Sushilkumar Shinde, Union power minister, appeared to be very pleased with the performance of his ministry during the past five to six years, but accepted that "we have a long way to go." India's per capita power consumption is currently 800 kwh per year, which is around one-tenth of that in developed countries. While Shinde issued laudatory remarks on the way the power generation capacity has performed, he was wary and even critical of the power distribution sector. "Distribution losses have to be seriously looked into," was just one of the several observations he made on this crucial last-mile segment in the power value chain.

On the generation front, the minister was more than happy to note that the country was going to add 51,000 mw of new power generation capacity from conventional sources alone, during the XI Plan period. This is over and above 14,000 mw of new capacity from renewable energy sources and 12,000 mw from captive power plants. During FY11 alone, he asserted, the country could add as much as 12,000 mw of new capacity. "There was a time when the country could add only 8,000 mw to 10,000 mw in an entire five-year Plan period," he noted with satisfaction. He also observed that over 80,000 mw of new power generation capacity was currently under construction.

With respect to power generation capacity, the role of private sector has been exemplary. In the X Plan period (2002- 07), private sector had a share of 10 per cent in new power generation capacity added. This is expected to grow to 32 per cent in XI Plan period and further to 52 per cent in the XII Plan period (2012-17), Shinde observed. While power generation capacity is increasing at a satisfactory pace, the shortage of subcontractors and manpower for maintenance works, remain as areas of concern. Shortage of balance-of-plant contractors for thermal power plants was a very serious issue, he noted.

Coal, gas and environment

While Shinde repeatedly noted that power generation capacity has grown as a very healthy rate, he expressed concern that fuel supplies-coal and gas-have not kept pace. "Coal and gas are not matching us (power sector)," he asserted. Shinde sought firm coal linkages for power projects and cautioned that if linkages were not in place, financing of new projects was in peril. For completed coal-fired plants, the minister said that he was keen that firm fuel supply agreements (FSA) are signed. Delays in environmental clearances are causing hardships on many frontsnot just for new power generation projects but also exploration of new coal mines. Domestic coal production has fallen considerably short of targets, government statistics indicate.

COMPETITIVENESS & COMPETITION
Shinde stressed on the need of building capacity in the BTG segment, asserting that India's development hinges on growth of its power sector. He was pleased that India was now in a position to export main plant equipment, a situation that was quite unthinkable say five to seven years ago. While domestic mainstay Bharat Heavy Electricals Ltd is ramping up its manufacturing capacity from 5,000 mw to 20,000 mw per year, there are several entities (joint ventures between Indian and multinationals) that are setting up manufacturing facilities in the country for supercritical BTG equipment. Admitting that there is a threat from imports, he assured domestic companies of government support. "You are bound to get our protection," Shinde said.

In his address, Ramesh D. Chandak, President, IEEMA, observed that India's investment in power T&D is lacking. While in developed countries, investment in T&D is one and a half times that in generation, in India the ratio was barely 1:1. Chandak noted that though T&D players have contemporary technology and have established themselves globally, the built-up capacity stands under utilized across several products, as there has been a surge in imports. Requesting the government to create a level-playing field for domestic manufacturers, Chandak noted, "Domestic electrical equipment manufacturing industry is at a substantial disadvantage vis-à-vis imports, which is impacting the commercial viability of the industry and would have long term consequences."

The "level-playing field" requirement in the context of imports was echoed by several manufacturers during the interactions that Electrical Monitor had with exhibitors at Elecrama 2012. Several domestic transformers manufactures said that they were not concerned with Chinese players establishing manufacturing base in India, but were apprehensive of cheap imports from China. The Chinese government supports exports through fiscal benefits resulting in lower landed costs in India. This hurts domestic suppliers. However, if Chinese companies set up shop in India, they will be at par with Indian counterparts. "We have no problems with a Chinese company setting up a manufacturing plant in India and competing with us (domestic manufacturers). We welcome such fair competition," a Hyderabad-based transformer maker told Electrical Monitor.

While Shinde abundantly assured protection to domestic companies from cheap imports, he was also sympathetic to the criticality of imported BTG equipment in meeting India's XI Plan targets. While there is a possibility of the government levying countervailing duty on imported equipment, to protect domestic manufacturers like BHEL, Larsen & Toubro, and the several JVs coming up, there could be a duty exemption on equipment already ordered by private power producers for commissioning in the XI Plan period. "We have to protect those power producers that have placed orders on foreign suppliers in the XI Plan," the minister said.

In his note on Industry Day, B. P. Rao, CMD, Bharat Heavy Electricals Ltd made very interesting observations on Indian competitiveness and the true challenges that the Indian power equipment industry faces. He noted that it was time India moved away from cost-led competitiveness to innovation-led competition. "Competition is still on the basis of low-cost of production. We have still to move to the plane of competition based on innovation," Rao observed. Citing the example of his own company, the CMD said that BHEL now spends 2.5 per cent of its sales on R&D, which is amongst the highest in the industry. The public sector engineering company is also filing patents at the rate of almost one per day. Yet, as Rao admitted, it was way below the standards of global giants.

Limit on UMPP developers

While responding to a question on the broad status of ultra mega power projects, Union power minister Sushilkumar Shinde expressed satisfaction at the government's initiative of launching ultra mega power projects. He said that the endeavour had even won the appreciation of the international community. From 2006 onwards, four UMPPs have been awarded and this was a commendable performance, the minister felt. When asked about his view on the fact that out of the four UMPPs, three have gone to the same developer, he said that the government has now decided to limit the number of UMPPs to be awarded to a single developer to three. This could imply that Reliance Power (Anil Ambani Group) would not be eligible to bid for more UMPPs. Reliance has won three UMPPs— Sasan, Krishnapatnam and Tilaiya—while the Mundra UMPP has gone Tata Power's way. The minister also noted that progress on the UMPPs in Orissa and Chhattisgarh was hampered by environmental clearances. However, with the recent clearance to the Orissa project, there should be forward movement in the near future, he felt. On the question of the financial viability given the increase in prices of imported coal, Shinde said that talks were on with ambassadors of coal-exporting countries like Indonesia. "We will do our best to resolve the issue," was what he had to say. It may be mentioned that Indonesia recently decided to export coal only at market-related prices thereby affecting the financial viability of UMPPs. Developers of the coastal Krishnapatnam and Mundra projects had contracted to buy coal at much lower rates, backed by long-term purchase agreements. The increase in coal prices could very much affect the tariffs quoted by the developers whilst wining the projects. Increase in coal prices could put a big question mark on the financial viability of the UMPPs, especially those designed to run on imported fuel.

On China too, Rao made some profound observations. He explained that China's so-called dominance was not the result of innovation but on that country's ability to create a local value chain. Having the complete production value chain has brought down China's cost of production to globally competitive levels.

Back home, there were many challenges on the power equipment production front. Rao said that the industry was still dependent on key imported material like CRGO steel, large diameter piping, HVDC insulation material, etc. "It puts industry at a disadvantage not just with respect to costs but also lead time." Rao pointed out that India's domestic power generation capacity is expected to nearly double from the current 1.86 lakh mw, by 2017. This would need concerted effort on the part of all stakeholders. Apart from import dependence, India also faced challenges in terms of infrastructure inadequacies. Slow ODC movement, due to infrastructure (logistics) bottlenecks, results in higher cycle time, he said. He also dwelt on lack of domestic testing facilities due to which high-voltage equipment needs to be sent overseas for testing, resulting in higher lead times.

On the subject of competitiveness, Rao exhorted industry players to become global names. "The industry is largely driven by local demand. We have failed to make a mark in the global market." On the much-debated topic of government support to the industry, Rao assured, "Industry has clarified several times. We don't need support; we need a level-playing field. We want protection from taxes, not from competition!"

S. Sundaresan, Secretary, Union Ministry of Heavy Industries also admitted that Indian manufacturers need to benchmark their products on global standards. He noted that the equipment manufacturing sector faces several challenges like dependence on imports for crucial raw material, shortage of manpower, low R&D expenditure, lack of planning, skewed procurement policies, etc. In this brief keynote address, Sundaresan noted that the "Brand India" endeavour has not received the desired policy attention.

National Electricity Fund

The Union government has recently approved the National Electricity Fund with a view to encourage reforms-based progress at the state government-level. NEF will be initially taken up for two years on pilot basis. This programme will be a reformsbased initiative where eligibility for entry (access to assistance under NEF) will be determined by the reforms-related performance of state power distribution utilities. Benefits in terms of interest subsidies will be available to participating utilities on the basis of achieving further parameters of reforms, mainly reduction in ATC losses. In the first two years, utilities would borrow Rs.25,000 crore from FIs and banks, and they will help in strengthening the distribution system and closing the gaps between achievement and target under flagship programmes like R-APDRP and RGGVY.

DISTRIBUTION IS THE WEAK LINK
Sushilkumar Shinde noted at regular intervals in his keynote address and press briefing that the power distribution sector was in poor state. "Distribution is the most critical element of electricity but has been widely ignored. The heart of the power sector lies in efficient management of the distribution sector," he explained.

The minister appeared worried about the high ATC (aggregate technical and commercial) losses. Though such losses have come down from about 39 per cent in FY02 to 27 per cent in FY10, the government would ideally like them to be lower than 15 per cent. "We are not happy," he said, adding that even foreign investors are appalled at the state of India's power distribution sector. While measures under the RAPDRP project as also modern technology is expected to bring down ATC losses, the efforts need to be redoubled.

Shinde also elaborated on the government's intention of firstly understanding the nature of these ATC losses. Various industry and government reports have placed combined losses of state-owned power utilities between Rs.50,000 crore to Rs.80,000 crore. "These losses need to be understood," the minister noted. To this effect, the power ministry is planning to appoint an independent (non-government) investigator to know the break-up of these losses-commercial losses, technical losses, power theft, free power, etc. On the subject of free power, the minister accepted that while the Electricity Act, 2003 does have a provision for free power, utilities are not exercising discretion. Utilities need to make budgetary provisions for such free power, a practice not fully adhered to currently, he noted.

Shinde also pointed out to mismanaged practices by power utilities with respect to tariffs. Increasing of power tariffs, as also envisaged by the Electricity Act, 2003, needs to be an "automatic" process. Several power utilities have not increased tariffs for as many as seven years and when they did, there was immense resistance from consumers. Such situations can be avoided. Meanwhile, it is reliably learnt that state electricity regulatory commissions are expected to penalize distribution companies that fail to annually revise tariffs. Shinde also appreciated that some utilities have started increasing tariffs even at six-monthly intervals. "I think this is a good sign," he observed.

Shinde was also appreciative of private sector enterprise in power distribution, noting the smart turnaround in erstwhile loss-making circles like Bhiwandi (Maharashtra), Agra, Kanpur (both UP), etc. The ATC losses in many privatized circles have reduced to single-digit levels. Even due to measures envisaged under R-APRDP, ATC losses in over 200 populous towns have come down to as low as 5 per cent, Shinde commented.

In his keynote address, Devendra Singh, Joint Secretary- Distribution, Ministry of Power, admitted that the power distribution sector was not in the best of health with cumulative losses exceeding Rs.1 lakh crore. There are gaps between recovery and cost of supply, and the losses are well in the high double-digit range.

CRITICAL PHASE FOR TRANSMISSION
R.N. Nayak, CMD, Power Grid Corporation of India made very emphatic statements about the power sector, suggesting that the critical growth phase will be from 2012 onwards. Over the past five years, the power sector has seen drastic changes. Prognosticating on the XII Plan period and onwards, Nayak said that supercritical technology will be the norm for coal-fired power plants and that 400kV transmission lines, considered as EHV lines currently, will be treated nothing more than "sub-transmission" infrastructure.

Transmission networks will need to be augmented rapidly given the growth in electricity load in urban areas. Some cities, as Nayak observed, have seen a load growth of 15 per cent, which is phenomenal compared to that seen in even developed countries. He explained that with India's per capita consumption still very low, such high growth in power consumption would be but obvious.

Nayak said that by March 2012, at least 1,000 km of 800kV AC lines and around six 765kV substations would be set up. PGCIL currently has 90,000 ckm of transmission lines in the country's total of some 2.5 lakh ckm. The PGCIL chairman also noted that construction of India's first 800kV DC line has started and completion is expected over the next 30 months. Among other achievements, Nayak highlighted India's movement to 1,200kV UHVAC power transmission infrastructure (See Box) and also PGCIL's involvement in the Smart Grid project.

POWR OUTLAY: XII PLAN
	1.8
Generation	6.0
Transmission	1.8
Distribution	5.0
Total	12.8

With power transmission infrastructure getting more intricate, conventional methods and thinking might not work. He citied the example of maintenance of transmission towers that is now being done with the help of helicopters. In the near future, PGCIL will be inviting international bids for helicopter-based maintenance of its transmission network.

He also alluded to the strong possibility of remote maintenance of EHV substations, without human intervention. Nayak explained that substations will be monitored remotely through online systems. Except for physical security, there will be no human intervention in substation maintenance. In the next 18 months, PGCIL expects that most of its EHV substations will be remotely maintained. On another note, PGCIL also expects to commission two mobile substations of 315MVA/400kV. This will help in quick replacement of substations needing repair.

On PGCIL's investment in the XII Plan period, Nayak said that the Central transmission utility expects to see an investment of $28-30 billion over the next 5-6 years. PGCIL expects to add another 70,000 ckm to its existing transmission network of 90,000 ckm, by March 2017. At least 80 more EHV substations will be built, growing from the 145 existing currently.

OUTLOOK FOR XII PLAN
P. Uma Shankar, Secretary, Ministry of Power, summarized the performance of the power sector in the XI Plan and charted possible courses of action for the ensuing Plan period. In the XII Plan period (2012-17), India is expected to add 76,000 mw of new power generation capacity as compared with around 52,000 mw in this Plan period. Further, over 50 per cent of the incremental power generation capacity in the XII Plan period will be from the private sector. Uma Shankar also observed that over 40 per cent of India's new power generation capacity in the XII Plan period will be based on supercritical technology.

In the transmission sector, 69,000 ckm of 220kV lines are expected to be added, which is broadly in tune with the target. In the XII Plan, the addition is targeted to be 1 lakh ckm. In terms of inter-regional transfer capacity (IRTC), the cumulative achievement up to March 2012 will be twice the level of March 2007. In the XII Plan, 58,000 mw of new IRTC is being planned that would once again double the outstanding level between March 2012 and March 2017.

The investment in power generation in the XII Plan is likely to be Rs.6 trillion, followed by transmission with Rs.1.80 trillion and distribution with Rs.5 trillion. This, as many industry experts point out, will be the first time that investment in T&D will surpass that of generation.

The power secretary also pointed out that flagship schemes like R-APDRP and RGGVY will continue in the XII Plan period. RGGVY, which is currently at the village-level, will be taken to the habitation level during the next Plan period. RAPDRP will see a lowering of its threshold limits thereby extending itself to many more towns, the Secretary noted.

Uma Shankar highlighted the growing contribution of renewable energy capacity. In the XII Plan, around 13,000 mw of new renewable capacity is expected, to be followed by 30,000 mw in the XIII Plan. To support the 43,000 mw of such capacity over the next decade, the power ministry has planned to strengthen the inter-state transmission network, particularly with respect to renewable energy-rich states like Tamil Nadu, Punjab, Maharashtra, etc. Financing the proposed inter-state transmission system will be supported through measures like capital subsidy and viability gap funding (VGF) mechanism.

In all the deliberations at Elecrama 2012, it came out very strikingly that the XII Plan period will define a paradigm shift in India's power sector. Across all parameters—policy framework, reforms process, physical performance and building local competencies—the XII Plan has much in store. India has done reasonably well—if not exceedingly well—in the XI Plan period and the ensuring Plan period will hopefuly be an improved furtherance of the current effort.

India moves to 1,200kV

India will soon have the rare distinction of having the highestrating power transmission system in the world. On January 27, 2012, PGCIL was set to inaugurate the 1,200kV UHVAC test station at Bina in Madhya Pradesh. In his address, R. N. Nayak, CMD, PGCIL was very appreciative of the effort and lauded domestic suppliers to have contributed to this landmark development. Nayak reminisced that when 1,200kV infrastructure was conceived in 2006, it was never expected that it could be done entirely through indigenous technology. However, he noted that the entire gamut of equipment, from clamps and connectors to power transformers,was supplied by Indian manufactures. Nayak also observed that some companies supplied equipment without any financial charge, treating it as contribution for a national objective.

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