While the power sector in India has witnessed a few success stories in the last 4-5 years, the road that lies ahead of us is dotted with innumerable challenges that result from the gaps that exist between what’s planned versus whatthe power sector has been able to deliver. This document highlights and quantifies some of these gaps and attempts to analyze the problem. The document builds on the risks prevalent in the industry, some prominent hurdles that the power sector has already crossed, and more importantly - others that various players have to overcome. Understanding these core issues & risks of the power sector help in identifying the opportunities that lie ahead; for example why is private sector participation an important requirement. A short peek at our past performances indicate that during the last three five year plans (8th, 9th and 10th), we have barely managed to achieve half of the capacity addition that was planned. As we enter the third year of the 11th five year plan, we have already seen slippages on the planned approx. 79 GW capacity addition.
Once we break the problem down and identify the bottlenecks, we may be able to better understand the integration challenges that such large projects pose. While there may be heavy dependencies on equipment suppliers and challenges around logistics and work-front availability – with the right and timely application of project management principles along the lifecycle of the project, one can strive to achieve increased project completion against baselines. Certain best practices around stakeholder management, integrated project and asset development and interdependency mapping across various entities can help improve overall project planning. Once we understand the practical implementation challenges, various teams and people get aligned to the overall strategy, then the delivery on our estimated plans becomes more of a reality.
India has the fifth largest generation capacity in the world with an installed capacity of 152 GW as on 30 September 20091, 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 704 kWh 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 kWh2. The Indian government has set ambitious goals in the 11th plan for power sector owing to which the powr 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.
While some progress has been made at reducing the
Transmission and Distribution (T&D) losses, these still
remain substantially higher than the global benchmarks, at
approximately 33 percent. In order to address some of the
issues in this segment, reforms have been undertaken
through unbundling the State Electricity Boards into
separate Generation, Transmission and Distribution units
and privatization of power distribution has been initiated
either through the outright privatization or the franchisee
route; results of these initiatives have been somewhat
mixed. While there has been a slo and gradual
improvement in metering, billing and collection efficiency,
the current loss levels still pose a significant challenge for
distribution companies going forward.
While additional gas supply from KG Basin has eased shortage to a limited extend, supply constraints for domestic coal remain and are expected to continue going forward. Consequently, public and private sector entities have embarked upon imported coal as a means to bridge the deficit. This has led to some Indian entities to take upon the task of purchasing, developing and operating coal mines in international geographies. While this is expected to secure coal supplies it has again thrown upon further challenges. For example, the main international market for coal supply to India – Indonesia, poses significant political and legal risks in the form of changing regulatory framework towards foreign companies. Similarly, coal evacuation from mines in South Africa is constrained by their limited railway capacity and the capacity at ports is controlled by a group of existing users making it difficult for a new entrant to ensure reliable evacuation9. In this case it is essential to manage the risk of supply disruption by different options like – diversification of supply, due diligence on suppliers, unambiguous contracting and strict monitoring among others.
Source : ©2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, http://www.kpmg.de/docs/PowerSector_2010.pdf