Chapter 1

Economy
1.1 INDIAN ECONOMY:

India is developing into an open-market economy, yet traces of its past autarkic policies
remain. Economic liberalization, including reduced controls on foreign trade and investment,
began in the early 1990s and has served to accelerate the country's growth, which has
averaged more than 7% since 1997. India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude
of services. Slightly more than half of the work force is in agriculture, but services are the
major source of economic growth, accounting for more than half of India's output, with less
than one-third of its labor force. India has capitalized on its large numbers of well-educated
people, skilled in the English language, to become a major exporter of software services and
software workers. An industrial slowdown early in 2008, followed by the global financial
crisis, contributed to the deceleration in annual GDP growth to 6.1% in 2009. However, India
escaped the brunt of the global financial crisis because of cautious banking policies and a
relatively low dependence on exports for growth. Domestic demand, driven by purchases of
consumer durables and automobiles, has re-emerged as a key driver of the economy, as
exports have fallen since the global crisis started. India's fiscal deficit increased substantially
in 2008 due to fuel and fertilizer subsidies, a debt waiver program for farmers, a job
guarantee program for rural workers, and stimulus expenditures. The government abandoned
its deficit target and allowed the deficit to reach 6.8% of GDP in FY09. The government has
expressed a commitment to fiscal stimulus in 2010, and to deficit reduction the following two
years. It has proposed limited privatization of government-owned industries, in part to offset
the deficit. India's long term challenges include inadequate physical and social infrastructure,
limited employment opportunities, and insufficient basic and higher education opportunities.
In the long run, however, the huge and growing population is the fundamental social,
economic, and environmental problem.
1.1.1GDP:

Gross domestic Percent

Gross domestic product, Percent
Year Year product,
constant prices Change
constant prices Change

1980 3.626   2000 5.693 -17.68 %

1981 6.176 70.33 % 2001 3.885 -31.76 %

1982 4.072 -34.07 % 2002 4.558 17.32 %

1983 6.365 56.31 % 2003 6.852 50.33 %

1984 4.647 -26.99 % 2004 7.897 15.25 %

1985 4.891 5.25 % 2005 9.211 16.64 %

1986 4.88 -0.22 % 2006 9.817 6.58 %

1987 4.153 -14.90 % 2007 9.372 -4.53 %

1988 8.258 98.84 % 2008 7.346 -21.62 %

1989 6.81 -17.53 % 2009 5.355 -27.10 %

1990 5.63 -17.33 %

1991 2.136 -62.06 %

1992 4.385 105.29 %

1993 4.939 12.63 %

1994 6.199 25.51 %

1995 7.351 18.58 %

1996 7.56 2.84 %

1997 4.619 -38.90 %

1998 5.979 29.44 %

1.1.2 NATIONAL INCOME:

"National Income is the money value of all goods and services produced in a country during a
year"

Productive Sectors:

Primary Secondary Tertiary

Agriculture and allied Registered industries Communications
activities
Forest Non registered industries Banking/Insurance
Fishing Electricity Public Administration
Mining Trade Health
Manufacturing Education
Other services

Debt > External $165,400,000,000.00 [28th of 136]

Distribution of family income >Gini index 36.8 [13th of 43]

Economic freedom 1.5 [123rd of 156]

Economic importance 2.1 [25th of 25]

Exports $151,300,000,000.00 [25th of 189]

GDP $906,268,000,000.00 [12th of 203]

GDP > PPP $3,362,960,000,000.00 [4th of 163]

GDP > Real growth rate 9% [21st of 198]

GDP per capita in 1973 $853.00 [50th of 52]

GINI index 36.8 [11th of 40]

Gross National Income $477,000,000,000.00 [12th of 172]

Human Development Index 0.602 [128th of 178]

Income category Low income

Income distribution > Richest 10% 33.5% [38th of 114]

Population below poverty line 25% [9th of 46]

Poverty > Share of all poor people 41.01 % of world's poor [1st of 80]

Public debt 58.2 % of GDP [32nd of 121]

Technological achievement 0.2 [59th of 68]

Tourist arrivals 2,374,000 [35th of 152]

1.1.3 INFLATION:

For 2009, Indian inflation stood at 11.49% Y-o-Y. This rate reflects the general increase in
prices, taking into account the purchasing power of the common man. According to the
Economic Survey Report for 2009-10, economic growth decelerated to 6.7% in 2008-09,
from 9% in 2007-08. The economy is expected to grow by 8.7% in 2010-11, with a return to
a growth rate of 9% in 2011-12

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 - -
2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70
2007 6.72 7.56 6.72 6.67 6.61 5.69 6.45 7.26 6.40 5.51 5.51 5.51
2006 4.39 5.31 5.31 5.26 6.14 7.89 6.90 5.98 6.84 7.63 6.72 6.72

1.1.4 MONITORY POLICY:

Introduction
In mid 90s the thrust of monetary policy was to reduce the annual inflation rate and provide
credit support for production. Money supply (M3) was reduced considerably, mainly because
of a slow growth in bank deposits and a decline in the growth of reserve money.

Slow Growth

Another major factor in controlling this growth was the lower level of foreign exchange
inflows. Slower monetary growth was accompanied by lower bank credit to the commercial
sector. These trends were compounded by a decline in other sources of finance to industry,
such as primary issues in the domestic stock market and GDR issues in Euro markets.

Other reasons

Funds raised from capital markets declined and the amount raised through Euro issue loans
also fell down nearly 70 percent over the same period. Continued high levels of government
borrowing associated with a large and over-budget fiscal deficit kept money markets tight
throughout the period. This in turn put increasing pressure on interest rates.

Monetary Growth
Despite falling inflation, real rates faced by industry remained high, and the prime lending
rate of most of the banks was 16.5 percent. Based on an inflation rate of 6 percent and
projected GDP growth of 6.6 percent for 1996-97, monetary growth had been targeted at
15.5-16 percent for 1996-97

RBI measures

The RBI reduced banks' cash reserve requirements by one percentage point, freed bank
deposit interest rates of over one year term and shortened the minimum term for deposits
from 46 days to 30 days. It also withdrew a refinancing facility for banks' investments in
government securities. These steps were to add the equivalent of USD 1.2 billion to the
banking sector. Short-term call money market rates of interest and forward premiums on the
dollar have dropped sharply.

Response
While financial and industry sources have welcomed the liquidity-easing measures, they
remain worried at the rigidity of high lending rates of interest and suspect that the
Government will soon absorb this new bank liquidity by increasing Government borrowing
from the market.

Growth of M3

Growth in broad money (M3) in 1997-98 registered an increase, higher than the RBI's growth
target. The increase was due to a substantial expansion of domestic credit to the government
and the business sector, and an increase in net foreign exchange assets. Bank credit to
business increased, net RBI credit to the government increased and strong foreign exchange
inflows during the first half of 1997-98 coupled with sluggish credit creation ensured that the
money market was awash with liquidity. Banks investment in government securities
increased by 17.7 percent in 1997-98, and non-food credit to business increased by 14.2
percent.

Credit policy

The credit policy for April-October 1998, aimed to accelerate industrial investment and
output, keep inflation under control, continue financial sector reforms, reduce interest rates
and improve credit availability to meet business requirements. Key reference rates were
reduced by one percentage point each, sending a strong signal that commercial banks should
lower interest rates for commercial borrowers. Banks responded by reducing prime lending
rates to 13 percent. The Cash Reserve Ratio requirement was left unchanged at 10 percent.
Under the new credit policy, FIIs were allowed to invest up to 30 percent of their assets in
treasury bills, and banks were given freedom to fix penalties on premature withdrawal of
deposits. In January 1998, the rupee hit a low of Rs 40.45/ dollar, due in large part to
concerns about the Asian currency crisis.

RBI measures

The RBI adopted a number of measures that stopped the rupee's slide and actually led to
some appreciation. These measures included an increase in banks' cash reserve ratio and an
increase in the RBI's bank rate. Once the rupee had stabilized, the RBI announced a two-
phase rollback of the bank rate to 10 percent, and of the CRR to 10 percent. In both cases, the
first phase was to be effective from late March and the second in early April. The interest rate
on short-term domestic deposits was also deregulated and banks were allowed to set different
prime lending rates.

FII/FDI
Foreign institutional investors or FIIs will have to follow the rules applicable to portfolio
investors even if they are investing through the foreign direct investment route, limiting their
ability to acquire big stakes in companies.

“FDI route is long term and more stable form of investment and this policy will restrict the
free flow of FDI into the country,” said Punit Shah, leader, financial services tax practice,
KPMG.

FIIs can invest in Indian companies through both the portfolio investment route or secondary
market purchases and foreign direct investment route. But the policy makes a distinction
between portfolio investments by FIIs and foreign direct investment.

Under the portfolio route FIIs can individually acquire up to 10% equity in an Indian
company though the aggregate FII limit is pegged at 24%. The limit can, however, be raised
after securing board’s approval in sectors where 100% FDI is allowed.

The DIPP has now clarified that the same rule will apply if FIIs come through the FDI route.
They can not pick up more than 10% stake in a company even if their investments are treated
as FDI and that such investment should not be more than 24% of the total equi
 EXCHANGE RATE:
In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX
rate) between two currencies specifies how much one currency is worth in terms of the other.
It is the value of a foreign nation’s currency in terms of the home nation’s currency

INDIAN RUPEE:

1INR IN INR

American Dollar    0.0216264   46.2397 

  Argentine Peso    0.0864891   11.5622 
  Australian Dollar    0.0233498   42.8268 
  Botswana Pula    0.146719   6.81573 
  Brazilian Real    0.0371635   26.9081 
  British Pound    0.0139939   71.4598 
  Bulgarian Lev    0.0332392   30.085 
  Canadian Dollar    0.0222943   44.8546 
  Chilean Peso    10.7334   0.093167 
  Chinese Yuan    0.146393   6.83091 
  Colombian Peso    38.9576   0.0256689 
  Croatian Kuna    0.123798   8.07765 
  Danish Krone    0.126533   7.90309 
  Estonian Kroon    0.265919   3.76055 
  Euro    0.0169952   58.84 
  Hong Kong Dollar    0.167988   5.95282 
  Hungarian Forint    4.8241   0.207292 
  Iceland Krona    2.56007   0.390614 
  Israeli New Shekel    0.0815459   12.263 
  Japanese Yen    1.81577   0.55073 
  Kazakhstani Tenge    3.18925   0.313553 
  Latvian Lat    0.0120462   83.0135 
  Libyan Dinar    0.0417909   23.9286 
  Lithuanian Litas    0.0586812   17.0412 
  Malaysian Ringgit    0.0671957   14.8819 
  Mexican Peso    0.280257   3.56815 
  Nepalese Rupee    1.61225   0.620251 
  New Zealand Dollar    0.0296498   33.727 
  Norwegian Kroner    0.133854   7.4708 
  Omani Rial    0.00831537   120.259 
  Pakistan Rupee    1.85283   0.539716 
  Qatari Rial    0.0787202   12.7032 
  Romanian Leu    0.0726376   13.767 
  Russian Ruble    0.667606   1.49789 
  Saudi Riyal    0.0810991   12.3306 
  Singapore Dollar    0.0289838   34.5021 
  South African Rand    0.155309   6.43877 
  South Korean Won    25.2337   0.0396295 
  Sri Lanka Rupee    2.43116   0.411327 
  Swedish Krona    0.156389   6.39433 
  Swiss Franc    0.0221277   45.1921 
  Taiwan Dollar    0.688828   1.45174 
  Thai Baht    0.665619   1.50236 
  Trinidad/Tobago Dollar    0.137007   7.29889 
  Turkish Lira    0.0325696   30.7034 
  Venezuelan Bolivar    0.0928717   10.7675 
using values from Friday, September 10, 2010
 NATURAL CALAMITIES

Introduction

Disasters in all forms , whether made-created or natural have an immediate direct reflection
on the economies where they strike and in a chain-reaction on overall economies because of
the complex demands that have to be addressed to bring relief and a sense of normalcy as
best as possible.

However , in this topic the economical effects due to natural disaster are specifically being
addressed and first we should look at some of the different types of natural disaster faced by
humankind the world over.

These include earthquakes , volcanic eruptions , flooding in all forms including typhoons and
tornados tsunamis , landslides out-break of diseases and even lightening among other natural
phenomena . Most of the times , these natural disasters strike without early warning causing
devastation to people , their properties and livelihoods and the environment . As a
consequence , economies are strained to provide relief rehabilitation and other humanitarian
aid to the affected people and for the repair of damaged infrastructures.

One point of interest to be made is that in comparison with the past ,the modern world has an
increased population with a better organised living style , based on close and densely
populated communes with larger houses , buildings , industrial complexes and overall
structures .Therefore , more people are likely to be affected when natural disasters strike due
to this important factor .In recognition of the terrible devastation natural disasters can cause
,all second Wednesdays in Octobers are now considered as International Days for Natural
Disasters by the United Nations ,to refocus the urgent need to prevent activities and reduce
loss of life , damage to property ,infrastructure and the environment . Plus , to focus on
finding ways and means of managing social and economic without disruption when natural
disasters strike.

Background to Natural Disaster and Its Effect on Economy The regularity with which natural
disasters strike is rising but with unpredictable intervals . The reasons for these disasters are
also due to the consequences of development and industrialisation , deforestation and
constant degradation of the ecological systems the world over . For examples , when the
Caribbean was hit be tropical storms in 2004 , due to deforestation there was nothing to stop
the storm waters from wreaking devastating havoc in Haiti . Similarly , European countries
such as Germany and France were adversely affected when their major rivers over-flooded
because they had been straightened to ease the flow commercial traffic on them . While the
element of human behaviour also plays a part towards the growing patterns of climate
 changes and global warming , the natural phenomena factors have also to be considered as
the reasons.

 INTEREST RATE
The RBI left all major policy rates like repo and reverse repo rates — the rates at which it
lends to and accepts money from banks respectively — and cash reserve ratio (CRR) — the
percentage of deposits banks are supposed to keep with the central bank — unchanged. But it
took the first step towards rolling back its easy money policies, pursued for the past year to
counter the economic slowdown. It terminated special liquidity facilities like credit refinance
limits extended to banks against the loans given to exporters and mutual fund companies
ahead of the original March 31, 2010 expiry date.

Cash Reserve Ratio and Interest Rates

(per cent per annum)
2009 2010
Item/Week Ended
Aug. 28 Jul. 23 Jul. 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27
1 2 3 4 5 6 7 8
Cash Reserve Ratio
5.00 6.00 6.00 6.00 6.00 6.00 6.00
(per cent)(1)
Bank Rate 6.00 6.00 6.00 6.00 6.00 6.00 6.00
I.D.B.I.(2) 10.25 10.25 10.25 10.25 10.25 10.25 10.25
11.00-
Base Rate(3) 7.50-8.00 7.50-8.00 7.50-8.00 7.50-8.00 7.50-8.00 7.50-8.00
12.00
Deposit Rate(4) 6.50-7.75 6.00-7.50 6.00-7.50 6.00-7.50 6.00-7.65 6.75-7.75 6.75-7.75
Call Money Rate              
(Low/High)(5)
- Borrowings 1.00/3.30 2.90/5.85 2.90/5.81 2.90/6.10 1.10/6.00 2.90/5.85 2.00/5.80
- Lendings 1.00/3.30 2.90/5.85 2.90/5.81 2.90/6.10 1.10/6.00 2.90/5.85 2.00/5.80
Cash Reserve Ratio relates to Scheduled Commercial Banks (excluding Regional Rural Banks).
(2) Minimum Term Lending Rate (MTLR)

(3) Base Rate relates to five major banks since July 1, 2010. Earlier figures relate to Benchmark Prime
Lending Rate (BPLR)
(4) Deposit Rate relates to major banks for term deposits of more than one year maturity.
(5) Data cover 90-95 per cent of total transactions reported by participants.

 INFRASTRATURE:
 Infrastructure is given due recognition for a nations economic progress. Infrastructure sector
is characterized by

 Natural monopoly
 High sunk costs
 Non tradability of output
 Non rivalness in consumption
 Price exclusion
 Impart externalities

 Infrastructure in India include transportation, agriculture, water management,

telecommunications, industrial and commercial development, power, petroleum and natural
gas, housing and other segments such as mining, disaster management services, technology-
related infrastructure.

Important sectors in Infrastructure in India:

Within the Infrastructure of India, the transportation sector is the most important, including
the aviation, ports, roads, rail system and logistics. The agriculture sector comprises
infrastructure-related storage facilities, construction relating to agro-processing projects and
reservation and storage of perishable goods. Among others essential sectors, real-estate
development, including industrial parks, special economic zones, tourism and entertainment
centers, educational institutions and hospitals and solid waste management systems, also play
significant role in Indian economy.
 Finance for Infrastructure in India:
The rules for government-owned infrastructure companies for raising funds through initial
share offerings are made flexible by the Securities and Exchange Board of India, which
naturally will increase the flow of investment in the Infrastructure of India. To bridge the
wide gap between the potential demand for infrastructure for high growth and the available
supply, there is urgent need for a close partnership between the public and private sectors,
with a vital role reserved for foreign capital. In India infrastructure sector itself is becoming
an attractive investment area for FDIs. To encourage foreign funds flow into the
Infrastructure in India, the Indian Finance Ministry has allowed Foreign Institutional
Investors (FIIs) also to invest in unlisted companies. FIIs now can invest 100 per cent of their
funds in the Infrastructure in India. In order to make the core sector more attractive for FDI,
the Cabinet Committee on Foreign Investment (CCFI) has modified the 49 percent cap on
foreign equity in the infrastructure sector to make fund mobilization easier. This major policy
decision which will indirectly raise the foreign equity investment in infrastructure sector to
well over 51 per cent.

Besides, even if allocation in the Infrastructure in India is raised with a greater inflow of FDI
and a large participation of private sector, the immediate problem will still remain, since,
infrastructure is subjected to long gestation period. Consequently, the inadequacy of
Infrastructure in India will continue for quite some time, unless technology upgradation can
be done in the infrastructure production, including construction activities, for reducing the
gestation lags and simultaneously improving the quality of products. With this infrastructure
limitation any indiscriminate growth may lead the economy of the country to a situation of
over-heating and a further rise in inflation.

Under the Infrastructure in India the most essential field in which there should be
development is in the urban infrastructure. Except for a few large projects in a handful of
cities, paucity of urban infrastructure projects is a standing problem. Although city mass
transport systems and airports have found place in developmental plans, essential services
such as roads, drinking water, sewerage management, drainage, and primary health are still
greatly under developed.

However, with the economy growing at more than at the rate of 8 per cent, the government is
aiming at an economic growth rate of 8 per cent during the Eleventh Plan (2008 �12), for
which the government is taking necessary steps to develop the Infrastructure in India.
 CH 2
INDUSTRY
 2.1 INTRODUCTION TO POWER SECTOR

2.1.1 GLOBAL OVERVIEW

The energy required to support our economies and lifestyles provides tremendous
convenience and benefits. De-regulation in areas of the global energy markets has led to
fierce competition. Now more than ever electricity has to be produced at a lower cost with
many countries imposing ever tightening environmental legislation to reduce the impact
power generation has on the environment.

The enormous challenges are recognized in providing electricity as efficiently as possible and
strive to develop technology to meet your needs. Collectively, developing countries use 30%
of the world's energy, but with projected population and economic growth in those markets,
energy demands are expected to rise

World energy consumption is projected to expand by 50% from 2005 to 2030 in the IEO2008
reference case projection. Although high prices for oil and natural gas, which are expected to
continue throughout the period, are likely to slow the growth of energy demand in the long
term, world energy consumption is projected to continue increasing strongly as a result of
robust economic growth and expanding populations in the world‘s developing countries.
Energy demand in the OECD economies is expected to grow slowly over the projection
period, at an average annual rate of 0.7%, whereas energy consumption in the emerging
economies of non-OECD countries is expected to expand by an average of 2.5 % per year.

China and India—the fastest growing non-OECD economies—will be key contributors to

world energy consumption in the future. Over the past decades, their energy consumption as a
share of total world energy use has increased significantly. In 1980, China and India together
accounted for less than 8 % of the world‘s total energy consumption. In 2005 their share had
grown to 18 %.

Even stronger growth is projected over the next 25 years, with their combined energy use
more than doubling and their share increasing to one-quarter of world energy consumption in
2030 in the IEO2008 reference case. In contrast, the U.S. share of total world energy
consumption is projected to contract from 22 % in 2005 to about 17 % in 2030. Energy
consumption in other non-OECD regions also is expected to grow strongly from 2005 to
2030, with increases of around 60 % projected for the Middle East, Africa, and Central and
South America. A smaller increase, about 36 %, is expected for non-OECD Europe and
Eurasia (including Russia and the other former Soviet Republics), as substantial gains in
energy efficiency result from the replacement of inefficient Soviet-era capital stock and
population growth rates decline.

Fig .1: World Marketed Energy Consumption, 1980 - 2030

 Source: EIA International Energy Annual 2005(June-October 2007)

SIZE

The total installed capacity in India is calculated to be 145,554.97 mega watt, out of which
75,837.93 mega watt (52.5%) is from State, 48,470.99 mega watt (34%) from Centre, and
21,246.05 mega watt (13.5%) is from Private sector initiative.

 Generation capacity of 141 GW; 663 billion units produced (1 unit = 1kwh)-January
2008. CAGR of 5% over the last 5 years
 India has the fifth largest electricity generation capacity in the world. Low per capita
consumption at 631 units; less than half of China
 Transmission & Distribution network of 6.6 million circuit km - the third largest in
the world
 Coal fired plants constitute 54% of the installed generation capacity, followed by 25%
from hydel power, 10% gas based, 3% from nuclear energy and 8% from renewable sources

STRUCTURE

 Majority of Generation, Transmission and Distribution capacities are with either

public sector companies or with State Electricity Boards (SEBs)
 Private sector participation is increasing especially in Generation and Distribution
 Distribution licences for several cities are already with the private sector
 Three large ultra-mega power projects of 4000MW each have been recently awarded
to the private sector on the basis of global tenders.
  

MAIN PLAYERS

Major players in the Power sector can be broadly divided into public, private and
international private sectors.

•G - Generation •T - Transmission •D - Distribution

Source: Ministry of Power, Capitaline

POLICY

 100% FDI permitted in Generation, Transmission & Distribution - the Government is

keen to draw private investment into the sector
 Policy framework: Electricity Act 2003 and National Electricity Policy 2005
 Incentives: Income tax holiday for a block of 10 years in the first 15 years of
operation; waiver of capital goods' import duties on mega power projects (above 1,000 MW
generation capacity)
 Independent Regulators: Central Electricity Regulatory Commission for central PSUs
and inter-state issues. Each state has its own Electricity Regulatory Commission

STRATEGIES TO ACHIEVE THE OBJECTIVES:

Power Generation Strategy with focus on low cost generation, optimization of capacity
utilization, controlling the input cost, optimisation of fuel mix, Technology upgradation and
utilization of Non Conventional energy sources

Transmission Strategy with focus on development of National Grid including Interstate

connections, Technology upgradation& optimization of transmission cost.

Distribution strategy to achieve Distribution Reforms with focus on System upgradation,

loss reduction, theft control, consumer service orientation, quality power supply
commercialization, Decentralized distributed generation and supply for rural areas

Regulation Strategy aimed at protecting Consumer interests and making the sector
commercially viable

Financing Strategy to generate resources for required growth of the power

sectorConservation Strategy to optimise the utilization of .electricity with focus on Demand
Side management, Load management and Technology upgradation to provide energy
efficient equipment / gadgets.

Communication Strategy for political consensus with media support to enhance the genera;
public awareness.

statistics

Power Sector at a glance - all India - as on February 28, 2009

Opportunities n outlook

With the country’s power requirement expected to touch 8,00,000 MW by 2031-32, India
would need an investment of Rs6,00,000 crore. This investment is possible only by attracting
foreign direct investment and public-private participation in the power sector,

At present, the energy shortage in the country was estimated at 10% and it touches 13%
during peak seasons. There are states, where the energy shortage is 25%.

This is a serious impediment in the way of industrial development and economic process. We
need a crash project for capacity building and need to eliminate power shortage by 2012.

2.1.2 OPPORTUNITY
 India possesses a vast opportunity to grow in the field of power generation, transmission, and
distribution. The target of over 150,000 MW of hydel power germination is yet to be
achieved. By the year 2012, India requires an additional 100,000 MW of generation capacity.
A huge capital investment is required to meet this target. This has welcomed numerous power
generation, transmission, and distribution companies across the globe to establish their
operations in the country under the famous PPP (public-private partnership)programmes. The
power sector is still experiencing a large demand-supply gap. This has called for an effective
consideration of some of strategic initiatives. There are strong opportunities in transmission
network ventures - additional 60,000 circuit kilometers of transmission network is expected
by 2012 with a total investment opportunity of about US$ 200 billion.

The implementation of key reforms is likely to foster growth in all segments:

 Unbundling of vertically integrated SEBs

 “Open Access” to transmission and distribution network
 Distribution circles to be privatised
 Tariff reforms by regulatory authorities
 Opportunities in generation for:
 Coal based plants at pithead or coastal locations (imported coal)
 Natural Gas/CNG based turbines at load centres or near gas terminals
 Hydel power potential of 150,000 MW is untapped as assessed by the Government of
India
 Renovation, modernisation, up-rating and life extension of old thermal and hydro
power plants

2.1.3 INITIATIVES

 Allowing foreign equity participation up to 100 per cent in the power sector under the
automatic route.
 Encouraging the private sector to set up coal, gas or liquid-based thermal projects,
hydel projects and wind or solar projects of any size.
 Constitution of Independent State Electricity Regulatory Commissions in the states.
 Deregulation of the ancillary sectors such as coal.
 Introduction of the Electricity Act 2003 and the notification of the National Electricity
and Tariff policies.
 Provision of income tax holiday for a block of 10 years in the first 15 years of
operation and waiver of capital goods' import duties on mega power projects (above 1,000
MW generation capacity).
 Un-bundling of the State Electricity Boards (SEBs) into generation, transmission, and
distribution companies for better transparency and accountability.
 2.1.4 OUTLOOK

 Over 78,000 MW of new generation capacity is planned in the next five years. A
corresponding investment is required in Transmission and Distribution networks
 Power costs need to be reduced from the current high of 8-10 cents/unit by a
combination of lower AT & C losses, increased generation efficiencies and added low-cost
generating capacity

2.1.5 POTENTIAL

 Large demand-supply gap: All India average energy shortfall of 10% and peak
demand shortfall of 13%.
o Unbundling of vertically integrated SEBs
o “Open Access” to Transmission and Distribution networks
o Select distribution circles to be franchised/privatised
o Tariff reforms by regulatory authorities

 Opportunities in Generation for:

o Coal based plants at pithead or coastal locations (imported coal)
o Natural Gas/CNG based turbines at load centres or near gas terminals
o Hydel power potential of 150,000 MW is untapped as assessed by Government of India
o Renovation, modernisation, up-rating and life extension of old thermal and hydro power
plants

 Opportunities in Transmission network ventures - additional 60,000 circuit km of

transmission network expected by 2012.

 Opportunities in Distribution through bidding for the privatisation of distribution in

thirteen states that have unbundled/corporatised their State Electricity Boards – expected to
take place over the next 2-3 years

 Total investment opportunity of about US$ 200 billion over a seven year horizon.

The sector has since witnessed innovative financial engineering as well as the introduction of
incentive-based schemes funded by the central government. There are mainly 3 stage involve.

1. GENERATION

2. TRANSMISSION

3. DISTRIBUTION
GENERATION

Electricity generation is the process of creating electricity from other forms of energy.

The fundamental principles of electricity generation were discovered during the 1820s and
early 1830s by the British scientist Michael Faraday. His basic method is still used today:
electricity is generated by the movement of a loop of wire, or disc of copper between the
poles of a magnet.

Electricity is most often generated at a power station by electromechanical generators,

primarily driven by heat engines fueled by chemical combustion or nuclear fission but also by
other means such as the kinetic energy of flowing water and wind. There are many other
technologies that can be and are used to generate electricity such as solar photovoltaic and
geothermal power. Unlike the solar heat concentrators mentioned above, photovoltaic panels
convert sunlight directly to electricity.

Centralized power generation became possible when it was recognized that alternating
current power lines can transport electricity at very low costs across great distances by taking
advantage of the ability to raise and lower the voltage using power transformers.

Electricity has been generated at central stations since 1881. The first power plants were run
on water power or coal, and today we rely mainly on coal, nuclear, natural gas, hydroelectric,
and petroleum with a small amount from solar energy, tidal harnesses, wind generators, and
geothermal sources.

TRANSMISSION
Electric power transmission or "high voltage electric transmission" is the bulk transfer of
electrical energy, from generating power plants to substations located near to population
centres’. Transmission lines, when interconnected with each other, become high voltage
transmission networks. These are typically referred to as "power grids" or sometimes simply
as "the grid".

Historically, transmission and distribution lines were owned by the same company, but over
the last decade or so many countries have introduced market reforms that have led to the
separation of the electricity transmission business from the distribution business.

Electricity is transmitted at high voltages (110 kV or above) to reduce the energy lost in long
distance transmission. Power is usually transmitted through overhead power lines.
Underground power transmission has a significantly higher cost and greater operational
limitations but is sometimes used in urban areas or sensitive locations.
DISTRIBUTION

Electricity distribution is the final stage in the delivery (before retail) of electricity to end
users. A distribution system's network carries electricity from the transmission system and
delivers it to consumers. Typically, the network would include medium-voltage (less than
50 kV) power lines, electrical substations and pole-mounted transformers, low-voltage (less
than 1 kV) distribution wiring and sometimes electricity meters
A key limitation in the distribution of electricity is that, with minor exceptions, electrical
energy cannot be stored, and therefore it must be generated as it is needed. A sophisticated
system of control is therefore required to ensure electric generation very closely matches the
demand. If supply and demand are not in balance, generation plants and transmission
equipment can shut down which, in the worst cases.
2.2 SOURCES OF ENERGY

SOURCES OF ENERGY GENERATION

Fossil Fuels Renewable Nuclear

2.2.1 Fossil Fuels

Types of fossil fuels

A. Petroleum

B. Coal

C. Natural Gas

A. Petroleum

Petroleum, or "crude oil," is a liquid fuel that is present in various locations throughout the
world. It has many uses, from the generation of electricity to the manufacture of medicines,
plastics, and other commercial items. Much like coal, petroleum is formed from the remains
of biodegraded organic material. When animals that lived in the sea millions of years ago
died underwater, their remains were gradually covered by layers of very fine dirt known as
"silt" on the ocean floor. Then, as the years passed, pressure from the layers built up and
compressed the organic material, forming the oil.

B. Coal
 About 300 million years ago, enormous ferns and other prehistoric plants were common on
the swamp-like earth. When those plants died and fell to the ground, they were covered with
water and they slowly decomposed. As decomposition took place in the absence of oxygen,
much of the hydrogen content of the matter was eroded away, leaving a material rich in
carbon. The material was compressed over the years by sand and dirt, leaving the form of
carbon known as coal.

C. Natural Gas

Natural gas is almost always found in deposits of petroleum. When the petroleum is drilled,
natural gas is also recovered. Wells with only natural gas also exist. Many houses, offices,
and other buildings are heated by natural gas heaters. The western hemisphere, Europe, and
parts of Africa contain the largest natural gas deposits. The gas is usually transported by
pipelines. Compared to petroleum and coal, natural gas is relatively clean-burning. Because it
contains only trace portions of sulphur and nitrogen.

Advantages and Disadvantages of Fossil Fuel

ADVANTAGES

 Depending on fuel, good availability

 Simple burning process can directly heat or generate electricity
 Inexpensive
 Easily distributed

DISADVANTAGES

 Probable contributor to global warming

 Questionable availability of some fuels...major price swings based on politics of oil
regions
 Cause of acid rain
 2.2.2Renewable Energy

Uncertainty about the future of fusion research has increased the importance of "renewable"
energy sources. Among the most important of these sources are hydroelectric, solar, and
wind. As you will see, renewable energy sources' main assets are their environmental
cleanliness. Major drawbacks, however, are limited energy production (in most cases not
suitable for large-scale power generation) as well as relative costliness to build and maintain.
In light of diminishing fossil fuels, however, renewable energy may end up as the energy of
choice for the 21st century. India is blessed with abundance of water in the form of rivers and
oceans, sunlight, biomass and large tracts of land with suitable amounts of wind.

Hydroelectric Solar Biomass Wind Geothermal

a) Hydroelectric

Man has utilized the power of water for years. As coal became a better-developed source of
fuel, however, the importance of hydropower decreased. Water power really didn't stage a
major comeback until the 20th century. The development of an electric generator helped
increase hydropower's importance.

The building of several hydroelectric dams successful in controlling the flooding, they also
provide electricity to the region. India is gifted with economically exploitable and feasible
(large) hydro potential assessed to be about 100,000 MW. In addition, it is estimated that the
country has over 15,000 MW of small and micro hydro potential. (Source: MNRE)

Advantages and Disadvantages of hydroelectric

ADVANTAGES

 Unlimited fuel source

 Minimal environmental impact
 Viable source--relatively useful levels of
energy production
 Can be used throughout the world

DISADVANTAGES

 Smaller models depend on availability of fast flowing streams or rivers

 Run-of-the-River plants can impact the mobility of fish and other river life.
NOTE: Building a fish ladder can lessen this negative aspect of hydroelectric power

OPPORTUNITIES IN INDIA

 With it intricate network of rivers, substantial opportunities for generation of hydro-

power exist in India.

 Only 22% of the 150 GW hydroelectric potential in the country has been harnessed so
far. (Economic Times 2008) Private participation will play a key role in meeting the target
requirement of an additional 45 GW over the next 10 years.

b) Solar power

There would be no life on earth without the sun, which provides energy needed for the
growth of plants, and indirectly, the existence of all animal life. The solar energy scientists
are interested in is energy obtained through the use of solar panels. Although the field of
research dealing with this type of solar power is relatively new, bear in mind that man has
known about the energy of the sun for thousands of years.
Solar water heaters have proved the most popular so far within solar energy, but in recent
times, interest in solar PV has accelerated.

Advantages and Disadvantages of solar power

ADVANTAGES

 Unlimited fuel source

 No pollution
 Often an excellent supplement to other renewable sources
 Versatile--is used for powering items as diverse as solar cars and satellites

DISADVANTAGES
 Very diffuse source means low energy production--large numbers of solar panels (and
thus large land areas) are required to produce useful amounts of heat or electricity
 Only areas of the world with lots of sunlight are suitable for solar power generation


OPPORTUNITIES IN INDIA

 Despite the prevalence of an inherent advantage in the form of solar insulation, the
potential for solar energy is virtually untapped in India.

 India’s installed solar – based capacity stands at a mere 100MW compared to its present
potential of 100,000MW.

 Based on the substantial investment opportunities that exist in this sector, it is estimated
that by 2031 – 32, solar power would be the single largest source of energy, contributing
1,200 MTOE i.e. more than 30% of our total expected requirements. (India Brand Equity
Foundation)

 High capital investment has kept solar power away from mass applications. However,
capex has been steadily declining and is likely to touch $2 per watt by 2010 and, perhaps, hit
$1.5 per watt by 2012 on account of high efficiency solar cells. By 2012, solar power could
become more attractive than non-pithead coal and gas. Only hydro and nuclear will have
lower delivered costs.

 In July 2009, India unveiled a $19 billion plan to produce 20 GW of solar power by
2020.Under the plan, solar-powered equipment and applications would be mandatory in all
government buildings including hospitals and hotels.

c) Biomass

Although chances are that you have never heard of "biomass" before, it is one of the oldest
and most well-established energy sources in the world. Biomass is simply the conversion of
stored energy in plants into energy that we can use. Thus, burning wood is a method of
producing biomass energy.

If the burning of wood were the only biomass application, then that field of study would not
be nearly as interesting as it is. In fact, biomass has many possibilities as a renewable energy
source. High energy crops grown specifically to be used as fuel are being developed, and
scientists are beginning to consider agricultural and animal waste products as possible fuel
sources

Advantages and Disadvantages of biomass

ADVANTAGES

 Theoretically unlimited fuel source

Wood
 When direct burning of plant mass is not used to generate energy, there is minimal
environmental impact
 Trees
 Alcohols and other fuels produced by biomass are efficient, viable, and relatively
clean-burning
 Shrubs
 Available throughout the world
 Wood Residue
DISADVANTAGES
Sawdust, bark, etc.
from forest clearings
 Could contribute a great deal to global
and mills
warming and particulate pollution if directly
Wastes burned
 Still an expensive source, both in
 Municipal
terms Solid Waste
of producing the biomass and
(MSW)
converting it to alcohols Felled Trees Wood Chips
Paper,
 foodOn
anda yard
small scale there is most likely a
wastes, plastics,
net loss wood,
of energy--energy must be put in to
and grow
tires the plant mass
 Livestock Waste
 Process Waste The
 Sewage Paper Waste
Wheelabrator
Shasta plant is
Crops
powered by

 Starch crops wood chips.

Corn, wheat, and

barley
 Sugar crops
Cane and beet
 Forage crops Corn Field
Sewage Plant
2.2.3alfalfa,
Grasses, Wind Power
and
clover
 Oilseed crops
soybean, sunflower,
safflower

Sugar Cane A biotechnologist

Aquatic Plants
examines a flask of oil
 Algae made from microalgae.
d) wind power

Mankind has made use of wind power since ancient times. Wind has powered boats and other
sea craft for years. Further, the use of windmills to provide power for the accomplishment of
agricultural tasks has contributed to the growth of civilization. This important renewable
energy source is starting to be looked at again as a possible source of clean, cheap energy for
years to come.

Wind power in India has made rapid strides, and India is today one of the top ranked
countries for wind power generation. The development of wind power in India began in the
 1990s, and has significantly increased in the last few years to reach an installed capacity of
over 12 GW.

Advantages and Disadvantages of wind power

ADVANTAGES

 Unlimited fuel source

 No pollution
 Often an excellent supplement to other renewable sources

DISADVANTAGES

 Very diffuse source means low energy production--large numbers of wind generators
(and thus large land areas) are required to produce useful amounts of heat or electricity
 Only areas of the world with lots of wind are suitable for wind power generation
 Relatively expensive to maintain

OPPORTUNITIES IN INDIA

 India is the 4th largest country in the world in terms of installed wind energy. (KPMG
Report, November 2007)

 India’s potential of wind power is pegged at 45,000 MW while its current capacity
stands at only 7,660MW. (Economic Times 2008)

 Tax incentives, including availability of accelerated depreciation @ 80% under WDV

method on cost incurred on setting up of wind turbine generators have resulted in significant
private investment in this area.

 It is estimated that 6,000 MW of additional wind power capacity will be installed in

India by 2012. Wind power accounts for 6% of India's total installed power capacity, and it
generates 1.6% of the country's power.

 The Ministry of New and Renewable Energy (MNRE) has fixed a target of 10,500
MW between 2007-12, but an additional generation capacity of only about 6,000 MW might
be available for commercial use by 2012.
 e) Geothermal

The center of the earth can reach 12000 degrees

Fahrenheit. Just imagine if we could tap that heat
for our own use. Well, geothermal systems do just
that. Convection (heat) currents travel quite near
the surface in some parts of the world. For instance,
Iceland's capital city of Reykjavik is located near
hot springs that power virtually the entire city.

Indian geothermal power is another active renewable resource of energy in India that has the
capacity to produce 10,600 MW of power. However, this sector is just beginning to get
explored.

Advantages and Disadvantages of geothermal

ADVANTAGES

 Theoretically unlimited energy source

 No pollution
 Often an excellent supplement to other renewable sources
 Does not require structures such as solar panels or windmills to collect the energy--
can be directly used to heat or produce electricity (thus very cheap)

DISADVANTAGES

 Not available in many locations

 Not much power per vent

2.2.3 NUCLEAR POWER

The diminishing availability of natural resources such as coal, petroleum, and crude oil has
left scientists searching for an energy alternative. Harnessing the power of the atom appears
to be the solution to that search, at least for the time being. Fission research into lessening
 problems caused by reactors is of great concern to many, while fusion has risen to the
forefront of future energy research.

Advantages and disadvantages of nuclear power

ADVANTAGES

 Nuclear power plants don't require a lot of space.

 It doesn't pollute (it does, but in a very different way... more about it further on.)

 Nuclear energy is by far the most concentrated form of energy.

 DISADVANTAGES

 Nuclear explosions produce radiation, this radiation harms the cells of the body which can
make humans sick or even cause them death. Illness can appear or strike people years after
they were exposed to nuclear radiation

 A possible type of reactor disaster is known as a meltdown. In a meltdown, the fission

reaction of an atom goes out of control, which leads to a nuclear explosion releasing great
amounts of radiation.

 Reactors produce nuclear waste products which emit dangerous radiation, because they
could kill people who touch them, they cannot be thrown away like ordinary garbage.
Nuclear wastes are stored in special cooling pools at the nuclear plants.

 Another disadvantage is that nuclear reactors only last for about forty to fifty years.

OPPORTUNITIES IN INDIA

 By 2032, the government plans to raise the contribution of nuclear energy from the current
level of less than 3% to around 10% of the country's installed capacity (Angel Broking
report)

 The signing of the Indo – US nuclear deal has created significant opportunities for several
players across the entire power supply chain, with an estimated investment opportunity of
US$ 10 billion over the next five years. (JP Morgan estimate)

 Further, India has among the world's largest reserves of alternative nuclear fuel – thorium.
Accordingly, substantial investment opportunities are also likely to arise once commercial
production based on thorium becomes feasible.

Table: 1

Estimated medium-term (2032) potential and cumulative achievements as on 31-09-

2008.

Estimated Cumulative
No Potential Achievements
. Sources/Systems (MW) (MW)

Biomass Power (Agro residues &

1 Plantations) 61,000 656

2 Wind Power 100000 * 9521

3 Small Hydro Power (up to 25 MW) 15,000 2290

4 Cogeneration (bagasse) 5,000 993

5 Waste to Energy 2700 55

6 Solar Thermal Power (CSP) 200000** Nil

7 Solar PV and CPV 200000** 2.12

  Total 5,83,700 13,450

 2.3 POWER SECTOR IN INDIA

2.3.1 Power Infrastructure in India:

 The power sector in India is predominantly controlled by the Government of India's public
sector undertakings (PSUs). The power industry in India derives its funds and financing from
the government, some private players that have entered the market recently, World Bank,
public issues and other global funds.

 The Power Ministry India has set up Power Finance Corporation of India that looks after the
financing of the power sector in India. The Power Finance Corporation Limited provides
finance to major power projects in India for power generation and conversion, distribution
and supply of power in India.

 Power Finance Corporation (PFC) Ltd India also looks after the installation of any new
power projects as well as renovation of an existing power project India. The PFC in
association with central electricity authority and the ministry of power facilitates the
development in infrastructure of the power sector India.

 They have taken up construction of mega power projects that will answer to the power
shortage in various states through power transmission through regional and national power
grids.

AUTHORITY

Indian power sector comes under the Ministry of Power India. Earlier known as Ministry of
Energy, it comprised of separate departments for power, coal and non-conventional sources
of energy. In 1992, the Ministry of Power started working independently with work areas
covering planning and strategizing the Indian power projects and policies.

The Ministry of Power (MoP) is coordinated by Central Electricity Authority (CEA) in all
technical and economic aspects. Along with the CEA, other subsidiary organizations of the
Mop are:

   National Thermal Power Corporation (NTPC)

 National Hydro Electric Corporation (NHEC)

 Power Finance Corporation of India (PFCI)

 Nuclear Power Corporation of India Limited

 North Eastern Electric Power Corporation (NEEPC)

 Rural Electrification Corporation (REC)

 Damodar Valley Corporation (DVC)

 Bhakra Beas Management Board (BBMB)

 Tehri Hydro Development Corporation (THDC)

 Satluj Jal Vidyut Nigam (SJVN)

 Power Grid Corporation of India Ltd (Power Grid India)

 Power Trading Corporation (PTC)

 Bureau of Energy Efficiency (BEE)

 Central Electricity Regulatory Commission:

The Commission has been established under the Electricity Regulatory Commissions Act,
1998 to discharge the various functions.

 State Electricity Regulatory Commission:

The State Electricity Regulatory Commission has been envisaged in the Electricity
Regulatory Commissions Act, 1998. As per Section 17(1) of the Act, the State Government
may, if it deems fit, establish an Electricity Regulatory Commission for the State. The main
functions of the SERC would be
To determine the tariff for electricity, wholesale, bulk, grid or retail
To determine the tariff payable for use by the transmission facilities
To regulate power purchase and procurement process of transmission utilities and
distribution utilities

To promote competition, efficiency and economy in the activities of the electricity

industries, etc.
 2.3.2 POWER COMPANIES IN INDIA

Many government as well as private organizations have taken up the task of power generation in
India. The major Indian power companies playing prime are:

Bhakra Beas Management Board

Enercon Systems India
Essar Group
GMR Group
Gujarat State Petroleum Corporation Ltd
Jindal Steel & Power Limited
Karnataka Power Transmission Corporation Limited (KPTCL)
Karnataka Renewable Energy Development Limited
Konarka
Magnum Power Generation Limited
Nippo Batteries
Reliance Energy Ltd.
Shri Shakti
Durgapur Projects Limited
Satluj Jal Vidyut Nigam Ltd.
United Power
Ventral Systems Pvt. Ltd.
Enron India Power Plant
Celetronix Power India
Caterpillar Power India
Alton Power India
Thorium Power India
GE Power Controls India
Green Power India

2.3.3 POWER GENERATION IN INDIA

 Grand Total Installed Capacity is 156092.91 MW.

 India has the fifth largest generation capacity in the world with an installed capacity of 152
GW as on 30 September 2009, which is about 4 percent of global power generation. The top
four countries, viz., US, Japan, China and Russia together consume about 49 percent of the
total power generated globally.

 The average per capita consumption of electricity in India is estimated to be 704kWh during
2008-09. However, this is fairly low when compared to that of some of the developed and
emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The world average
stands at 2,300 kWh.

 The Indian government has set ambitious goals in the 11th plan for power sector owing to
which the power sector is poised for significant expansion. In order to provide availability of
over 1000 units of per capita electricity by year 2012, it has been estimated that need-based
capacity addition of more than 100,000 MW would be required. This has resulted in massive
addition plans being proposed in the sub-sectors of Generation Transmission and
Distribution.

 Thermal Power

Current installed capacity of Thermal Power (as of 12/2008) is 93,398.84 MW which is

64.7% of total installed capacity.

 Current installed base of Coal Based Thermal Power is 77,458.89 MW which comes
to 53.3% of total installed base.
 Current installed base of Gas Based Thermal Power is 14,734.01 MW which is 10.5%
of total installed base.
 Current installed base of Oil Based Thermal Power is 1,199.75 MW which is 0.9% of
total installed base.

The state of Maharashtra is the largest producer of thermal power in the country.

 Hydro Power

India was one of the pioneering countries in establishing hydro-electric power plants. The
power plant at Darjeeling and Shimsha (Shivanasamudra) was established in 1898 and 1902
respectively and is one of the first in Asia. The installed capacity as of 2008 was
approximately 36877.76. The public sector has a predominant share of 97% in this sector.

 Nuclear Power
 Currently, seventeen nuclear power reactors produce 4,120.00 MW (2.9% of total installed
base)

 Renewable Power

Current installed base of Renewable energy is 13,242.41 MW which is 7.7% of total installed
base with the southern state of Tamil Nadu contributing nearly a third of it (4379.64 MW)
largely through wind power.
 2.3.4 POWER TRANSMISSION IN INDIA
 Transmission of electricity is defined as bulk transfer of power over a long distance at
high voltage, generally of 132kV and above. In India bulk transmission has increased from
3,708ckm in 1950 to more than 165,000ckm today (as stated by Power Grid Corporation of
India).

 The transmission system planning in the country, in the past, had traditionally been
linked to generation projects as part of the evacuation system. But now Transmission
planning has moved away from the earlier generation evacuation system planning to integrate
system planning.

 Certain provisions in the Electricity Act 2003 such as open access to the transmission
and distribution network, recognition of power trading as a distinct activity, the liberal
definition of a captive generating plant and provision for
supply in rural areas are expected to introduce and
encourage competition in the electricity sector. It is
expected that all the above measures on the generation,
transmission and distribution front would result in
formation of a robust electricity grid in the country.

 The current installed transmission capacity is only

13 Percent of the total installed generation capacity. With
focus on increasing generation capacity over the next 8-
10 years, the corresponding investments in the
transmission sector is also expected to augment.

 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.

 The entire country has been divided into five regions for transmission systems,
namely, Northern Region, North Eastern Region, Eastern Region, Southern Region and
Western Region. The Interconnected transmission system within each region is also called
the regional grid.
 2.3.5 POWER DISTRIBUTION IN INDIA

 The total installed generating capacity in the country is over 148,700MW and the total
number of consumers is over 144 million. Apart from an extensive transmission system
network at 500kV HVDC, 400kV, 220kV, 132kV and 66kV which has developed to transmit
the power from generating station to the grid substations, a vast network of sub transmission
in distribution system has also come up for utilization of the power by the ultimate
consumers.

 However, due to lack of adequate investment on transmission and distribution (T&D) works,
the T&D losses have been consistently on higher side, and reached to the level of 32.86% in
the year 2000-01.The reduction of these losses was essential to bring economic viability to
the State Utilities.

 As the T&D loss was not able to capture all the losses in the net work, concept of Aggregate
Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as
well as commercial losses in the network and is a true indicator of total losses in the system.

 High technical losses in the system are primarily due to inadequate investments over the
years for system improvement works, which has resulted in unplanned extensions of the
distribution lines, overloading of the system elements like transformers and conductors, and
lack of adequate reactive power support.

 The commercial losses are mainly due to low metering efficiency, theft & pilferages. This
may be eliminated by improving metering efficiency, proper energy accounting & auditing
and improved billing & collection efficiency. Fixing of accountability of the personnel /
feeder managers may help considerably in reduction of AT&C loss.

 With the initiative of the Government of India and of the States, the Accelerated Power
Development & Reform Programme (APDRP) was launched in 2001, for the strengthening
of Sub – Transmission and Distribution network and reduction in AT&C losses.
Government Distribution Company
 State Discoms

Andhra Pradesh Eastern Power Distribution Company of A.P. Ltd.

Central Power Distribution Company of A.P. Ltd.
Southern Power Distribution Company of A.P. Ltd.
Northern Power Distribution Company of A.P. Ltd.

Assam Upper Assam Distribution Company Ltd

Central and Lower Assam Distribution Company
Ltd.

Delhi BSES Rajdhani Power Ltd.

BSES Yamuna Power Ltd.
North Delhi Power Ltd.

Haryana Uttar Haryana Bijli Vitran Nigam (UHBVN)

Dakshin Haryana Bijli Vitran Nigam (DHBVN)

Karnataka Bangalore Electricity Supply Company Ltd.

(BESCOM)
Mangalore Electricity Supply Company Ltd.
(MESCOM)
Hubli Electricity Supply Company Ltd. (HESCOM)
Gulbarga Electricity Supply Company Ltd.
(GESCOM)
CESCO Company Ltd.

Madhya Pradesh M.P. Poorv Kshetra Vidyut Vitran Co.

M.P.Paschim Kshetra Vidyut Vitran Co.
M.P.Madhya Kshetra Vidyut Vitran Co.

Orissa Central Electricity Supply Company of Orissa Ltd.

Northen Electricity Supply Company of Orissa Ltd.
Western Electricity Supply Company of Orissa Ltd.
Southern Electricity Supply Company of Orissa Ltd.

Rajasthan Jaipur Vidyut Vitran Nigam Ltd.

Ajmer Vidyut Vitran Nigam Ltd.
Jodhpur Vidyut Vitran Nigam Ltd.

Uttar Pradesh Poorvanchal Vidyut Vitran Nigam Ltd.

PashchimanchalVidyut Vitran Nigam Ltd.
Madhyanchal Vidyut Vitran Nigam Ltd.
Dakshinanchal Vidyut Vitran Nigam Ltd.
Kanpur Electric Supply Company Ltd.
  Private Distribution Company

Companies

BSES

BEST

CESC

TATA Power

Ahmedabad Electricity Corporation

Torrent

Surat Electricity Co-operation.

CURRENT STATUS OF DEMAND & SUPPLY

 India has an installed power generation capacity of 156 GW as on Dec 2009- fifth largest in
the world. The country generated a total of 723.8 billion KWh in FY 2008– 09 to meet the
demand of 777 billion KWh.

 The country is clearly a power deficit economy. The graph below compares the supply and
demand of power in India for past five years:
 The power deficit in the country has been to the tune of 11.9 percent during 2008-09. It is
noteworthy here that the power demand mentioned accounts only for the demand from the
electrified areas of the country.

 The country has about 80,000 villages that are yet to be electrified. Further, the mentioned
deficit does not take into account the latent demand (the electricity demand that could not be
realized due to load shedding).

CURRENT SCENARIO

Power Sector at a Glance "ALL INDIA"

As on 30-04-2010
Source:CEA

1.Total Installed Capacity:

Power for All by

2012
 Sector MW %age

State Sector 79,391.85 52.5

Central Sector 50,992.63 34.0  

Private Sector 29,264.01 13.5

Total 1,59,648.
49

Fuel MW %age

Total Thermal 102703.98 64.6

                                             Coal 84,448.38 53.3

                                             Gas 17,055.85 10.5
                                             Oil 1,199.75 0.9
Hydro (Renewable) 36,863.40 24.7

Nuclear 4,560.00 2.9

RES** (MNRE) 15,521.11 7.7

Total 1,59,648.49

FUTURE PROSPECT

The Indian power sector would see an investment of about USD 250 billion
(approximately INR 12500 billion) by 2017. This investment would be made to meet
the following objectives:
 To increase the generation capacity from current level of 156 GW to 330 GW by the
mentioned period

 To strengthen and expand all the five transmission systems of the country
 To pursue rural electrification in the country
During the period of next eight years, the percentage share of nuclear energy and wind
energy in the power generation mix of the country would increase considerably. The
growth in percentage share of hydro energy would also be observed to some smaller
extent. However, thermal energy would continue to dominate the power generation mix
of the country
.
 Investment Expected

With the current focus of the Government of India on development of power

infrastructure, it is estimated that a total of about USD 167 billion (INR 7,500 billion)
would be invested on this sector during next five years. Of this, about USD 107 billion
(INR 4,800 billion) would be invested on power generation and rest on transmission
and distribution. The graph below presents break-up of this investment on power
generation and transmission & distribution:
2.4 POWER SECTOR IN GUJARAT

2.4.1Gujarat the present scenario

GENERATION:

The present installed capacity of Gujarat is 9701 MW of which 5929 MW comes from
state public sector companies, 2065 MW from central generating companies like
NPCIL & NTPC, 232 MW from Sardar Sarovar Hydro project.
Industrial and commercial undertaking join Gujarat have installed about 5000 MW of
captive generation capacity. This constitutes a significant addition to the total power
consumption in the state. The Govt. encourages industries for co-generation of power to
utilize waste heat. The GERC has recently enforced order for wind development and
biogases based power generation. 323 MW is installed wind generation capacity.

TRANSMISSION & DISTRIBUTION NETWORK:

The state has more than 2 lakh kms of transmission and distribution network catering to
more than 9 million consumers across Gujarat, through 800 transmission substation
varying from 400 KV to 66 KV.

CONSUMPTION:

Gujarat's per capital energy consumption stands at 1313 units which are more than
double of the national average of 606 units.
 Public and private companies in the power sector of Gujarat:

  Generating   Transmission   Distribution  

companies Companies Companies

  Public sector   Public Sector   Public Sector  

  GSECL   GETCO   UGVCL  

  GIPCL       DGVCL  
  GMDC       PGVCL  
  GSEG,GSPC,GPCL       MGVCL  

  Private Sector   Power Purchase   Private Sector  

  Torrent Power Ltd.   GUVNL   Torrent power  

Ltd
  GPEC          
  Essar Power          
Successful Private Participation:

Private business groups have ventured into the energy section with considerable success
in Gujarat.
1) ESSAR Power:-

The company has 515 MW gas based power plant at Hazira.Its group company Essar
Power has plans to set-up 1500MW gas based plant at Hazira,Surat.

2) Gujarat Paguthan Energy Corp: -

GPEC has a 655MW gas based power plant in Bharuch district. Company has planted
to expand its capacity by 1000MW, and 1000MW imported coal based power project
near Kandala,Kutch.

3) Torrent Power Ltd.:-

TPL generates 500MW at Ahmedabad and is setting up another 1145MW gas based
power plant in Surat district. TPL is also managing the business of distribution of
electricity in Ahmedabad,Surat and Gandhinagar. TPL has also planned to set-up 1000+
MW imported coal based power project in joint venture at Pipavav, Amreli.
Existing Power Plants

Sr. Total MW/

Name of Power Stations No. of Units
No. Station

I. Thermal Power Stations

1. Gandhinagar Thermal i.   2x120 870

Power Station ii.  3x210

2. Ukai Thermal Power Station i.   2x120 850

ii.  2x200

iii. 1x210

3. Wanakbori Thermal Power Station i.   7x210 1470

4. Sikka Thermal Power Station      2x120 240

5. Dhuvaran Thermal Power Station i.  2x110 220

II. Gas Based Power Stations

1. Dhuvaran GBCCPP Unt-I i.    1x67.85 107

ii.   1x38.77

2. Dhuvaran GBCCPP Unt-II i.    1x72.51 112.45

ii.   1x39.94

3. Utran Gas Based Power Station (STG) I.    3x30 135

ii.   1x45

III. Lignite Power Station

1. Kutch Lignite Thermal Power Station i.    2x70 215

ii.   1x75
IV. Hydro Power Stations

1. Ukai Hydro Power Station i.   4x75 300

2. Kadana Hydro Power Station i.   4x60 240

3. Ukai left Bank Canal Hydro Power i.   2x2.5 5

Station

4. Panam Canal Mini Hydro Power Station i.   2x1 2

  Total (I+II+III+IV)   4766

2.4.2 SECTOR STRUCTURE:

As a part of the reform process, the Government of Gujarat has unbundled
the various functions of GEB. As a result of this unbundling, Gujarat State
Electricity Corporation Limited (GSECL) has taken up the responsibility of
electricity generation. Electricity Transmission has been entrusted to the
already existing company - GETCO. Distribution network in the state has
been split up among four distribution companies, which cater to the
northern, central, southern, and western parts of the state respectively. All
these companies have been structured as subsidiaries of a holding company,
Gujarat Urja Vikas Nigam Limited (GUVNL). GUVNL is also the single
bulk buyer in the state as well as the bulk supplier to distribution
companies. It will also carry out the trading function in the state. The
pictorial representation of the restructuring is as given below:

Figure 1 : Sector Structure Post Unbundling  (Erstwhile GEB)

 Power scenario in Gujarat:

Power Scenario in Gujarat as on 31.12.2008

Present power generating capacity including State sector, Private sector & Share from
Central sector: 10417 MW.

Particulars Capacity in MW
Sr. No.
1 State Sector including Hydro 4766
2 Private Sector 2418
3 Central Sector 3233
Total…. 10417

 56% is generated from South Gujarat.

 37% is generated from Central Gujarat.

 7% is generated from Saurashtra and Kutch area.

 Out of total 10417 MW installed capacity, 63% is from thermal, 23% is from Gas, 7%
from hydro and 7% from nuclear sources.
 Future Power Scenario in Gujarat

Particulars Capacity addition during 11th FYP in Capacity in

Sr. No. MW MW
1 State Sector 1785 6551
including Hydro
2 Private Sector 5690 8108
3 Central Sector 2042 5275
Total…. 19934
9752
4 After March-2012 3000 (1900 MW Private sector + 22934
1100 MW Central sector)
Total…. 22934
12752
 52% is generated from South Gujarat.

 31% is generated from Central Gujarat.

 27% is generated from Saurashtra and Kutch area.

 4000 MW Mundra, UMPP is also located at Mundra in Dist: Kutch.

 Out of total 19934 MW installed capacity, 67% is from thermal, 26% is from
Gas, 4% from hydro and 3% from nuclear sources.
2.4.3INVESTMENT PLANS & OPPORTUNITIES:

The state plans to add 15,000 MW capacities by 2012.An array of new projects
including expansion of existing plants and emphasis on non conventional sources will
certainly catapult Gujarat into an Energy Hub.
Gujarat’s dynamic Chief Minister Shri Narendra Modi's futuristic vision to relentless
efforts have borne fruit. MoUs worth more than Rs.57000 crores were signed during the
2003 and 2005 Vibrant Gujarat Summits for more than 14000 MW power generation
projects.

As Gujarat surges ahead with its multi pronged strategy towards becoming an energy
surplus state, it has rolled out the red carpet for investors and provided opportunities for
private and public sector participation in projects more than 75000 crores in the power
sector, for the Vibrant Gujarat 2007, MoUs.

NPCIL, Sanghi Industries Ltd., Torrent Power Ltd., GPEC(CLP), Visa Power,
Videocon, Adani, JSW Energy Ltd., GSPC, GSECL, UTDDDNH etc. are some of the
major investors in power sector projects.

Power Projects Under Implementation

 

1. Kutch Lignite Thermal Power Station 1 x 75 75

2. Utran Gas Based Power Station 1 x 370 370
3. Sikka Coal based Power Station 2 x 250 500

4 Ukai Coal based Power Station 1 x 500 500

  Total   1445
 2.4.3 Power sector SWOT Analysis

 Strength:-
 India has the fifth largest generation capacity in the world
 Transmission and Distribution network of 6.6 million circuit km-the largest in the
world
 Potential for growth in this sector(demand exceeding supply)
 Increasing focus on renewable sources of energy
 Government presence in the sector
 Encouraging entry of foreign players

 Weakness:-
 Public sector players are only in generation of power
 Large demand supply gap: All India energy shortfall of 9% and peak demand shortfall
of 14%
 Lack of exposure of entrepreneurs to handle international contracts
 Unavailability of fuel and unwillingness of fuel suppliers to enter into bankable
contracts
  Lack of necessary infrastructure to transfer and store fuel, high cost risk involved in
transporting fuels.

 Opportunities:-
 Huge population base
 Opportunities in generation
 Ultra mega power projects(UMPP)-9 projects of 4000 MW each
 Coal based plants at pithead or coastel locations which are untapped
 Hydel power potential of 150,000 MW is untapped by the government of India
 Renovation, modernization, up-rating and Life extension of old thermal and hydro
power plant

 Threats:-

 Competition to domestic players from foreign private players as 100% FDI permitted
by government in Generation, Transmission and Distribution.
 Not a lucrative option for investors.
 Rise in price of raw material.
 Tariffs are distorted and do not cover cost.


2.5 WIND POWER

2.5.1 Introduction

 Air in the motion is called wind. Wind is global phenomenon occurring on the earth’s surface
due to unequal heating of various parts of the earth’s surface by the sun. Wind speed and
direction vary in the short and long term. There is a variation in minute to minute. Wind is
affected by the terrain and by height above the ground. Wind speed generally increases with
the height above the ground as moving wind moving across the earth’s surface encounters
friction caused by the turbulent flow over and around the mountains, hills, trees, buildings
etc.

 Wind energy is the kinetic energy associated with the movement of atmospheric air. It has
been used for hundreds of years for sailing, grinding grain, and for irrigation. Wind energy
systems convert this kinetic energy to more useful forms of power. Wind energy systems for
irrigation and milling have been in use since ancient times and since the beginning of the 20th
century it is being used to generate electric power. Windmills for water pumping have been
installed in many countries particularly in the rural areas.
 Wind turbines transform the energy in the wind into mechanical power, which can then be
used directly for grinding etc. or further converting to electric power to generate electricity.
Wind turbines can be used singly or in clusters called ‘wind farms’. Small wind turbines
called aero-generators can be used to charge large batteries.

2.5.2 WIND POWER IN INDIA

The development of wind power in India began in the 1990s, and has significantly increased
in the last few years. Although a relative newcomer to the wind industry compared with
Denmark or the US, India has the fifth largest installed wind power capacity in the world.

As of 31, October 2009 the installed capacity of wind power in India was 10,925 MW,
mainly spread as follow,

State Installed Capacity

Tamil Nadu 4301.63MW
Maharashtra 1942.25MW
Gujarat 1565.61MW
Karnataka 1340.23MW
Rajasthan 738.5MW
Madhya Pradesh 212.8MW
Kerala 26.5MW
West Bengal 1.10MW
Others 3.20MW

It is estimated that 6,000 MW of additional wind power capacity will be installed in India by
2012. Wind power accounts for 6% of India's total installed power capacity, and it generates
1.6% of the country's power.

Suzlon, as Indian-owned company, emergd on the global scene in the past decade, and by
2006 had captured almost 7.7 percent of market share in global wind turbine sales. Suzlon is
currently the leading manufacturer of wind turbines for the Indian market, holding some 52
percent of market share in India. Suzlon’s success has made India the developing country
leader in advanced wind turbine technology.
 Incentives:
 Concession on import duty on specified wind turbine parts
 80% accelerated depreciation over one or two years
 10 year income tax holiday for wind power generation projects
 Excise duty relief on certain components
 Some states have also announced special tariffs, ranging from Rs 3-4 per kWh, with a
national average of around Rs 3.50 per kWh
 Wheeling, banking and third party sales, buy-back facility by states
 Guarantee market through a specified renewable portfolio standard in some states, as decided
by the state electricity regulator by way of power purchase agreements
 Reduced wheeling charges as compared to conventional energy
 Land policies:
 The Ministry of Environment and Forests has issued guidelines for diversion of forest lands
for non-forest purposes, particularly to enable wind generation
 Clearance of leasing and forest land for up to a period of 30 years for wind developers.
 Financial assistance:
 Setting up of the Indian Renewable Energy Development Agency (IREDA), the premier
finance agency of the Government of India to provide soft loans for renewable energy
projects, particularly for demonstration and private sector projects.
 Wind resource assessment:
 The government set up the Centre for Wind Energy Technology (C-WET) to map wind
energy potentials.
 The C-WET has set up more than 1,000 wind monitoring and wind mapping centers across
25 states.
 Wind mapping at 50 meters (C-WET) and 60-80 meters height (private companies)
Wind Map of India:
Source:C-WET
 Current Trends
 India has a potential of generating over 48,000 Mw through wind energy farms, and for that it
would require just 1 per cent of its land, according to an estimate by the Centre for Wind
Energy Technology (C-WET).

 Wind power in India has been concentrated in a few regions, especially the southern state of
Tamil Nadu, which maintains its position as the state with the most wind power, with 4.1 GW
installed at the end of 2008, representing 44% of India’s total wind capacity.

 India is aiming to rely more on renewable sources in coming years as part of the global push
for clean energy. The Central Electricity Regulatory Commission, India’s power regulator,
recently introduced renewable energy certificates in a bid to reward clean energy producers.

 The central government is planning to remove the incentive cap in wind energy which is
currently restricted to projects up to 49mw.

 The Indian government envisages the addition of 2 GW/annum in the next five years.
 The government is expecting an investment of $300 billion to come in the XII Five-Year Plan
in the power sector.
2.5.3 WIND POWER IN GUJARAT

The state of Gujarat blessed with along coast lined and certain inland areas which have
potential for harnessing of Wind energy for power generation. According to the study
conducted by the Ministry of Non – Conventional Sources of Energy, the state of Gujarat has
a gross potential of 7362 MW of Wind Power.

About 50 sites in the state have been declared potential for setting up of Wind farms, on the
basis of the long term data of Wind speed, collected and analyzed under the aegis of the
Ministry of Non Conventional Sources of Energy.

Given the potential of wind power generation in the state, the first demonstration Wind farm
project was set up by the Agency in 1986 at the Okha coast followed by few more
demonstration Wind farms with an aggregate capacity of 16.295 MW. The satisfactory
performance and operation of these demonstration Wind farms, led to an incentive scheme in
1993, declared by the state government for private sector participation in the Wind power
generation.

Year wise wind power installed capacity (MW) in India (As on 31.03.2009)

Sr. No. Year Gujarat Total

1 Up to 1992 14.52 41.19
2 1992 to 1993 1.63 12.7
3 1993 to 1994 10.63 61.1
4 1994 to 1995 37.75 235.58
5 1995 to 1996 51.16 382.15
6 1996 to 1997 31.14 169.07
7 1997 to 1998 20.1 66.84
8 1999 to 2000 0 122.76
9 2000 to 2001 0 172.5
10 2001 to 2002 0 288.4
11 2002 to 2003 7.15 238.95
12 2003 to 2004 29.28 674.86
13 2004 to 2005 51.18 1114.59
14 2005 to 2006 84.6 1747.96
15 2006 to 2007 328.95 1760.72
16 2007 to 2008 584.81 1610.84
17 2008 to 2009 313.6 1542.07
Total 1566.5 10242.3

Source: www.windpowerindia.com
 BHAGAVANPUR

GADOLI
BISHENGARH
MANDAL

BASI

JASWANTHGAD
SAWA

UNDARI
BARI SADRI

DHROBANA
DAMOTAR
TAGA KHERWADA
SISODA DEVGARH
JAMANVADA NANDLI AHADA

ADESAR
MAMATKHEDA ALOT
SIVALAKHA CHORASIA BADAILA
MOTI SINDHOLI BODHINA
KUKMA VANDHYA
POLADIYA KERA SINUGRA SURAJBARI PADSOLI

BAYATH SINAI
WARSHAMEDI S

GUJ ARAT
MUNDRA RATABHE KAWASA

DAHOD
JHABUA
OKHA LIMBARA MACHALIYA GHAT
MESARIA BET
SUVARDA BAMANBORE 1
BAMANBORE 2
HARIPAR KHEDA
DHANDHALPUR
GALA PAREWADA
OKHAMADHI MAHIDAD
KALYANPUR BHANDARIYA SADODAR
NAVADRA GODLADHAR
LAMBA BUTAVADAR ROJMAL
MOTA DADAWA
HARSHAD NANI KUNDAL
DHANK 2
DHANK 1 KAGAVAD
AMRAPAR (SETH)

NAVI BANDER VALIYARPANI

SANODAR SENDHVA
KHAMBADA KAMRAVAD
JASAPAR
AMRAPAR (GIR)
CHAKLA

DUMDHA BRAHMANVEL
VERAVAL JAFRABAD TAKARMAULI
VELAN RAIPUR
DANDI

SAPUTARA

SAPTHASRINGIGAD

MALEGAON KARIYAT THOKAL MALEG

WPD range Potential (MW) GAWALWADI
THOKALWADI PANHAL SATHE
MAHISMAL
KOGDA
KHARUMBHAPADA KANKORA

SURYAMAL AUNDHEWADI

200-250 (red) 7216 VEDI

MAL
PANCHPATTA

SHIRASGAON
MAH
250-300 2842
RAJEWADI PIMPALGAON KHANDKE
(violet) VAGERA
ELEPHANTA ISLAND
DHAKALE
KAVDYA DONGER
BEDARWAD

LONAVLA KOLGAON
300-400 587 DHAVADI SAUTADA

MAHIJALGAON

(green) ROTI

Total 10645
MANDHARDEO
PANCHGANI
AMBRAL MOGRALE
KAS KHOKADE
JAMBULMURE
CHALKEWADI
THOSEGHAR
AMBERI
VANKUSAWADE
VANKUSAWADE WAGHAPUR SADA
RAJACHIKURLI
NANDIVADE PALSI KAMTHI BHUD
SHIVANE RENAVI
DEOUD VAREKARWADI
AMBED MATREWADI
DHALGAON
GUDE PANCHAGANI HORT
ALKUD VAHMSPET
KOTHOLI
KUCHI
DONGERWADI SOMADEVAR
MASAIPATHAR BEDAG
ALAMPRABHUPATHAR
NERKEWADI KOGIL
VIJAYADURG
MAHALUNGE CHIKKODI MAVINHUNDA
DEOGAD

DHANGARWADI SANG
GOKAK
MALWAN
MANNIKERE
ARABIAN S EA VENGURLA NELAGANTI
HANUMANHATTI
KHAMKARKATTI M

Summary of Wind farms in Gujarat NAVILTHIRTH DAM SAUNDATTI

NARGUND

GOA
MURGOD
CHALAMATTI
KAPPA

KHAND
 Sr. Description Capacity of Wind farm in MW
No.
Kutch Saurashtr North Total
a Gujarat
1 Wind farm capacity 1120.40 804.20 -- 1923.60

and connectivity approved

a) Commissioned wind farm 795.83 551.75 -- 1347.58
b) Wind farm to be commissioned 324.57 252.45 -- 577.02

2 Wind farm capacity approved 148.00 1550.00 -- 1698.00

but work not completed by

developer
3 Total Wind farm capacity 1268.40 2354.20 -- 3622.60

already approved (1+2)

4 Pending proposals 1925.00 2335.00 650.00 4910.00

Existing Wind farms in Gujarat

Sr.
Name of Wind
No Name of S/S Approved Installed
Farms
. Capacity( MW) Capacity(MW)
1 Shikarpur, Kutch 132 KV Samakhiali 85.4 46.10
2 Shikarpur, Kutch 66 KV Shivlakha 50.0 16.50
3 Changadai, Kutch 66 KV Bayath 25.0 25.00
4 Vanku, Kutch 66 KV Kothara 50.0 47.90
5 Jangi, Kutch 66 KV Samakhiali 100.0 76.50
6 Layja, Kutch 66 KV Don 50.0 37.50
7 Chandrodi, Kutch 66 KV Shivlakha 55.0 + 55.0 26.03
8 Vandhiya, Kutch 220 KV Shivlakha 150.0 75.60
Suthari & Sindhori,
9
Kutch 220 KV Nanikhakhar 500.0 444.70
10 Patelka, Jamnagar 66 KV Kalyanpur 15.0 13.73
11 Ukharala, 66 KV Mamsa  13.2 13.20
 Bhavnagar
12 Mervadar, Junagadh 66 KV Sardargadh  30.0 20.72
13 Bamansa, Jamnagar 132 KV Bhatia 170.0 92.23
14 Navadara, Jamnagar 66 KV Bhatia 45.0 35.88
66 KV Bhatia &
15 Bhogat, Jamnagar
Lamba 30.0 24.85
Lambha &
16 66 KV Bhatia
Gandhavi, Jamnagar 60.0 54.20
17 Dhank, Junagadh 66 KV Sardargadh 60.0 32.94
Okha, Okhamadhi,
18
Jamnagar 66 KV Bhatia  4.0 4.00
220 KV Motipaneli & 340.0 238.40
19 Samana, Junagadh
Sardargadh 
Kuchhadi,
20 66 KV Bokhira
Porbandar 25.0 21.60
21 Sanodar, Junagadh 66 KV Tansa 12.0 0.00
    Total 1923.6 1347.58

Proposed Wind farms in Gujarat (Approved and work under progress)

Sr.
Name of Wind Farms Name of S/S MW
No.
1 Bita Valadiya, Kutch 66 KV Khedoi 50
2 Bayath, Kutch 66 KV Bayath 18
3 Mithi Rohar, Kutch 66 KV Mithirohar 80
Total in Kutch 148 MW
1 Bojapuri, Rajkot 66 KV Sardhar 70
2 Korana, Rajkot 66 KV Kuvadava 70
3 Pipadia Agaba, Rajkot 66 KV Kagadadi 70
4 Amarsar, Rajkot 66 KV Mahika 70
5 Pipadia Agaba, Rajkot 66 KV Taraghadi 60
6 Pratapgadh, Rajkot 66 KV Bangavadi 60
 7 Kotda Nayani, Rajkot 66 KV Jadeshwar 60
8 Momana, Jamnagar 66 KV Morvadi 50
9 Baradiya, Jamnagar 66 KV Varvala 25
10 Wankia, Gondal 66 KV Jasdan-II 50
11 Visavada, Porbandar 66 KV Visavada 25
12 Varvala, Jamnagar 66 KV Varvala 35
13 Vinjalpur, Jamnagar 66 KV Bhadthar 35
14 Motagunda, Jamnagar 66 KV Motagunda 25
15 Gala, Jamnagar 66 KV Pipartoda 25
16 Rojmal, Bhavnagar 66 KV Gadhada 25
17 Ratabhe, Surendranagar 66 KV Dungarpur 25
18 Kidi, Amreli 66 KV Babra 25
19 Jasdan, Rajkot 132 KV Jasdan 100
20 Kotdapitha, Amreli 66 KV Kotdapitha 50
21 Tebhada, Jamnagar 66 KV Lalpur 50
22 Tebhada, Jamnagar 66 KV Sonvadia 50
23 Tebhada, Jamnagar 66 KV Samana 55
24 Tebhada, Jamnagar 220 KV Rajkot 300
25 Maliya, Rajkot 132 KV Wankaner 100
26 Varshamedi, Rajkot 66 KV Vajepar 40
Total in Saurashtra 1550

Wind Policy in Gujarat - 2007

1. Title:
This scheme shall be known as the “Wind Power Policy – 2007”.
2. Operative Period:
This policy will come into force with effect from 20 th June, 2007 and shall remain in
operation up to 30th June 2012, which will be the operative period of the scheme. Wind
Turbine Generators (WTGs) installed and commissioned during the operative period shall
become eligible for the incentives declared under this policy, for a period of twenty years
from the date of commissioning or for the life span of the WTGs , whichever is earlier.

3. Eligible Unit:
Any company or body corporate or association or body of individuals, whether incorporated
or not, or artificial juridical person, will be eligible for setting up of WTGs, either for the
purpose of captive use and /or for selling of electricity, in accordance with the Electricity Act
2003, as amended from time to time. Explanation: The use of electricity for own consumption
at his end use location/s by the owner of WTGs shall be considered as Captive use.

4. Eligible Sites:
The WTGs may be set up at sites notified by Gujarat Energy Development Agency (GEDA)
and/ or any other sites identified as potential site, within the State by the Developer.

5. Wheeling of Electricity:
The wheeling of electricity generated from the WTGs, to the desired location/s within the
State, shall be allowed at a wheeling charge of 4% of the energy fed to the grid, as per
Gujarat Electricity Regulatory Commission (GERC) order, as amended from time to time.

6. Exemption from payment of Electricity Duty:

Except in case of Third Party Sale of electricity, the electricity generated from the WTGs
shall be exempted from payment of Electricity Duty. The sale of electricity other than to
GUVNL and/ or any Distribution Licensee in the State shall be considered as Third Party
Sale of Electricity. In case of Third Party Sale, the eligible unit shall have to recover the
Electricity Duty from the purchaser, at such rates, as applicable under the Bombay Electricity
Duty Act 1958.

7. Exemption from Demand Cut:

Exemption from demand cut to the extent of 30% of the installed capacity of WTGs, assigned
for captive use purpose, shall be allowed.

8. Sale of Energy:
The electricity generated from the WTGs may be sold to GUVNL and/ or any Distribution
Licensee within the state, at a rate of Rs.3.37 per unit of electricity as per GERC order, as
amended from time to time. The requisite Power Purchase Agreement (PPA) shall be done
between the purchaser of power and the eligible unit.

9. Third party sale of Energy:

The sale of electricity generated from the WTGs shall also be allowed to a third party, in
accordance with the GERC order, as amended from time to time.
10. Land
The WTGs may be set up on private land, or revenue wasteland / GEDA land, if available.
The allotment of GEDA land on lease shall be done upon approval of the Coordination
Committee consisting of the following members.

i. ACS/ PS/ Secretary (EPD) Chairman

ii. AS/ JS/ Deputy Secretary (EPD) Member
iii. Chief Electrical Inspector & Collector of Elect. Duty Member
iv. General Manager (Comm.), GUVNL Member
v. Respective District Collector Member
vi. Director, GEDA Member Secretary
11. Plant and Machinery:
Second hand WTGs shall not be eligible for installation under this Policy. Only such WTGs
which are approved either by Ministry of New and Renewable Energy, Government of India,
or by recognized international test houses, shall be eligible.

12. Metering of Electricity:

The electricity generated from the WTGs, shall be metered on a monthly basis jointly by
GEDA/ GETCO at the sending substation of 66 kV or above, located at wind farm site.

13. Reactive Power Charges:

The drawl of reactive power shall be charged as per the GERC order, as amended from time
to time.

14. Nodal Agency:

GEDA shall be the nodal agency for implementation of the Wind Power Policy – 2007.
Notwithstanding anything contained in this resolution, the provisions of the Electricity Act –
2003, and the GERC order, as issued from time to time, shall prevail, for the purpose of the
implementation of this policy. This issues with the concurrence of the Finance Department’s
note dated 27.12.2006 on this Department’s file of even number. By order and in the name of
the Governor of Gujarat

 Clean Development Mechanism

CDM, an arrangement provided for in the Kyoto Protocol is a flexibility mechanism that
allows government or private entities in industrialized countries to implement emission
 reduction projects in developing countries and receive credit in the form of “certified
emission reductions”(CERs). The purpose of CDM is to assist developing countries in
achieving sustainable development.

Highly industrialised and developed countries agreed to reduce the emission of GHGs by 5
per cent by the year 2012. As the developed countries realized that they will not be able to
meet this deadline, they have proposed a way out saying that they will continue with the
effort to reduce their carbon footprint, but also help other countries – mostly developing –
reduce the carbon emission. This is how CDM came in to existence. The logic of this offer is,
once the emission enters the atmosphere it is difficult to trace which country it came from.

All projects have a designated carbon footprint that is “allowed” under the UNFCCC. If a
project emits less GHGs than that, it is entitled to carbon credits for the saved emission. This
credit has been identified as a tradable commodity which can be sold internationally. The
buyers would be companies or countries that fail to reduce the emission, thus maintain their
level of damage under check. When one tonne of carbon is saved the investor is entitled to
one carbon credit. These credits carry a price tag which fluctuates depending upon the
demand for them.

 Carbon offset credits: clean forms of energy production, wind, solar, hydro and bio fuels.
 Carbon reduction credits: The collection and storage of carbon from the atmosphere through
bio sequestration, ocean and soil collection and storage efforts.

The international price of carbon credits fluctuate between US $12 and US $ 25. Carbon
credit is now poised to become an option for financial investment. A criticism about the
tradability of credits however, is that this will encourage or certainly not stop the proliferation
by developed nations. The critics fear that industries in developed countries will simply buy
credits from countries like India and continue polluting the atmosphere.

2.5.4 WIND POWER TECHNOLOGY

Basic technology
 Wind electric generator converts kinetic energy available in wind to electrical energy by
using rotor, gearbox and generator.

The Basic Process

 The wind turns the blades of a windmill-like machine. The rotating blades turn the shaft to
which they are attached. The turning shaft typically can either power a pump or turn a
generator, which produces electricity.

 Most wind machines have blades attached to a horizontal shaft. This shaft transmits power
through a series of gears, which provide power to a water pump or electric generator. These
are called horizontal axis wind turbines.

 There are also vertical axis machines, such as the Darrieus wind machine, which has two,
three, or four long curved blades on a vertical shaft and resembles a giant eggbeater in shape.

 The amount of energy produced by a wind machine depends upon the wind speed and the
size of the blades in the machine. In general, when the wind speed doubles, the power
produced increases eight times. Larger blades capture more wind. As the diameter of the
circle formed by the blades doubles, the power increases four times

Upcoming Project in Wind Power in Gujarat

Company name Capacity(MW) Location Investment

GSPL 52.5MW Rajkot and Porbandar
Alembic 5 MW Bhavnagar Rs. 212 million.
Gautam Freight 12 MW Kutch Rs.6800 million
K S Oils 8.5 MW Rs. 350 million
Mahalaxmi Rubtech 1.25 MW Bhavnagar
Ghari group 10MW
Western Railways 10.5 MW Saurashtra Rs.700 million
Indian Oil Corp 25 MW Kandla Rs.1300-1400 million
GAIL 4.5 MW 250 million.
CLP India 100.8MW Jamnagar $125 million
Tata Power 50MW Rajkot

Companies Signed MoU with Gujarat Government

Investmen
MOU with Guj. Govt. t Capacity Location
 Suzlon Gujarat Wind Park Ltd. Rs. 90 billion 1500MW Kutch-Saurashtra

Gujarat Fluorochemicals Ltd (GFL) inox wind Ltd Rs. 60 billion 1000 MW
Enercon India Rs. 35 billion
GSPC Rs. 12 billion 200MW
ONGC with Suzlon 50 MW Bhuj

 ONGC has signed a MoU with Suzlon Energy for a 50 MW wind farm unit at Bhuj for its
own consumption. The company is investing nearly Rs. 6 billion in the first phase and plans
to tap the huge potential of offshore wind power along the Indian coastline.

2.5.5 Five Forces Analysis of Wind Power Industry:

 Internal Rivalry:

The major players of the wind power market in Gujarat are Tata power, GSPL, IOC, GSPC,
ONGC etc. All the companies engaged in the wind energy market have to face significant
costs: labour cost, capital costs including the cost of the turbines, the cost of the grid
connection, the cost of civil work, the development and licensing procedures, and variable
costs, the most significant being the operation and maintenance of wind turbines.

Since all the energy farms-developed by different manufactures/seller-produce the same

product, electricity, there is no product differentiation between different companies. Since it
is obligated for all owners of the wind energy farms to sell the energy produce at a fixed price
which is not negotiated there is no pricing competition among the different firms.

As a result there is neither industry price elasticity of demand nor brand loyalty existing
sellers. What is more, the wind energy farms are relationship – specific investment and entail
a large capital cost and as a result there are important exit barriers. Although there is no need
for farms to use advertising in order to promote their construction activities and the
production of electricity, firms try to have access to key lands. The wind energy market is a
highly competitive market.

The competition among the firms is so fierce that in many cases firms that have made
substantial investment in the metrology measurement and the measurement of the wind
potential of a certain region, a time consuming and expensive procedure, find out that others
firms have submitted for the same regions without preceding in the measurement of its
potential. As a result the market is characterised by fierce and intense non price competition.

 Entry:
 There are no legal barriers that can prevent entry but also the government is strong promoting
private investment in the area of wind energy application. Government provides so many
incentives that can easily attract new entry.

As such there is no entry barrier and government also provide incentive such as tax
exemption for 10 years. So that so many big companies are entering in this sector which will
increase competition. The majority of the incumbents are also engaged in planning and
construction of conventional power plants.

As a result, they are very experience and enjoy economies of scope. The fact that entrant’s
access to favourable location is difficult since officeholder have already submitted
applications regarding the region that have favourable wind potential poser a very important
barrier to entrants high development costs and the experience based advantage of the
incumbents combine to make entry in to the Gujarat energy farm industry extremely difficult.

Finally, the incumbents are able to construct big wind energy farms enjoying economies of
scale that arise when the number and size of the wind turbines per wind farm increases. Wind
terms of decline invest per KW with increasing turbine capacity.

 The buyer power:

The wind energy farms constitute a relationship – specific investment dedicated on the
production of electrical energy. Consequently, the investors run the risk of hold-up if they
can’t find potential buyers. The price is not the result of competition but is decided by the
government. The purpose of the determination of these buy-back tariffs is to offer incentives
to investors in order to invest in the Gujarat wind energy market.

The price plays a fundamental role for the economic viability of the farm. It results that the
pay-back period is remarkably diminished as the electricity price is increased. The
determination of the buy-back tariffs aims at an average pay – back period equal to eight
years. One price applies to all transactions. Although there are a lot of conventional power
plants that produce electricity, the state government is ready to buy all the electricity produce
by the wind farms in this way there is no competition between the electricity produced by
wind energy farms and the conventionally generated energy range.

Taking all the above into consideration, the Gujarat government, tries to ensure the economic
viability of such investments offering to the farms the certainty of the absorption of all their
production by the transmission grid.

As far as future prospect are concerned, it is doubtful that the legislation is going to change.
Taking into account that Gujarat has not yet reached the goals of Kyoto Protocol concerning
the reduction of Co2 emission and the percentage of the total electricity consumed that must
 be produced by renewable energy source. It is logical to assume that government is going to
continue purchasing the electricity produced by the Gujarat wind energy farms.

 The supplier power:

Wind energy is a capital-intensive technology. The capital cost can be as much as 80% of the
total cost of the project over its entire life, with variations between models, markets and
locations. The wind turbine because of the complexity of its sub-components and its structure
constitute the single largest cost.

Suppliers play a very important role in the market of wind energy farms since the capital cost
of the investment is driven by the cost of the wind turbine and its different sub-components.
As a result, suppliers have the power of eating away the profits of the firms. Since firms that
construct wind energy farms are not able to set the price of the electricity they sell to the
public grid, the importance of the capital cost, dedicated on the turbines, for the economic
viability of the farm is obvious. During the last two years the booming demand for wind
energy has put pressure on the supply chain. The cost of raw materials, steel, cooper, lead,
cement, aluminium and carbon- all of which are found in the major subcomponent of wind
turbine has been pushed upward. As a result, the capital costs per KWh of wind energy have
increased in the past three years.

Actually the firms that develop wind energy farms outsource the construction of the wind
turbines since there are firms with an international presence in the construction of wind
turbines. These firms enjoy economies of scale due to fact that they produce a large number
of turbines for different companies around the world. Consequently, there is no reason for the
Gujarat firms that are engaged in the wind energy market to develop their own wind turbines.
In the Gujarat market, wind power machine with various technologies and capacities are
available from about 20 ‘approved’ manufactures or supplier in India, 75% of who have
technical and/or financial collaborations with mostly European manufactures like Suzlon,
Eneron, Micon and so on.

The supplier market is very concentrated. It is an oligopolistic market. Taking into account
the high cost of the wind turbines, the firms choose very carefully the supplier based on the
price of the product. Since all the suppliers offer a variety of wind turbines that can be used,
the firms choose the supplier that bids the lower price. What is more, in order not to be
subject to a potential rise of the price firms not only use their bargaining power but they also
set up long term contracts in order to achieve a favourable for them price that cannot eating
away largely their profits. It is very interesting to mention that in earlier years the high price
of the wind turbines has played a negative role in the viability of the wind energy farms.

As far as the rest of the electromechanical equipment required (e.g. cables), there is a large
number of supplier whose products are homogeneous. As a result they don’t have the ability
of negotiating high input prices with the firms in the industry.

 Substitute:
The energy produced by conventional energy plants as well as by plants exploiting other
forms of renewable energy sources constitute close substitute for the energy produced by
 wind energy farms. Actually, thanks to the renewable law, the energy produced by means of
renewable energy sources is granted priority and therefore there is no price competition with
the electricity produced by conventional plants. Whether the price of the wind based
electricity is higher than the price of the conventionally produced energy. Its absorption by
the grid is obligatory.

At present, it is obvious that as far as the construction of big energy plants based on
renewable energy sources is concerned there is neither price competition nor price elasticity
of demand among the energy produced by different types of RES since the Gujarat
government tries to exploit all the different renewable energy sources and government buys
the electricity produce a by them at the same price.

As far as future prospects are concerned, reason other than price competition can lead to a
significant eating away of the electricity produced by other means of RES. For example, if
the Gujarat government decides to promote more the photovoltaic energy or other means of
RES and government stop buying all the electricity production of the wind energy farms or
reduce significantly its price, then the firms in the market will suffer losses of profits. These
losses will not be the result of price sensitivity between the products but the result of the
change of the current legislation.

 Summary:
The table that follows summaries the five-force analysis of Gujarat wind energy market. The
Gujarat government supports the electricity production based on the wind energy utilization
guaranteeing its absorption.

There is no price competition with the conventional power plants. As far as future prospects
are concerned, it is doubtful that the situation will change the suppliers are the only that can
eating away the profits of the firms since the price of the electricity sold to the grid is fixed.
 2.5.6 Wind power sector SWOT Analysis
 Strengths:
 India has the fifth largest electricity generation capacity in the world
 Transmission & Distribution network of 6.6 million circuit km - the third largest in the world
 Potential for growth in this sector (demand exceeding supply)
 Increasing focus on renewable sources of energy
 Government presence in the sector (encouraging entry of foreign players)
 No barriers to entry

 Weakness:
 Public sector players are only into generation of power
 Large demand-supply gap: All India average energy shortfall of 9% and peak demand
shortfall of 14%

 Lack of exposure of entrepreneurs to handle international contracts

 Inexperience of SEBs to handle changing market environment in addition to their weak
financial condition

 Unavailability of fuel and unwillingness of fuel suppliers to enter into bankable contarcts
 Lack of necessary infrastructure to transport and store fuel, high cost risk involved in
transporting fuel

 Opportunities:

1. Environmental Awareness

Now a days environmental awareness has been increased among the population of India.
They have started saving energy and trying to reduce pollution. This factor is favorable for
the wind power energy as its an option to thermal power, which is also responsible for
polluting the environment. So wind energy is having benefit of no pollution as it produces
pollution free wind energy. Therefore, there is a high growth opportunity for wind power in
future horizon.
2. Government Initiatives

As government has also understood the importance of natural resources, the govt. is in favour
for wind energy which uses wind and provide pollution free energy. Govt. of India is
supporting firms those provide untraditional energy. Govt. is also providing tax exemption on
their earnings and also providing subsidies for encouraging investment in backward areas of
society to generate employment.
3. Steady Growth in Demand

As awareness of wind energy is increasing and people understood the importance of

renewable energy sources which is cost effective, this leads to steady growth in demand
giving an opportunity to business more.
4. Vast coastlines of Gujarat and low cost

In Gujarat we have a vast coastal line which is very supportive to establish wind mills at
lower cost. So this can be a favourable factor for this industry as well as will give an ample
opportunity to wind power to extract more from this natural presence.

 huge population base

 Opportunities in Generation
 Coal based plants at pithead or coastal locations which are untapped.

 Threats:

1. Objections to Wind Power

The main objection to wind power is due to other environmental costs. Many wind parks
remain shut-down for a part of the year because of bird migration patterns and numerous
turbine related bird-deaths. Furthermore, turbines take up lands; though larger turbines
produce more power, they also take more land to operate safely and effectively, and since any
man-made installation can have adverse effects on terrestrial ecosystems. Hardcore
environmentalists may object to the installation of wind parks, lobbing the govt. to look for
other sources of energy. Obviously, the oil and coal industries will lobby against govt.
subsidization of clean energy sources. Basing on this industry, effective lobbying could
greatly reduce the amount of government support given to the wind power industry.

 Competition to domestic players from foreign Pvt. players as 100% FDI permitted by
government in Generation, Transmission & Distribution

 Not a lucrative option for investors(ROE )

 Rise in price of raw materials
 Tariffs are distorted and do not cover cost

 There are several challenges that the domestic wind energy industry is facing. In the absence
of a grid code for wind power, grid managers and generators face difficulties in integrating
wind power efficiently with the grid. The variability of wind speed and absence of advanced
computing technologies to predict wind generation make it challenging for grid operators in
India as grid operators of the country as grid capacities and inter-regional transfer capabilities
are limited. This results in low capacity utilization factor.
• Current method of financing wind project is another problem that the players in this field
are facing. Investment in wind power projects are not treated as infrastructure finance, despite
wind-based generation being a proven technology. If investments in wind projects were to be
treated like other power projects, longer-term debt at better rates will be available.
• Another main problem that the industry is facing is of land acquisition. A long time is
required to get land clearance despite the fact that most sites suitable for the project are
barren and often on hilltops and in deserts where the topsoil has been completely eroded.
• The cost of private land is getting expensive day-by-day and its transaction requires a lot of
government certificates and clearances. Manufactures are facing problems due to the poor
infrastructure facility while transporting turbines from the manufacturing facility to the sites.
Developers also face shortage of skilled personnel in remote sites.

CONCLUSION

From the above SWOT Analysis we can draw a conclusion that the Internal Strengths are
sufficient to compensate the Weaknesses as well, but for this the sector has to take effective
and time bound actions. Though there are some threats that restrict its growth, they will not
form a compound pressure on the development of the sector. There is a sky of opportunities
and it has to reach one by one by defeating the threats and by rooting out the weaknesses that
if faces. In a nut-shell it can be said that to start a venture it requires a little patience and time,
undoubtedly, there will be a day when the entire world will become happy without any
pollution and harmful particles with much pleasure and prosperity.
 CH 3:
COMPANY
3.1 INTRODUCTION

Suzlon Energy is a global wind power company based in India. In terms of market share, the
company is the largest wind turbine manufacturer in Asia (and the 3rd largest worldwide
(Suzlon + REpower). In terms of net worth, it is the world's most valuable wind power
company, but measured by market value, the company is smaller than Vestas and possibly
GE, Gamesa Corporación Tecnológica, Enercon and Siemens, of which the market value is
harder to know because they are not traded as independent entities. With headquarters in
Pune, it has several manufacturing sites in India including Pondicherry, Daman, Bhuj and
Gandhidham as well as in mainland China, Germany and Belgium. The company is listed on
the National Stock Exchange of India and on the Bombay Stock Exchange

Suzlon is a vertically integrated wind power company. Suzlon delivers end-to-end wind
power solutions from assembly, installation to commissioning. The company manufactures
blades, generators, panels, and towers in-house, as well as gearboxes through its partial
ownership of Hansen Transmissions and state-of-the-art large or offshore turbines through its
subsidiary REpower. The company is integrated downstream and delivers turnkey projects
through its project management and installation consultancy, and operations & maintenance
services. Suzlon is a multinational company with offices, R&D and technology centers,
manufacturing facilities and service support centers spread across the globe.

Suzlon has design and R&D teams and facilities in Germany, India and The Netherlands to
fit blades for clients. The international sales business of Suzlon is managed out of Aarhus,
Denmark, while its global management office is in Pune, India.

Suzlon and Elin EBG Motoren GmbH of Austria have entered into a joint venutre Suzlon
Generators (P) Ltd to manufacture slip ring generators required for wind turbine generators
(WTGs) at the former's manufacturing facility at Pune in Maharashtra. Suzlon acquired
Hansen Transmissions, Belgium in 2006. The acquisition of the world’s second leading
gearbox maker gives Suzlon manufacturing and technology development capability for wind
gearboxes, enabling an integrated R&D approach to design even more efficient wind
turbines. It Plugs a critical gap in Suzlon’s supply chain as the Gearbox is one of the longest
lead-time products in WTG value chain. It also develops a long-term growth driver in form of
Wind and Industrial gearbox business of Hansen Transmissions.
3.2 BACKGROUND

Suzlon was founded by Tulsi Tanti in 1995, when he was working in a family-owned textile
company. In that year, India's shaky power grid and the rising cost of electricity offset any
profits the company would make. With the help of some of his friends of Rajkot, he moved
into wind energy production as a way to secure the textile company's energy needs, and
founded Suzlon Energy. In 2001, Tanti sold off the textile business, so he could focus on the
development of his wind energy business. In 2009, Suzlon is still actively run by Tulsi Tanti,
now in the role of Chairman and Managing Director.

In 2003, Suzlon got its first sale in USA, with an order from DanMar & Associates to
supply 24 turbines in southwestern Minnesota.

Suzlon Rotor Corporation in 2006 began producing the blades in Pipestone, Minnesota in the
United States. Among its clients is Wind Capital Group.

In the year 2006, Suzlon reached a definitive agreement for acquisition of Belgium firm
Hansen Transmissions, specializing in gearboxes for wind turbines, for $565 million. In
2007, the company purchased a controlling stake in Germany's REpower which valued the
firm at US$ 1.6 billion.

In June 2007, Suzlon had signed a contract with Edison Mission Energy (EME) of US for
delivery of 150 wind turbines of 2.1 MW in 2008 and a similar volume to be delivered in
2009. EME had an option not to purchase the 150 turbines due to be delivered in 2009, which
it has chosen to exercise.

In November 2009, the company decided to sell 35% stake of Hansen through placing new
shares. It appointed Bank of America Merrill Lynch and Morgan Stanley as the managers and
book runners for the same.
3.3 Key Recent Development

May 10, 2010:- Trust Power To Expand Snow town Wind Farm In Australia

April 23, 2010:-SBI Inaugrates Windfarm project In Tamil Nadu, India

April 18, 2010:- : Suzlon, GEDCL To Jointly Set Up Wind Farm Project In West Bengal,
India

April 09, 2010:- Suzlon Receives Contract From KHTP For Wind Power Project In
Rajasthan, India

April 06, 2010:- Suzlon Receives 18MW Repeat Order From GSFC

Suzlon Energy Limited Presents at 12th Renewable Energy Finance Forum - London 2010,
Sep-20-2010

Suzlon Energy Limited Presents at 12th Renewable Energy Finance Forum - London 2010,
Sep-20-2010 . Venue: The Grange, St Paul's, London, Greater London, United Kingdom.

Suzlon Energy Limited to Expand Output in China

Suzlon Energy Limited announced that it plans to expand its capacity of the works in China.
The company will regard China as its export hub, in order to export 120-megawatt wind-
turbines to Brazil initially. By deepening its presence in China, the wind turbine maker, hopes
to gain more power in the Chinese market and polish its brand around the globe. After the
expansion, the maker will be capable of turning out turbines by 2013 with an electricity
generating capacity of 1,000 megawatts in total each year in its China-based works. The
capacity will be 67% more than the current capacity of 600 megawatts, which is said to be
fully used in 2011.
Suzlon Energy Limited expected to report Q2 2011 results on October 22, 2010. This event
was calculated by Capital IQ (Created on September 13, 2010).

Suzlon Energy Limited expected to report Q2 2011 results on October 22, 2010. This event
was calculated by Capital IQ (Created on September 13, 2010).
3.4 SWOT ANALYSIS

Strengths:

 Skill Amalgamation
 Cost Reduction---It has blended the best resources across the globe. It has
competitive R&D in Europe. The Manufacturing Units in India and China proves to
be cost effective. Suzlon has continuously reduced capital cost per unit of power
generation and also has maintained a consistent new product launch schedule.

 Reverse outsourcing-- The Company has international head offices in Aarhus,

Denmark where it has wide base of wind energy expertise and large network of
components suppliers. The skilled workforce is available to the company. Globally
renowned wind energy companies’ presence like Vetas and NEG Micon makes it a
hub of talented workforce and technology.

 End to End Solutions---Planning of Wind Farm Systems, Land Acquisition,

Development and Technical Design., Infrastructure and Equipment, O&M services.
Suzlon offers customers' end-to-end wind energy solutions, including wind resource
mapping, site development and installation, and finally operations & maintenance
services in India. This allows Suzlon to offer Indian customers economies of scale,
and eliminates the need for customer involvement in the complex process of wind
farm development.

 Vertical Integration and Amalgamation--Suzlon is a vertically integrated wind

turbine manufacturer – with manufacturing capability along the full value chain –
ranging from components to complete wind turbine systems.

 Market leadership in India and Global Presence-The industry's outlook to turn

favorable by 2010 as easing credit and lower costs boost demand from the U.S.,
Europe, China and India.

 Growth-Growing at 29% CAGR for past 10 years, higher than industry rate.

 Integrated Business Model-The Company plans to enter in to Solar and Bio-fuel

Business. The company is conducting feasibility study for the further approach in this
business. This will help the company to produce 10-20 MW additionally. It has
 become global/ world-wide sponsor for CNN International innovative capsule on
environment preservation.

 Innovation-Suzlon’s R&D effort includes a highly successful practice of leveraging

skill and knowledge pools in the industry and allied areas the world over. This has
resulted in a R&D network located across geographies.

 Human Resource-Suzlon’s true strength is seen not only in its technology, quality
and market share – but also its people. The Suzlon Group boasts one of the largest
teams in the wind energy business, totaling over 13,000 people from over a dozen
nationalities in operations around the world. Suzlon in its vision for future growth
aims to rank among the top three wind turbine manufacturers worldwide, maximizing
growth while maintaining margins to generate maximum value for all stakeholders.

 The Electricity Act, 2003: specifies that a minimum percentage of power generation
should come from non-conventional energy sources. For example, the Karnataka
government has mandated 5% from non-conventional sources, and the Madhya
Pradesh government 0.5% This reflects the government’s intention of reducing the
dependence on fossil fuels and cut down carbon-dioxide emission. Moreover,
perennial power shortages assure a sustained growth in demand for power generation.
Weakness:

 Management Structure-The Company is fully dependent on promoter Tulsi Tanti. In

fact the board of directors have only two Tanti brothers as executive directors. Three
other board members are non-executive independent directors.

 Capital Intensive-Wind power projects require high upfront capital investment per
kWh of energy. So demand will be sensitive to interest rates.

 Overseas Business-Suzlon Energy is expanding overseas, where major players have

established markets. The advantage of new markets and new orders may take time,
while marketing, personnel and other initial costs could jump. Hence, this may put
pressure on the margin in the short run. Risks involved in overseas business are also
higher, Company is facing liquidity crunch to pay its debt recently promoters had sold
their holding in the company. So expansion plan may further increase the burden on
the company balance sheet.

 Operational Risk

 Cash Conversion-Company revenue mostly comes from the International clients that
involves exchange rate risk.

 Growth in Assets overweighting Growth in Profits -Root cause analysis shows cost
overrun due to retrofitting in winter which is an operationally challenging season
results in low productivity and inefficiencies. As it is a rate sensitive sector reduction
in commodity prices, logistics costs, inventory, and overall project costs affects the
business as a whole.

 Basic Infrastructure: Disruptions in telecommunications and basic infrastructure could

harm our ability to provide O&M services, which could result in client dissatisfaction
and a reduction of our revenues.

 Local Units-The construction and operation of wind power projects has faced
opposition from local communities and other Parties

 Financial Performance: The founders of Suzlon Energy to raise up to $48 million

through the sale of 30 million shares or a stake of 2% in the wind turbine maker to
institutional investors.
 Profitability-The Company faces foreign exchange loss of nearly Rs 435 crore
because of that 500 million zero coupon convertible foreign Currency Convertible
Bond (FCCB) which is still pending are due in 2012. The blade retrofits and
consequentially availability charges of nearly Rs 307 crore is another concern area
and the third is the mark-to-market (MTM) loss of nearly Rs 215 crore which is on
account of foreign exchanges forwards options contract which the company has taken
to hedge. These are the three important areas – the foreign exchange loss, blade
retrofits and MTM loss which can affect the company’s profitability in coming time

 Leverage-The total debt on the company’s book stands nearly Rs 14,860 crore .The
Redemption of 500 million Zero Coupon Convertible which are due in 2012 is nearly
Rs 273 cr.

 Ratings—CRISIL has downgraded the rating of the Company to BBB/P3 from

A-/P+2.It reflects the significant delays in Private equity infusion into Suzlon
resulting in a sharp deterioration in its gearing, in contrast to the expected
improvement.

 Net Income-The allocation of Equity Shares pursuant to Employee Stock Option Plan
will result in a change to income statement and will adversely impact company net
income.
Opportunities:

 Environmental and Government initiatives-The projections of Ministry of Non-

Conventional Energy Sources says10% of the 2, 40,000MW (i.e. 24,000MW)
installed capacity requirement by the year 2012 A.D. will come from renewable. It is
envisaged that 50% of this capacity or 12,000MW may come from wind power. India
has now gained sufficient technical and operational experience, and is now on the
threshold of "taking off" in wind power.

 Favourable tax exemptions-The Wind Energy industry enjoys special tax benefits
from government and subsidies from regulatory bodies. Better tariffs, policy support
and optimistic outlook are driving investment in this sector.

 Untapped offshore Market-According to the estimate the demand for power is still
high in India even during the recent global slowdown. The gap between supply and
demand is increasing .According to the CEA estimates by 2012 the energy demand is
expected to increase by 44%.

 Steady source of demand-In US by 2030, 20 % of the electricity would be generated

by wind energy as compared to today's 1%. In Europe, wind is expected to account
for 34% of new generating capacity. It'll account for 46% from 2020-2030. Mexico is
investing more than half a billion US dollars and plans to build a wind farm of 250
MW within ten years. Kenya plans to erect a wind farm that will provide up to 30
percent of its electricity needs.

 Green Power: The existing power sector emits around 40% of global carbon dioxide
emissions and there are only three options to substantially reduce these emissions
between now and 2020: energy efficiency, fuel switching, and renewable,
predominantly wind power. Wind power could produce 12% of the world’s energy
needs and save 10 billion tones of CO2 within 12 years. Thus addressing the
environmental concerns all over the world.
Threats:

 Intense competition-The Indian wind industry was placed third in terms of total
installed capacity of wind electricity in the world some years back. It suffered a great
setback when this rank shifted down to fifth after the United States, Germany,
Denmark, and Spain in later years. The fastest growing wind markets are Turkey,
Mexico, Brazil, China, and Poland. Over dependence on US-USA accounts for 50%
sales for Suzlon. Recent economic slowdown results affects the States wind energy
sector which results in liquidity crunch and investment setback in India.

 Foreign Exchange Risk-Fluctuation in the value of the Rupee against other

currencies could adversely affect the cost of our borrowings and repayment of
indebtedness, the costs of our raw materials and revenues from exports.

 Technology Risk-The failure to keep technical knowledge confidential could erode

company competitive advantage.

 Decreasing Price of crude-There is a direct correlation between Crude prices and

Wind energy demand. If the crude suffers from low prices which indicate the overall
fall in demand in infrastructure and energy demand then it would affect the growth of
the Sector.

 Interest rate increase-Company agreements with wholly-owned overseas

subsidiaries are subject to transfer pricing regulations. These agreements may be
subject to regulatory challenges, which may subject to higher taxes and adversely
affects the earnings.

 Further Cancellation of orders-The construction and operation of wind power

projects is subject to regulation, including environmental controls and other
regulations , global slowdown may hamper the demand for the energy in the host
countries which are most affected by the recession further blade quality issue in China
and Australia is a concern for the company
3.5 INVESTMENT RATIONLE:

Full integration of RE Power acquisition will affect the EPS of the company positively. It will
give it immediate access to mature European market. European market is largest WTG
market in terms of volumes. RE Power is considered strong technology company. RE Power
margins are lowest in industry as it is only working as assembler. With its acquisition a
vertically integrated Suzlon can improve upon its margin.
As world is looking alternative source of energy to sustain the growth, harvesting energy
through wind is the best alternative. Suzlon is better positioned to capture the opportunity.
People are very much now concerned about the environment. The demand for pollution free
source of energy is gaining ground. Harvesting energy through wind is good alternative as
most of the regions have good wind, specially the coastal region. Energy produced from wind
mills are low cost as compared to the energy produced through any other sources.
The wind energy demand is directly correlated with the crude oil prices. As global economy
is expected to revive by the FY2010 .We expect the demand for crude oil will be back as and
prices will be once again shoot up from the current levels. The demand for crude will be there
for the revival of economies especially in Emerging markets like India and China. This
scenario would urge the demand for other alternative energy resources on demand-Supply
concerns.
The industry's outlook is expected to turn favorable by 2010 as easing credit and lower costs
boost demand from the U.S., Europe, China and India. The slowdown in the renewable
energy sector is likely to be temporary. US is expected to approve $150b to support the US
renewable energy sector with large government incentives. The US policy will likely boost
the global renewable energy market as well.
Competition
  Last Market Sales Net Total Assets
Price Cap. Profit
(Rs. cr.)Turnover
BHEL 2,493.70 ------- 26,858.63 3,138.2 16,045.11
1
Larsen 1,904.50 ------- 37,034.80 4,375.5 25,112.47
2
Suzlon Energy 51 8,997.9 3,508.93 - 13,205.53
1 1,414.0
9
BGR Energy 837.8 6,036.3 3,073.78 201.02 1,635.80
8
BEML 1,185.10 4,935.2 2,797.17 268.84 2,946.39
9
AIA Engineering 409.6 3,863.3 819.24 122.56 745.46
6

Alfa Laval 1,411.25 2,562.9 887.57 123.34 382.07

0
Praj Industries 77.75 1,436.3 603.12 113.89 532.35
4

Shriram EPC 274.25 1,205.1 1,119.02 44.66 644.97

1
TRF 860.9 947.37 649.95 47.18 315.72
PROFIT AND LOSS A/C

------------------- in Rs.
Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10      

 
 

  12 mths 12 mths 12 mths 12 mths 12 mths      

 
Income              

Sales Turnover 3,788.46 5,380.37 6,945.13 7,254.47 3,504.34      

Excise Duty 0 0 2.89 2.53 0      

Net Sales 3,788.46 5,380.37 6,942.24 7,251.94 3,504.34      

Other Income 67.64 51.56 -18.97 -869.17 -182.59      

Stock 110.6 68.6 154.14 68.37 -254.97      

Adjustments

Total Income 3,966.70 5,500.53 7,077.41 6,451.14 3,066.78      

Expenditure              

Raw Materials 2,406.26 3,333.74 4,429.10 4,651.06 2,284.16      

Power & Fuel 1.77 3.47 4.48 4.46 3.93      

Cost

Employee Cost 62.96 111.46 139.34 199.07 181.01      

Other 262.19 284.83 382.2 286.79 235.23      

Manufacturing
Expenses
Selling and 225.18 445.66 516.4 694.13 371.27      
Admin Expenses

Miscellaneous 2.88 24.27 21.75 620.08 369.25      

Expenses

Preoperative Exp 0 0 0 0 0      
Capitalised

Total Expenses 2,961.24 4,203.43 5,493.27 6,455.59 3,444.85      

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10      

 
 

  12 mths 12 mths 12 mths 12 mths 12 mths      

 
Operating Profit 937.82 1,245.54 1,603.11 864.72 -195.48      

PBDIT 1,005.46 1,297.10 1,584.14 -4.45 -378.07      

Interest 56.93 104.03 142.14 436.35 734.35      

PBDT 948.53 1,193.07 1,442.00 -440.8 -1,112.42      

Depreciation 45.87 73.49 86.21 99.16 126.27      

Other Written 0 0 0 0 0      
Off

Profit Before Tax 902.66 1,119.58 1,355.79 -539.96 -1,238.69      

Extra-ordinary -0.04 10.96 -0.13 0.92 0      

items

PBT (Post Extra- 902.62 1,130.54 1,355.66 -539.04 -1,238.69      

ord Items)
Tax 81.43 69.4 89.95 -70.69 175.4      

Reported Net 821.19 1,061.14 1,416.88 -469.27 -1,414.09      

Profit

Total Value 554.98 869.69 1,064.17 1,804.53 1,160.69      

Addition

Preference 1.51 1.5 0 0 0      

Dividend

Equity Dividend 143.76 143.88 149.69 0 0      

Corporate 20.38 20.39 25.44 0 0      

Dividend Tax

Per share data (annualised)              

Shares in issue 2,875.31 2,877.65 14,969.34 14,982.95 15,567.3      

(lakhs) 2

Earning Per 28.51 36.82 9.47 -3.13 -9.08      

Share (Rs)

Equity Dividend 50 50 50 0 0      
(%)

Book Value (Rs) 97.63 129.04 46.41 43.23 35.9      

3.6 RATIO ANANLYSIS

Ratio Mar 06 Mar 07 Mar08 Mar 09 Mar 10

Current Ratio 2.47 1.49 1.46 0.82 1.14

Quick Ratio 2.05 2.4 2.12 2.19 2

Debt Equity 0.12 0.31 0.44 1.13 1.36

Ratio

Inventory 3.49 3.98 4.71 5.45 4.67

Turnover
Ratio

Debtors 3.35 3.03 2.63 1.8 0.91

Turnover
Ratio

Investments 3.56 3.96 4.71 5.45 4.67

Turnover
Ratio

Fixed Assets 15.32 14.07 9.65 8.91 2.97

Turnover
Ratio

Gross Profit 25 22.72 21.85 10.55 -9.18

Margin(%)

Net Profit 21.28 19.41 20.09 -6.34 -37.89  

Margin(%)

Face Value 10 10 2 2 2

Dividend Per 5 5 1 -- --
Share

3.7 Analysis
From the above information we can analyze that , the company’s ratio indication show that
the company is not able to generate enough profits as compare to other competitor and
therefore mostly all the ratios are not showing a fruitful result the Profitability ratio are
continuously declining at a larger space.

Even the liquidity and turnover or management efficiency ratios are more or less at a
declining pace therefore we can conclude that the company is not able to maintain its
efficient working capital requirement.

The net worth ratio indicates i.e an E.P.S ratio Is at a growing rate in the year 2006 and 2007
but then they are declining at a larger pace thus we can say that the company’s share are not
preferred by the investors thus it should undertake the measures to improve its goodwill
among the investors.

On the whole we can say that the company ratio’s do not indicate a good sign they are not at
an increasing pace if we compare the industry’s growth.

Thus it should take an effective step such as retaining less from the profit and giving the
dividend to the shareholders it should effectively try to improve its goodwill in the market
and take an effective step to improve its sales and profits.