Private Sector Presence - Scope Unlimited

1. Private Sector Presence - Scope Unlimited -by Shri Markand Bhatt Group CEO Torrent Group

2. Contents: • Lifeline of Growth • Private Sector presence Today • Emphasis on Public Sector • Cake is too Big • Integrated Approach Essential • Way Forward- Some Suggestions • Conclusion Source:-, Draft Integrated Energy Policy 2006, Mid term review of X th plan, Approach paper to XI th plan, Indian Electricity Act 2003, MoP Annual Report 2005-06, National Electricity Policy, Tariff policy, MoP Presentation (April 2006) etc.

3. 1. Lifeline Of Growth “While everything is important; roads, railways, ports, airports, communication, by far the most important is the availability of power. Without power, there will be no momentum left in the economy”. --- Dr. Rangarajan (Economic Times – 20th July, 2006) “Power is considered the biggest obstacle in the Indian growth story”. Business Confidence Index Survey (Economic Times – 21st July, 2006)

4. 2. Private Sector Presence – Today • Only 11% in Generation • Insignificant presence in Transmission • Limited presence in Distribution- • Tata, Reliance, RPG, Torrent etc - 5 cities from the past. • Orissa and Delhi states - in recent initiatives.

5. 3. Emphasis on Public Sector Certain excerpts from Integrated Energy Policy 2006: • “Worldwide experience shows that privatization in the electricity sector can certainly help but may not be necessary or sufficient to effect transformation”. • “While privatization is one possible option for distribution, it cannot be a pre-requisite or a necessary consequence of APDRP restructuring. The door for reform under public ownership must be left open”. • “Unless AT&C losses are brought down and subsidies to farmers are fully reimbursed by the State Government, or unless all hurdles in the path of open access are removed, the private sector is unlikely to get into generation in a big way. Thus the public sector is here to stay and we should leverage its strength to introduce competition in the sector with minimal risk. Public sector also needs to lower its costs”.

6. 3. Emphasis on Public Sector • These excerpts may be viewed in the following background: • Generation - Private sector invited from 1991 – only 15 years • Transmission- just opening up for private sector • Distribution • Past experience of Tata, Reliance, RPG and Torrent is encouraging. • Despite initial setbacks, Orissa and Delhi initiatives are successful.

7. 3. Emphasis on Public Sector • During the last three years, many enabling policies, provisions and initiatives such as Indian Electricity Act, 2003, National Electricity Policy, Tariff Policy, Independent regulatory set up, delicensing of generation, open access, Ultra Mega projects, automatic 100% FDI, viability funding etc have been introduced: The Impact of which will be seen in next 5 to 10 years.

8. 4. Cake is too Big • With 8.5% targeted growth rate in GDP for 11th plan and having the objective of “Power For All” by 2012, the required capacity will be over 200,000 MW. • It is estimated that Rs. 4.5 Lac crore investment will be required in 11th plan. If role of private sector is assumed at 20%, even then Rs. 90,000 crore investment by the private sector is envisaged in 11th plan period. SCOPE IS UNLIMITED- CAKE IS TOO BIG FOR ALL PARTICIPANTS

9. 5.Integrated Approach Essential • The task is mammoth. Therefore, it is not ‘either’ ‘or’ but ‘both’ - co-existence. • Private sector can complement not only in creating the capacities but can also play a more effective role in optimal utilization of the available capacities.

10. 6. Way Forward – Some Suggestions • Optimal utilization of existing capacities: • Distribution – AT & C Losses • Appropriate incentives through retention of achieved efficiencies with the distribution licensee • Demand side management / Energy Conservation • Private sector to play a significantrole in actualising the targeted 15% savings. • R&M • NTPC has done a commendable job • Private sector also to be encouraged by earmarking say 15 schemes. • Privatization • 20 to 25 identified distribution circles may be offered for privatization in the next 2 to 3 years (similar to ultra mega projects). In addition, similar model for 20 to 25 integrated utilities (of say atleast 250 MW each) can be followed.

11. 6. Way Forward – Some Suggestions • Augmenting the capacities: • Fuel constraints resolution • Increasing availability • Gas – declared goods status. • Transmission availability on a priority basis to projects under execution generally and in particular where EPC contracts have been awarded. • Risk mitigation- Though the scope is unlimited, the following few factors will limit the full realization of private sector role. • Sanctity of contracts. • Permanency of cost predictions. • Sectoral limits of FIs/Banks • Depreciation rate

12. 6. Way Forward – Some Suggestions • Facilitating Measures • Coordinated approach between the central and state electricity regulatory commissions for consistent policies • For meeting the colossal requirements of efficient power, power sector would require enormous number of well trained professional manpower for generation, distribution, customer care, etc (possibly similar to current software sector). This would in turn call for more educational infrastructure, specialised courses etc, which need to be planned and provided for. • Training academy for regulatory personnel as suggested by mid term review of 10th Plan.

13. 7. Conclusion If one is to survive this constant battle with the unexpected, two qualities are indispensable: first, an intellect that will recognize the opportunity and second, the courage to act and exploit the same.

14. Thank You

15. Disclaimer • This presentation in many places provides the micro perspective. • The views contained herein are of the author only and does not represent the views of the organization he represents. • This presentation does not seek or purport to evaluate any of the policies or the regulations of the Central Government, State Government, CEA,CERC and SERCs.