This chapter brings forward the background details, which inspired us to have the workshop Power on Demand by 2012. Ministry of Power, Government of India has dared to dream. They have a hallucination in this new millennium and hence have come up with a vision document named Blueprint of Power Sector Development, which elaborates the dream to have power for all by 2012 in India.

Power is the backbone of modern global society. It is a crucial ingredient for economic growth and improving the standard of life. Electricity consumption is practically synonymous with modern life in the industrialized world. Our communications, transport, food supplies, and most amenities of contemporary homes, offices and factories depend on a reliable supply of electrical power.

The growth rate of demand for power in developing countries is generally higher than that of Gross Domestic Product (GDP). In India, the elasticity ratio was 3.06 in the first Plan and peaked at 5.11 during third plan and come down to 1.65 in the Eighties. Therefore, in order to support a rate of growth of GDP of around 7 percent per annum, the rate of growth of power supply needs to be over 10 percent annually. But given the budgetary support limitation, due to growing demands from other sectors, particularly social sector and the severe borrowing constraints, a new financing strategy was required. This had been recognised by the Government as reflected in the new policy enunciated in 1991, allowing private enterprise a larger role in the power sector.. This had been recognised by the Government as reflected in the new policy enunciated in 1991, allowing private enterprise a larger role in the power sector.

The achievement of increasing installed power capacity from 1362 MW to over 100,000 MW since independence and electrification of more than 500,000 villages is impressive in absolute terms. However it is a matter of grave concern that the annual per capita consumption of electricity in India, at about 350 kWh is among the lowest in the world. Further, people in a large number of villages have no access to electricity. The end users of electricity like households, farmers, commercial establishments, industries are confronted with frequent power cuts, erratic voltage supply and low and high supply frequency have added to the power woes of the consumer. These problems arise from:

• Inadequate power generation capacity;
• Lack of optimum utilisation of the existing generation capacity;
• Inadequate inter- regional transmission links;
• Inadequate and ageing sub- transmission and distribution network leading to power cuts and local failures/faults;
• Large scale theft and skewed tariff structure;
• Slow pace of rural electrification;
• Inefficient use electricity by the end users
• Lack of grid discipline

The Union Ministry of Power has developed appropriate strategies and a blueprint to address the above issues in a time bound manner. The outcome of these strategies hinges on their effective countrywide implementation.

The States have the greater share of generation and transmission assets and almost the entire distribution under their control. They would need to play to very vital role in effecting institutional and result oriented changes.

Strategies to augment power generation capacity to remove shortages
On account of inadequate generation capacity, the country is plagued by power shortages. The total energy shortage, during 2000-2001, was 39,816 million units, amounting to 7.8 per cent and the peak shortage was 10,157 MW translating to 13 per cent of peak demand. Based on the demand projections made in the 16th Electric Power Survey, over 1,00,000 MW additional generation capacity needs to be added by 2012 to bridge the gap between demand and supply of power.

The Ministry has taken a comprehensive and realistic review of the various power projects to priorities those, which can be commissioned in the X and XI Plans. Based on this review, a capacity addition target of 46,500 MW has been tentatively fixed for Central Public Sector Undertakings under the Ministry of Power. At the State level, the SEBs/State utilities and private sector will add about 41,800 MW. For optimal development of the electricity energy in its totality, an integrated approach, including capacity addition through nuclear and nonconventional energy, has been adopted. The capacity addition targets of 6400 MW through nuclear power and 10,700 MW through non-conventional resources have been accordingly fixed for the period upto 2012.

The large coal reserves in the country provide a ready and economical resource and ensure energy security. Hence, coal has been identified as the mainstay fuel for power generation till 2012. Emphasis has been laid on setting up large pit head stations to avoid high costs associated with transportation of high ash bearing Indian coal and overstraining the already stretched rail network.

Hydroelectricity is clean energy and its generation is not linked to issues concerning fuel supply, especially the price volatility of imported fuels. It enhances our energy security and is ideal for meeting peak demand. Less than one fourth of the vast hydel potential of 1,50,000 MW has been tapped so far. Consequently, thermal generation, which should generally be used for base load operation, is also being used to meet peaking requirements. As against the desirable hydro share of 40 per cent, the current share is only about 25 per cent in India.

The Ministry has developed appropriate strategies of fully exploit the country's hydro potential and accords high priority for its development. It is estimated that for building over 1,00,000 MW of additional power capacity and associated transmission & distribution infrastructure, nearly Rs. 8,00,000 crores of investments would be needed in the next decade. The investors have been wary of the sector due to lack of confidence in getting returns on their investments. The payment security measures taken till now have not yielded desired results. There is little doubt that resource generation within the sector through prompt and efficient collection of appropriate user charges from all the electricity consumers is the only long-term solution to attract investments in the sector. The sector has to be made financially strong from within in order to attract investments from outside. In view of the pending fructification of the long-term measures in this regard, the Ministry has taken steps to set up an alternate payment security mechanism for the investors as an interim resource mobilization strategy. A Committee of Experts has been constituted to identify the sources of funds including Government funding, multilateral and bilateral assistance, institutional financing, market borrowings, internal resources, private investment etc; and suggest institutional policy and other measures required for the massive resource mobilization that is needed. An action plan to expedite financial closure of private sector projects is also going to be implemented.

There have been major slippages in meeting targets of capacity addition during the VIII and IX Five-Year Plans. Only 53.77 per cent of the capacity addition target was achieved during the VIII Plan. During the IX Plan, too, only about half of the target of 40,245 MW is likely to be achieved. To avoid such slippages in the X and XI Plans, a comprehensive project monitoring and control system has been put in place. Special emphasis has been laid on monitoring of projects at pre-implementation stage. A Power Projects Monitoring Committee has been set up. Special Secretary (Power) has been taking weekly reviews to monitory the progress of power projects to be identified for commissioning upto 2012. To ensure greater success in capacity addition, the central power generating companies under Ministry of Power are being asked to add 43 per cent of the total required capacity as against a contribution of 23 per cent during the IX Plan.

Transmission initiatives
Inadequate investments in transmission & distribution infrastructure have resulted in power evacuation constraints from the generating stations. The problem has been severe in the eastern region. Concentration of coal reserves and hydel sources in a few geographic pockets calls for an effective inter-regional network to transmit the electricity generated in fuel rich regions to other regions. Accordingly, a perspective plan has been developed to build 30,000 MW inter-regional transmission capability by 2012. The formation of a national grid will improve reliability, quality and economics of power supply. Ultimately, national grid is the solution to the problem of inter-regional imbalances. However, in view of idling of surplus power capacity in eastern region, immediate steps to facilitate transfer of power from eastern region are being undertaken.

Pursuant to the enactment of legislation in 1998, permitting private investment in transmission, detailed guidelines have been issued for attracting private invstment in transmission projects. Due to mismatch in generation and demand, there is a tendency among state utilities to overdraw from the grid. This coupled with inadequate capacitors, results in low frequency and low voltages in the grid and the cascading effect could lead to collapse of the entire regional grid. Both short and long-term measures are being adopted to prevent grid failure.

Distribution Reforms - The Core of Sector Reforms
The toughest roadblock stalling power sector development has been the poor financial health of the State Electricity Boards (SEBs), which in turn, is mainly due to poor performance on the distribution front. Out of total energy generated, only 55% is billed and only 41% is realized. The gap between average revenue realization and average cost of supply has been constantly increasing. During the year 2000-2001, the average cost of supply was 304 paise per unit and average revenue per unit was 212 paise per unit i.e. there was a gap of 92 paise of every unit of power supplied. All this has caused erosion in the volume of internal resources generation by the SEBs. The annual losses of SEBs have reached a level of about Rs. 26,000 crores. Consequently they are unable to make fully payments to CPSUs for purchase of power and coal. This has resulted in accumulation of outstandings of more than Rs. 40,000 Crores by the SEBs.

The major factors responsible for financial sickness of SEBs are:

• Skewed tariff structure leading to unsustainable cross subsidies
• Huge T & D losses, largely due to outright theft and unmetered supply. It has been estimated that theft along causes loss of about Rs. 20,000 crores annually.
• Lack of accountability in distribution.

Power sector development cannot accelerate until the above issues are addressed with full commitment at all levels. Accordingly, distribution reforms have been identified as the key area for putting the sector on the right track. The strategies identified by Ministry of Power in this direction include:

• Development of district level distribution improvement plans/projects for all districts.
• Setting up of district level energy committees for monitoring and resource planning.
• Development of 60 distribution circles as Centres of Excellence for distribution reform. These Centres would act as models for replication in other districts.
• Hundred per cent metering and effective Management Information System (MIS) for monitoring at feeder level, backed up by detailed energy audit to bring accountability into the system at all levels.
• Taking high voltage lines up to the load center to prevent theft of power and reduce technical losses.
• Singning of MOUs with States for undertaking distribution reforms in a time bound manner and linking the support of Government of India to achievement of pre-determined milestones. (Sixteen states have signed the MOUs so for).
• Privatisation/corporatisation of distribution
• Tariff rationalization by State Electricity Regulatory Commission (SERC) (16 States have set up SERCs and 9 have issued tariff orders).

Steps are also being taken to expedite the enactment of a composite Electricity Bill to accelerate the reform process and harmonise the provisions in the existing laws.

Electrification of Villages and Households
The pace of rural electrification in the VIII and IX Plans has declined. Nearly 80,000 villages are yet to be electrified. Only 31 per cent rural and 45 per cent urban households have been covered so far. It is planned to cover all non-electrified households by the year 2012. In order to accelerate rural electrification, it has been proposed to treat rural electrification as a Basic Minimum Service in the Prime Minister's Gramodaya Yajana. The Ministry is also taking a number of other specific measures including strengthening of the rural distribution network under the Accelerated Power Development Programme (APDP). The objective of the Ministry is to complete electrification of 62,000 villages by 2007, which is within the next 6 years and 18,000 remote villages (through renewable sources) by 2012. Decentralised generation and distribution through district level Energy Committees have been envisaged to contribute in this endeavour. All households are to be covered by 2012.

Providing affordable power
With increasing prices of fuels and cost of installations, the cost of power generation has significantly increased. While attending to the task of doubling the country's generation capacity by 2012, high priority is to be given to reduce the cost of power to enable different segments of population and the economy to effectively utilize power as an input. In order to recommend strategies to reduce the cost of power, an Inter-Disciplinary Group of Experts was constituted. The Group has submitted its report. The implementation of number of strategies outlined in the report would help in cost reduction efforts and provide affordable power to the consumer.

Benchmarking in project costs, adoption of best practices, and choosing least cost option in capacity addition are going to be promoted. Competitive bidding will be adopted as a transparent and cost reducing approach. Already the Ministry has ensured that its PSUs post all their tenders on websites. Some State power utilities have also done so.

Sustainable power development
Concerns relating to pollution and the disposal of the large amount of ash from coal-based power stations, which are the mainstay of India's power generation, are being addressed through strategies to promote environmentally sustainable power development. The useful recommendations of the Fly Ash Mission of TIFAC are to be implemented. The Ministry is taking steps for making the use of fly ash mandatory for road and bridge construction, as well as for construction of Government buildings. Fiscal incentives to supplement the market mechanism for taking up production and promotion of fly ash products are also envisaged.

All Central utilities have been advised to adopt ISO 14001 standards. Afforestation is being given major emphasis and a Special Purpose Vehicle (SPV) is being set up for afforestation. Introduction of super critical technology and clean coal technologies is also planned to generate power with maximum efficiency and minimal pollution. The Ministry is taking environmental initiatives in keeping with the global developments and mechanisms. Thus, the Ministry is striking a fine balance between the power development imperatives and the emerging concerns for the environment.

Upgrading technical efficiency and skill levels, and re-orientation
To make the power sector truly efficient and competitive in the changing scenario, steps have already been taken to impart greater thrust to research and development, training of the human resources in the power sector and adoption of progressive management practices and tools, (including IT). Personnel are also being educated about their changed roles in the power reform scenario. Emphasis on commercialisation of the sector is also being imparted. A Standing Committee on Research and Development has been constituted to draw up a Perspective Research and Development Plan to ensure optimum utilization of the infrastructure and provide a standing forum for R & D activities in the power sector. Another Committee has been set up to formulate a 'National Training Policy for Power Sector' and to develop a national level action plan for training of the power professionals to align their skills and mindset to the changing requirements. Integration to training facilities available in the sector is also planned to optimise their utilization.

The Ministry is planning to recast the role of the Central Electricity Authority (CEA) to enable it to effectively perform the role expected of it in the new environment.

Awareness Campaign and Opinion building
In order to focus public attention on the need to shed the 'business-as-usual' approach and undertake speedy reforms in the power sector, a multi-media mass awareness campaign is being launched countrywide. The Union Power Minister has already sent personal letters to different stakeholders and opinion makers on critical issues concerning the sector. Five international conferences-cum-business meets have been planned on the themes of (i) Transmission, Energy Management & Convergence, (ii) Distribution, (iii) Non fossil Fuel Generation, (iv) Fossil Fuel Generation and (v) Optimising Existing capacity through Renovation & Modernisation (R & M) between August 2001 and February 2002 to optimise investment in power sector. CII, FICCI and the CPSUs are organizing these meets.

It is only with the cooperation and understanding of all the stakeholders and opinion makers that the reforms and other initiatives can be pushed ahead firmly and expeditiously.