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  1. Power Grid Corporation of India Ltd. Shri Shashi Shekhar Presentation to Joint Secretary, Minister of Power June,27, 2003 New Delhi

  2. OBJECTIVES OF POWERGRID The Corporation has set following objectives in line with its Mission and its status as “Central Transmission Utility”: • Undertake transmission of energy through Inter-State transmission system. • Discharge all functions of planning and coordination relating to Inter-State transmission system • Exercise supervision and control over the Inter-State transmission system. • Efficient Operation and Maintenance of Transmission systems. • Establish / augment and operate all Regional Load Despatch Centres and Communication facilities. Contd/-

  3. OBJECTIVES OF POWERGRID Contd/- - To facilitate private sector participation in transmission system through Independent Private Transmission Company / Joint Ventures. - To assist various SEBs and other utilities in upgradation of skills & sharing of expertise by organising regular conferences, tailor-made training workshops directed towards specific technological and O&M areas and extending laboratory facilities for testing purposes etc.  - Restoring power in quickest possible time in the event of any natural disasters like super cyclone, flood etc. through deployment of Emergency Restoration Systems.  - To provide consultancy services at national and international level in transmission sector based on the in- house expertise developed by the organisation.  - To participate in long distancetrunk telecommunication business ventures.

  4. ORGANISATIONAL STRUCTURE OF POWERGRID • Corporate Centre • RHQ (7 No.) • Lines/ Sub-Stations • NLDC • RLDC(5 No.) • SLDC • RTU

  5. POWERGRIDToday… • Incorporated in October, 1989. • Commenced commercial operation from April 1, 1992. • Notified as Central Transmission Utility in Dec’ 98. • One of the largest and best managed transmission utility in the World with EHV network of over 46,000 ckm, wheeling more than 200 billion units (worth Rs. 40,000 Crore) per year - 40% of total generated power in the country. • Sustained high system availability - about 99%. • Consistently profit making.

  6. POWERGRIDToday… Rated “EXCELLENT” against MOU with MOP since 1993-94. Received “The Prime Minister’s MOU Award” consecutively for 3 years since 1998-99. First ISO 9001 company in Indian Power Sector. Rated at the highest bracket by domestic credit rating agencies. During the FY 2002-2003, POWERGRID commissioned projects worth Rs 5,300 Crore. These projects were completed at a cost lesser by Rs 820 Crore than the GoI approved cost and ahead of schedule.

  7. POWERGRIDGrowth Profile 1992-93 2002-03Growth(%) Physical Performance • No. of Sub-stations 39 79 102 • MVA capacity 13,200 44,836 240 • Circuit kms 23,000 46,245 101 • Inter-regional transfer 500 8,000 1500 capacity (MW) Financial Performance (Rs Cr.) • Net profit 236 650 175 • Turnover 634 2,419 282 No. of employees 5,725 6,339* 11 * Excluding 586 employees transferred from CEA (with RLDCs) and from NTPC (with HVDC)

  8. LEGAL FRAMEWORKS IN 1910/1948 ACTS • The Electricity Laws (Amendment) Act, 1998 provided for: • Transmission as a distinct activity. • A new concept of Central Transmission Utility (CTU) at the National level / State Transmission Utilities (STUs) at the State level for ensuring centralized planning, co-ordination and control. • CTU / STUs kept under Govt. ownership. • Granted “Apex Body” status to RLDCs.

  9. LEGAL FRAMEWORKS IN 1910/1948 ACTS • RLDCs/SLDCs to be operated by CTU/STUs respectively, unless specified otherwise by Central Government. • CTU/STUs to be actively involved in private investment in transmission. • Appropriate Commissions to issue the Transmission License to private parties upon the approval by CTU/STUs. • Govt. used to give directions to POWERGRID to establish, operate & maintain Transmission System under Section 18A of 1948 Act.

  10. PROVISIONS IN 2003 ACT & ITS IMPACT • Separate Companies for NLDC, RLDCs and SLDCs. • Roles, responsibilities and functions of RLDCs / RPCs. • Responsibility of short term planning of transmission system. • Functions of CTU and its privatisation. • Role of CTU in Private Investment in transmission. • Usage of transmission assets for telecom purposes. • Open access to transmission system

  11. SEPARATE COMPANIES FOR LDC FUNCTIONS. • The Act, under clauses 26(3), 27(2) and 31(2), envisages formation of separate Government companies for the operation of NLDC, RLDCs and SLDCs. • In line with the worldwide trends, the main transmission agency should be responsible for system operation functions on permanent basis, i.e., CTU shall operate NLDC and RLDCs, while STUs shall operate respective SLDCs, in line with the current practice.

  12. ROLES AND RESPONSIBILITIES OF RLDCs VS RPCs • The Act under clause 2(55) and clause 28(1) defines the roles of REBs/RPCs as a facilitator for integrated operation of power system, and that of RLDCs as an agency responsible for integrated operation of power system in that region. The Act has only changed the name of the body i.e. from REB to RPC. • Roles and responsibilities of RLDCs / RPCs need to be clearly demarcated by specifying their respective functions.

  13. SHORT TERM PLANNING OF TRANSMISSION SYSTEM • As per the Act under clause 73(a), CEA has been mandated to formulate short term & perspective plan for power development in the country. • In line with the statutory function of CTU for planning and coordination, the short term planning of inter-state transmission system should have been entirely left to CTU under the overall long term Electricity Plan developed by CEA.

  14. PRIVATIZATION OF CTU • The Act under clause 38(1) provide for a Government Company to be CTU. However, the Act under third para of clause 38(1), provides further that the Central Government may transfer, and vest any property, etc., of CTU, to a company or companies to be incorporated under the Companies Act, 1956 to function as a transmission licensee, through a transfer scheme. • This provision militates against the very concept of having a Government-owned CTU.

  15. ROLE OF CTU IN PRIVATE INVESTMENT. • The 1910 Act under clause 27C(2) provides for licensee to work under direction, supervision and control of CTU. • The 2003 Act under clauses 12 & 14 has placed CTU at par with other Transmission Licensees. • CTU, being a statutory authority, should not be referred to as a Transmission Licensee. Its role should have remained as envisaged in the earlier Acts.

  16. ROLE OF CTU IN PRIVATE INVESTMENT.. • The 1910 Act under clause 27C(4) states that no license application shall be entertained by CERC unless the applicant has obtained the approval of CTU. The 2003 Act under clause 15(3) states that any person can apply directly to CERC for the License, with a copy to CTU for recommendations. However, such recommendations of CTU shall not be binding on CERC. • CTU, being a statutory authority, no application for a license should be entertained by CERC, unless the same is approved by CTU, in line with the existing provisions.

  17. ADDITIONAL ISSUES IN 2003 ACT • The Act under clause 41 empowers CERC to look into the question of using transmission assets for any other purposes where as the existing Acts are silent on this issue. • Duties of generating companies include dedicated transmission lines also. Captive generating plants may also set up dedicated transmission lines. • Directions corresponding to 18A of 1948 Act needed.

  18. ADDITIONAL ISSUES IN 2003 ACT • CTU & RLDC not to engage in generation and trading of electricity. • CTU to provide non-discriminatory open access to its transmission system for use by any licensee, generating company or consumer (clause 38-2-d). • Guidelines for determining tariff through a process of bidding shall be issued by the Central Government (clause 63).

  19. FUNCTIONS OF CTU • Undertake transmission of electricity through inter- state transmission system. • Discharge all functions of planning and co-ordination relating to inter state transmission system. • Ensure development of an efficient, coordinated & economical inter state transmission system. • Provide non-discriminatory open access to its transmission system

  20. FUNCTIONS OF CTU • POWERGRID was anyway performing almost all the functions, which the earlier amended statute & the Electricity Act 2003 bestowed upon the CTU. Notifying POWERGRID as CTU is thus a natural and logical step. • Objectives of POWERGRID and the Statutory Role and Responsibilities of CTU go hand in hand and they are so much inter-mingled that they can not be separated.

  21. ACTION PLAN FOR 2003-04 (In Rs. Crores) • Budget Estimate (2003 - 04) : 2750 • Scheme-wise break-up:BE(2003-04) Ongoing Schemes - 2028.73 New Schemes - 563.74 Completed Schemes - 13.88 Telecom - 143.65 --------- TOTAL : 2750 Utilisation of Budget under the new schemes (Rs. 563.74 Crore) would largely depend on availability of investment approval of major projects like Sipat-I, Sipat-II, and Tala Transmission projects (about Rs. 343 Crore) -GoI’s approval is awaited.

  22. ACTION PLAN FOR 2003-04 • Funding Plan for BE 2003-04

  23. Action Plan for next 10 years

  24. POWERGRIDPerspective Plan… Addition of 60,000 ckm of Transmission Network with an investment of Rs. 71,000 crores to evacuate additional 1,00,000 MW by 2011-12 Mobilising adequate financial resources (including private participation) for the implementation of the plan, while maintaining sound financial health of the company POWERGRID’s own investment Rs. 50,000 Crore and balance Rs. 21,000 Crore from Private Sector Creation of National Grid and enhancing inter-regional transfer capacity from the existing level of 8,000 MW to 30,000 MW by 2012

  25. POWERGRIDPerspective Plan… Rs/Crs. Investment Program

  26. POWERGRIDPerspective Plan… Estimate of Funds to be Mobilised

  27. Investment andFundingStrategy Future Funding Option Assumed

  28. Diversification into Telecom

  29. POWERGRID’s DIVERSIFICATION INTO TELECOM • POWERGRID diversifying into Telecom to utilize spare telecommunication capacity of ULDC schemes and maximize return on its transmission infrastructure • Through an incremental investment • In a limited manner and without affecting the core business • Foray into telecom recommended by reputed international consultants viz. IVO Power Engineering, Finland along with PricewaterhouseCoopers, UK

  30. POWERGRID’s DIVERSIFICATION INTO TELECOM • POWERGRID has implemented /is implementing ULDC projects for Real Time Power System Management in all five Regions • Dedicated Telecom links under ULDC Schemes Region Status/Completion OFC (Km) • Northern Completed 830 • Southern Completed 613 • North Eastern Completed 961 • Eastern By Mar’ 03 887 • Western By Aug’ 03 1,431 • NLDC By 2005 941 Total 5,663

  31. POWERGRID’s DIVERSIFICATION INTO TELECOM Fiber Optic Backbone Network of 14,000 Km, which will interconnect 60 major cities • OFC under ULDC/ LDC schemes 5,663 Km • Incremental Network required 8,437 Km • Total project cost Rs. 934 cr. • Investment approval accorded by GoI in March 2002 • Target Completion by 2004-05

  32. POWERGRID’s DIVERSIFICATION INTO TELECOM • Obtained IP-II license in January 2001 • Delhi-Mumbai Link was prioritised and commissioned in a record time of 9 months • Links under commercial operation • Delhi-Chandigarh; • Delhi-Lucknow-Mumbai; • Delhi- Jaipur;

  33. Facilitating Distribution Sector Reforms (APDRP) • Appointed Advisor-cum-Consultant : 105 circles • Direct Advisor-cum-Consultant : 37 circles (15 States) • Co-ordinator : 14circles in 5 States (assigned to NPC, WAPCOS, ERDA). 54 circles (developed by SEBs) • Ist Phase is over and cumulative projects worth Rs16,000 Crore already approved in the country. • Projects worth Rs 5587 Crore approved, where POWERGRID was associated • In addition APDRP program undertaken on turnkey and bilateral basis in three States namely Assam, Goa, Bihar.

  34. Perspective Plan - Development ofNational Power Grid

  35. Needof National Grid • Uneven disposition of energy resources • Major Hydro resources in NER & NR • Coal reserves mostly in Jharkhand / Orissa / West Bengal • Cost of power transmission lower than cost of fuel transportation • Transmission is more environment friendly than load centre based generation • Growth disparity • ER surplus (Load did not grow as expected) • Other regions deficit (Demand outstripped Gen. Cap. addition) • Optimization of generation capacity addition • Utilising time and seasonal diversity • Spinning reserve optimisation • Utilisation of operational surpluses • Flexibility of adding IPPs along the National Grid • Conservation of Right-of-Way -- especially in areas with scarcity of ROW viz. area near hydro projects, chicken - neck area, forest area, towns etc.

  36. Development of National Grid : Strategy • Development in a phased manner – commensurate with generation / load growth. • Flexible Plan to accommodate change in load-generation pattern. • Detailed studies carried out in consultation with CEA to evolve system elements • Existing ER surplus and operational surpluses in the time frame of 2006 - 07 are to be transmitted over National Grid • Uncertainty in generation capacity addition can be fine tuned from time to time including impact of time & cost overruns, if any. • National Load Dispatch Center envisaged by 2005 - 06 for coordinated operation of National Grid

  37. POWERGRIDPerspective Plan… National Grid, Phase-I • Interconnection of Regional Grids through HVDC Back-to-Back and AC links • to take care of widely varied operational parameters • Development of phase-I of National Grid completed when Sasaram HVDC B/B Link between ER and NR was commissioned in Sept. 2002. • Cumulative Inter-Regional Transfer Capacity estableshed at the end of Phase-I : 5,000 MW

  38. POWERGRIDPerspective Plan… National Grid, Phase-II (by 2007) Strategy: • High capacity Inter-Regional “Transmission Highways” envisaged along with major generation projects • Hybrid HVAC and HVDC interconnection planned • Development of Phase-II of National Grid has already commenced - 3000 MW capacity added • 2000 MW HVDC bi-pole between Talcher-Kolar (Asia’s largest HVDC Bi-pole) • 1000 MW 400 kV AC link between Rourkela and Raipur (Facilitate Interconnection of ER/WR & NER • Cumulative Inter-regional transfer capacity at the end of 2002-03 – 8000 MW • By the end of Phase-II Cumulative Inter-regional Capacity - 23,500 MW

  39. POWERGRIDPerspective Plan… National Grid, Phase-III(by 2012) • Strengthening of inter-regional links to have a ring of 765 kV lines, inter-connecting Northern, Western and Eastern Regions synchronously • ER inter-connection with SR to be strengthened through HVDC bi-pole links (Asynchronous link) • After Phase-III Cumulative Inter-regional Capacity - 30,000 MW

  40. Private SectorParticipation

  41. Private Sector Participation • Two routes identified • Joint Venture (JV) route • Independent Private Transmission Company (IPTC) route JV route • Major transmission lines associated with Tala HEP in Bhutan, estimated to cost about Rs. 1,100 Crore, • M/s Tata Power selected as JV partner • Shareholders Agreement initialled at management level • IA/ TSA initialled at working level • PIB approval obtained in Dec’02. CCEA awaited (investment approval + approval of creating a JV company)

  42. Private Sector Participation IPTC Route • Identified Project : 400 KV D/C Bina-Nagda- Dehgam Transmission line • Estimated cost : Rs. 450 crore. • Consortium of TNB & Kalpataru, the only bidder • Tariff quoted is 77% higher compared to if the project to be undertaken by POWERGRID • Petition submitted by POWERGRID to CERC seeking direction • Hearing held on 25 June’03, order awaited

  43. Assistance Sought

  44. LIQUIDATION OF OUSTANDING DUES • Payable Outstanding as on May, 2003 - Rs.429 Crore Includes • Interest Rs. 171 Crore • Major Defaulters • BIHAR Rs. 102 crore • DVB Rs. 283 Crore • MPEB Rs. 67 Crore • Manipur Rs. 51 Crore • Maharashtra Rs. 17 Crore • Arunachal Rs. 10 Crore • Tripura Rs. 9 Crore • Madhya Pradesh, Maharashtra, Orissa, Delhi, Tripura, Arunachal Pradesh, Mizoram and Manipur have not signed the TPA for POWERGRID.

  45. BUDGETARY SUPPORT TO POWERGRID IN X PLAN • POWERGRID sought a budgetary support of Rs. 4,907 crore for an investment programme of Rs. 30,143 crore (considering Debt:Equity ratio of 70:30) • Planning Commission scaled down the investment to Rs. 21,370 crore with Net budgetary support to Rs. 1,000 crore. (Debt:Equity ratio of 80:20) • Taking up the future incremental investment in the limiting debt-equity norm of 80:20 would create problems for the Corporation for fund mobilization • Further equity support of Rs 1257 Crore to maintain D:E ratio as 70:30. • NBS to be made available in the form of Equity and not as Grant. Contd…

  46. POWERGRID’S PROPOSAL FOR COMPENSATION FOR NER-TS • POWERGRID’s losses due to pegging of the tariff @ 35 paise/unit as per Unified Common Pool Transmission Tariff (UCPTT)–Rs. 1012 cr. till 2006-07 • To cover this loss to the extent of only 50%, MoP recommended: • One time upfront grant of Rs. 385 crores and • Equated annual installment of Rs. 33.46 cr. during Xth plan period from 2002-03 to 2006-07 (or additional upfront grant of Rs. 120.60 cr.) • The proposal is being considered by Planning Commission. • Some clarification on existing assets was sought by Planning Commission which has since been furnished.

  47. MEGA POWER PROJECT STATUS TO TRANS. PROJECTS Accordance of Mega Power Project status for the transmission System associated with Mega Generation Project. • Sipat project of NTPC already granted this status. • Associated transmission project to be granted Mega Power Project Status. It meets the criteria which are comparable to those specified for Mega Power Projects:- • System forms part of National grid • Catering power needs of more than one state • Introduction of 800 kV state-of-the-art technology • Involvement of huge investment • Transmission of large block of power thus reducing ROW requirements • Economy of scale on account of lower T&D losses • To keep the tariff low for financially poor states

  48. INVESTMENT APPROVAL • CCEA may approve a basket of projects, while individual project approval may be delegated to MoP. • Pre-PIB limits to be raised from Rs. 500 Crore to Rs. 1500 Crore. • PIB Memo may be circulated while circulating the FR itself. • Investment approval for projects involving cost up to Rs. 1000 cr. may be delegated to Board of Directors of POWERGRID.

  49. ISSUES RELATED TO CERC • Review of depreciation norms in transmission tariff • CERC through their notification reduced rate of depreciation from 6.12% to 2.91%, which is adversely affecting the financial position of the company • Payment of FERV on pass through basis • CERC insists that FERV be capitalized and recovered as tariff by spreading it over the years. • This is putting extra financial burden on POWERGRID due to mismatch in inflow and outflow, which will have direct impact on internal resources and capability to add capacity. • Fixation of availability of transmission system at 95% instead of 98% • CEA has recommended 98% availability of transmission system to ensure grid stability and this norm should not be used for recovery of transmission charges. Contd…

  50. ISSUES RELATED TO CERC Contd… • Utilisation of Development Surcharge • CERC has not notified Dev. Surcharge in revised tariff notification for Rihand-Dadri Line (1st case) • Applicability of Depreciation Adversely affects the Financial ratios because of no RoE on Development Surcharge • Implication of Income Tax on Development Surcharge • Its utilisation on National Level may be allowed in stead of Regional level