Power Sector in India: Introduction

India accounts for 4 per cent of global power generation, and has the fifth largest generation capacity in the world with an overall installed capacity of 159,398.50 mega watt (MW) as on March 31, 2010 according to a report by Cygnus Business Consulting & Research. The total installed generation capacity in the country as on September 20, 2011 stood at 182,344.62 MW, with thermal power contributing 118,695.98 MW, nuclear 4,780.00 MW and hydro power 38,706.40 MW, according to Central Electricity Authority data.

The Indian power and distribution transformer sector registered revenue of US$ 2.67 billion during 2009 and it is estimated that it will reach US$ 4.04 billion in by the end of 2016 according to an analysis from Frost & Sullivan. The Government of India plans to install a Integrated National Power Grid in the country by 2012 with approximately 200,000 MW generation capacities and 37,700 MW of inter-regional power transfer capacity.

Technological advancements along with viable economies of scalewill assist in building the power sector in the country with a competitive edge and assist in enhancing the capacity further by 67,000 MW of solar generation by 2022,which amounts to almost thrice of the India's target—as per the report generated by the consultancy firm, KPMG. In another accomplishment, the sector added a record capacity of 15,795 MW in the power sector during 2010-11, according to Mr Sushilkumar Shinde, Union Minister of Power. The prominent companies which added to the capacity include NTPC, Adani Power, Reliance Power and Tata Power. Further, power generation projects totaling 28,000 MW will become operational in the current financial year, according to Mr Shinde.

An ambitious target of 78,577 MW has been set by the government for the eleventh plan period (2007 -2012). The target determines that the hydropower's share would be 16,553 MW, the thermal power would constitute 58,644 MW and the nuclear power’s share would be 3,380 MW.

Industry Size

The Indian government has set ambitious goals in the eleventh plan for the power sector due to which the power sector is poised for significant expansion. In order to provide availability of more than 1000 units of per capita electricity by year 2012, it has been estimated that capacity addition of more than 100,000 MW will be required. This has resulted in massive addition plans being proposed in the sub-sectors of Generation Transmission and Distribution.

The current installed transmission capacity is only 13 per cent of the total installed generation capacity. With the focus on increasing generation capacity over the next 8-10 years, the corresponding investments in the transmission sector is also expected to increase. The Ministry of Power plans to establish an integrated National Power Grid in the country by 2012 with close to 200,000 MW generation capacities and 37,700 MW of inter-regional power transfer capacity. Considering that the current inter-regional power transfer capacity of 20,750 MW, this is indeed an ambitious objective for the country to pursue in the long run.

While some progress has been made at reducing the Transmission and Distribution (T&D) losses, these still remain substantially higher than the global benchmarks, at approximately 33 per cent. In order to address some of the issues in this segment, reforms have been undertaken through unbundling of the State Electricity Boards into separate Generation, Transmission and Distribution units and privatization of power distribution has been initiated either through outright privatization or the franchisee route; results of these initiatives have been somewhat mixed. While there has been a slow and gradual improvement in metering, billing and collection efficiency, the current loss levels still pose a significant challenge for distribution companies going forward.

Power Sector in India: Recent Trends and Investments

GMR Energy Ltd (GEL), a subsidiary of GMR Infrastructure, has commissioned its 25-MW solar power plant at Patan district in Gujarat. The 25-MW grid interactive solar power project has been executed through GMR Gujarat Solar Power, a subsidiary of GMR Energy. The project was awarded to the company in October 2010 under the Gujarat Solar Policy. GMR Energy, after tasting success of this solar venture, has initiated plans to enhance its renewable energy portfolio by over 100 MW in the next two years. GMR Energy is currently operating 808 MW. The company is currently executing power projects of about 7,500 MW capacity which includes 2,200 MW hydro capacity.