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Power Sector in 2008-09, Shri R V Shahi, Former Secretary, Ministry of Power

Tentative details about the performance of Indian power sector during the year 2008-09 have started coming. This paper would cover and comment on some of the important performance parameters as also the major events and initiatives that have happened during the year.

  1. The electricity generation growth during the year has been the lowest in last eight years. It has been just 2.71% as compared to 6.33% during the year 2007-08. The generation growth rates during the previous years starting from 2001-02, which was the last year of the Ninth Plan, are as follows - 2001-02 (3.1%), 2002-03 (3.2%), 2003-04 (5.0%), 2004-05 (5.2%), 2005-06 (5.2%), 2006-07 (7.3%), 2007-08 (6.3%) and 2008-09 (2.7%).

  2. It is reported that one of the main reasons for this drastic drop in the growth rate is the 8.42% decline in the generation at hydro electric power plants. It needs to be mentioned that hydro electric generation constitutes hardly about 18% of the total power generation. Though, hydro electric capacity is about 25%, since the Plant Load Factor in these plants is in the range of 40 to 45% only, the overall contribution in power generation is significantly less as compared to the proportion in the installed capacity. It is, however, relevant to mention that hydro electric plants provide electricity during peak hours, and therefore their performance needs to be judged in terms of peak load support rather than overall electricity generation alone. In any case, the decline in electricity generation at hydro plants during the year 2008-09 which has been reported at about 8.42% cannot contribute more than 1.5% in the overall decline in the electricity generation growth. Therefore the drastic decline to 2.71% cannot be explained on account of hydro electric generation as the primary reason. Even if we add 1.5% to 2.7%, it gives only about 4.2% as the generation growth.

  3. During the year, while writing about electricity generation performance, I have been highlighting the issue of inadequacies in fuel supply - both coal and gas. The performance of coal sector does affect electricity generation. Coal sector has been making the point that it has been supplying coal as per the linkage agreed. This is true. But it is also true that if power plants can be made to perform better and meet the need of the economy, required fuel support would be necessary. It is gratifying for the country and the power sector that today not only NTPC power plants, but also in the power plants of State Electricity Boards, a State Generating Companies and the Private sector there has been an overall improvement in capacity utilisation. During the year 2008-09 more than 30 power stations in the country, including 10 power plants of NTPC, have achieved more than 90% Plant Load Factor.

  4. Coal supply factor issue becomes the matter of serious concern every year. While efforts of coal companies must continue, power generating utilities also need to recognise that 5 to 10% of coal requirement, if met through imports, will have a magical effect not only on the parameter of Plant Load Factor, but also on the smoothness of operations. I would like to highlight that I have observed a normal resistance from power utilities, in many cases, towards supplementing coal needs through imports. A linked issue also relates to the Port infrastructure. I recall, during the year 2005-06 and subsequently during 2006-07 we targeted to import larger amounts of power grade coal, it was discovered that handling infrastructure at Ports and subsequent transportation did need suitable augmentation. Throughout the year the issue of production of coal, likely shortfall as compared to required levels of generations of power, planning for import, Port infrastructure should be regularly reviewed. One of the alternatives could be that Coal India subsidiaries themselves import at various Ports to supplement the domestic coal supply. One conclusion that should always guide us on this issue is that keeping the operating power plant asset underutilised would always be a much costlier option. Even if cost of imported coal is higher, it is better to produce power when needed than not to import coal and keep the machines underutilised.

  5. NTPC is the largest player in the Indian power sector. Even in their case, the electricity generation growth during 2008-09 has been just about 3% as compared to about 6.5% last year. This is also one of the lowest in last many years. Electricity generation in NTPC in last few years is as follows (in terms of billion units) - 2004-05 (159.1), 2005-06 (170.9), 2006-07 (188.7), 2007-08 (200.9), 2008-09 (206.9). NTPC achieved electricity generation growth rates of 7.4% in 2005-06, 10.4% in 2006-07, 6.5% in 2007-08 and about 3% in 2008-09.

  6. I have analysed the shortfall in the case of NTPC. Almost 4.8 billion units of generation was lost on account of coal shortage. If this shortage was not there, the Plant Load Factor would have improved by about 3.5%. As many as 10 power stations of NTPC achieved more than 90% Plant Load Factor, the average being 91.1%. The plants which achieved more than 90% include Dadri - 840 MW (99.4%), Simadri - 1000 MW (97.4%), Rihand - 2000 MW (97.2%), Korba - 2100 MW (96.2%), Sipat - 1000 MW (94.6%), Ramagundam - 2600 MW (94.5%), Unchahar 1050 MW (93.7%), Vindyachal - 3260 MW (93.2%), Talcher Thermal - 460 MW (92.7%), Singrauli - 2000 MW (90.7%).

  7. It is relevant to mention that out of the 10 NTPC power plants which have achieved the distinction of above 90% PLF, 2 power plants viz. Unchahar and Talchar are the plants which were sick with State Electricity Board/Utility, were taken over by NTPC and were turned around within few years of takeover.

  8. As regards gas based power plants of NTPC, the capacity utilisation has been just about 65%. This has been the story of almost all the gas based power generation capacity, which is of the order of about 15,000 MW in the country. All of them could easily generate more than 95%, but the average was less than 65%. Thus, almost 1/3rd of the capacity remained unutilised on account of shortage of gas supply. The good news is that now gas has started flowing from KG Basin of Reliance Industries. The Empowered Group of Ministers has decided the allocation of gas. More than 40% of gas production has been allocated, and rightly so, to the power plants. NTPC power stations have also been given additional allocations. But, even including these allocations, these power plants would not be able to achieve more than 85% Plant Load Factor. There is a need to have gas allocations for power stations relevant to 95% Plant Load Factor just as coal linkages for well run power plants should correspond to 90% Plant Load Factor, with possibility to supply more if required.

  9. The nuclear power plants have also not been able to perform better because of the shortage of nuclear fuel. In fact, capacity additions during the last 4 to 5 years have not yielded commensurate benefits in terms of additional power generation on account of this factor. Overall Plant Load Factor on the nuclear plants has been substantially less than 60%.

  10. One of the important reasons for the poor electricity generation growth has also been the shortfalls in additional capacity which had been targeted. Electricity generation growth is contributed by improved availability and generation at existing power stations, as well as additional electricity which becomes available from new capacities which are installed. During the year 2008-09, out of targeted capacity addition of 11,100 MW, the capacity installed has been 4,900 MW, i.e. about 44%.

  11. The matter regarding new projects, the process of planning, fixation of target, infrastructure of equipment manufacturing, transportation, have been discussed at length during last few years. The performance during the year further vindicates and reinforces the points already made. Even now, the domestic preparedness of power equipment manufacturing sector alongwith their infrastructure for construction and commissioning is adequate only for 5000 to 7000 MW a year. The capacity addition of 9300 MW achieved during 2007-08 should not convey a wrong message that preparedness has improved. As a matter of fact, what was achieved in 2007-08 was entirely the slippage of 2006-07 which was of the order of 10,000 MW. A few important issues, which have already been brought out in the past, but need to be reemphasised, are as follows:

  1. For capacity addition of 15,000 MW a year, we must have 4 to 5 manufacturing companies for the main plant. No doubt, BHEL has done a lot in the past, but their capacity to deliver, not only from the point of view of manufacturing but also inclusive of their ability to construct and commission, is grossly limited. In our anxiety to accelerate the pace of expansion of installed capacity, we started pushing placement of orders. This was essential because this forms the basis for further follow up and monitoring on execution. This led to upsurge in order book position of BHEL. In March, 2002, BHEL had an order book position of Rs. 12,500 Crores. It increased to Rs. 15,800 Crores (March 2003), Rs. 23,650 Crores (March 2004), Rs. 31,800 Crores (March 2005), Rs. 37,500 Crores (March 2006), Rs. 55,000 Crores (March 2007), Rs. 85,500 Crores (March 2008), Rs. 117,000 Crores (March 2009). Thus, during the Tenth Plan period itself the volume of orders on BHEL increased five times and now it is almost ten times of the volume as in the beginning of the Tenth Plan. Their preparedness has been far too short to meet such huge inflow of orders on them. I recall, when we started monitoring the placement of orders, within a period of 2 years - 2002-03 and 2003-04, the volume doubled, from around Rs. 12,000 Crores to around Rs. 24,000 Crores. We were concerned about the capacity of their manufacturing. Ministry of Power constantly reviewed BHEL's preparedness, but their response was rather slow. This resulted in, towards the end of Tenth Plan, in the wake of massive orders, huge slippages in supply, erection and commissioning. Almost 10,000 MW projects, which were to be commissioned in the last year of Tenth Plan slipped to Eleventh Plan.

  2. Main plant manufacturing is not the only area of concern. In fact, the preparedness in the country on the balance of plants, both from the point of view quantity and quality, is even weaker. We need strong agencies which could manufacture and/or co-ordinate manufacturing and supply followed by construction and commissioning, the entire range of balance of plant under one umbrella. Not one but atleast half a dozen such agencies are needed. Organisations like BHEL, NTPC and other large generating utilities should facilitate emergence of such agencies. To encourage this process to be initiated and to happen, a realistic and balanced approach will be needed to formulate the qualifying requirements. If we were to say that such an agency should have had experience in a number of projects and for a number of years, this process would end even before it begins. Pragmatism requires that in the interest of the sector a more reasonable and facilitative approach is adopted.

  3. There has been such a rapid increase in the number of projects under execution at a time that even inexperienced construction and erection agencies are hard to find. During the advanced stage of erection and commissioning, I have observed, an effort to augment the teams of construction/erection personnel in one plant has only meant corresponding depletion in another plant. Good welders, fitters, riggers, electrician etc. are in large demands. Skilled agencies in the area of turbine erection are very few. At higher end, the story is similar when it comes to commissioning of a large number of units, spread over different parts of the country, during the same period of time, particularly the last six months of the financial year. Commissioning teams of competent engineers shift from place to place because the number of such teams is much less than needed. This again will require a co-ordinated approach to develop and facilitate a large number of agencies in the field of construction/erection and also adequate number of commissioning teams.

  1. The performance on the non-conventional energy capacity addition has also not been so satisfying. On the wind turbine, the capacity addition is only 1500 MW, almost similar to what was achieved last year. Though the target was much higher, a few months back it was expected that about 1700 MW of wind based generation would be commissioned during the year.

  2. On the policy initiative side, the most notable achievement of the year was the Agreement with the Nuclear Supplier Group. This would definitely facilitate better supply of nuclear fuel for the existing nuclear power plants as also for starting new projects. Results of these initiatives, no doubt, would be available in next 5 to 10 years, though the positive impact on improved generation on the existing plants could be seen in the short term. The initiative of the Ministry of New and Renewable Energy in respect of solar power has also been one of the most powerful policy instruments to promote solar energy. The Scheme which provides payment of incentive linked to electricity generation would definitely encourage larger volumes on Solar PV Systems.

On the whole, the year 2008-09 presented a mixed experience for the Indian power sector. There have been remarkable improvements in power generation at a number of power plants. Yet, the overall growth has fallen short even of 3% thus being the least in last 8 to 9 years. The decline in growth is not due to lower growth in manufacturing or in service sector. In fact, the year also saw increase in shortages of electricity, particularly during peak hours. On the new capacity addition again, the performance has been only about 44%. On both these fronts there are areas which need co-ordinated attention. Fuel supply, equipment manufacturing and supply, particular attention to balance of plant manufacturing, need for a large number of construction and commissioning agencies are some of the areas which continue to cause concern and they need to be attended to with urgency.