobe complemented with an industry structure that aligns operators incentives towards pursuitof value for money. The more recent paper on regulation looks further at the future ofregulation in India. Papers on financing comprise two independently written reviews:domestic financing and the role of IDFC, and infrastructure financing and the role of non-banking finance companies. Other papers include a short note on infrastructure developmentin India (prepared for the World Economic Forum), an analysis of the political economy ofinfrastructure development (which concludes that political logic would drive decisionmakersto deliver improved infrastructure with a greater reliance on private provision of theseservices), and a detailed comparison of infrastructure creation in China and in India. Thelast paper identifies some of the lessons that can be learnt from the Chinese experience, suchas using improved technology, pursuing financially sustainable solutions, and improvingefficiency and accountability in the government while pursuing solutions that are moreimplementable in our context.

All in all, it is hoped that this publication would give the readers an insight into some of theevolving policy perspectives and recommendations that have emerged in the last fifteenyearsa period when infrastructure development has received more focussed attention than

at any time since Independence.

Introduction | xxi

LIST OF ABBREVIATIONS

A$ Australian Dollar

ACA Australian Communications Authority

ACCC Australian Competition Consumer Council

ACS Average Cost of Supply

ADB Asian Development Bank

ADF Airport Development Fees

ADRD Alberta Department of Resource Development

AEC Ahmedabad Electricity Company

AEE Autorita per l'Energia Elettrica e il Gas

AERA Aviation Economic Regulatory Authority

AGCOM The Communications Regulatory Authority

AGR Adjusted Gross Revenue

AIM Alternative Investment Market

AIP Administrative Incentive Pricing

AMC Ahmedabad Municipal Corporation

AP Andhra Pradesh

APDRP Accelerated Power Development and Reform Programme

APERC Andhra Pradesh Electricity Regulatory Commission

APL Adaptable Programme Loan/Lending

APM Administrative Price Mechanism

APPSRP Andhra Pradesh Power Sector Restructuring Programme

APSEB Andhra Pradesh State Electricity Board

ARR Annual Revenue Requirement

ARR Average Revenue Realised

ASEAN Association of Southeast Asian Nations

ASP Activated Sludge Process

AT&C Aggregate Technical and Commercial

ATE Appellate Tribunal for Electricity

ATF Aviation Turbine Fuel

AUDA Ahmedabad Urban Development Authority

BBCD Bare-Boat-Charter-cum-Demise

bbl Barrels

BCC Beneficiary Capital Contribution

BCC Base Construction Cost

bcm Billion Cubic Metres

BCM Book Consolidation Module

BEE Bureau of Energy Efficiency

BEST Brihan Mumbai (Bombay) Electric Supply and Transport Undertaking

BG Broad Gauge

BIAL Bengaluru International Airport Limited

BKCC B. K. Chaturvedi Committee

BLD Billion Litres per Day

BLT Build, Lease, Transfer

BOD Biological Oxygen Demand

BOLT Build, Operate, Lease, Transfer

BOO Build, Own, Operate

BOOM Build, Own, Operate, Maintain

BOOST Build, Own, Operate, Share, Transfer

BOOT Build, Own, Operate, Transfer

BOQ Bill of Quantities

BOT Build Operate Transfer

BP British Petroleum

BPCL Bharat Petroleum Corporation Limited

BRPL Bongaigaon Refinery and Petrochemicals Limited

BRTS Bus Rapid Transit System

BS basic service

BSES Bombay Suburban Electric Supply

BSF Bond Service Fund

BSNL Bharat Sanchar Nigam Limited

BTS Bangkok Mass Transit System

BUA Built-up Area

BWSSB Bangalore Water Supply and Sanitation Board

BYPL BSES Yamuna Power Limited

xxiv | Indian Infrastructure: Evolving Perspectives

CA Constitutional Amendment

CAA Constitutional Amendment Act

CAA Civil Aviation Authority

CAA Cost under the Annuity Approach

CAGR Compound Annual Growth Rate

CAIDI Consumer Average Interruption Duration Index

CAM Common Area Maintenance

CAMMESA Compaa Administradora del Mercado Mayorista Elctrico

CAT Consumer Analysis Tool

CBDT Central Board of Direct Taxes

CCA Cost under the Conventional Approach

CCI Competition Commission of India

CDB China Development Bank

CDMA Code Division Multiple Access

CDs Certificates of Deposits

CEA Central Electricity Authority

CEPZ Cochin Export Processing Zone

CERC Central Electricity Regulatory Commission

CESC Calcutta Electric Supply Company

CESCO Central Electricity Supply Company

CFC Consumer Facilitation Centres

CFS Centre for Sight

CGD City Gas Distribution

CGHS Central Government Health Scheme

CGWB Central Ground Water Board

CIL Coal India Limited

CLF Credit Local de France

CMIE Centre for Monitoring Indian Economy

CMS Cellular Mobile Service

CMT Comisin del Mercado de las Telecomunicaciones

CMTS Cellular Mobile Telephony Service

CMW Chennai Metro Water

List of Abbreviations | xxv

CNE Comisin Nacional de Energa

COAI Cellular Operators Association of India

CONCOR Container Corporation of India

CONEA Coalition of North East Association

CP Commercial Paper

CPCB Central Pollution Control Board

CPPs Captive Power Plants

CPSU Central Public Sector Unit

CPT Chennai Port

CPUC California Public Utilities Commission

CREF Credit Rating Enhancement Fund

CRG Crisis Resolution Group

CSE Centre for Science and Environment

CST Concentrated Solar Thermal

CSUs Central Sector Undertakings

CTC Competitive Transition Charge

DALY Disability Adjusted Life Years

DBFO Design Build Finance Operate

DELs Direct Exchange Lines

DEPB Duty Entitlement Pass Book

DERC Delhi Electricity Regulatory Commission

DESU Delhi Electric Supply Undertaking

DF Distribution Franchisee

DFID Department for International Development

DFIs Development Finance Institutions

DFRC Duty Free Replenishment Certificate

DGH Directorate General of Hydrocarbons

DIAL Delhi International Airport Limited

DIMTS Delhi Integrated Multimodal Transit System

discom/distco Distribution Company

DJB Delhi Jal Board

DM De-mineralisation

xxvi | Indian Infrastructure: Evolving Perspectives

DMRC Delhi Metro Rail Corporation

DoT Department of Telecommunications

DSCR Debt-Service Coverage Ratio

DSM Demand-Side Management

DSR Debt Service Requirement

DT/DTR Distribution Transformer

DTA Domestic Tariff Area

DVA Distribution Value Added

DVB Delhi Vidyut Board

DVP Delivery versus Payment

DWT Decentralised Wastewater Treatment

EA 03 Electricity Act 2003

EA Energy Audit

EC European Commission

ECB External Commercial Borrowings

ECBC Energy Conservation Building Code

EDENOR Empresa Distribuidora y Comercializadora Norte S.A.

EDZ Economic Development Zone

EIRP Equivalent Isotropically Radiated Power

ENARGAS Ente Nacional Regulador del Gas

ENRE Ente Nacional Regulador de la Electricidad

EoD Event of Default

EOU Export Oriented Unit

EPC Engineering, Procurement and Construction

EPZ: Export Promotion Zone

ERC Electricity Regulatory Commission

ESC Essential Services Commission

ESIS Employees State Insurance Scheme

ETDMA Extended Time Division Multiple Access

ETOSS Ente Tripartito de Obras y Servicios Sanitarios

EU European Union

EUA Electricity Utilities Act

List of Abbreviations | xxvii

EUB Energy and Utilities Board

EWS Economically Weaker Section

FAA Federal Aviation Administration

FAR Floor Area Ratio

FCA Fuel Cost Adjustment

FCC Federal Communications Commission

FDI Foreign Direct Investment

FERC Federal Energy Regulatory Commission

FIE Foreign Invested Enterprises

FIPB Foreign Investment Promotion Board

FIs Financial Institutions

FiT Feed-in Tariff

FM Frequency Modulation

FO Furnace Oil

FOB Free-on-Board

FOR Forum of Regulators

FP Future Plot

FPPPA Fuel and Power Purchase Price Adjustment

FRP Financial Restructuring Plan

FSA Fuel Supply Agreement

FSA Financial Services Authority

FSI Floor Space Index

FTCs Foreign Trade Companies

FY Fiscal Year

GACL Gujarat Ambuja Cements Limited

GAIL Gas Authority of India Limited

GARR Guaranteed Average Revenue Realisation

GBI Generation-based Incentives

GBWASP Greater Bangalore Water Supply and Sanitation Project

GDP Gross domestic product

GIC General Insurance Corporation of India

GNCL Gujarat NRE Coke Limited

xxviii | Indian Infrastructure: Evolving Perspectives

GNCTD Government of National Capital Territory of Delhi

GNIDA Greater Noida Industrial Development Authority

GOG Government of Gujarat

GOI Government of India

GOK Government of Karnataka

GOM Government of Maharashtra

GQ Golden Quadrilateral

GRIDCO Grid Corporation of Orissa

GRIHA Green Rating for Integrated Habitat Assessment

GSDP Gross State Domestic Product

G-Secs Government of India Securities

GSM Global System for Mobile Communications(formerly, Groupe Spcial Mobile)

GSPC/GSPCL Gujarat State Petroleum Corporation (Limited)

GSPL Gujarat State Petronet Limited

GTPUDA Gujarat Town Planning and Urban Development Act

GU Geographic Unit

GUVNL Gujarat Urja Vikas Nigam Limited

GWCL Ghana Water Company Limited

ha Hectare

HBEPL Hanzer Biotech Energies Private Limited

HBJ Pipeline Hazira-Bijaipur-Jagdishpur Pipeline

HCBS High Capacity Bus System

HCCL Hindustan Construction Company Limited

HERC Haryana Electricity Regulatory Commission

HFCL Himachal Futuristic Communications Limited

HIDRONOR Hidroelctrica Norpatagnica Sociedad Annima

HMRDCL Hassan Mangalore Rail Development Company Limited

HNIs High Net-Worth Investors

HP Himachal Pradesh

HPCL Hindustan Petroleum Corporation Limited

HR Human Resources

List of Abbreviations | xxix

HSD High Speed Diesel

HUDCO Housing and Urban Development Corporation

HVDS High Voltage Distribution System

IAAI International Airports Authority of India

IARR Implied Average Revenue Realisation

IAT Independent Assessment Team

ICICI Industrial Credit and Investment Corporation of India

ICRA (formerly) Investment Information and Credit RatingAgency of India Limited

ICTSL Indore City Transport Services Limited

IDBI Industrial Development Bank of India

iDeCK Infrastructure Development Corporation (Karnataka)

IDFC Infrastructure Development Finance Company Limited

IFCI Industrial Finance Corporation of India

IGBC Indian Green Building Council

IGIA Indira Gandhi International Airport

IGL Indraprastha Gas Limited

IIBI Industrial Investment Bank of India

IIFCL India Infrastructure Finance Company Limited

IL&FS Infrastructure Leasing and Financial Services

IOC IndianOil Corporation

IPGCL Indraprastha Power Generation Company Limited

IPPs Independent Power Producers/Projects

IR/IRC Indian Railways (Corporation)

IRA Independent Regulatory Agency

IRBI Industrial Reconstruction Bank of India

IRDA Insurance Regulatory and Development Authority

IRR Internal Rate of Return

IRRA Indian Rail Regulatory Authority

IT Information technology

ITU International Telecommunications Union

IUP Intended Use Plans

xxx | Indian Infrastructure: Evolving Perspectives

I-WIN ICICI-West Bengal Infrastructure Development Corporation Limited

JCC Japanese Cocktail Crude

JICA Japan International Cooperation Agency

JNNSM Jawaharlal Nehru National Solar Mission

JNNURM Jawaharlal Nehru National Urban Renewal Mission

JNPT Jawaharlal Nehru Port Trust

JV Joint Venture

KERC Karnataka Electricity Regulatory Commission

KESCO Kanpur Electricity Supply Company

K-G Basin Krishna-Godavari Basin

KINFRA Kerala Industrial Infrastructure Development Corporation

K-RIDE Karnataka Rail Infrastructure Development Corporation

KUIDFC Karnataka Urban Infrastructure Development andFinance Corporation

KUWASIP Karnataka Urban Water Supply Improvement Project

KUWSBD Karnataka Urban Water Supply and Drainage Board

KWSPF Karnataka Water and Sanitation Pooled Fund

LEED Leadership in Energy and Environmental Design

LIC Life Insurance Corporation of India

LNG Liquefied Natural Gas

LoI Letter of Intent

LPCD Litres per Capita per Day

LPR Land Pooling and Readjustment/Reconstitution

LPVR Least Present Value of Revenues

LSHS Low Sulphur Heavy Stock

M&A Mergers and Acquisitions

MADP Maximum Alternative Distribution Payment

MAGP Maximum Alternative Generation Payment

MASTS Mobile Assignment Technical System

MATS Monitoring and Tracking System

MBR Membrane Bio Reactor

mBtu/mmBtu Million British thermal units

List of Abbreviations | xxxi

MCA Model Concession Agreement

MCB Miniature Circuit Breaker

mcm Million Cubic Metres

MCs Municipal Corporations

MDF Municipal Development Fund

MEPZ Madras Export Processing Zone

MERC Maharashtra Electricity Regulatory Commission

MFL Madras Fertilizers Limited

MG Metre Gauge

MMC Madurai Municipal Corporation

MMDR Act Mines and Minerals (Development and Regulation) Act

MMRDA Mumbai Metropolitan Regional Development Authority

mmscmd Metric Million Standard Cubic Meters per Day

Mmt Million Metric Tonnes

Mmtpa Million Metric Tonnes per Annum

MNRE Ministry of New and Renewable Energy

MoCA Ministry of Civil Aviation

MoD Ministry of Defence

MoP Ministry of Power

MoPNG Ministry of Petroleum and Natural Gas

MoR Ministry of Railways

MoRTH Ministry of Road Transport and Highways

MoST Ministry of Surface Transport

MoU Memorandum of Understanding

MoUD Ministry of Urban Development

MP Madhya Pradesh

MPE Mumbai-Pune Expressway

MPSC Model Production Sharing Contract

MRTS Mass Rapid Transit System

MS Motor Spirit

MSB Minimum Subsidy Bidding

MSEB Maharashtra State Electricity Board

xxxii | Indian Infrastructure: Evolving Perspectives

MSEDCL Maharashtra State Electricity Distribution Company Limited

MSRDC Maharashtra State Road Development Corporation

MT Million Tons

mt Metric Tonnes

MTNL Mahanagar Telephone Nigam Limited

MYT Multi-year Tariff

NABARD National Bank for Agriculture and Rural Development

NBFCs Non-Bank Financial Companies

NBFI Non-Bank Financial Institution

NCR National Capital Region

NDPL North Delhi Power Limited

NDRC National Development and Reform Commission

NELP New Exploration Licensing Policy

NEN National Expressway Network

NEPZ Noida Export Processing Zone

NESCO Northern Electricity Supply Company

NFAP National Frequency Allocation Plan

NHAI National Highways Authority of India

NHDP National Highway Development Project

NHPC National Hydroelectric Power Corporation

NLD National Long Distance

NMMC Navi Mumbai Municipal Corporation

NMP National Mineral Policy

NMPT New Mangalore Port Trust

NPAs Non-performing Assets

NPCL Noida Power Company Limited

NPV Net Present Value

NSDL National Securities Depository Limited

NSE National Stock Exchange

NS-EW North South-East West

NTHS National Trunk Highway System

NTPC National Thermal Power Corporation

List of Abbreviations | xxxiii

NUIF National Urban Infrastructure Fund

NUTP National Urban Transport Policy

NWP National Water Policy

NWRC National Water Resources Council

NYSPSC New York State Public Service Commission

NZ$ New Zealand dollar

O&M Operation and Maintenance

OA Open Access

OCC Oil Coordination Committee

OECD Organisation for Economic Co-operation and Development

OECF Overseas Economic Cooperation Fund

OERC Orissa Electricity Regulatory Commission

OFAPs Operational and Financial Action Plans

OFCOM Office of Communications

OFGEM Office of Gas Electricity Markets

OFWAT Office of Water Services

OHPC Orissa Hydro Power Corporation

OIL Oil India Limited

OMT Operate, Maintain, Transfer

ONGC Oil and Natural Gas Corporation of India

OP Original Plot

OPEC Organization of Petroleum Exporting Countries

OPGC Orissa Power Generation Corporation

ORR Office of the Rail Regulator

OSEB Orissa State Electricity Board

OSN Obras Sanitarias de la Nacin

OUR Office of Utilities Regulation

P&O Peninsular and Oriental Steam Navigation Company

PBOC Peoples Bank of China

PBR Private Business Radio

PCS Personal Communications Services

PDCOR Project Development Company of Rajasthan

xxxiv | Indian Infrastructure: Evolving Perspectives

PE Private Equity

PFC Power Finance Corporation

PFDF Pooled Finance Development Fund

PFDS Pooled Finance Development Fund Scheme

PFI Private Finance Initiative

PfP Payment for Performance

PFs Provident Funds

PGCIL Power Grid Corporation of India Limited

PIDB Punjab Infrastructure Development Board

PIL Petronet India Limited

PIL Public Interest Litigation

PLF Plant Load Factor

PMCs Project Management Consultants

PMT Panna Mukta Tapti

PNGRB Petroleum and Natural Gas Regulatory Board

POL Petroleum, Oil and Lubricants

PPA Power Purchase Agreement

PPCL Pragati Power Corporation Limited

PPFCA Power Purchase Fuel Cost Adjustment

PPIAF Public-Private Infrastructure Advisory Facility

PPP Public-Private Partnership

PSA Port of Singapore Authority

PSA Power Sale Agreement

PSC Production Sharing Contract

PSC Public Sector Comparator

PSEB Punjab State Electricity Board

PSP Private Sector Participation

PSU Public Sector Undertaking

PTC Power Trading Company

PTIM Pre-tax Investment Multiple

PwC PricewaterhouseCoopers

PWLB Public Works Loan Board

List of Abbreviations | xxxv

QoS Quality of Service Parameters

QoSS Quality of Supply and Service

R&D Research and Development

RAPDRP Restructured-Accelerated Power Development andReforms Programme

RCF Rashtriya Chemicals and Fertilizers Limited

RE Renewable Energy

REBs Regional Electricity Boards

REC Renewable Energy Certificate

RERC Rajasthan Electricity Regulatory Commission

RET Renewable Energy Technology

RFP Request for Proposal

RFQ Request for Quotation

RFQ Request for Qualification

RLDCs Regional Load Dispatch Centres

RMC Rajkot Municipal Corporation

RoC Regulation by Contract

ROE Return on Equity

ROR Rate of Return

ROT Rehabilitate, Operate, Transfer

ROW Right of Way

RPOs Renewable Purchase Obligations

SAA Simultaneous Ascending Auction

SAIDI System Average Interruption Duration Index

SAIFI System Average Interruption Frequency Index

SBR Sequential Batch Reactor

SCADA Supervisory Control and Data Acquisition System

SCI Shipping Corporation of India

SCM Subsidies and Countervailing Measures

SEBI Securities and Exchange Board of India

SEBs State Electricity Boards

SEDs State Electricity Departments

xxxvi | Indian Infrastructure: Evolving Perspectives

SEEG Socit d'Exploitation des Eaux de Guine

SEEPZ Santa Cruz Electronic Export Processing Zone

SEGBA Servicios Elctricos del Gran Buenos Aires

SERC State Electricity Regulatory Commission

SEZ Special Economic Zone

SFC State Finance Commission

SFCD State Finance Commission Devolution

SGAs Specialised Government Agencies

SGI Solicitor General of India

SHP Small Hydro Power

SKO Superior Kerosene Oil

SLAUs Special Land Acquisition Units

SOE State-owned Enterprise

SONEG Socit National des Eaux de Guine

SOUTHCO Southern Electricity Supply Company

SPD Solar Power Developer

SPFE State Pooled Finance Entity

SPV Special Purpose Vehicle/Company

SPV Solar Photovoltaic

SSI Small Scale Industry

SSUs Standard Spectrum Units

STD Subscriber Trunk Dialing

STP Sewage Treatment Plant

STU Standard Trading Unit

STW Sewage Treated Water

SWM Solid Waste Management

T&D Transmission and Distribution

TA Technical Assistance

TACID Tamil Nadu Corporation for Industrial Infrastructure Development

TAMP Tariff Authority for Major Ports

TAT Tourism Authority of Thailand

TBA To Be Announced

List of Abbreviations | xxxvii

tcf Trillion Cubic Feet

tcm Thousand Cubic Metres

TDRs Transfer of Development Rights

TDSAT Telecom Disputes Settlement and Appellate Tribunal

TD-SCDMA Time Division Synchronous Code Division Multiple Access

TEA Tirupur Exporters Association

TERI The Energy and Resources Institute

TEU Twenty-foot Equivalent Unit

TFC Thirteenth Finance Commission

TIMS Transformer Information Management System

TN Tamil Nadu

TNEB Tamil Nadu Electricity Board

TNERC Tamil Nadu Electricity Regulatory Commission

TNUDF Tamil Nadu Urban Development Fund

TNUIFSL Tamil Nadu Urban Infrastructure Financial Services Ltd

TNWSPF Tamil Nadu Water and Sanitation Pooled Fund

TOU Time of Use

TPAs Third Party Administrators

TPC Total Project Cost

TPO Town Planning Officer

TRAI Telecom Regulatory Authority of India

Transco Transmission Company

TSS Total Suspended Solids

TTRO Tertiary Treatment and Reverse Osmosis Plant

TVEs Township and Village Enterprises

UASL Unified Access Services License

UDF User Development Fee

UI Unscheduled Interchange

ULBs Urban Local Bodies

UMPPs Ultra Mega Power Projects

UMTS Universal Mobile Telecom Service

UPERC Uttar Pradesh Electricity Regulatory Commission

xxxviii | Indian Infrastructure: Evolving Perspectives

UPPCL Uttar Pradesh Power Corporation Ltd

UPRVUNL Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited

UPSEB Uttar Pradesh State Electricity Board

US$ United States Dollar

USAID United States Agency for International Development

USF Universal Service Fund

USFA Universal Service Fund Administrator

VAT Value Added Tax

VfM Value for Money

VGF Viability Gap Funding

VPT Village Public Telephone

VSNL Videsh Sanchaar Nigam Limited

WB West Bengal

WBSEDCL West Bengal State Electricity Distribution Company Limited

WESCO Western Electricity Supply Company

WLL Wireless Local Loop

WPC Wireless Planning and Coordination Wing

WPI Wholesale Price Index

WS&S Water Storage and Supply

WSA Water Service Agency

WSP Waste Stabilisation Pond

WSPF Water and Sanitation Pooled Fund

WSS Water Supply and Sewerage

WTO World Trade Organization

WUA Water Users Association

WWD Water Works Department

List of Abbreviations | xxxix

1. INTRODUCTIONThe investment needed in the power sector in the next five years is estimated tobe in excess of Rs 200,000 crore (US$50 billion), largely in new generating plants.Over a longer term, 75,000 MW of new generating capacity is being contemplatedin the form of mega power plants. Since each MW of generating capacity installedby an independent power producer requires an estimated commitment of aboutRs 1.5 crore per annum (6000 MWhrs, at Rs 2.5 per kWh), the payment liabilityfor this generating capacity would amount to Rs 112,500 crore (US$28 billion)per year. Considering that the total revenue of all electricity boards in the countryis only around Rs 40,000 crore per annum, the additional liabilities areunmanageable under the current regime of revenue mobilisation.

The government has provided many incentives to independent power producers(IPPs). These include a guaranteed rate of return of 16 per cent, counter guaranteesfrom the central and state governments, escrow accounts for assured payments, etc.As a result, over 250 MoUs have been signed. However, the success rate from MoUto financial closure has been low. Only a few projects have been implemented in thepast seven years. The primary hurdle in implementation is now recognised as thepoor financial health of the electricity boards, who are currently the sole purchasersof electricity from the IPPs. In turn, this is attributable to the poor state ofdistribution, characterised by low quality of service, rampant theft, high subsidiesand poor revenue recovery.

Therefore, in order to make these planned MWs a reality, a substantially increasedrevenue generation from the distribution system assumes the highest priority.Additional megawatts can only be generated if more megawatt hours are delivered

POWER SECTOR REFORM:Policy Decisions inDistributionMay 1998

1

4 | Indian Infrastructure: Evolving Perspectives

and paid for, that is, either the number of paying consumers has to increase or theconsumption of the currently paying consumers must rise. An efficient revenuegenerating system would also obviate the need for sovereign guarantees, escrowaccounts and take-or-pay contracts, and permit the development of the sector oncommercial lines. The consequences of ignoring additional revenue generation canlead eventually to major national problems, similar to that being currentlyexperienced in Indonesia (see Box 1.1).

Box 1.1: Take-or-pay in Indonesia

In a situation very similar to that of India, the paucity of investible funds led Indonesiato invite the private sector to construct power plants. With optimistic growth forecasts,the National Power Corporation, PLN, set itself ambitious targets and signed 26 take-or-pay power purchase agreements with private IPPs. In most contracts, the price,which was linked to the US dollar, ranged from 5.7 to 8.5 US cents per kWh. Therecent Southeast Asian currency crisis saw the Indonesian rupiah depreciate by over70 per cent and the GDP growth rate turn negative. The growth in electricity demandslumped to zero and the dollar equivalent of the tariff fell sharply. At the prevailingexchange rate, PLNs tariff rates are less than 2.0 US cents per kWh. Its liability for thenext 15 years is estimated at US$43 billion, which it has no means to honour. PLNs

take-or-pay contracts are now a major national problem.

2. CHARACTERISTICS OF SEBs

State Electricity Boards (SEBs) in India are beset with numerous problems. They arecharacterised by huge financial losses, high transmission and distribution lossescomprising technical and non-technical components, unsatisfactory quality andlow reliability of supply, undelivered and misdelivered bills, poor collection andunresponsiveness to consumers requirements.

Financial losses: The annual commercial losses of the electricity boards in thecountry have increased from Rs 1565 crore in 198586 to nearlyRs 10,000 crore in 199697 (Planning Commission 1997). The average revenuecollection per unit sold is 158 paise, against the average cost of208 paise. A desirable scenario where the electricity boards can undertake asustainable expansion programme would require surplus generation of aboutRs 10,000 crore,1 which in effect means that the current shortfall in revenue is closeto Rs 20,000 crore per year.

Transmission and distribution losses: The transmission and distribution lossesfor the country were reported to be 21.2 per cent in 199495. However, it is widelybelieved, and substantiated by spot surveys, that the level of losses is considerablyhigherin the range of 40 to 50 per centin many electricity boards, with a large

Power Sector Reform | 5

degree of regional variations. It is alleged that lower losses are shown by falselyattributing higher energy consumption to unmetered consumers. In fact, the so-called losses are more likely to be due to uncalibrated and unsatisfactory meters,theft of energy by unauthorised connections, tampering of meters, and collusionbetween consumers and board staff to reduce the billing.

Poor quality of service: The quality of service in electricity supply can be measuredby the frequency, voltage and continuity of supply. On all these scores, the Indiandistribution system rates extremely low. Frequency variations of 2 per cent arequite common on Indian grids, whereas internationally even a 0.2 per centvariation is considered unacceptable. Voltage variations here regularly exceed 10per cent, whereas international norms prescribe 5 per cent as the maximumpermissible range. Consequently, agricultural and industrial electrical equipmentand domestic electrical appliances suffer from frequent breakdowns. Continuityof service, that is, receiving uninterrupted power supply, is quite rare in India.Restoration of service after an unplanned or forced interruption is generally greatlydelayed. The consumer response to the situation is the proliferation of gensets,involving significant investment in a relatively inefficient mode of powergeneration using scarce liquid fuels.

3. REASONS FOR THE PRESENT STATE OF SEBsThe factors that have contributed to the present state of electricity boards can bebroadly classified under two headsmanagement failure and inappropriate policieson the part of state governments. The potential for corruption in this highly capital-intensive sector has only added to its woe.

Lack of management attention: The management of distribution facilities are notup to desired standards in terms of investment, manpower allocation andtechnological innovation. The share of transmission and distribution in the planoutlays has been only 26 to 28 per cent since the second five-year plan, against adesirable level of about 40 to 50 per cent. Generation projects requiring largeinvestments, higher technological content, well-defined objectives and greaterpotential for job satisfaction and rewards have traditionally attracted more resources.

Inappropriate emphasis: In distribution, the emphasis has been on extensivedevelopment rather than intensive development. Since targets focus on quantityrather than quality, the tendency has been to spread a low-cost and low-standarddistribution network to as many households, villages and agricultural pump sets aspossible, within the constraints of the budget. After construction, relatively littleattention is devoted to preventive maintenance, as most distribution staff are engagedin new constructions.


Metering, billing and collection practices: The present collection system causeslarge revenue losses. It is characterised by lack of proper customer informationand reliance on antiquated billing and accounting systems that do not providetimely information. Existing labour policies provide no incentive for staff toproduce results. Added to this is the persistent inability to take disciplinary actionagainst defaulting consumers, many of whom are state and local governmentorganisations or influential industrial and commercial consumers. This has led toestimated revenue arrears, receivable by electricity boards, of over Rs 13,000 crorein 199596 amounting to 37.5 per cent of the total annual revenues (PlanningCommission 1997).

Government subsidy policies: The governments policy of supplying electricityto favoured consumers at lower costs is estimated to have resulted in a revenueloss of Rs 19,228 crore in 199697 (Planning Commission 1997). State governmentsare required to compensate the electricity boards for such losses. To the extentthat this is done, it has a debilitating effect on state finances. Often though, thestate government does not make the necessary budgetary transfers, resulting inpaucity of funds for operation, maintenance and capital work. Apart from therevenue loss, a worse long-term consequence of this policy is the loss of incentivefor electricity boards to meter such consumers, affecting the very basis of therevenue generation infrastructure.

Cross-subsidisation: Electricity boards try to recover a part of the above revenueloss by charging higher tariffs to other sectors, such as industrial and commercialconsumers. However, over-reliance on this mechanism results in unduly hightariffs, which affects industrial competitiveness and also drives industries to setup their own generation, through captive power plants.

4. SOLUTIONSTo reiterate, in order to add additional megawatts to the sector, it is imperativethat additional revenue be generated from the distribution system. Currently, theSEBs, who run the system, are characterised by massive financial losses, largetransmission and distribution losses and poor quality of supply. They are not in aposition to increase the resources mobilised from electricity consumers. In orderto accomplish this task, it is thus necessary to remedy the fundamental causes ofSEB failure, that is, ineffective management and inappropriate policies, as describedabove. The recommendations that follow seek to do just that.

Separate the distribution system: The distribution system must be separated fromthe generation and transmission systems, and formed into commercial companies.This separation is essential to insulate the revenue-generating portion of the power


sector from external pressure. It would also lead to more attention being paid todistribution issues, through a focused management.2

Privatise the management: The only way to incentivise the separated distributionsystem to mobilise additional resources is to ensure that it bears responsibility forits losses. The most credible manner of enforcing such a hard budget constraint isto privatise the management. This can be done in a variety of ways, such asmanagement contracts, leases, joint ventures and outright disinvestment. Themethod is not as important as the principles on which such management control istransferred. The two crucial aspects are:

Transfer, whether by management contract or lease or any other method, mustbe for a long period (for example, 30 years), enough to make new investmentremunerative.

The private management must have complete autonomy in all commercialdecisions, subject to oversight due to the continuing monopoly status.

Create an independent regulatory authority: Once management is transferred toprivate hands, there is a strong need for independent state-level regulatorycommissions to monitor the private managements decisions in matters of tariff,investments, etc. They should be empowered to approve tariffs that will permit thelicensees to earn a reasonable return on their investment, if they are operatingefficiently. In addition, the commissions will provide a useful and necessary forumto resolve disputes between the government and the new private managers.

Strategies to attract private investment: In the current environment, it may not beeasy to induce private firms to take over the management of distribution companies,due to several perceived hurdles. These include the presence of mandated customersin distribution zones; a relatively low rate of return; absence of long-term incentives;unreliable power supply from the electricity boards; difficulty in carrying out assetvaluation; and continued interference from the government and electricity boardbureaucracies, leading to difficulty in dealing with the existing staff. In order toaccelerate the process of improvement in distribution management and revenuemobilisation through private sector participation, these problems need to beaddressed quickly. One way of doing so is outlined below.

Offer urban franchise areas: The object of privatising the management of distributionis to generate efficiency gains leading to additional resource mobilisation. The franchiseareas should be chosen to maximise these efficiency gains. For this, the area must havetwo properties. It must have a customer base of sufficient size, with the capability topay, and it must have physical infrastructure in reasonable condition. It is, therefore,recommended that private investors should initially be offered dense urban areas,and other areas that satisfy the above properties, like industrial estates, for distribution.3


Since urban demand is over 50 per cent of the total demand in the country, the ultimatescope of the proposed strategy will be large. In these areas, licensees would not beburdened with social obligations, nor would there be subsidisation of any consumersin the licence area. In view of the highly successful operation of licensees in urbancentres, like Ahmedabad, Surat, Mumbai and Kolkata, it would be much easier toattract private investment in such centres. In order to provide sufficient incentive forlicensees to meet inevitable urban expansion, a process must be simultaneously put inplace for transferring contiguous urban agglomerations and other new concentrationsof consumers to private management.

Give full management autonomy: Since the thrust of this strategy is to increaseresource mobilisation by reaping efficiency gains, it is essential that managementshave complete autonomy over commercial decisions, including those relating toemployment. Without such autonomy, managements cannot be held fullyresponsible, and this would dilute the incentives for efficient operation. Since theurban areas employ only a fraction of the total labour force of the SEBs, the problemsof staff transfer need not form a bottleneck, and if required, the electricity boardshould retain the staff in the interim.

Provide a reasonable rate of return: The permissible rate of return to privateinvestors in distribution as per the Indian Electricity Act is set at RBI Bank Rate plus5 per cent, which currently works out to 14 per cent. This is lower than the 16 percent permitted to IPPs at 68.5 per cent Plant Load Factor (PLF). With an incentivebonus of 0.7 per cent for each per cent increase in PLF, IPPs can expect to earnreturns of 22 to 23 per cent. Operation and maintenance of distribution facilities inIndia involve greater effort and greater degree of risk than what is involved in settingup generating plants. This skews the investment incentives towards generation. Thereis, therefore, a need to free the private investors in distribution from the provisionsof the Electricity Act and permit the state regulatory commissions to determinetariffs to recover higher rates of return when warranted. Eventually, this could leadto a system where prices are regulated, instead of rates of return, and bulk consumerscan strike customised deals with distributors and generators.

Enable wheeling: In order for the distribution licensees to supply quality power,they need to be free from the vagaries of supply from unreliable generators. Thesimplest way would be to allow the distribution licensees access to efficient andreliable generators through wheeling, that is, by permitting the transport of powerfrom a generating station in one area to a consuming centre in another area usingthe transmission network of the grid operator (SEB/Transmission Company/PowerGrid Corporation). Permitting wheeling will also enable cost-effective captivegeneration plants to sell their surplus power to other consumers and expand theircapacities to serve consumers in contiguous areas. This will add experienced


producers to the pool of power generators.4 In the short term, however, lack oftransmission capacity may prevent this from happening. This should not be areason to hold back on the urban distribution strategy.

Power trading corporation: A power trading corporation like the MEM in Argentina(see box below), which is a virtual spot market for power, could facilitate the processof wheeling considerably. By enabling efficient generators to supply electricity tocreditworthy distributors at competitive rates, by enforcing commercial disciplineon the distribution licensees and by excluding them from the market for non-payment, it creates a powerful force to generate additional revenues, thus bringingin extra megawatts.

It is understood that there is a proposal to create Power Trading Companies(PTCs)5 for handling power wheeling. Furthermore, these are to act as long-termbuyers of power and to sell it to existing HT consumers. However, unlike theexample above, this is similar to escrowing the HT consumers for the IPPs thatsell power to the PTC. This approach does not increase the total resourcemobilisation from the distribution system, since the identified HT consumers arealready paying customers. As such, it does not generate additional revenue fromthe distribution system, which is imperative in order to add additional megawatts.

Box 1.2: Power sector reform in Argentina

In the late 1980s, the Government of Argentina (GOA) reformed its power sectorto achieve efficient pricing and sufficient investment levels. The reform processcomprised unbundling, privatisation and regulation. The reform strategy simulatedcompetition in natural monopoly segments, such as distribution and transmission,through regulation, award of concessions and the creation of a wholesale marketfor electricity.

In distribution, the federal government broke up the Buenos Aires distribution area,which accounts for almost 60 per cent of Argentinas electricity consumption, andawarded three exclusive concessions. To facilitate competition, a spot wholesale marketfor electricity, called the MEM, was created. Large consumers as well as distributionentities are free to negotiate power contracts directly with generators or fulfil theirneeds through the MEM. A National Regulatory Entity for Electricity (ENRE) was setup to ensure fair access to transmission and distribution networks and oversee all facetsof the sector, including service quality. ENRE also sets maximum tariffs for transmissionand distribution services under a price cap system (RPI-X), with the cap reset everyfive to eight years.

Since the advent of the reform process in 1992, EDESUR, one of the major suppliersto the Buenos Aires area, has decreased its energy losses from 21 per cent to 12 per centand reduced its outages from 39 to 6 hours per year. During the same period, the spot


price of electricity on the MEM has decreased from 4.2 to 2.2 US cents per kWh, andthermal availability has increased from 48 per cent to 70 per cent. In transmission,forced outages have declined from 1000 to 300 hours.

The privatised distribution companies have also made substantial investments in the sector.For example, the consortium owning EDENOR invested US$380 million till 1995, and isexpected to invest an additional US$500 million by 2000. Private sector investment in

the entire electricity sector is projected to reach US$7 billion by the year 2001.

Revenue implications for remaining areas: The strategy being proposed can beaccused of cherry picking the lucrative areas for private management. Thequestion naturally arises as to how the remaining distribution will be handled bythe SEBs, in the absence of the profitable urban areas. At the outset, it is necessaryto realise that many urban areasfor example, Lucknow and Bhubaneshwarare not presently profitable. In fact, the suggested strategy focuses on dense urbanareas because they have significant potential for efficiency gains. Their transferwill reduce losses to the boards and augment their revenues. In addition, bulksupply to urban licensees, wheeling charges and additional revenues in terms oftaxes and excise duty on the sale of electricity, as being currently practised incities like Ahmedabad and Mumbai, will also augment the SEB/governmentresources. These additional resources arising out of the expected efficiency gainswill result in more revenue, not less, which can be used to support distribution inthe remaining areas.

Decentralised distribution and generation: Over time, other approaches will haveto be explored to solve the problem of developing extensive distribution networksin far-flung areas and consumers with limited capability to pay. A model worthconsideration is the one being thought about by West Bengal, that has created theRural Energy Development Corporation, that will be responsible for the distributionof power under 11 kV to all rural areas (Gupta 1998). Decentralised distributioncoupled with decentralised generation may be an answer to this problem. Thisapproach could also use non-conventional energy sources, which areenvironmentally beneficial. Even if the generation cost is higher, this may becompensated by direct cost-savings on building long-distance transmission linkagesand lower transmission losses.

5. NEXT STEPS AND CONCLUSIONThis section lays out the next steps to be taken in order to implement the identifiedstrategy for improving resource mobilisation in the distribution systems of the Indianpower sector. The first two are absolutely necessary, while the third helps tosubstantially increase efficiency.


Selection of centres: The first priority is to select twenty or so centres to start theprocess. To begin with, areas contiguous with urban zones currently under privatelicense, like Ahmedabad and Kolkata, can be offered. Urban centres in states thathave completed their unbundling exercise are the next natural target. Their sizewould vary from region to region, but indicative examples are Pune and Nagpur inMaharashtra, Vadodara and Rajkot in Gujarat, and Hyderabad and Visakhapatnamin Andhra Pradesh. Industrial estates with sufficient power consumption can alsobe included.

Mode of transfer to private management: The actual mode can be determined ona case-to-case basis (as noted on page 7: Privatise the management) using atransparent process like international competitive bidding. Transfer of assets, whennecessary, should take place on the basis of the revenue stream it can be expected togenerate. In all cases, management autonomy must be guaranteed.

Facilitating wheeling: The Indian Electricity Act will need to be amended to permitwheeling transactions, and electricity boards and the Power Grid Corporation willhave to be obligated to permit the use of their network for a charge to be determinedon a case-by-case basis by the central or state regulatory commissions. This, however,is not a precondition for successful transfer to private managements and can bedone in tandem with the above processes.

Conclusion: In the above paragraphs, we attempted a quick review of thecharacteristics of the distribution system as it exists today, and the causes thathave led to this situation. More to the point, we have outlined a strategy that isbased upon increasing the size of the financial cake produced by the distributionsystem, rather than quarrelling over who gets the larger slice. The strategy reliesupon transferring urban areas and other such dense concentrations of consumersto private management, and implementing appropriate arrangements for theremaining distribution areas. We feel this can be quickly implemented, and thatthis can revitalise the Indian power sector by enhancing distribution efficiency,thereby generating additional revenues to bring in extra megawatts, withoutsovereign guarantees and take-or-pay contracts.


REFERENCES

1. Annual Report on the Working of State Electricity Boards and ElectricityDepartment by Planning Commission (November 1997).

2. A Concept Note on Power Trading Corporation by T. L. Sankar (undated).

3. Energising Power Sector: Light at the End of the Tunnel by R.K. Pachauri,Times of India (1 May 1998).

4. PFCs Initiative on Power Sector Reform by Power Finance Corporation(undated).

5. Privatisation of Distribution in India: Issues, Options and Lessons from OtherCountries by International Resource Group Ltd (8 December 1997).

6. Report of the Committee on Private Sector Participation in PowerDistribution by S.J. Coelho (March 1998).

7. Separate Power Corporation for Rural Sector in Bengal by Gautam Gupta,Economic Times (29 April 1998).

NOTES1. This is based on a rough calculation. An annual increase of 8000 MW in capacity, at

Rs 4 crore a megawatt, requires Rs 32,000 crore of investment. A 70:30 debt equity ratiowould imply that SEBs should be able to commit around Rs 10,000 crore.

2. Studies conducted for various SEBs over the past few years have led to nearly similarreform structures. They all recommend the separation of the distribution systemfrom the generation and transmission systems, and the establishment of commissionsto set tariffs, license activities and perform other regulatory functions (Power FinanceCorporation, PFCs Initiative on Power Sector Reform; Coelho 1998).

3. The current approach is to create zonal distribution companies. The franchise areasinclude a mix of paying consumers and mandated customers, who are supplied electricityat subsidised or free rates. Each zone has a mix of urban and rural areas, with far-flungdistribution networks, high cost of supply, and agricultural and irrigation loads fromwhich recovery has traditionally been weak. The currently defined franchise areas thusadd additional costs and social responsibilities that private investors are ill equipped toshoulder. Such privatisation needs transparent and guaranteed mechanisms for flow ofsubsidy from the state government to the licensee, which complicates the process anddetracts from commercial orientation.

4. Some estimates indicate that there is about 15,000 MW of captive generating capacitywhich will be decaptivated by the wheeling provision (Sankar, A Concept Note onPower Trading Corporation).

5. Based on the Annual Report on the Working of State Electricity Boards and ElectricityDepartment by Planning Commission (1997) and newspaper reports.

Power Sector in India | 13

1. INTRODUCTIONSince Independence, in 1947, the Indian power sector has been mainly dominatedby the public sector. As of 31 March 1997, about 95 per cent of the total installedcapacity of 85,919 MW was owned by the central (32 per cent) and state (63 percent) sector undertakings. In terms of fuel-type mix, thermal, hydro andnuclear capacities account for 72 per cent, 25 per cent and 3 per cent respectively.During the year 199697, the total generation in the country was about 394billion units.

Legislation: Under the Indian constitution, electricity is on the concurrent listmeaning that it comes under the purview of both the central (federal) and state(provincial) governments. The Indian Electricity (IE) Act 1910 and the ElectricitySupply (ES) Act 1948 are the key Central Acts, under the broad ambit of whichindividual states have enacted their own laws. The IE Act 1910, which was enactedwhile India was still under the British rule, defines the obligations, powers andresponsibilities of licensees in the electricity industry. Few such licensees exist today.The ES Act of 1948, passed soon after India achieved independence, set out theframework for establishing the Central Electricity Authority (CEA), the StateElectricity Boards (SEBs) and generating companies. The first SEBs were establishedin the early 1950s, soon after the legislation had been enacted. The industrial policyresolution adopted in 1956 provided that generation and transmission of electricitywould be reserved exclusively for the public sector. Accordingly, the law stated thatno person or firm shall engage in the business of supplying energy to the publicexcept with the previous sanction of the state government. Although the centralgovernment is apparently competent to give permission to generating companies

POWER SECTOR IN INDIA:A Summary DescriptionNovember 19982


to sell energy, it can only do so for the sales aimed at SEBs or State ElectricityDepartments (SEDs).

2. INSTITUTIONAL STRUCTUREAlthough policy, generation and transmission activities are undertaken by both thecentral and state governments, distribution and supply of electricity to the finalconsumer and the associated tariff setting are exclusively under the purview of thestate governments. A pictorial representation of the institutional structure of theIndian power sector is provided in Figure 2.1.

Figure 2.1: Institutional structure of the Indian power sector

Central level: At the federal level, the Ministry of Power and Non-ConventionalEnergy Sources is responsible for power policy as well as the generation andtransmission capacity in the central sector undertakings (CSUs).

Policy: In policy setting, the ministry is assisted by the Central Electricity Authority(CEA), which was formed in 1948 as the industrys regulatory body.1 In addition tocontributing to national power policy, CEA also undertakes other coordinatingactivities such as conducting appraisals of projects, granting clearances and issuingguidelines for setting tariffs.

Generation: The generating capacity in the central sector accounts for about 30 percent of the countrys total generating capacity. This capacity comes mainly from theNational Thermal Power Corporation (NTPC) and the National HydroelectricPower Corporation (NHPC). SEBs draw their share of power from these CSUs, andeach CSU is entitled to a tariff that is an aggregate of three componentsfixed cost

Governmentof India

Central Electricity Authority (CEA)

StateGovernments

State Electricity Boards (SEBs)/

Departments (SEDs)

Departmentof Energy

Private sector licensees

Ministryof Power

Department of Atomic Energy

NationalDevelopment

Council

PlanningCommission

NuclearPower Corporation

National ThermalPower Corporation(NTPC) and others

Generating utilities

Power Grid Corporation of

India Ltd (PGCIL)

Transmission utilityRegional

Electricity Boards (REBs)

Power Sector in India | 15

(capacity charge), variable cost (energy charge) and incentive. With a capacity of16,795 MW, NTPC is the largest power generating utility in the country, contributingabout 20 per cent of the total installed capacity in the country. In terms of PlantLoad Factor (PLF), NTPC achieved a PLF of 77 per cent in 199697 as against thenational average of 64 per cent.

Transmission: In recognition of the need for greater integration of the transmissionsystem, five regional electricity boards (REBs) were established in 1964, coveringthe northern, western, southern, eastern and north-eastern regions. These REBsco-ordinate system operations within each regional grid through regional loaddispatch centres (RLDCs). In 1989, the Power Grid Corporation of India Limited(PGCIL) was established for managing the national transmission and dispatchingsystem. As of March 1997, PGCIL was operating about 27,853 circuit kilometres(CKMs) of transmission lines, distributed over 54 substations with 23,331 MVAof transformation capacity. PGCILs performance in terms of overall averageavailability of its transmission linesat above 98 per centis comparable tointernational standards. About 30 per cent of the countrys total installedgenerating capacity (81,500 MW) is connected to its network. Currently, PGCILis in the process of linking regional grids, through a series of high voltage directcurrent (HVDC) interconnections. On the successful completion of this process,PGCILs network would have the capacity to transfer 1000 to 1500 MW of powerfrom any one region to another.

State level: State governments are exclusively responsible for the supply of power tofinal consumers located in the state, along with associated tariffs. In the states, thepolicy for the power sector is looked after by the depar

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