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Several Initiatives to Improve Access of Electricity in Rural Areas

Removing Roadblocks in Generation – Towards 24 Hour Power Supply Association of Power Producers 19 Dec 2011. Several Initiatives to Improve Access of Electricity in Rural Areas Electricity Act 2003 and National Electricity Policy – decentralised distributed generation

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Several Initiatives to Improve Access of Electricity in Rural Areas

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  1. Removing Roadblocks in Generation – Towards 24 Hour Power SupplyAssociation of Power Producers19 Dec 2011

  2. Several Initiatives to Improve Access of Electricity in Rural Areas • Electricity Act 2003 and National Electricity Policy – decentralised distributed generation • Rajiv Gandhi GrameenVidyutikaranYojana However, • 56% of rural households and 400 million people without electricity access • Per capita consumption of India @ 778 kwh as compared to 2471 kwh of China • Electrified rural areas get 6-8 hours of supply with poor quality of service 24 hours supply appears to be a distant dream as long as basic power generation issues are not tackled

  3. Indian power sector is passing through a very critical phase and the current situation is the outcome of inaction on the part of the Govt and exuberance on part of some of the private players

  4. The major bottlenecks are • Fuel – shortage of domestic coal and pricing of imported coal and blended power • Land Acquisition Issues • Environmental Issues • Poor Financial Health of Distribution Utilities

  5. Biggest Challenge Being Faced by Developers - Fuel Rest Coal 62% Installed Capacity (MW) Coal 54% Rest Rest Coal 55% Rest Coal 63% Coal 62% Rest Rest Coal 59% Rest Coal 65% Coal has remained and is expected to remain the dominant fuel by far. With 74% of the 12th Plan additions being based on coal, coal share of the total generation portfolio is expected to be 62% by the end of 2017

  6. Shortage of Domestic Coal • Estimated domestic coal requirement for the power sector in FY 12 is 455 MT (as per CEA) and availability is around 402 MT (including all sources). Therefore the current deficit of coal is 53 MT for power sector in FY 12 leading to a stranded capacity of ~13000 MW Looking at the fact that 74% of the 12th Plan capacity addition (of 100,000 MW) is based on coal, it is estimated that the total coal deficit will be 292 MT by the end of 2017

  7. How Is This Impeding Country’s Generation Portfolio • Case I linkage coal based projects – At the time of bidding, tariff quoted by developer was on the domestic linkage coal price and LOAs once issued assures the holder of ‘100% of the quantity as per the normative requirement’ as per the New Coal Distribution Policy. However, Coal India Ltd’s failure to meet its commitments under LOA has resulted in Case I developers unable to meet their obligations under PPA as there is no provision in PPA to provide for escalation in case coal is arranged through e-auction or through imports. • Case 2 linkage coal based projects – Same situation, however incase the design specifications of the boilers limit the acceptance of imported coal beyond 10-15%, the developer would not be able to meet the normative capacity availability requirement of 85% • Imported coal based projects – Shortage of coal in India and China and the resource nationalism exhibited by coal exporters such as Indonesia and Australia has led to steep increases in coal prices on a global level. Stranded assets post 2009: Ratnagiri (JSW), Babandh (Lanco), Amarkantak (Lanco), Tiroda (Adani), Jhajjar (CLP), Bara (JP) etc Projects based on Imported Coal: Mundra (Tata), Krishnapatnam (Reliance), Udupi (Lanco) Projects based on Blended Coal: Aravali (NTPC JV), Sipat (NTPC)

  8. Capacity Contracted Under Competitive Bidding Type of Bidding Types of Projects PPAs signed in the year

  9. Is Imported Coal A Viable Option Restrictions on export, additional customs and duties etc Almost 1/3rd of current crude import bill Most plants can take up to 28% imported coal max Distribution utilities to get exposed to fluctuating price risks Logistical Issues

  10. Suggested Measures to Increase Domestic Coal

  11. Land Acquisition Issues • Draft Land Acquisition and Rehabilitation & Resettlement bill introduced for public comments by GoI in July 2011 It is estimated that land will move up from a historical 5-8% of total project cost to as high as 30% of total project cost

  12. Activity Flow of the Land Acquisition Process Needs Review Proposal Received by Govt SIA conducted by Appropriate Govt • Practically, the affected families cannot give the consent unless the details of the rehabilitation and resettlement benefits are known Public Hearing for SIA No timelines mentioned Appraisal of SIA Report by Expert Group • Legitimacy of public purpose should be identified at an early stage to avoid wastage of effort Verification of public purpose legitimacy and 80% consent, Approval of SIA Report • In case notification is not issued within 12 months, SIA will be deemed to have lapsed 12 months Publication of Preliminary Notification Preparation of Draft R&R Scheme The process as chalked out today is cumbersome and creates ambiguity. A review is needed to ensure efficient implementation of projects 12 months Public Hearing Draft Declaration and Publication of R&R Scheme 24 months Award

  13. Environmental Issues

  14. Precarious Position of Distribution Utilities

  15. Losses • AT&C losses at ~30% is amongst the highest in the world, when compared to South East Asian nations which had 5-8% losses in 2007 and Brazilian utilities which averaged 15% in 2005 • Reasons vary from combination of LT-HT lines and improper load management to unmetered supplies, faulty meters and electricity theft • APDRP intended to reduce losses of utilities to 15%, improve financial viability of Discoms and improve quality of supply • Re-launched as R-APDRP in XI FYP, the program focused on actual, demonstrable performance in terms of sustained loss reduction At the current level the losses are likely to reach Rs 80,000 Cr by end of 2012 and Rs 116,000 Cr by end of 2015

  16. Tariff Below Cost of Supply Increasing Revenue Gap • In most states, tariff increase has been inadequate to cover the cost increases witnessed by the utilities. • While the average cost of supply (all-India) level increased from Rs. 2.64 per unit to Rs. 4.81 per unit i.e. an increase of 82%, the increase in revenue has been only 56% (due to low tariffs). • The revenue gap increased from 38 paise per unit in 2006-07 to 127 paise per unit in 2009-10 implying losses for the utilities. 1.27 0.75 0.48 0.38 Source: Report of High Level Panel on Financial Position of Distribution Utilities, Dec 2011

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