Govt to bring more services under tax net!Electrifying Electricity to SHOCK the Masses!Remeber the Enran episode? Nuclear Power Plant Drive expediated by Indo US Nuclear Agreement further made the lifeline Lethal for economic sustenance! In sixties, we in Rural India were mostly Deprived of Electricty but the Rural World in neo Liberal age may NOT Survive without Electrcity. My home in basantipur is just Six KM away from Pant Nagar Universuty, one of the Epicentres of Green Revolution in India. We depended on rain or indigenous Irrigation system till then. But Green Revolution opened up the Ground Water Option. We had Tube Wells in 1967 and needed electricity. Then Finance Minister of UP ND Tiwari had to inaugruate Electricity in Basantipur and I had to Draft the Welcome Address which I had rejected. Now, Urban and Industrial life is fully dependent on Electricity. Even in Remote Villages equipped with computers, you may NOT use home appliances so abundant with the expansion of Consumer Free market. Fuel Subsidy finished and you have NOT to get any Subsidy whatsoever in future! How do you Afford ELECRTICITY in sensex India?This summer, when Indian consumers were again reeling under a spate of electricity outages, private power companies in the country were in the middle of a breakneck investment binge. Their total investment commitment, Rs 2.25 lakh crore, is aimed at creating 50,000 mw of new generation capacity by 2014. A large part of the committed amount has already been spent. The additional power would suffice to light up ten cities like Delhi.Economi Times reports!
Swiss banks owe Indian holders over $2 billion: Swiss Central Bank

Indian Holocaust My Father`s Life and Time - SIX HUNDRED EIGHTY SIX

Palash Biswas

http://indianholocaustmyfatherslifeandtime.blogspot.com/

http://basantipurtimes.blogspot.com/

Indian Holocaust My Father`s Life and Time: Electrifying Electricity

indianholocaustmyfatherslifeandtime.blogspot.com/.../electrifying-el...- Cached
23 Jan 2010 – At present (2009), the price per unit of electricity in India is about Rs. 4 (8 US cents) for domestic consumers, and Rs. 9 for the ...
Electricity - consumption: 568 billion kWh (2007 est.)
Definition: This entry consists of total electricity generated annually plus imports and minus exports, expressed in kilowatt-hours. The discrepancy between the amount of electricity generated and/or imported and the amount consumed and/or exported is accounted for as loss in transmission and distribution.
Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of July 12, 2011
See Also

http://www.indexmundi.com/india/electricity_consumption.html

Govt to bring more services under tax net!

Electrifying Electricity to SHOCK the Masses!Remeber the Enran episode? Nuclear Power Plant Drive expediated by Indo US Nuclear Agreement further made the lifeline Lethal for economic sustenance! In sixties, we in Rural India were mostly Deprived of Electricty but the Rural World in neo Liberal age may NOT Survive without Electrcity. My home in basantipur is just Six KM away from Pant Nagar Universuty, one of the Epicentres of Green Revolution in India. We depended on rain or indigenous Irrigation system till then. But Green Revolution opened up the Ground Water Option. We had Tube Wells in 1967 and needed electricity. Then Finance Minister of UP ND Tiwari had to inaugruate Electricity in Basantipur and I had to Draft the Welcome Address which I had rejected. Now, Urban and Industrial life is fully dependent on Electricity. Even in Remote Villages equipped with computers, you may NOT use home appliances so abundant with the expansion of Consumer Free market. Fuel Subsidy finished and you have NOT to get any Subsidy whatsoever in future! How do you Afford ELECRTICITY in sensex India?This summer, when Indian consumers were again reeling under a spate of electricity outages, private power companies in the country were in the middle of a breakneck investment binge. Their total investment commitment, Rs 2.25 lakh crore, is aimed at creating 50,000 mw of new generation capacity by 2014. A large part of the committed amount has already been spent. The additional power would suffice to light up ten cities like Delhi.Economic Times reports!

PSLV C-17 Launch

ISRO successfully launches latest communication satellite
ISRO used the most powerful XL configuration with six extended solid strap-on motors carrying 12 tonnes of solid propellant for today's flight.

Indian COBRA Troops to Take on Maoist Insurgents

By VIVEK RAGHUVANSHI
Published: 3 Sep 10:48 EDT (14:48 GMT)

NEW DELHI - India for the first time is raising special forces to tackle Maoist terrorists. The Home Ministry has approved the creation of 10 battalions, about 11,000 special forces troops, to fight Maoist terrorists operating in some parts of the country.
These homeland security special forces, called Commando Battalions for Resolute Action (COBRA), will be operational in the next three years.
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A senior Indian Home Ministry official said that specialized equipment worth millions of dollars - including helicopters, electronic warfare ground systems, surveillance assets and light weaponry - will be procured from home and overseas markets to equip the new battalions.
The special forces will be trained at the Indian Army's anti-terrorist training facilities, a senior Home Ministry official said.
The Maoist terrorists are proponents of the ideology of the Communist Party of India (Maoist), an underground political party often referred to as Naxalites.
The terrorists are active in the Indian states of Andhra Pradesh, Maharashtra, Orissa, Bihar, Jharkhand and Chattisgarh.
http://www.defensenews.com/story.php?i=3705004

The Union Finance Ministry plans to bring more professions in the services sector under the tax net, a senior bureaucrat said here today.

He was speaking at a Service Tax-related event organised by the Associated Chamber of Commerce (Assocham).

"More areas in the services sector need to be brought under service tax. In India, this is tougher to do, because goods are sometimes classified as services and vice versa. The Centre has shown commitment to implement the Goods And Service Tax (GST), which will subsume most of the indirect taxes like excise duty and service tax at the central level, as well as VAT on the state front, besides local levies," Joint Secretary Union Ministry of Finance V K Garg said.

"Very soon, there will be an announcement by the Union Finance Minister on a negative list of taxation. We have drawn up a negative list of taxation about what we do not and should not tax. Once we are sure of this, everything else, which is not included in this list, can be brought under the tax net," he added.

He said that taxation is important for any country, and if taxation fails, it leads to deficits and inflation - which is the worst kind of taxation.

He also said that if taxes are improper, the economic activity would end up getting distorted. Similarly, if import duties are high, then local businessmen would enjoy protection and monopoly, which will result in customers suffering, he said.

"In India, even defining certain economic activities as a service is not easy, because the constitution does not recognise several such activities as service. So, there is a challenge even at the definition level," Garg said.

"Currently, only a limited number of services are under the tax net. The government proposes to tax most of the services under the GST regime. A constitution amendment bill is pending in the Parliament, which seeks to pave the way for the introduction of GST. The idea is to implement the GST regime by the year 2013," he said.
Swiss banks owe Indian holders over $2 billion: Swiss Central Bank
GENEVA: The Swiss Central Bank has estimated the total liabilities of Swiss banks toward Indian account holders at about $2.5 billion in 2010 as against the USD 1.5 trillion figure projected by some political parties and non-governmental organisations.

"The Swiss National Bank can only say that liabilities of Swiss banks toward Indian holders according to our annual statistics... were Swiss francs 1.945 billion (USD 2.5 billion( in 2010," the spokesperson for the Swiss National Bank President, Walter Meier, told PTI.

He said the liabilities of the Swiss banks toward Indian account holders was 1.965 billion Swiss francs (USD 2.7 billion) in 2009 and 2.4 billion Swiss francs (about USD 3 billion) in 2008.

In the aftermath of the financial crisis that engulfed the West after the collapse of Lehman Bank in the United States in 2008, Swiss private banks, particularly their largest bank UBS, had suffered huge losses.

Subsequently, there were substantial withdrawals of funds from Swiss banks.

Several legal cases against Swiss banks, especially UBS, for parking funds illegally subscribed by wealthy US citizens through tax evasion, as well as growing international pressure from the Paris-based OECD (Organisation for Economic Cooperation and Development) and G-20 financial regulations forced the Swiss government to considerably relax confidentiality provisions for numbered accounts.
'Tax reforms in India lag behind growth'
Taxation reforms in India have not kept pace with economic growth, leading to the problems of tax evasion and money laundering and resulting in an estimated $1.4 trillion of black money, an expert said.

"In India, tax reforms have lagged behind growth. It is a big challenge for politicians and policymakers to keep the pace of reforms with growth," Jeffrey Owens , director of the OECD (Organisation for Economic Cooperation and Development) Centre for Tax Policy and Administration , told IANS during a visit to New Delhi.

He said high tax rates and loopholes in policies led to huge black money in India, which is mostly stashed abroad.

According to unofficial estimates, the quantum of Indian black money ranges from $450 billion to $1.4 trillion.

"Indian economy has transformed in the last two decades. Along with high growth, it has increasingly become importer and exporter of capital. But tax regulations have largely remained the same. You have to change with the changing environment," the OECD official said.

Owens said the proposed tax reforms would help plug loopholes in the system and boost growth.

India plans comprehensive reforms in both direct and indirect tax regulations. The government aims to replace the archaic Income Tax Act, 1961, with a simplified norm called Direct Tax Code (DTC) from the beginning of the next financial year.

The DTC Bill, that aims at reducing tax rates but expanding the tax base by minimising exemptions, was introduced in parliament in August last year. However, the bill has not been passed yet.

Under the new tax regime, the government proposes to introduce measures that would help curb tax evasion and black money. It proposes to bring into the tax net all passive income earned by residents from substantial shareholding in companies situated in the low tax jurisdictions, often referred to as tax havens.

Assessees are also required to furnish details of their investment and interest in any entity outside India.

Finance secretary Sunil Mitra said recently that the reformed tax regime would help bring back the ill-gotten money stashed abroad.

To reform the indirect tax regime, the government proposes to introduce a unified Goods and Services Tax (GST). It seeks to bring uniformity in indirect tax structure across the country by replacing the excise duties, services tax, value-added-tax, state surcharges and local levies with a unified tax rate.

Originally, the GST was planned to be introduced from April 1, 2010, but it has been delayed because of stiff opposition from the Bharatiya Janata Party ( BJP ))-ruled states.

The new tax regime is unlikely to be implemented soon, given the rift between the federal government and opposition-ruled states.

Owens said the proposed reforms would boost the government's revenues and economic growth.

According to him, the focus of the reforms should be on broadening the tax base and reducing dependence on direct taxes. "The focus should be on consumption tax and property tax. Corporate taxes need to be reduced and the tax base broadened," he said.

Owens said that to attract more foreign investment, India needs to bring stability and predictability in its tax regime.
17 JUL, 2011, 04.29AM IST, SOMA BANERJEE & MITUL THAKKAR,ET BUREAU
Power Paradox: 50,000 mw extra supply means power outages and costlier bills for consumers

This summer, when Indian consumers were again reeling under a spate of electricity outages, private power companies in the country were in the middle of a breakneck investment binge. Their total investment commitment, Rs 2.25 lakh crore, is aimed at creating 50,000 mw of new generation capacity by 2014. A large part of the committed amount has already been spent. The additional power would suffice to light up ten cities like Delhi.

Reliance Power Ltd.

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Normally, the news should also light up the faces of consumers. In energy-starved India, any move to increase power capacity, however small, is good news. Power bills in India have been ballooning in recent years. And there seems be no respite in sight. Electricity charges are expected to escalate by up to 40% over the next three years.

So the move to bump up capacity through a barrage of investments is welcome news. Wouldn't it keep a lid on the electricity charges and check, if not end, power outages? Sadly, that is hardly the case.

Running on Empty

The reason is another story, a sobering one, that has been playing out elsewhere, in the commodity sector. The prices of commodities such as coal, nearly 70% of the electricity consumed in India is generated by thermal power plants and more than 50% of the commercial energy demand is met through coal, have been hardening over the past few months globally.

Geopolitical conditions in West Asia, particularly Libya, have impacted supplies of oil, fuelling higher prices. There is no letup in the prices of other commodities like steel and coal. Coal-rich countries like Indonesia haven't helped, changing norms and triggering price escalations. Tata Power, for instance, is buying coal from other companies despite owning a mine in the country.

India has vast reserves of coal, but the availability is far from easy. "The availability of domestic coal is directly influenced by Go/No-Go decision of the environment ministry on various coal mines which in turn effects the coal production/mining capacity of Coal India as well as other captive producers," says Ravi Sharma, CEO,Adani Power .

The availability of domestic coal and losses that distribution companies generate are a big concern, he says.

An energy report by CLSA has estimated that as much as 30% of the additional coal requirement for power projects will have to depend on imported coal that would raise costs further.

Average imported coal prices have moved to $120 a tonne from $99 a tonne. Indian power companies have already started feeling the pressure on the fuel front. State-owned Coal India has indicated that it will not be in a position to meet the demands of the upcoming coal-based plants fully.

Supercritical Situation

The scene is worse in the case of gas-based plants. A meeting held in the Planning Commission last Wednesday concluded that there could be no new power plants running on natural gas. Says Rajiv Mishra, managing director of China Light and Power: "Fuel availability and issues with land acquisition are the two main challenges to commissioning projects in India."

Mumbai Attack: Lessons & Threats

Terror biz being outsourced to local criminal gangs
With huge gaps in intelligence & local goons ready to turn into mercenaries, anyone from anywhere can outsource bloodshed.

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-paradox-50000-mw-extra-supply-means-power-outages-and-costlier-bills-for-consumers/articleshow/9251351.cms

Calculate Electricity Bill Online - How do I: National Portal of India
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Government is trying to cut down food grain prices: Finance Minister Pranab Mukherjee
KOLKATA: Finance Minister Pranab Mukherjee said on Sunday that the hike in prices of foodgrains was due to some obvious reasons, but the government was still trying to bring it down.

Talking to mediapersons here, Mukherjee said the price of lentils rose because India's consumption is more than its production.

"The prices of foodgrains have been due to some obvious reasons. For the last eight months, the price of rice and wheat is steady. Earlier the price of dal (lentils) had increased because India doesn't produce as much as it consumes. India needs 19 million tonnes, but production is only 14 million tonnes. But this year, the production of dal has increased," said Mukherjee.

Mukherjee added the government collects a third of the total production, which sets the benchmark price of foodgrains.

"The support money of one quintal rice was Rupees 600 and now it is Rupees 1,100 per quintal. Government collects a third of the total production, which sets the benchmark price of foodgrains. These are the reasons for the foodgrain price hike, but we are still trying to cut down the price," added Mukherjee.

India's food price index rose 9.16 percent this year till June 11, government data showed on Thursday (June 23). In the previous week, annual food inflation stood at 8.96 percent.

Food articles have a weight of little over 14 percent in India's inflation basket.

The record food grain produced during farm year July 2010 to June 2011 was 23 million tonnes more than the year before. However, the demand is set to rise with population growing at nearly 1.8 per cent annually.

The government has recently lifted the four-year old ban on wheat exports, even as shipment of the grain is not viable at current global prices.

The government had banned wheat exports since 2007 to boost domestic supply and contain inflation. (ANI)

India may give incentives to VCs investing in SMEs: DIPP Secy
SINGAPORE: India plans to provide incentives to venture capitalists who invest in small and medium-size enterprises (SMEs), a senior DIPP official said here on Friday.

"We are trying to incentivise venture capitalists' (VCs') investments for SMEs," R P Singh, Secretary of the Department of Industrial Policy and Promotion (DIPP), told reporters here today after addressing a seminar of 150 investors.

Singh said the current venture capital funding for Indian SMEs was negligible.

Asked to be specific about the venture capitalist investments in the type of SMEs, he said it should be across the board with focus on manufacturing sector.

Singh highlighted his department's plans to create more incentives, making it more attractive for foreign direct investors to participate in the Indian infrastructure developments during the seminar on "FDI and Infrastructure Development in India".

He led a delegation of Indian state investment official team to Singapore which met with Singapore-based international investors.

The team, among others, included Amitabh Kant , chief executive officer of the Delhi Mumbai Industrial Corridor (DMIC).

"Singapore is not only a financial capital but several Singapore companies have participated in Indian development projects.

Going forward, we are looking at the possibilities of Japanese and Singapore companies partnering with each other with their expertise of undertaking mega projects on long-term basis," Kant said.

"There will be cases where the Japanese companies with their technical expertise and Singapore companies with their experiences coming to India to help implement projects," he added.

Top industrial officials from Gujarat, Haryana and Maharashtra presented their respective state's projects in the DMIC.

The Singh-led delegation members said each of their state had one-stop agencies to implement the projects, assuring that all approvals have been obtained with land acquisition and final designs ready for private sector investments, including foreign investors.

"Preparations have been made and were further being strengthened for encouraging participation of public and private sector in the DMIC scheme, cost of which was estimated over USD 90 billion," the industry representatives added.
1 JUN, 2011, 03.57AM IST, SARITA C SINGH,ET BUREAU

Lack of coal, reforms & funds may lead India's power sector into crisis

NEW DELHI: India's power sector is heading for a serious crisis as many new plants have no fuel to burn, lenders are reluctant to fund projects, and state distribution utilities are in such a financial mess that companies have a power surplus while consumers face long blackouts.

Power producers and financers say this is the worst crisis in the sector since 2003, when a path-breaking Electricity Act was expected to herald rapid growth in generation, transmission and distribution of power to fuel the rapidly expanding economy.

The new law had cleared several obstacles for private capital in the sector, helping the country rapidly add capacity. Government officials say an unprecedented 60% of the new capacity to be added in the next Five-Year Plan would come from the private sector.

But companies that can build this capacity say many new projects may collapse as they can't sell electricity at remunerative rates even if they get fuel to fire their plants. Lack of distribution reforms, low power tariffs and fuel scarcity may force investors to stay away from the sector.

Lenders turn cautious

Even if power companies are willing to build new capacity, funds won't come easy. Financial institutions are increasingly cautious. State-run Power Finance Corp and Rural Electrification Corp have started asking companies to have fuel agreements in place before disbursing loans.

But Coal India won't promise fuel unless half the project is complete. Just two months ago, lenders were happy to part with funds provided companies arranged for fuel supply within a year of first disbursement.

"We are careful and concerned," said a top official of Rural Electricity Corp, which has the mandate to energise thousands of villages with new electricity lines.

Power Secretary P Uma Shankar says his ministry is trying hard to make sure the power sector gets enough coal and to help producers get better tariffs. "We are approaching the APTEL (Appellate Tribunal for Electricity) to get tariff revisions done," he said.

The power ministry says about 17,000 mw of new and upcoming projects will not operate as there is no coal. Further, plants with capacity of 5,593 mw, commissioned in 2009-10, will generate only 42% of actual output.

http://economictimes.indiatimes.com/news/newsbyindustry/energy/power/Lack-of-coal-reforms-funds-may-lead-Indias-power-sector-into-crisis/articleshow/8672576.cms

30 JUN, 2011, 05.36AM IST, SARITA C SINGH,ET BUREAU

Power ministry says new plants may default on loan repayment

NEW DELHI: The power ministry has said many new power plants are running at half their capacity due to coal shortage and may default on loan repayment to banks if the fuel situation does not improve immediately.

Most of the newly-commissioned power plants are unable to meet their contractual obligation to supply agreed quantity of power to state utilities, power secretary P Uma Shankar said in a letter to the coal ministry.

A power ministry official said shortfall in coal supply was forcing companies to import and buy coal in spot market. "The additional cost incurred by developers is not a pass through in tariff. We have informed the coal ministry that the increase in cost is resulting in developers defaulting power purchase agreements. If the problem persists, developers may even start defaulting in payments to banks and financial institutions," the official said.

He said a large scale default would adversely affect power sector financing which is already experiencing a crunch. In a recent report, global rating agency Fitch cautioned that funding for the country's power projects could be slow. The ministry expects about 28 million tonnes of coal shortfall for power projects this year. The annual growth rate in supply by Coal India to power utilities has been 1.73% during the last two years, against the required 15%. Supply from Coal India to power utilities increased by less than a percent during May 2011.

Power projects with 12,694-MW capacity commissioned in 2009-10 and 2010-11 require 55 million tonnes of coal. Projects coming up this year will need another 20 million tonnes coal. Against this, Coal India has agreed to supply 41 million tonnes coal to new projects while another 6 million tonnes is likely to be imported by power utilities.

In order to improve coal supply, the power ministry has asked Coal India to stop spot trade and meet committed coal supply to the power firms. "The spot sale or e-auction of coal was introduced for the benefit of consumers who do not have committed coal ties. Last financial year, power utilities had procured 10-12 million tonnes of coal. At least this quantity of could be supplied to power utilities on an assured basis," the official said.

http://economictimes.indiatimes.com/news/economy/indicators/Power-ministry-says-new-plants-may-default-on-loan-repayment/articleshow/9046138.cms

POWER TRADING

BACKGROUND: Power trading inherently means a transaction where the price of power is negotiable and options exist about whom to trade with and for what quantum.In India, power trading is in an evolving stage and the volumes of exchange are not huge. All ultimate consumers of electricity are largely served by their respective State Electricity Boards or their successor entities, Power Departments, private licenses etc. and their relationship is primarily that of captive customers versus monopoly suppliers. In India, the generators of electricity like Central Generating Stations (CGSs), Independent Power Producers (IPPs) and State Electricity Boards (SEBs) have all their capacities tied up. Each SEB has an allocated share in central sector/ jointly owned projects and is expected to draw its share without much say about the price. In other words, the suppliers of electricity have little choice about whom to sell the power and the buyers have no choice about whom to purchase their power from.

The pricing has primarily been fixed/controlled by the Central and State Governments. However, this is now being done by the Regulatory Commissions at the Centre and also in the States wherever they are already functional. Power generation/ transmission is highly capital intensive and the Fixed Charge component makes up a major part of tariff. India being a predominantly agrarian economy, power demand is seasonal, weather sensitive and there exists substantial difference in demand of power during different hours of the day with variations during peak hours and off peak hours. Further, the geographical spread of India is very large and different parts of the country face different types of climate and different types of loads.

Power demand during the rainy seasons is low in the States of Karnataka and Andhra Pradesh and high in Delhi and Punjab. Whereas many of the States face high demand during evening peak hours, cities like Mumbai face high demand during office hours. The Eastern Region has a significant surplus round the clock, and even normally power deficit states with very low agricultural loads like Delhi have surpluses at night. This situation indicates enough opportunities for trading of power. This would improve utilization of existing capacities and reduce the average cost of power to power utilities and consumers.

In view of high fixed charges, average tariff becomes sensitive to PLF. Trading of power from surplus State Utilities to deficit ones, through marginal investment in removing grid constraints, could help in deferring or reducing investment for additional generation capacity, in increasing PLF and reducing average cost of energy. Over and above this, the Scheduled exchange of power will increase and un-scheduled exchange will reduce bringing in grid discipline, a familiar problem.

OPEN ACCESS AND TRADING : The Electricity Act, 2003 which has come into force from 10th June, 2003 repeals the Indian Electricity Act, 1910; Electricity (Supply) Act, 1948; and Electricity Regulatory Commissions Act, 1998. In view of a variety of factors, financial performance of the state Electricity Boards has deteriorated. The cross subsidies have reached unsustainable levels. A few States in the country have gone in for reforms which involve unbundling into separate Generation, Transmission and Distribution Companies. To address the ills of the sector, the new Act provides for, amongst others, newer concepts like Power Trading and Open Access.

Open Access on Transmission and Distribution on payment of charges to the Utility will enable number of players utilizing these capacities and transmit power from generation to the load centre. This will mean utilization of existing infrastructure and easing of power shortage. Trading, now a licensed activity and regulated will also help in innovative pricing which will lead to competition resulting in lowering of tariffs.

DEFINITION OF "OPEN ACCESS" IN THE ELECTRICITY ACT, 2003: The non-discriminatory provision for the use of transmission lines or distribution system or a associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission"

A MORE GENERAL DEFINITION OF "OPEN ACCESS" : Enabling of non-discriminatory sale/purchase of electric power/energy between two parties utilizing the system of an in-between (third party), and not blocking it on unreasonable grounds".

ISSUES:

a) Freedom to buy/sell, and access to market

b) Adequacy of intervening transmission

c) Transmission/wheeling charges

d) Treatment of transmission losses

e) Energy accounting, scheduling, metering and UI Settlement.

The present level of inter-regional electricity exchange is still quite limited and the constraints for enhancing the same are the relative lack of commercial awareness with SEBs, lack of proper market mechanism (absence of tariff structure to promote merit-order operation and encourage trading of power), inadequate transmission capacity, lack of statutory provisions for direct sale by IPPs/CPPs/ Licenses outside the State, grid indiscipline and financial viability of State Utilities, among others.

EXAMPLE: Suppose a company from Maharashtra wants to sell 100 MW to a Discom-A in Andhra Pradesh.

Following steps need to be taken:

a) The company and Discom-A has to agree on terms and conditions of sale

b) The company has to get the consent of MSEB and "no-objection" of MSERC

c) Discom-A has to get the consent of APTransco and "no-objection" of APSERC.

d) MSLDC and APSLDC has to ascertain transmission adequacy, and agree to arrange necessary metering, scheduling, energy accounting and UI settlement.

e) WRLDC and SRLDC has to ascertain transmission adequacy in their regional transmission systems.

f) All concerned to have a common understanding about treatment/sharing of transmission losses, and levy of transmission/ wheeling charges for the use of intra-State and inter-State systems.

IMPACT OF "OPEN ACCESS SYSTEM" ON DISCOM'S:

Electricity Act 2003 has mandated that with immediate effect open access should be implemented. While everyone accepts that it may serve the consumer interests, there are two contradicting views regarding the implications of the open access system on the electricity entities especially the DISCOMs. The first view is that competitive power generation will bring down the ultimate costs to the consumers. Cost reduction is possible only by reducing the T&D losses, keeping under control the operating costs and keeping the additional power purchase costs low. Given the facts that power purchase costs keep increasing and the HT tariff has been mandated to be brought down closer to the average costs (thereby reducing the cross-subsidy) according to a fixed time schedule to be set by the regulator, the first group argues that taking up additional liabilty by way of HT consumers at such high marginal costs of power purchase would be financially imprudent for the electricity entities.

The other view is that electricity entities have heavy responsibility to meet the needs of agricultural consumers and small domestic consumers at a lower rate than the average cost. Consumers who are currently the HT consumers and commercial consumers paying a higher tariff are providing the means to do this. If such consumers walk away from Grid supply subsidy from Government will have to increase. The correct position would depend on the statewise situation regarding relative tariff of the different consumers, the possible rates of growth of category wise consumption and the potential for purchasing additional power at low rates in the future.

MARKET DEVELOPMENT: In the legal framework before enactment of the new Act, the development of market in power was highly constrained as the industry structure was horizontally and vertically integrated. The electricity supply to a customer is through a chain of monopolies earlier regulated by the Government and now by the Regulatory commission.

With the new Act, a liberalized market structure is sought to be provided. A customer has a number of choices to get his power. The generators can also compete among themselves for distribution companies/individual customers. There is a provision for surcharge to meet current level of cross subsidy, if a consumer opts to get electricity directly from generator or any source other than his own distribution license and has been allowed open access by the Regulator. However, there is no surcharge when distribution company buys power from a generator directly. There is also a provision for bilateral contract for supply of power through a competitive process between a generator and distributor. With the provision of non-discriminatory open access to transmission, the competition for bulk supply to distribution companies could become a reality in the near future. The market structure will, perhaps, require to be transformed.

The commission is committed to the development of a fully competitive power sector.

However, given the current realities of the sector (shortages, cross subsidies, long term PPAs, capacity allocation from CGS to state etc), the market development has to go through a number of intermediate phases. It may be noted that the retail competition has yielded perceptible benefits to consumers in the countries having surplus generation. There are a number of complex issues such as transition risks, settlement of imbalances in power injected and drawals, effective metering, efficient pricing of transmission, management of congestion etc. on which the Commission would float a separate discussion paper in due course.

As per an estimate, Captive Power capacity in the country is about 20,000 MW of which about 14,000 MW is grid connected. Surplus is available with many Captive Power plants and also with IPPs and Licenses of some of the States. They need permission from the State Govt. as well as consent for usage of SEB's transmission network, which besides being difficult to come by, is also usually irrationally priced. Many Captive plants are keen to trade their power at a remunerative tariff, but there is no statutory provision presently for direct sale of surplus power by them to outside States. A provision for this however, exists in the Electricity Bill.

POWER MARKET: The Wholesale transactions for electric power globally are through spot contracts, forward and future contracts and long term bilateral contracts. The primary driver for change in the power market in India today, at least from the consumers' point of view, is the desire to see lower prices in the wholesale electricity market. For this objective to bear fruit, attention has to be paid to the ideal power exchange for India backed with adequate regulations, as poor exchange design may lead to market failures. The envisaged power market will rely on competition, instead of regulation, to minimize generation costs and additionally will obtain long-term financing for power systems / generating companies.

TRANSMISSION AND WHEELING :

With the introduction of mandatory open access, there will be demand by third parties for wheeling of power through the existing transmission networks in addition to wheeling being undertaken at present for various beneficiaries importing power from outside the region. In this context, CERC has jurisdiction for regulation of transmission and wheeling charges for all inter-state and inter-regional power flows. As per the existing notification, the wheeling charges are payable at the same rate as the transmission charges for a particular region.

METHODOLOGY FOR SHARING OF TRANSMISSION CHARGES: Although the principles for sharing of transmission charges/wheeling charges have been enumerated in detail in the present notification, there appears to be need to bring further clarity in the matter. The following methodology for sharing of transmission and wheeling/congestion charges is proposed for discussion:

a) Transmission charges for the inter-regional lines may be shared by the two contiguous regions on 50:50 basis and further shared among the beneficiaries within the respective region.

b) Transmission charges for the inter-regional lines may not be pooled with those for the other transmission assets in the respective regions.

c) Transmission charges (after deducting the wheeling/congestion charges realized from others) for the regional assets (other than the inter-regional assets) may be shared by the "regional beneficiaries" (Regional beneficiaries means beneficiaries located in the region concerned)

d) If an inter-regional asset is used for wheeling by a third party, the balance transmission charges after accounting for the payable wheeling/congestion charges, may be shared by the beneficiaries of the contiguous region on 50:50 basis.

RECOMMENDATIONS: The best system would be one in which the consumer has a choice that comes out of competition. Establishment of markets with rules for their operation and a regulator to see that they are followed will give acceptable results for consumers and investors both. Competition and markets do not have to wait for shortages in supplies to be overcome. Trading is a bridge even in shortage situations and regulators can rightly be expected to look after the interests of the less powerful.

However, the lessons from around the world indicate that adequate availability of power, its unrestricted flow across geographical boundaries, strong commercial mechanisms that determine market operations and the paying ability of consumers are vital necessities that would need to be in place for competition at all levels to be truly sustainable. Rules and regulations are to be formulated for interstate, inter-regional and international transactions which have built-in relaxation that encourages trading and makes transfer of power easier. Streamlining levy of reasonable transmission charges, wheeling charges and losses on power to be traded are important, otherwise trading will not remain competitive with incidental use of transmission system to be priced on incremental cost basis. Transmission losses should also be charged on actuals, rather than on a normative basis.

There is an immediate need for strengthening the upstream and down stream transmission networks to better utilise the existing Inter-regional transmission capacity. Also better reactive power management would lead to significant additions to existing transmission capacity utilisation. Bottled-up capacities of the IPPs and Captive Generators as well as underutilized capacities of Utilities needs to be tapped urgently through a more commercial approach. Trading of such capacities would mean availability of extra energy at only the variable cost, thus bringing down the average cost of power not only to bulk consumers but also reducing the burden of rate increases on ordinary consumers too.

India is already on its way to establishing a power market. This requires considerable and continuous effort starting from continued strengthening of inter-regional power transmission links, open access to transmission and later to distribution links, releasing the underutilized captive capacities, to the designing of an effective market mechanism suited to India's needs. The institutional set-up of the Market could make a significant difference to the final market price. In the short term, market rules should promote economic efficiency, so that customer loads are served and reliability is maintained at the lowest possible cost. In the long term, the market should produce prices that stimulate appropriate levels of investments in new generation and transmission capacity.

In addition, the market rules should be such as to encourage broad participation and ensure fairness. Such a process will reduce the need for government oversight because it will be to a large extent self-policing and it will be difficult for individual participants to manipulate results in their favor.Of the two market mechanisms evaluated, Pool day-ahead market, with Pay SMP settlement, may produce lower prices than the bilateral model. However, in the case of a power exchange with a small number of buyers and sellers, often there may be not enough bids to provide an assurance that the price is competitive, thus creating the need for more market participants.

To ensure that sufficient generating capacity is available to prevent capacity shortages and wholesale price spikes an installed-capacity requirement may be made mandatory as proposed in California. This standard would require all retail providers to acquire, either through contracts or physical assets, sufficient capacity to meet peak demand plus a certain reserve margin. Combining the above mentioned reforms with a more transparent bidding and price setting mechanism, could also lead to more demand-side participation, and hence greater price elasticity.

http://www.electricityindia.com/powertrading.html

Statutes & Rules

Under the Constitution of India, electricity is a 'concurrent' subject. Hence, the Central as well as the State governments have authority to enact legislation in regard to the power sector. The Central Government generally provides the policy framework and the State governments focus on specific issues. Currently, the constitution, responsibilities and accountability of the Power sector entities in India are governed by the following Central statutes, besides various State legislation:
The Indian Electricity Act, 1910 The Electricity (Supply) Act, 1948 The Electricity Regulatory Commissions Act, 1998
The Electricity Act 2003 (in .pdf format)
Indian Electricity Act, 1910
The first Indian Electricity Act, enacted in 1903, was a somewhat tentative measure. The Indian Electricity Act, 1910, which replaced it, has, with numerous amendments, stood the test of time.
This Act mainly governs the relations between the consumer and the licensees supplying electrical energy to the consumer or other licensees. The Act contains provisions regarding issue of licensees to the licensees and according sanction to other persons for the generation, distribution and supply of electrical energy, their powers and obligations, and for the taking over of their Undertakings by the State Electricity Boards, the State Government or, as the case may be, by a local authority.
The Electricity (Supply) Act, 1948
The Electricity (Supply) Act, 1948 was enacted in order to provide for the rationalisation of the production and supply of electricity and generally for taking measures conducive to electrical development. It provided the basis for the takeover of most electricity generation and distribution by the State Electricity Boards constituted under it. Its provisions mainly govern the constitution of the Central Electricity Authority, State Electricity Boards, Generating Companies, Consultative Councils and local Advisory Committees, their statutory powers and functions. It also makes certain provisions relating to fixation of tariffs etc. The Supply Act empowers the State to make rules providing for management and accounts of the State Electricity Boards and to issue directions to licensees for regulating the supply, distribution, consumption or use of electrical energy for the purpose of maintaining and securing equitable distribution of energy.
Delhi Electricity Regulatory Commission Act 1998
The Government of NCT of Delhi vide notification No.F.11 (28)/98-EB/341 dated 3.3.99 constituted Delhi Electricity Regulatory Commission to discharge the following functions:
a)	to determine the tariff for electricity, wholesale, bulk, grid or retail, as the case may be in the manner provided in section 29 of the Electricity Regulatory Commission Act,1998.
b)	to determine the tariff payable for the use of the transmission facilities in the manner provided in section 29 of the Electricity Regulatory Commission Act, 1998.
c)	to regulate power purchase and procurement process of the transmission utilities and distribution utilities including the price at which the power shall be procured from the generating companies, generating stations or from other sources of transmission, sale, distribution and supply in the National Capital Territory of Delhi.
d)	to promote competition, efficiency and economy in the activities of the electricity Industry to achieve the objects and purposes of the Central Electricity Regulatory Commission Act, 1998.

Delhi Electricity Control Order 1959

Amendment of Delhi Electricity Control order, 1959
No. F.11(10)/95-EB/2879-91 dt. 15.02.01
No. F.11(10)/95/Power/669 dt. 8.05.02
Delhi Electricity Control Order 1959 & Delhi Vidyut Board Control Regulations 1998
The DECO 1959 came into existence under provision of section 22 B of Indian Electricity Act 1910 read with notification of Govt. of India, Min. of Home affairs no. F-2 (12)/ 59- Judl II dated 10.11.1959 to regulate transmission, distribution and utilisation of electricity and for maintaining the supply and securing equitable distribution of energy by all concerned in Union Territory of Delhi. When functions to deal with electricity were delegated to MCD under DMC act 1957 as licensee. At that time DESU was functioning as undertaking of MCD and no Board was in existence.
It was felt time and again that restrictions imposed under the provisions of DECO 1959 and by linking the policy for grant of electricity connections with building bye-laws have come in the way of DESU/ DVB to freely grant electricity connections as per actual requirements of applicants. Some of the restrictions made DESU/ DVB a tool of certain government agencies such as MCD, DPCC, DDA etc. to enforce their Bye-laws. While they themselves failed to take action, as permissible under their Rules & Regulations, for years together. This created an anomalous situation resulting into public resentment on one side due to non grant of electricity connections even to genuine applicants while on the other hand it tempted the general public to resort to drawl of electricity by unfair means, causing loss of revenue. Further the restrictions so imposed had also not yielded the desired result of enforcing Bye-laws of various other Govt. agencies.
In recent past government of NCT Delhi has considered various difficulties and approved certain amendments in DECO 1959 with particular reference to class 4 D. But these amendments were still not sufficient to enable DESU/ DVB to freely grant electricity, under different categories, at par with other state electricity boards in accordance with provisions Indian Electricity Act 1910 and supply act 1948, even after constitution of the Board under section 5 of electricity supply act 1948 vide notification no. F11(10/92) – LSG/PF-II dated 24.2.97 replacing erst-while DESU.
In order of the remove bottle necks in the year 1993 vide office order no. 23/1/92-LSG/ 13900 Dated 12.11.93 secretary LSG has constituted a committee under the chairmanship of O.P Anand the then AGM (TD) DESU, Sh. Ramesh Negi Joint Secretary (LSG), Sh. D.N. Gupta Chief Engineer NDMC and Sh. H.R. Bhatia. The then C.E (Comml.) DESU to suggest amendments in DECO 59. This committee submitted its report to secretary LSG vide no. AGM (T-D) 48/ 3088 dt.16.8.94 recommending New Delhi Electricity Control Order 1994 as per Annuxure II, replacing DECO 1959.
The Chief Secretary Govt. of NCT Delhi vide order no. F-11 (10)/EB/UD/95/8426-28 DT. 21.7.98 further constituted a committee of following members to examine each provisions of DECO 59 in light of the constitution of Delhi Vidyut Board and suggest amendments wherever necessary so as to make it more effective and relevant by 10th August 1998: -
•	Special Secretary UD-Chairman
•	Member (Tech-I) DVB-Member
•	Sh. H.C. Aggarwal, Consultant UD-Member
The Minister of power, Govt. of India Sh. P.R. Kumar Manglam vide letter dt. 2.6.98 wrote to Chief Minister Govt. of NCT Delhi that it has been felt that one of the reason for large scale of theft and poor revenue of DVB is due to stringent procedure of DECO 59 and the revenue position will go up if this control order is replaced. This was also felt necessary that in that event DVB can work on commercial lines and can ensure more recoveries for the same available power, it is required to distribute.
Further, anauthorised colonies have come to stay in Delhi and some of these colonies by and by are losing their residential character in violations to the provision of Master Plan/ Building Bye-laws etc due to mushroom growth of non-domestic/ Industrial/ Commercial establishments, catering the requirements of the local public, with practically no checks from concerned local bodies whose Bye-laws/ Rules and Regulations were violated in the process.
Considering the above on formulation of Delhi Vidyut Board vide notification no. F-11 (10) 92/LSG/PF-II dated 24.2.97, replacing erst-while DESU, Delhi Vidyut Board vide resolution no. 62.68/1028 A dated 9.9.98 decided the following: -
1.	To completely repeal the DECO 59.
2.	The policy regarding grant of electricity connection should have no linkage with the building bye-laws. However this shall be subject to resorting to disconnection of electricity and removal of meter and service line as and when concerned Govt. enforcing agency of MCD/DDA/NCT of Delhi conveys and initiate action to either pull down the illegal structure or to seal it.
3.	Necessary fresh Regulations shall be framed under sub section J of section 79 of electricity supply act 1948 for controlling generation, distribution, transmission and utilisation of electricity. Mean while the Regulations as may be required to be enforced through executive orders.
The DVB Control Regulations as approved by DVB vide resolution no. 62/68/1028 A dated 9.9.98 are reproduced as an Annexure III. These Control Regulations were forwarded to Chief Secretary Govt. of NCT of Delhi vide no. CHN5/Coml/2092-93 DT 15.9.98 for notification by the Govt. of NCT of Delhi replacing the existing DECO 59. The matter has also been followed up through various letters at different levels and in meetings with Chief Secretary, Chief Minister, and Hon. Lieutenant Governor.
In pursuance to above Govt. of NCT of Delhi approved short term action Plan, identified in strategy paper on power sector in Delhi. Further to check theft of power, Government approved sanction of electricity connection on demand except in areas where network is not existing. It was further conveyed vide Additional Secretary UD's letter no. F-11 (10/96/EB/15815 Dated 4.2.99that to facilitate sanction of electricity connection on demand, DECO 59 deemed to have been relaxed to that extent.

http://www.delhitransco.gov.in/stu_rules.htm

4 JUL, 2011, 05.34AM IST, SARITA C SINGH,ET BUREAU

Power producers seek protection from fuel shocks

NEW DELHI: Power generating companies have expressed their inability to honour contracts bagged under tariff-based competitive bidding unless they are insulated from increase in fuel prices .

The companies have asked the government to set up an expert panel to evolve mechanisms for revisiting the existing contracts. Over the past five years, power projects with 42,065 mw capacity of have been awarded through over 30 contracts.

Association of Power Producers director general Ashok Khurana told ET, "We have written letters to Planning Commission deputy chairman Montek Singh Ahluwalia and power secretary P Uma Shankar.

Except for the 4,000 mw each Sasan and Tilaiya pit-head power projects, no other plant awarded on competitive bidding would come up unless they (government) have an expert committee which can do a benchmarking and reopen the contracts. Environment is so bad today."

A senior power ministry official said the government was considering changes in the standard bidding documents for awarding projects in future but no changes were proposed in existing contracts.

Khurana said conditions under which bidding of the projects took place have changed radically. "A spectre of acute coal shortages looms large on the power sector. There is a severe risk of stranding of assets and the associated contracts," he said.

The association, a body representing 13 companies like Tata Power, Reliance Power , Adani Power , Lanco Infratech and Essar Power, told government that signals of plants defaulting obligations are being seen due to fuel and environmental issues.

About 80% of these plants were likely to default on account of shortfall in domestic coal availability, environmental issues involved in captive coal blocks and changes in regulations in coal exporting countries, it said. Khurana said the current contractual framework doesn't protect power companies from coal price changes triggered by any change in law in the coal exporting country. Indonesia has said it would not allow coal exporting companies to sell coal at prices below notified rates after September 23.

Australia issued a draft mining law 10 days ago to impose levy on coal and iron ore projects from next year. On domestic coal front, total deficit by end of 2017 is likely to increase to 226 million tonnes. The power ministry has also cautioned coal ministry that new power producers may default payments to banks if fuel supply does not improve immediately.

The newly commissioned power projects are generating just half of their capacity due to coal shortage and are defaulting power supply obligations with state utilities.

http://economictimes.indiatimes.com/news/economy/indicators/Power-producers-seek-protection-from-fuel-shocks/articleshow/9094373.cms

FICCI and Ministry of Power are pleased to organise the Sixth edition of the mega power sector event. India Electricity-2011 will further attempt to work with investors and project developers for smooth implementation of power projects in India.

The Conference at India Electricity-2011, through a number of Plenary & Technical Sessions, will provide a greater and more interactive platform to Indian and international power sector entities to identify and analyze business opportunities in Indian Power Sector. This edition of Conference will also entail "State Focus Sessions", engaging States leading on power reforms front to showcase their power sectors.
http://www.indiaelectricity.in/

Central Electricity Authority (CEA) is a Statutory Body constituted under the erstwhile Electricity (Supply) Act, 1948, hereinafter replaced by the Electricity Act 2003, where similar provisions exists, the office of the CEA is an "Attached Office" of the Ministry of Power. The CEA is responsible for the technical coordination and supervision of programmes and is also entrusted with a number of statutory functions. More ....

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http://www.cea.nic.in/

15 JUL, 2011, 03.08AM IST, SARITA C SINGH,ET BUREAU

Liability clause threatens nuclear power programme

NEW DELHI: The country's ambitio US nuclear programme may grind to a halt because of uncertainty over how the liability for an accident would be apportioned among equipment suppliers and vendors under the provisions of the nuclear liability law, top companies said.

Equipment makers, including Bharat Heavy Electricals and France's Areva, have made it clear that dealing with Nuclear Power Corp, which operates Indian reactors, would be impossible if the present conditions were not tweaked.

Nuclear Power Corp, the country's only permitted entity to generate such energy, is worried that after a mishap it will be difficult to fix responsibility of vendors. "It's not a turnkey contract. A nuclear project is a complex mix of 2,000 industries," company chairman and managing director SK Jain told ET. "The question is who will be sued. The damage can be due to failure of components, poor upkeep or not using original spare parts or deploying technical people," Jain said.

Industry officials say that before the liability law was introduced, nuclear plant owners had the option to indemnify suppliers but this is not possible in the new regime.

Equipment suppliers and the Nuclear Power Corp are keeping their fingers crossed as the implementing guidelines of the Act are likely to be tabled in Parliament in the ensuing monsoon session.

Minister of state in prime minister's office V Narayanasamy said the government has finalised implementation rules of the nuclear liability law. A department of atomic energy official said: "The guidelines should address concerns and it is our assurance that nothing will come to halt."

The civil liability for nuclear damage law, passed by Parliament last year, allows operator of a plant to seek damages from equipment supplier in case of a mishap. The Act has fixed operator's liability limit at 1,500 crore per event. India aims to generate 20,000-mw from nuclear projects by 2020 from the present 4560-mw.

Many components like a reactor vessel are designed by Nuclear Power Corp, which also sources raw material and carries fabrication at vendors' facility. "All this is done in presence of our company's deputed engineers. In such cases technical input of a vendor is zero. They have just rented their machinery," he said.

A BHEL official said the company would not supply equipment to Nuclear power Corp if the rules were not clear. Areva India chairman and managing director Arthur de Montalembert said the Indian nuclear liability law was not in conformity with international regime. "We are certainly keeping our fingers crossed,' he said. Alstom and General Electric did not offer comments.

Suppliers in the US want India to ratify international convention on supplementary compensation for nuclear damages. India had signed the convention weeks before US President Barack Obama's visit in November last year and promised to ratify it by November 2011. However, experts believe that India's liability law does not comply with the convention.

"Westinghouse is looking forward to India taking this important step, as ratification and adherence to convention on supplementary compensation will assure participation by the Indian and global supply chain in India's civilian nuclear programme," Westinghouse director (India business development) Balendra Sutharshan said.

Jain said Nuclear Power Corp could make provision for 1,500 crore for up to 30 years of shutting down a project but equipment suppliers said they earn a maximum of $5 million profit from a one-time deal. Nuclear Power Corp has 13,839 crore reserves. "Many vendors have said that their annual turnover is 500 crore and they will go bankrupt. There are many American, Russian suppliers who supply something as small as a valve," he said.

Suppliers have also conveyed risk of multiplicity of claims by victims under civil liability law and civil law of torts. "This is a nuisance for any company," he said.

14 JUN, 2011, 06.44AM IST, SARITA C SINGH,ET BUREAU

Bhel in talks to source tech for higher-rating nuke plants

NEW DELHI: State-run Bharat Heavy Electricals (Bhel) is in talks with Areva, Alstom, Toshiba, General Electric and

Siemens

to source technology for manufacturing higher rating nuclear sets of 1,000 mw and above. Bhel chairman and managing director BP Rao said the move was strategic as the country was heading towards high-capacity nuclear power projects. The power equipment maker has a tripartite joint venture with Nuclear Power Corporation of India (NPCIL) and Alstom to manufacture 700-mw nuclear turbines.

Rao said there was good scope for manufacturing high-rating sets of above 1,000 mw in the country. NPCIL plans to set up high-capacity units in Gujarat, Maharashtra and Tamil Nadu. Several projects, including Jaitapur in Maharashtra, are proposed to have 1,650-mw units, he said. "We want to expand to highersized units and are in talks with various vendors for technology tie-ups for nuclear as well as conventional islands," Rao said.

Nuclear power plants consist of two main components - nuclear island, including the reactor; and conventional island with turbines and generators . While nuclear island generates steam using nuclear technology, conventional islands use the steam to produce electricity through turbines and generators .

Conventional and nuclear islands are housed in separate buildings. A senior Bhel official said the company was in talks with Alstom , Siemens, Toshiba, General Electric and some other Russian and Japanese companies for sourcing technology to manufacture turbines and generators for big nuclear projects. "We are in talks with Areva, Toshiba and GE to get technology to make a few critical components of nuclear reactors of bigger size," the official said. Bhel has a preliminary agreement with Nuclear Power Corporation and Alstom to manufacture turbines and carry out engineering, procurement and construction activities for nuclear plants of 700-mw and above in India.

As per the agreement, Nuclear Power Corporation will place all orders related to 700-mwunit size on the tripartite joint venture. In April, the Bharat Heavy Electricals-Alstom consortium bagged a Rs 1,600-crore order from Nuclear Power Corp for supplying steam turbine generators for two 700 mw nuclear units in Kakrapar, Gujarat.

NRI Corner

H-1B, L1 visa issuance to Indians good indicator: US

US has said it continues to issue these visas to a large number of Indians which is a "good indicator" of the thriving bilateral ties.

Murdochs Under Fire

Can Rupert Murdoch shake off the latest disaster?

Murdoch has always wriggled out of adversity. But even he could not have wagered on sharp turn the NoW hacking scandal has taken.

Global Economy Fears Crisis

Obama, lawmakers push plans to avoid debt default

Obama & US lawmakers pushed separate plans to avert an unprecedented default on America's national debt, with no signs of an immediate breakthrough.

http://economictimes.indiatimes.com/news/newsbyindustry/indlgoods/svs/engineering/Bhel-in-talks-to-source-tech-for-higher-rating-nuke-plants/articleshow/8845110.cms

[PDF]
Privatisation of Electricity in Delhi

www.ccsindia.org/interns2002/16.pdf
File Format: PDF/Adobe Acrobat - Quick View
Privatisation of Electricity in Delhi. Michael Stamminger. General Overview of the Power Sector in India. Principal Acts in the Indian Power Sector ...
Electricity Crisis in India: Is privatization the solution to the ...

www.electricityinindia.com/.../is-privatization-is-solution-to-ailing.h... - Cached
25 Jan 2009 – ElectriciyInIndia.com describes the prevailing crisis of electricity in India, efforts and analysis of ground level reality vis a vis claims ...
Electricity Privatisation

www.uow.edu.au/~sharonb/theives.html - Cached
The privatisation of electricity is not something that citizens have demanded ... Popular uprisings have occurred in Argentina, India, Indonesia and Ghana. ...
[PDF]
Electricity Distribution in India An Overview

www.asiapacificpartnership.org/.../Alok_FinaL__Presentation_on_...
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Electricity Distribution in India. -at a glance……contd.. Consumer Mix: ... intervention, Models of privatization,. PPP(franchisee), Pune Model. ...
Privatization in India: Issues and Evidence

www.scribd.com/doc/.../Privatization-in-India-Issues-and-Evidence - Cached
29 Sep 2007 – PRIVATIZATION IN INDIA : ISSUES AND EVIDENCE (A doctoral dissertation ... Is it the use of marketpower by oligopolistic firms whose pricing ...
Critique of Electricity Privatisation

herinst.org/sbeder/privatisation/critique.html - Cached
The privatisation of electricity is not something that citizens have demanded ... Popular uprisings have occurred in Argentina, India, Indonesia and Ghana. ...
[DOC]
Privatisation of electricity distribution - Public Services ...

www.psiru.org/reports/2001-04-E-Distrib.doc
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by K Bayliss - 2001 - Cited by 29 - Related articles
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Electricity privatization The case of India

ideas.repec.org/a/eee/enepol/v21y1993i8p875-880.html- Cached
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by D Kodwani - 1997
12 Jan 2011 – The discussion focuses on privatisation ofelectricity supply industry a key sector in economic development in India. ...
From Bombay to Delhi - Power sector privatisationexamples

www.eefi.org/0905/090510.htm - Cached
From Bombay to Delhi - Power sector privatisation examples.... Electricity Employees Federation of India · Home | Voice ofElectricity workers | Press ...

The Gazette of India

EXTRAORDINARY

PART I - Section 1

PUBLISHED BY AUTHORITY

No…., New Delhi, Dated ….

Ministry of Power

New Delhi,

Dated the 12th, February, 2005

RESOLUTION

No. 23/40/2004-R&R (Vol.II)

1.0 INTRODUCTION

1.1 In compliance with section 3 of the Electricity Act 2003 the Central Government hereby notifies the

National Electricity Policy.

1.2 Electricity is an essential requirement for all facets of our life. It has been recognized as a basic

human need. It is a critical infrastructure on which the socio-economic development of the country

depends. Supply of electricity at reasonable rate to rural India is essential for its overall development.

Equally important is availability of reliable and quality power at competitive rates to Indian industry to

make it globally competitive and to enable it to exploit the tremendous potential of employment

generation. Services sector has made significant contribution to the growth of our economy. Availability

of quality supply of electricity is very crucial to sustained growth of this segment.

1.3 Recognizing that electricity is one of the key drivers for rapid economic growth and poverty

alleviation, the nation has set itself the target of providing access to all households in next five years. As

per Census 2001, about 44% of the households do not have access to electricity. Hence meeting the

target of providing universal access is a daunting task requiring significant addition to generation capacity

and expansion of the transmission and distribution network.

1.4 Indian Power sector is witnessing major changes. Growth of Power Sector in India since its

Independence has been noteworthy. However, the demand for power has been outstripping the growth of

availability. Substantial peak and energy shortages prevail in the country. This is due to inadequacies in

generation, transmission & distribution as well as inefficient use of electricity. Very high level of technical

and commercial losses and lack of commercial approach in management of utilities has led to

unsustainable financial operations. Cross-subsidies have risen to unsustainable levels. Inadequacies in

distribution networks has been one of the major reasons for poor quality of supply.

1.5 Electricity industry is capital-intensive having long gestation period. Resources of power generation

are unevenly dispersed across the country. Electricity is a commodity that can not be stored in the grid

where demand and supply have to be continuously balanced. The widely distributed and rapidly

increasing demand requirements of the country need to be met in an optimum manner.

1.6 Electricity Act, 2003 provides an enabling framework for accelerated and more efficient development

of the power sector. The Act seeks to encourage competition with appropriate regulatory intervention.

Competition is expected to yield efficiency gains and in turn result in availability of quality supply of

electricity to consumers at competitive rates. 1.7 Section 3 (1) of the Electricity Act 2003 requires the Central Government to formulate, inter alia, the

National Electricity Policy in consultation with Central Electricity Authority (CEA) and State Governments.

The provision is quoted below:

"The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy,

in consultation with the State Governments and the Authority for development of the power system

based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials,

hydro and renewable sources of energy".

Section 3 (3) of the Act enables the Central Government to review or revise the National Electricity Policy

from time to time.

1.8 The National Electricity Policy aims at laying guidelines for accelerated development of the power

sector, providing supply of electricity to all areas and protecting interests of consumers and other

stakeholders keeping in view availability of energy resources, technology available to exploit these

resources, economics of generation using different resources, and energy security issues.

1.9 The National Electricity Policy has been evolved in consultation with and taking into account views of

the State Governments, Central Electricity Authority (CEA), Central Electricity Regulatory Commission

(CERC) and other stakeholders.

2.0 AIMS & OBJECTIVES

The National Electricity Policy aims at achieving the following objectives:

• Access to Electricity - Available for all households in next five years

• Availability of Power - Demand to be fully met by 2012. Energy and peaking shortages to be overcome

and adequate spinning reserve to be available.

• Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates.

• Per capita availability of electricity to be increased to over 1000 units by 2012.

• Minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012.

• Financial Turnaround and Commercial Viability of Electricity Sector.

• Protection of consumers' interests.

3. NATIONAL ELECTRICITY PLAN

3.1 Assessment of demand is an important pre-requisite for planning capacity addition. Section 3 (4) of

the Act requires the Central Electricity Authority (CEA) to frame a National Electricity Plan once in five

years and revise the same from time to time in accordance with the National Electricity Policy. Also,

section 73 (a) provides that formulation of short-term and perspective plans for development of the

electricity system and coordinating the activities of various planning agencies for the optimal utilization of

resources to subserve the interests of the national economy shall be one of the functions of the CEA. The

Plan prepared by CEA and approved by the Central Government can be used by prospective generating

companies, transmission utilities and transmission/distribution licensees as reference document. 3.2 Accordingly, the CEA shall prepare short-term and perspective plan. The National Electricity Plan

would be for a short-term framework of five years while giving a 15 year perspective and would include:

• Short-term and long term demand forecast for different regions;

• Suggested areas/locations for capacity additions in generation and transmission keeping in view the

economics of generation and transmission, losses in the system, load centre requirements, grid

stability, security of supply, quality of power including voltage profile etc. and environmental

considerations including rehabilitation and resettlement;

• Integration of such possible locations with transmission system and development of national grid

including type of transmission systems and requirement of redundancies; and

• Different technologies available for efficient generation, transmission and distribution.

• Fuel choices based on economy, energy security and environmental considerations.

3.3 While evolving the National Electricity Plan, CEA will consult all the stakeholders including state

governments and the state governments would, at state level, undertake this exercise in coordination

with stakeholders including distribution licensees and STUs. While conducting studies periodically to

assess short-term and long-term demand, projections made by distribution utilities would be given due

weightage. CEA will also interact with institutions and agencies having economic expertise, particularly in

the field of demand forecasting. Projected growth rates for different sectors of the economy will also be

taken into account in the exercise of demand forecasting.

3.4 The National Electricity Plan for the ongoing 10th Plan period and 11th Plan and perspective Plan for

the 10th, 11th & 12th Plan periods would be prepared and notified after reviewing and revising the

existing Power Plan prepared by CEA. This will be done within six months.

4.0 ISSUES ADDRESSED

The policy seeks to address the following issues:

• Rural Electrification

• Generation

• Transmission

• Distribution

• Recovery of Cost of services & Targetted Subsidies.

• Technology Development and Research and Development (R&D)

• Competition aimed at Consumer Benefits

• Financing Power Sector Programmes Including Private Sector Participation.

• Energy Conservation • Environmental Issues

• Training and Human Resource Development

• Cogeneration and Non-Conventional Energy Sources

• Protection of Consumer interests and Quality Standards

5.1 RURAL ELECTRIFICATION

5.1.1 The key development objective of the power sector is supply of electricity to all areas including

rural areas as mandated in section 6 of the Electricity Act. Both the central government and state

governments would jointly endeavour to achieve this objective at the earliest. Consumers, particularly

those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted

twenty four hours supply of quality power. About 56% of rural households have not yet been electrified

even though many of these households are willing to pay for electricity. Determined efforts should be

made to ensure that the task of rural electrification for securing electricity access to all households and

also ensuring that electricity reaches poor and marginal sections of the society at reasonable rates is

completed within the next five years.

5.1.2 Reliable rural electrification system will aim at creating the following:

(a) Rural Electrification Distribution Backbone (REDB) with at least one 33/11 kv (or 66/11 kv) substation

in every Block and more if required as per load, networked and connected appropriately to the state

transmission system

(b) Emanating from REDB would be supply feeders and one distribution transformer at least in every

village settlement.

(d) Wherever above is not feasible (it is neither cost effective nor the optimal solution to provide grid

connectivity) decentralized distributed generation facilities together with local distribution network would

be provided so that every household gets access to electricity. This would be done either through

conventional or non-conventional methods of electricity generation whichever is more suitable and

economical. Non-conventional sources of energy could be utilized even where grid connectivity exists

provided it is found to be cost effective.

(e) Development of infrastructure would also cater for requirement of agriculture & other economic

activities including irrigation pump sets, small and medium industries, khadi and village industries, cold

chain and social services like health and education.

5.1.3 Particular attention would be given in household electrification to dalit bastis, tribal areas and other

weaker sections.

5.1.4 Rural Electrification Corporation of India, a Government of India enterprise will be the nodal agency

at Central Government level to implement the programme for achieving the goal set by National Common

Minimum Programme of giving access to electricity to all the households in next five years. Its role is

being suitably enlarged to ensure timely implementation of rural electrification projects. 5.1.5 Targetted expansion in access to electricity for rural households in the desired timeframe can be

achieved if the distribution licensees recover at least the cost of electricity and related O&M expenses

from consumers, except for lifeline support to households below the poverty line who would need to be

adequately subsidized. Subsidies should be properly targeted at the intended beneficiaries in the most

efficient manner. Government recognizes the need for providing necessary capital subsidy and soft longterm debt finances for investment in rural electrification as this would reduce the cost of supply in rural

areas. Adequate funds would need to be made available for the same through the Plan process. Also

commensurate organizational support would need to be created for timely implementation. The Central

Government would assist the State Governments in achieving this.

5.1.6 Necessary institutional framework would need to be put in place not only to ensure creation of rural

electrification infrastructure but also to operate and maintain supply system for securing reliable power

supply to consumers. Responsibility of operation & maintenance and cost recovery could be discharged

by utilities through appropriate arrangements with Panchayats, local authorities, NGOs and other

franchisees etc.

5.1.7 The gigantic task of rural electrification requires appropriate cooperation among various agencies of

the State Governments, Central Government and participation of the community. Education and

awareness programmes would be essential for creating demand for electricity and for achieving the

objective of effective community participation.

5.2 GENERATION

5.2.1 Inadequacy of generation has characterized power sector operation in India. To provide availability

of over 1000 units of per capita electricity by year 2012 it had been estimated that need based capacity

addition of more than 1,00,000 MW would be required during the period 2002-12.

5.2.2 The Government of India has initiated several reform measures to create a favourable environment

for addition of new generating capacity in the country. The Electricity Act 2003 has put in place a highly

liberal framework for generation. There is no requirement of licensing for generation. The requirement of

techno-economic clearance of CEA for thermal generation project is no longer there. For hydroelectric

generation also, the limit of capital expenditure, above which concurrence of CEA is required, would be

raised suitably from the present level. Captive generation has been freed from all controls.

5.2.3 In order to fully meet both energy and peak demand by 2012, there is a need to create adequate

reserve capacity margin. In addition to enhancing the overall availability of installed capacity to 85%, a

spinning reserve of at least 5%, at national level, would need to be created to ensure grid security and

quality and reliability of power supply.

5.2.4 The progress of implementation of capacity addition plans and growth of demand would need to be

constantly monitored and necessary adjustments made from time to time. In creating new generation

capacities, appropriate technology may be considered keeping in view the likely widening of the

difference between peak demand and the base load.

Hydro Generation

5.2.5 Hydroelectricity is a clean and renewable source of energy. Maximum emphasis would be laid on

the full development of the feasible hydro potential in the country. The 50,000 MW hydro initiative has been already launched and is being vigorously pursued with DPRs for projects of 33,000 MW capacity

already under preparation.

5.2.6 Harnessing hydro potential speedily will also facilitate economic development of States, particularly

North-Eastern States, Sikkim, Uttaranchal, Himachal Pradesh and J&K, since a large proportion of our

hydro power potential is located in these States. The States with hydro potential need to focus on the full

development of these potentials at the earliest.

5.2.7 Hydel projects call for comparatively larger capital investment. Therefore, debt financing of longer

tenure would need to be made available for hydro projects. Central Government is committed to policies

that ensure financing of viable hydro projects.

5.2.8 State Governments need to review procedures for land acquisition, and other approvals/clearances

for speedy implementation of hydroelectric projects.

5.2.9 The Central Government will support the State Governments for expeditious development of their

hydroelectric projects by offering services of Central Public Sector Undertakings like National

Hydroelectric Power Corporation (NHPC).

5.2.10 Proper implementation of National Policy on Rehabilitation and Resettlement (R&R) would be

essential in this regard so as to ensure that the concerns of project-affected families are addressed

adequately.

5.2.11 Adequate safeguards for environmental protection with suitable mechanism for monitoring of

implementation of Environmental Action Plan and R&R Schemes will be put in place.

Thermal Generation

5.2.12 Even with full development of the feasible hydro potential in the country, coal would necessarily

continue to remain the primary fuel for meeting future electricity demand.

5.2.13 Imported coal based thermal power stations, particularly at coastal locations, would be

encouraged based on their economic viability. Use of low ash content coal would also help in reducing the

problem of fly ash emissions.

5.2.14 Significant Lignite resources in the country are located in Tamil Nadu, Gujarat and Rajasthan and

these should be increasingly utilized for power generation. Lignite mining technology needs to be

improved to reduce costs.

5.2.15 Use of gas as a fuel for power generation would depend upon its availability at reasonable prices.

Natural gas is being used in Gas Turbine /Combined Cycle Gas Turbine (GT/CCGT) stations, which

currently accounts for about 10 % of total capacity. Power sector consumes about 40% of the total gas in

the country. New power generation capacity could come up based on indigenous gas findings, which can

emerge as a major source of power generation if prices are reasonable. A national gas grid covering

various parts of the country could facilitate development of such capacities.

5.2.16 Imported LNG based power plants are also a potential source of electricity and the pace of their

development would depend on their commercial viability. The existing power plants using liquid fuels

should shift to use of Natural Gas/LNG at the earliest to reduce the cost of generation. 5.2.17 For thermal power, economics of generation and supply of electricity should be the basis for

choice of fuel from among the options available. It would be economical for new generating stations to be

located either near the fuel sources e.g. pithead locations or load centres.

5.2.18 Generating companies may enter into medium to long-term fuel supply agreements specially with

respect to imported fuels for commercial viability and security of supply.

Nuclear Power

5.2.19 Nuclear power is an established source of energy to meet base load demand. Nuclear power plants

are being set up at locations away from coalmines. Share of nuclear power in the overall capacity profile

will need to be increased significantly. Economics of generation and resultant tariff will be, among others,

important considerations. Public sector investments to create nuclear generation capacity will need to be

stepped up. Private sector partnership would also be facilitated to see that not only targets are achieved

but exceeded.

Non-conventional Energy Sources

5.2.20 Feasible potential of non-conventional energy resources, mainly small hydro, wind and bio-mass

would also need to be exploited fully to create additional power generation capacity. With a view to

increase the overall share of non-conventional energy sources in the electricity mix, efforts will be made

to encourage private sector participation through suitable promotional measures.

Renovation and Modernization (R&M)

5.2.21 One of the major achievements of the power sector has been a significant increase in availability

and plant load factor of thermal power stations specially over the last few years. Renovation and

modernization for achieving higher efficiency levels needs to be pursued vigorously and all existing

generation capacity should be brought to minimum acceptable standards. The Govt. of India is providing

financial support for this purpose.

5.2.22 For projects performing below acceptable standards, R&M should be undertaken as per welldefined plans featuring necessary cost-benefit analysis. If economic operation does not appear feasible

through R&M, then there may be no alternative to closure of such plants as the last resort.

5.2.23 In cases of plants with poor O&M record and persisting operational problems, alternative

strategies including change of management may need to be considered so as to improve the efficiency to

acceptable levels of these power stations.

Captive Generation

5.2.24 The liberal provision in the Electricity Act, 2003 with respect to setting up of captive power plant

has been made with a view to not only securing reliable, quality and cost effective power but also to

facilitate creation of employment opportunities through speedy and efficient growth of industry.

5.2.25 The provision relating to captive power plants to be set up by group of consumers is primarily

aimed at enabling small and medium industries or other consumers that may not individually be in a

position to set up plant of optimal size in a cost effective manner. It needs to be noted that efficient expansion of small and medium industries across the country would lead to creation of enormous

employment opportunities.

5.2.26 A large number of captive and standby generating stations in India have surplus capacity that

could be supplied to the grid continuously or during certain time periods. These plants offer a sizeable

and potentially competitive capacity that could be harnessed for meeting demand for power. Under the

Act, captive generators have access to licensees and would get access to consumers who are allowed

open access. Grid inter-connections for captive generators shall be facilitated as per section 30 of the Act.

This should be done on priority basis to enable captive generation to become available as distributed

generation along the grid. Towards this end, non-conventional energy sources including co-generation

could also play a role. Appropriate commercial arrangements would need to be instituted between

licensees and the captive generators for harnessing of spare capacity energy from captive power plants.

The appropriate Regulatory Commission shall exercise regulatory oversight on such commercial

arrangements between captive generators and licensees and determine tariffs when a licensee is the offtaker of power from captive plant.

5.3 TRANSMISSION

5.3.1 The Transmission System requires adequate and timely investments and also efficient and

coordinated action to develop a robust and integrated power system for the country.

5.3.2 Keeping in view the massive increase planned in generation and also for development of power

market, there is need for adequately augmenting transmission capacity. While planning new generation

capacities, requirement of associated transmission capacity would need to be worked out simultaneously

in order to avoid mismatch between generation capacity and transmission facilities. The policy

emphasizes the following to meet the above objective:

• The Central Government would facilitate the continued development of the National Grid for providing

adequate infrastructure for inter-state transmission of power and to ensure that underutilized

generation capacity is facilitated to generate electricity for its transmission from surplus regions to

deficit regions.

• The Central Transmission Utility (CTU) and State Transmission Utility (STU) have the key responsibility

of network planning and development based on the National Electricity Plan in coordination with all

concerned agencies as provided in the Act. The CTU is responsible for the national and regional

transmission system planning and development. The STU is responsible for planning and development

of the intra-state transmission system. The CTU would need to coordinate with the STUs for

achievement of the shared objective of eliminating transmission constraints in cost effective manner.

• Network expansion should be planned and implemented keeping in view the anticipated transmission

needs that would be incident on the system in the open access regime. Prior agreement with the

beneficiaries would not be a pre-condition for network expansion. CTU/STU should undertake network

expansion after identifying the requirements in consultation with stakeholders and taking up the

execution after due regulatory approvals.

• Structured information dissemination and disclosure procedures should be developed by the CTU and

STUs to ensure that all stakeholders are aware of the status of generation and transmission projects

and plans. These should form a part of the overall planning procedures. • The State Regulatory Commissions who have not yet notified the grid code under the Electricity Act

2003 should notify the same not later than September 2005.

5.3.3 Open access in transmission has been introduced to promote competition amongst the generating

companies who can now sell to different distribution licensees across the country. This should lead to

availability of cheaper power. The Act mandates non-discriminatory open access in transmission from the

very beginning. When open access to distribution networks is introduced by the respective State

Commissions for enabling bulk consumers to buy directly from competing generators, competition in the

market would increase the availability of cheaper and reliable power supply. The Regulatory Commissions

need to provide facilitative framework for non-discriminatory open access. This requires load dispatch

facilities with state-of-the art communication and data acquisition capability on a real time basis. While

this is the case currently at the regional load dispatch centers, appropriate State Commissions must

ensure that matching facilities with technology upgrades are provided at the State level, where necessary

and realized not later than June 2006.

5.3.4 The Act prohibits the State transmission utilities/transmission licensees from engaging in trading in

electricity. Power purchase agreements (PPAs) with the generating companies would need to be suitably

assigned to the Distribution Companies, subject to mutual agreement. To the extent necessary, such

assignments can be done in a manner to take care of different load profiles of the Distribution

Companies. Non-discriminatory open access shall be provided to competing generators supplying power

to licensees upon payment of transmission charge to be determined by the appropriate Commission. The

appropriate Commissions shall establish such transmission charges no later than June 2005.

5.3.5 To facilitate orderly growth and development of the power sector and also for secure and reliable

operation of the grid, adequate margins in transmission system should be created. The transmission

capacity would be planned and built to cater to both the redundancy levels and margins keeping in view

international standards and practices. A well planned and strong transmission system will ensure not only

optimal utilization of transmission capacities but also of generation facilities and would facilitate achieving

ultimate objective of cost effective delivery of power. To facilitate cost effective transmission of power

across the region, a national transmission tariff framework needs to be implemented by CERC. The tariff

mechanism would be sensitive to distance, direction and related to quantum of flow. As far as possible,

consistency needs to be maintained in transmission pricing framework in inter-State and intra-State

systems. Further it should be ensured that the present network deficiencies do not result in unreasonable

transmission loss compensation requirements.

5.3.6 The necessary regulatory framework for providing non-discriminatory open access in transmission

as mandated in the Electricity Act 2003 is essential for signalling efficient choice in locating generation

capacity and for encouraging trading in electricity for optimum utilization of generation resources and

consequently for reducing the cost of supply.

5.3.7 The spirit of the provisions of the Act is to ensure independent system operation through NLDC,

RLDCs and SLDCs. These dispatch centers, as per the provisions of the Act, are to be operated by a

Government company or authority as notified by the appropriate Government. However, till such time

these agencies/authorities are established the Act mandates that the CTU or STU, as the case may be,

shall operate the RLDCs or SLDC. The arrangement of CTU operating the RLDCs would be reviewed by

the Central Government based on experience of working with the existing arrangement. A view on this

aspect would be taken by the Central Government by December 2005. 5.3.8 The Regional Power Committees as envisaged in section section 2(55) would be constituted by the

Government of India within two months with representation from various stakeholders.

5.3.9 The National Load Despatch Centre (NLDC) along with its constitution and functions as envisaged in

Section 26 of the Electricity Act 2003 would be notified within three months. RLDCs and NLDC will have

complete responsibility and commensurate authority for smooth operation of the grid irrespective of the

ownership of the transmission system, be it under CPSUs, State Utility or private sector.

5.3.10 Special mechanisms would be created to encourage private investment in transmission sector so

that sufficient investments are made for achieving the objective of demand to be fully met by 2012.

5.4 DISTRIBUTION

5.4.1 Distribution is the most critical segment of the electricity business chain. The real challenge of

reforms in the power sector lies in efficient management of the distribution sector.

5.4.2 The Act provides for a robust regulatory framework for distribution licensees to safeguard consumer

interests. It also creates a competitive framework for the distribution business, offering options to

consumers, through the concepts of open access and multiple licensees in the same area of supply.

5.4.3 For achieving efficiency gains proper restructuring of distribution utilities is essential. Adequate

transition financing support would also be necessary for these utilities. Such support should be arranged

linked to attainment of predetermined efficiency improvements and reduction in cash losses and putting

in place appropriate governance structure for insulating the service providers from extraneous

interference while at the same time ensuring transparency and accountability. For ensuring financial

viability and sustainability, State Governments would need to restructure the liabilities of the State

Electricity Boards to ensure that the successor companies are not burdened with past liabilities. The

Central Government would also assist the States, which develop a clear roadmap for turnaround, in

arranging transition financing from various sources which shall be linked to predetermined improvements

and efficiency gains aimed at attaining financial viability and also putting in place appropriate governance

structures.

5.4.4 Conducive business environment in terms of adequate returns and suitable transitional model with

predetermined improvements in efficiency parameters in distribution business would be necessary for

facilitating funding and attracting investments in distribution. Multi-Year Tariff (MYT) framework is an

important structural incentive to minimize risks for utilities and consumers, promote efficiency and rapid

reduction of system losses. It would serve public interest through economic efficiency and improved

service quality. It would also bring greater predictability to consumer tariffs by restricting tariff

adjustments to known indicators such as power purchase prices and inflation indices. Private sector

participation in distribution needs to be encouraged for achieving the requisite reduction in transmission

and distribution losses and improving the quality of service to the consumers.

5.4.5 The Electricity Act 2003 enables competing generating companies and trading licensees, besides

the area distribution licensees, to sell electricity to consumers when open access in distribution is

introduced by the State Electricity Regulatory Commissions. As required by the Act, the SERCs shall

notify regulations by June 2005 that would enable open access to distribution networks in terms of subsection 2 of section 42 which stipulates that such open access would be allowed, not later than five years

from 27th January 2004 to consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one mega watt. Section 49 of the Act provides that such

consumers who have been allowed open access under section 42 may enter into agreement with any

person for supply of electricity on such terms and conditions, including tariff, as may be agreed upon by

them. While making regulations for open access in distribution, the SERCs will also determine wheeling

charges and cross-subsidy surcharge as required under section 42 of the Act.

5.4.6 A time-bound programme should be drawn up by the State Electricity Regulatory Commissions

(SERC) for segregation of technical and commercial losses through energy audits. Energy accounting and

declaration of its results in each defined unit, as determined by SERCs, should be mandatory not later

than March 2007. An action plan for reduction of the losses with adequate investments and suitable

improvements in governance should be drawn up. Standards for reliability and quality of supply as well

as for loss levels shall also be specified ,from time to time, so as to bring these in line with international

practices by year 2012.

5.4.7 One of the key provisions of the Act on competition in distribution is the concept of multiple

licensees in the same area of supply through their independent distribution systems. State Governments

have full flexibility in carving out distribution zones while restructuring the Government utilities. For grant

of second and subsequent distribution licence within the area of an incumbent distribution licensee, a

revenue district, a Municipal Council for a smaller urban area or a Municipal Corporation for a larger

urban area as defined in the Article 243(Q) of Constitution of India (74th Amendment) may be considered

as the minimum area. The Government of India would notify within three months, the requirements for

compliance by applicant for second and subsequent distribution licence as envisaged in Section 14 of the

Act. With a view to provide benefits of competition to all section of consumers, the second and

subsequent licensee for distribution in the same area shall have obligation to supply to all consumers in

accordance with provisions of section 43 of the Electricity Act 2003. The SERCs are required to regulate

the tariff including connection charges to be recovered by a distribution licensee under the provisions of

the Act. This will ensure that second distribution licensee does not resort to cherry picking by demanding

unreasonable connection charges from consumers.

5.4.8 The Act mandates supply of electricity through a correct meter within a stipulated period. The

Authority should develop regulations as required under Section 55 of the Act within three months.

5.4.9 The Act requires all consumers to be metered within two years. The SERCs may obtain from the

Distribution Licensees their metering plans, approve these, and monitor the same. The SERCs should

encourage use of pre-paid meters. In the first instance, TOD meters for large consumers with a minimum

load of one MVA are also to be encouraged. The SERCs should also put in place independent third-party

meter testing arrangements.

5.4.10 Modern information technology systems may be implemented by the utilities on a priority basis,

after considering cost and benefits, to facilitate creation of network information and customer data base

which will help in management of load, improvement in quality, detection of theft and tampering,

customer information and prompt and correct billing and collection . Special emphasis should be placed

on consumer indexing and mapping in a time bound manner. Support is being provided for information

technology based systems under the Accelerated Power Development and Reforms Programme (APDRP).

5.4.11 High Voltage Distribution System is an effective method for reduction of technical losses,

prevention of theft, improved voltage profile and better consumer service. It should be promoted to reduce LT/HT ratio keeping in view the techno economic considerations.

5.4.12 SCADA and data management systems are useful for efficient working of Distribution Systems. A

time bound programme for implementation of SCADA and data management system should be obtained

from Distribution Licensees and approved by the SERCs keeping in view the techno economic

considerations. Efforts should be made to install substation automation equipment in a phased manner.

5.4.13 The Act has provided for stringent measures against theft of electricity. The States and

distribution utilities should ensure effective implementation of these provisions. The State Governments

may set up Special Courts as envisaged in Section 153 of the Act.

5.5 RECOVERY OF COST OF SERVICES & TARGETTED SUBSIDIES

5.5.1 There is an urgent need for ensuring recovery of cost of service from consumers to make the power

sector sustainable.

5.5.2 A minimum level of support may be required to make the electricity affordable for consumers of

very poor category. Consumers below poverty line who consume below a specified level, say 30 units per

month, may receive special support in terms of tariff which are cross-subsidized. Tariffs for such

designated group of consumers will be at least 50 % of the average (overall) cost of supply. This

provision will be further re-examined after five years.

5.5.3 Over the last few decades cross-subsidies have increased to unsustainable levels. Cross-subsidies

hide inefficiencies and losses in operations. There is urgent need to correct this imbalance without giving

tariff shock to consumers. The existing cross-subsidies for other categories of consumers would need to

be reduced progressively and gradually.

5.5.4 The State Governments may give advance subsidy to the extent they consider appropriate in terms

of section 65 of the Act in which case necessary budget provision would be required to be made in

advance so that the utility does not suffer financial problems that may affect its operations. Efforts would

be made to ensure that the subsidies reach the targeted beneficiaries in the most transparent and

efficient way.

5.6 TECHNOLOGY DEVELOPMENT AND R&D

5.6.1 Effective utilization of all available resources for generation, transmission and distribution of

electricity using efficient and cost effective technologies is of paramount importance. Operations and

management of vast and complex power systems require coordination among the multiple agencies

involved. Effective control of power system at state, regional and national level can be achieved only

through use of Information Technology. Application of IT has great potential in reducing technical &

commercial losses in distribution and providing consumer friendly services. Integrated resource planning

and demand side management would also require adopting state of the art technologies.

Special efforts would be made for research, development demonstration and commercialization of nonconventional energy systems. Such systems would need to meet international standards, specifications

and performance parameters.

5.6.2 Efficient technologies, like super critical technology, IGCC etc and large size units would be

gradually introduced for generation of electricity as their cost effectiveness is established. Simultaneously, development and deployment of technologies for productive use of fly ash would be

given priority and encouragement.

5.6.3 Similarly, cost effective technologies would require to be developed for high voltage power flows

over long distances with minimum possible losses. Specific information technology tools need to be

developed for meeting the requirements of the electricity industry including highly sophisticated control

systems for complex generation and transmission operations, efficient distribution business and user

friendly consumer interface.

5.6.4 The country has a strong research and development base in the electricity sector which would be

further augmented. R&D activities would be further intensified and Missions will be constituted for

achieving desired results in identified priority areas. A suitable funding mechanism would be evolved for

promoting R& D in the Power Sector. Large power companies should set aside a portion of their profits for

support to R&D.

5.7 COMPETITION AIMED AT CONSUMER BENEFITS

5.7.1 To promote market development, a part of new generating capacities, say 15% may be sold

outside long-term PPAs . As the power markets develop, it would be feasible to finance projects with

competitive generation costs outside the long-term power purchase agreement framework. In the coming

years, a significant portion of the installed capacity of new generating stations could participate in

competitive power markets. This will increase the depth of the power markets and provide alternatives

for both generators and licensees/consumers and in long run would lead to reduction in tariff.

For achieving this, the policy underscores the following:-

a. It is the function of the Central Electricity Regulatory Commission to issue license for inter-state

trading which would include authorization for trading throughout the country.

b. The ABT regime introduced by CERC at the national level has had a positive impact. It has also enabled

a credible settlement mechanism for intra-day power transfers from licenses with surpluses to licenses

experiencing deficits. SERCs are advised to introduce the ABT regime at the State level within one

year.

c. Captive generating plants should be permitted to sell electricity to licensees and consumers when they

are allowed open access by SERCs under section 42 of the Act .

d. Development of power market would need to be undertaken by the Appropriate Commission in

consultation with all concerned.

e. The Central Commission and the State Commissions are empowered to make regulations under section

178 and section 181 of the Act respectively. These regulations will ensure implementation of various

provisions of the Act regarding encouragement to competition and also consumer protection. The

Regulatory Commissions are advised to notify various regulations expeditiously.

f. Enabling regulations for inter and intra State trading and also regulations on power exchange shall be

notified by the appropriate Commissions within six months.

5.8 FINANCING POWER SECTOR PROGRAMMES INCLUDING PRIVATE SECTOR PARTICIPATION

5.8.1 To meet the objective of rapid economic growth and "power for all" including household electrification, it is estimated that an investment of the order of Rs.9,00,000 crores at 2002-03 price level

would be required to finance generation, transmission, sub-transmission, distribution and rural

electrification projects. Power being most crucial infrastructure, public sector investments, both at the

Central Government and State Governments, will have to be stepped up. Considering the magnitude of

the expansion of the sector required, a sizeable part of the investments will also need to be brought in

from the private sector. The Act creates a conducive environment for investments in all segments of the

industry, both for public sector and private sector, by removing barrier to entry in different segments.

Section 63 of the Act provides for participation of suppliers on competitive basis in different segments

which will further encourage private sector investment. Public service obligations like increasing access to

electricity to rural households and small and marginal farmers have highest priority over public finances.

5.8.2 The public sector should be able to raise internal resources so as to at least meet the equity

requirement of investments even after suitable gross budgetary support from the Government at the

Centre and in the states in order to complete their on-going projects in a time-bound manner. Expansion

of public sector investments would be dependent on the financial viability of the proposed projects. It

would, therefore, be imperative that an appropriate surplus is generated through return on investments

and, at the same time, depreciation reserve created so as to fully meet the debt service obligation. This

will not only enable financial closure but also bankability of the project would be improved for expansion

programmes, with the Central and State level public sector organizations, as also private sector projects,

being in a position to fulfil their obligations toward equity funding and debt repayments.

5.8.3 Under sub-section (2) of Section 42 of the Act, a surcharge is to be levied by the respective State

Commissions on consumers switching to alternate supplies under open access. This is to compensate the

host distribution licensee serving such consumers who are permitted open access under section 42(2), for

loss of the cross-subsidy element built into the tariff of such consumers. An additional surcharge may

also be levied under sub-section (4) of Section 42 for meeting the fixed cost of the distribution licensee

arising out of his obligation to supply in cases where consumers are allowed open access. The amount of

surcharge and additional surcharge levied from consumers who are permitted open access should not

become so onerous that it eliminates competition that is intended to be fostered in generation and supply

of power directly to consumers through the provision of Open Access under Section 42(2) of the Act.

Further it is essential that the Surcharge be reduced progressively in step with the reduction of crosssubsidies as foreseen in Section 42(2) of the Electricity Act 2003.

5.8.4 Capital is scarce. Private sector will have multiple options for investments. Return on investment

will, therefore, need to be provided in a manner that the sector is able to attract adequate investments at

par with, if not in preference to, investment opportunities in other sectors. This would obviously be based

on a clear understanding and evaluation of opportunities and risks. An appropriate balance will have to be

maintained between the interests of consumers and the need for investments.

5.8.5 All efforts will have to be made to improve the efficiency of operations in all the segments of the

industry. Suitable performance norms of operations together with incentives and disincentives will need

to be evolved along with appropriate arrangement for sharing the gains of efficient operations with the

consumers . This will ensure protection of consumers' interests on the one hand and provide motivation

for improving the efficiency of operations on the other.

5.8.6 Competition will bring significant benefits to consumers , in which case, it is competition which will

determine the price rather than any cost plus exercise on the basis of operating norms and parameters.All efforts will need to be made to bring the power industry to this situation as early as possible, in the

overall interest of consumers. Detailed guidelines for competitive bidding as stipulated in section 63 of

the Act have been issued by the Central Government.

5.8.7 It will be necessary that all the generating companies, transmission licensees and distribution

licensees receive due payments for effective discharge of their operational obligations as also for enabling

them to make fresh investments needed for the expansion programmes. Financial viability of operations

and businesses would, therefore, be essential for growth and development of the sector. Concerted

efforts would be required for restoring the financial health of the sector. For this purpose, tariff

rationalization would need to be ensured by the SERCs. This would also include differential pricing for

base, intermediate and peak power.

5.8.8 Steps would also be taken to address the need for regulatory certainty based on independence of

the regulatory commissions and transparency in their functioning to generate investor's confidence.

5.8.9 Role of private participation in generation, transmission and distribution would become increasingly

critical in view of the rapidly growing investment needs of the sector. The Central Government and the

State Governments need to develop workable and successful models for public private partnership. This

would also enable leveraging private investment with the public sector finances. Mechanisms for

continuous dialogue with industry for streamlining procedures for encouraging private participation in

power sector need to be put in place.

Transmission & Distribution Losses

5.8.10 It would have to be clearly recognized that Power Sector will remain unviable until T&D losses are

brought down significantly and rapidly. A large number of States have been reporting losses of over 40%

in the recent years. By any standards, these are unsustainable and imply a steady decline of power

sector operations. Continuation of the present level of losses would not only pose a threat to the power

sector operations but also jeopardize the growth prospects of the economy as a whole. No reforms can

succeed in the midst of such large pilferages on a continuing basis.

The State Governments would prepare a Five Year Plan with annual milestones to bring down these

losses expeditiously. Community participation, effective enforcement, incentives for entities, staff and

consumers, and technological upgradation should form part of campaign efforts for reducing these losses.

The Central Government will provide incentive based assistance to States that are able to reduce losses

as per agreed programmes.

5.9 ENERGY CONSERVATION

5.9.1 There is a significant potential of energy savings through energy efficiency and demand side

management measures. In order to minimize the overall requirement, energy conservation and demand

side management (DSM) is being accorded high priority. The Energy Conservation Act has been enacted

and the Bureau of Energy Efficiency has been setup.

5.9.2 The potential number of installations where demand side management and energy conservation

measures are to be carried out is very large. Bureau of Energy Efficiency (BEE) shall initiate action in this

regard. BEE would also make available the estimated conservation and DSM potential, its staged implementation along with cost estimates for consideration in the planning process for National Electricity

Plan.

5.9.3 Periodic energy audits have been made compulsory for power intensive industries under the Energy

Conservation Act. Other industries may also be encouraged to adopt energy audits and energy

conservation measures. Energy conservation measures shall be adopted in all Government buildings for

which saving potential has been estimated to be about 30% energy. Solar water heating systems and

solar passive architecture can contribute significantly to this effort.

5.9.4 In the field of energy conservation initial approach would be voluntary and self-regulating with

emphasis on labelling of appliances. Gradually as awareness increases, a more regulatory approach of

setting standards would be followed.

5.9.5 In the agriculture sector, the pump sets and the water delivery system engineered for high

efficiency would be promoted. In the industrial sector, energy efficient technologies should be used and

energy audits carried out to indicate scope for energy conservation measures. Motors and drive system

are the major source of high consumption in Agricultural and Industrial Sector. These need to be

addressed. Energy efficient lighting technologies should also be adopted in industries, commercial and

domestic establishments.

5.9.6 In order to reduce the requirements for capacity additions, the difference between electrical power

demand during peak periods and off-peak periods would have to be reduced. Suitable load management

techniques should be adopted for this purpose. Differential tariff structure for peak and off peak supply

and metering arrangements (Time of Day metering) should be conducive to load management objectives.

Regulatory Commissions should ensure adherence to energy efficiency standards by utilities.

5.9.7 For effective implementation of energy conservation measures, role of Energy Service Companies

would be enlarged. Steps would be taken to encourage and incentivise emergence of such companies.

5.9.8 A national campaign for bringing about awareness about energy conservation would be essential to

achieve efficient consumption of electricity.

5.9.9. A National Action Plan has been developed. Progress on all the proposed measures will be

monitored with reference to the specific plans of action.

5.10 ENVIRONMENTAL ISSUES

5.10.1 Environmental concerns would be suitably addressed through appropriate advance action by way

of comprehensive Environmental Impact Assessment and implementation of Environment Action Plan

(EAP).

5.10.2 Steps would be taken for coordinating the efforts for streamlining the procedures in regard to

grant of environmental clearances including setting up of 'Land Bank' and 'Forest Bank'.

5.10.3 Appropriate catchment area treatment for hydro projects would also be ensured and monitored.

5.10.4 Setting up of coal washeries will be encouraged. Suitable steps would also be taken so that

utilization of fly ash is ensured as per environmental guidelines. 5.10.5 Setting up of municipal solid waste energy projects in urban areas and recovery of energy from

industrial effluents will also be encouraged with a view to reducing environmental pollution apart from

generating additional energy.

5.10.6 Full compliance with prescribed environmental norms and standards must be achieved in

operations of all generating plants.

5.11 TRAINING AND HUMAN RESOURCE DEVELOPMENT

In the new reforms framework ushered by Electricity Act 2003, it is particularly important that the

electricity industry has access to properly trained human resource. Therefore, concerted action would be

taken for augmenting training infrastructure so that adequate well-trained human resource is made

available as per the need of the industry. Special attention would need to be paid by the industry for

establishing training infrastructure in the field of electricity distribution, regulation, trading and power

markets. Efforts should be made so that personnel of electricity supply industry both in the private and

public sector become more cost-conscious and consumer-friendly.

5.12 COGENERATION AND NON-CONVENTIONAL ENERGY SOURCES

5.12.1 Non-conventional sources of energy being the most environment friendly there is an urgent need

to promote generation of electricity based on such sources of energy. For this purpose, efforts need to be

made to reduce the capital cost of projects based on non-conventional and renewable sources of energy.

Cost of energy can also be reduced by promoting competition within such projects. At the same time,

adequate promotional measures would also have to be taken for development of technologies and a

sustained growth of these sources.

5.12.2 The Electricity Act 2003 provides that co-generation and generation of electricity from nonconventional sources would be promoted by the SERCs by providing suitable measures for connectivity

with grid and sale of electricity to any person and also by specifying, for purchase of electricity from such

sources, a percentage of the total consumption of electricity in the area of a distribution licensee. Such

percentage for purchase of power from non-conventional sources should be made applicable for the

tariffs to be determined by the SERCs at the earliest. Progressively the share of electricity from nonconventional sources would need to be increased as prescribed by State Electricity Regulatory

Commissions. Such purchase by distribution companies shall be through competitive bidding process.

Considering the fact that it will take some time before non-conventional technologies compete, in terms

of cost, with conventional sources, the Commission may determine an appropriate differential in prices to

promote these technologies.

5.12.3 Industries in which both process heat and electricity are needed are well suited for cogeneration of

electricity. A significant potential for cogeneration exists in the country, particularly in the sugar industry.

SERCs may promote arrangements between the co-generator and the concerned distribution licensee for

purchase of surplus power from such plants. Cogeneration system also needs to be encouraged in the

overall interest of energy efficiency and also grid stability.

5.13 PROTECTION OF CONSUMER INTERESTS AND QUALITY STANDARDS

5.13.1 Appropriate Commission should regulate utilities based on pre-determined indices on quality of

power supply. Parameters should include, amongst others, frequency and duration of interruption,

voltage parameters, harmonics, transformer failure rates, waiting time for restoration of supply, percentage defective meters and waiting list of new connections. The Appropriate Commissions would

specify expected standards of performance.

5.13.2 Reliability Index (RI) of supply of power to consumers should be indicated by the distribution

licensee. A road map for declaration of RI for all cities and towns up to the District Headquarter towns as

also for rural areas, should be drawn by up SERCs. The data of RI should be compiled and published by

CEA.

5.13.3 It is advised that all State Commissions should formulate the guidelines regarding setting up of

grievance redressal forum by the licensees as also the regulations regarding the Ombudsman and also

appoint/designate the Ombudsman within six months.

5.13.4 The Central Government, the State Governments and Electricity Regulatory Commissions should

facilitate capacity building of consumer groups and their effective representation before the Regulatory

Commissions. This will enhance the efficacy of regulatory process.

6.0 COORDINATED DEVELOPMENT

6.1 Electricity being a concurrent subject, a well-coordinated approach would be necessary for

development of the power sector. This is essential for the attainment of the objective of providing

electricity-access to all households in next five years and providing reliable uninterrupted quality power

supply to all consumers. The State Governments have a major role, particularly in creation of generation

capacity, state level transmission and distribution. The Central Government would assist the States in the

attainment of this objective. It would be playing a supportive role in fresh capacity addition and a major

role in development of the National Grid. The State Governments need to ensure the success of reforms

and restoration of financial health in distribution, which alone can enable the creation of requisite

generation capacity. The Regulatory Commissions have the responsibility of ensuring that the regulatory

processes facilitate the attainment of this objective. They also have a developmental role whose

fulfillment would need a less formal and a consultative process.

The Electricity Act, 2003 also provides for mechanisms like "Coordination forum" and "Advisory

Committees" to facilitate consultative process. The Act also requires the Regulatory Commissions to

ensure transparency in exercise of their powers and in discharge of their functions. This in no way means

that the Regulatory Commissions should follow formal judicial approach. In fact, quick disposal of matters

would require an approach involving consultations with stakeholders.

6.2 Under the Act, the Regulatory Commissions are required to perform wide-ranging responsibilities. The

appropriate Governments need to take steps to attract regulatory personnel with required background.

The Govt. of India would promote the institutional capability to provide training to raise regulatory

capacity in terms of the required expertise and skill sets. The appropriate Governments should provide

financial autonomy to the Regulatory Commissions. The Act provides that the appropriate Government

shall constitute a Fund under section 99 or section 103 of the Act, as the case may be, to be called as

Regulatory Commission Fund. The State Governments are advised to establish this Fund expeditiously.

(Ajay Shankar)

Additional Secretary to the Government of India

http://www.cea.nic.in/reports/national_elec_policy.pdf

Introduction

The growth of the economy, calls for a matching rate of growth in infrastructure facilities. 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. For the Nineties, a ratio of around 1.5 is projected. 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. Power Sector, hitherto, had been funded mainly through budgetary support and external borrowings. 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. The information on the website includes the main features of the private sector policy along with copies of importantcirculars,notifications,etc.

Common Minimum National Action Plan for Power

The Chief Ministers met on 16th October and 3rd December, 1996 to discuss and deliberate upon the issues pertaining to the power sector.

Recognized that the gap between demand and supply of power is widening.

Acknowledged that the financial position of State Electricity Boards is fast deteriorating and the future development of the power sector cannot be sustained without viable State Electricity Boards and improvement of operational performance of State Electricity Boards.

Agreed that reforms and restructuring of State Electricity Boards are urgent and must be carried out in a definite time frame.

Identified creation of Regulatory Commissions as a step in this direction.

Noted that the requirements of the future expansion and improvement of power sector cannot be fully achieved through public resources alone and it is essential to encourage private sector participation in generation, transmission and distribution.

Observed that the changing scenario in the power sector calls forfurther delegation of powers and simplification of procedures.

A national consensus evolved for improving the performance of the power sector in a time bound manner and the following was adopted.

I. National Energy Policy

The Government would soon finalise a National Energy Policy.

II. State Electricity Regulatory Commission

Each State/Union Territory shall set up an independent State Electricity Regulatory Commission (SERC).

To set up SERCs, Central Government will amend Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948.

To start with such SERCs will undertake only tariff fixation.

Licencing, planning and other related functions could also be delegated to SERCs as and when each State Government notifies it.

Appeals against orders of SERCs will be to respective High Courts unless any State Government specifically prefers such appeals being made to the Central Electricity Regulatory Commission.

III. Central Electricity Regulatory Commission

Union Government will set up a Central Electricity Regulatory Commission (CERC) CERC will set the bulk tariffs for all Central generating and transmission utilities.

Licencing, planning and other related functions could also be delegated to CERC as and when the Central Government notifies it.

All issues concerning inter-State flow and exchange of power shall also be decided by the CERC.

To enable setting up of CERC, Central Government will amend Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948.

IV. Rationalisation of Retail Tariffs

Determination of retail tariffs, including wheeling charges etc., will be decided by SERCs which will ensure a minimum overall 3% rate of return to each utility with immediate effect.

Cross -subsidization between categories of consumers may be allowed by SERCs. No sector shall, however, pay less than 50% of the average cost of supply ( cost of generation plus transmission and distribution). Tariffs for agricultural sector will not be less than fifty paise per Kwh to be brought to 50% of the average cost in not more than three years.

Recommendations of SERCs are mandatory. If any deviations from tariffs recommended by it are made by a State/UT Government, it will have to provide for the financial implications of such deviations explicitly in the State budget.

Fuel Adjustment Charges (FCA) would be automatically incorporated in the tariff .

There shall be a package of incentives and disincentives to encourage and facilitate the implementation of tariff rationalisation by the States.

V. Private Sector Participation in Distribution

State Governments agree to a gradual programme of private sector participation in distribution of electricity.

The process of private participation shall be initially in one or two viable geographical areas covering both urban and rural areas in a State and the State may extend this to other parts of the state gradually.

VI. Role of Central Agencies

The Central Government would make a comprehensive review of the role of Central Electricity Authority (CEA).

Techno-economic approval of competitively bid power projects will be simplified and CEA shall not be concerned with capital cost, tariff and other commercial aspects of the project. Powers regarding approval ofprojects shall stand delegated to the States in respect of thermal power stations upto 250 MW. However, in respect of thermal projects beyond 250 MW capacity and other schemes, CEA s appraisal will continue in respect of planning and other related matters, such as to promote best optimal development of the river and its tributaries for power generation including proper hydro-thermal coordination the suitability of location and size of thermal power stations; fuel linkages; adequacy of power evacuation facilities covering inter-state and intra-state and the transmission schemes form an integral part of the National Power Grid for maximization of benefits for the country as a whole. Subject to such technical clearances which shall be accorded within two months State Governments will have powers to accord approval for power projects.

The role of FIPB will be minimised by putting as many projects on the automatic clearance route as feasible.

Government of India will issue transparent guidelines and delegate more powers for environmental clearance to State agencies. State agencies should equip themselves with requisite physical and technical expertise.

Government of India will delegate more powers to the states for issue of forest clearances. Statutory amendments will be made in the relevant Central statutes.

Ministry of Environment & Forests have proposed the following delegation to the States for environment clearance :-

(i) All cogeneration plants and captive power plants upto 250 MW

(ii) Coal based plants upto 500 MW using fluidized bed technology subject to sensitive areas restrictions

(iii) Power stations upto 250 MW on conventional technology

(iv) Gas/Naphtha based station upto 500 MW

VII. Autonomy to the State Electricity Boards

States will allow maximum possible autonomy to the State Electricity Boards.The State Electricity Boards will be restructured and corporatised and run on commercial basis.

VIII. Improvements in the Management Practices of State Electricity Boards

State Electricity Boards will professionalize their technical inventory manpower and project management practices.

IX. Improvement of Physical Parameters

Government of India will carry out necessary amendments in the relevant Acts/Rules to allow private participation in transmission.

State Governments will provide higher allocation for early completion of public sector projects Renovation and modernization of existing power plants shall be done in a time bound manner. PFC and other financial institutions will give higher priority for funding of R&M schemes. Clearance to R&M projects will fully be delegated to the States and no clearance will be requiredfrom CEA.

PLF of those thermal power stations having less than 40% PLF at present would be increased by 3% annually, by 2% in case of those plants with PLF between 40 and 60%and by 1% for those plants with PLF over 60%. The

overall PLF in the State sector in the country must comeup to a minimum of 65% and the national average to 70%by 2002 A.D.Compulsory metering at substations and on all major feeders would be introduced. Compulsory metering of all new electricity connections as also of connections toagriculture sector exceeding 10 HP will be undertaken and completed in two years. All electric supplies would be metered by 2002 A.D.

Compulsory annual energy audit of large consumers i.e.,100 KVA and above would be undertaken.

Time of the day metering would be introduced for big power consumers for better load management.

X. Cogeneration/Captive power plants

State Governments will encourage co-generation/ captive power plants. To facilitate evacuation of power from these plants to the grids, States shall formulate clear and transparent policies for purchase of power and wheeling charges which provide fair returns to the Cogeneration/Captive power plant owners. Captive power plants could also sell power to a group of industries as well as other categories of consumers in the said industrial zone or area. Wheeling of power from captive power plants to consumers located at a distance or through displacement basis shall be encouraged and the States will issue clear and transparent long term policies in this regard.

XI. Advance Action and High Priority for Hydro Projects

A national policy on hydro power development will be evolved by the Central Government which, inter-alia, would include development of mega hydro projects, both in the public sector and the private sector, at locations with substantial hydro potential, along with concomitant transmission facilities for evacuation of power to other Regions/states. States shall prepare a shelf of fully cleared hydro projects for implementation on high priority.

Special efforts will be made to promote hydro-electric projects in Himachal Pradesh and Jammu & Kashmir.

XII. Due Emphasis for Investment in North Eastern Region

Since there are geographical constraints in the North-Eastern region, the Government shall constantly review the public and private investments being made in that region so that these States get equitable shares in the investments in the power sector.

XIII.Allocation of liquid fuels

Government shall finalise the linkages of allocation of liquid fuels for power plants in consultation with State Governments soon.

XIV. Mega power projects at pit heads

Development of mega power projects at mine pitheads, both in the public sector and the private sector, with transmission facilities for evacuation of power to other Regions/ states would be encouraged.

XV Setting up of washeries.

Coal India Limited and its subsidiaries shall put up washeries at pitheads, wherever necessary. In case CIL cannot set up the washery private sector would be permitted to set up such washeries at pitheads. In either case, supply, washing and transportation of coal shall be on the basis of legally enforceable commercial contracts.

Terms & Abbreviations

CEA - Central Electricity Authority      MCMD - Million Cubic Meter per Day
CERC - Central Electricity Regulatory     SERC - State Electricity Regulatory
         Commission                                  Commission
Crore   - Ten million                        MOC - Ministry of Coal
CPCB - Central Pollution Control Board    MOE&F   - Ministry of Environment
CWC - Central Water Commission                     & Forests
CCFI - Cabinet Committee on Foreign       MOR - Ministry of Railways
      Investment
CIL - Coal India Limited                 MOU - Memorandom of Understanding
Deptt.Irrg - Department of Irrigation
DPR - Detailed Project Report            MP&NG   - Ministry of Petroleum
                                                      & Natural Gas
EOUs - Export Oriented Units
DOF - Department of Forest              MT - Million Tonnes
ECB - External Commercial Borrowing      MU - Million Units
EPC - Engineering, Procurement &         MW - Mega Watts
      Construction                       NTPC - National Thermal Power Corporation
E&F - Environment & Forest               NAA - National Airport
                                                      Authority
E(S) Act - Electricity (Supply)Act, 1948     NHPC - National Hydro-electric
                                                     Power Corp
FIPB - Foreign Investment Promotion Board
SIG - Standing Independent Group
FSA - Fuel Supply Agreement              PLF - Plant Load Factor
FTA - Fuel Transport Agreement           PPA - Power Purchase Agreement
FR - Feasibility Report                 RFP - Request for Proposal
GOI - Government of India                RFQ - Request for Qualification
HPB - High Powered Board                 ROE - Return on Equity
IA - Implementation Agreement           SEB - State Electricity
                                                      Board
IDC - Interest during Construction       SG - State Government
IOC - Indian Oil Corporation             SIA - Secretariat for Industrial
                                                      Approvals
IPC - Investment Promotion Cell
IPP - Independent Power Producer         SLC - Standing Linkage Committee
IRR - Internal Rate of Return            SPAC - Standing Project
                                                      Appraisal Committee
KWH - Kilo Watt Hour
KCal - Kilo Calorie                       SPCB - State Pollution Control
                                                      Board
LC - Letter of Credit                   TEC - Techno-Economic Clearance
LOI - Letter of Intent                   UT - Union Territory
Ckt.Kms - Circuit Kilometers                 CPP - Captive Power Project
PSU - Public Sector Undertakings         ICB - International Competitive
                                                         Bidding

Highlights and Main Achievements

1.0 POWER GENERATION

The yearwise generation is as follows:

Year Generation (BUs)

1991-92 287

1992-93 301

1993-94 324

1994-95 351

1995-96 380

1996-97 394

1997-98 420

1998-99 448

1999-00 480

2000-01 499.45

2001-02 515.27

2.0 INSTALLED CAPACITY

The all India installed capacity of electric power generating stations under utilities was 104917.50 MW as on 31.3.2002 consisting of 26261.22 MW hydro, 74428.82 MW thermal and 2720 MW nuclear and 1507.46 MW wind.

3.0 CAPACITY ADDITION DURING 2001-02

A capacity addition target of 4764.7 MW consisting of 1536.20 MW of Hydro and 3228.50 MW of thermal was envisaged for the year 2001-02. As against the afforesaid capacity addition target, the capacity of 3115.25 MW consisting of 1106.25 MW of hydro and 2009 MW of thermal has been achieved up to 31.3.2002.

3.1 CAPACITY ADDITION

Since 1994-95, the following new capacities have been added: (Figures in MW)

Year	Centre	State	Private	Total
1994-95	1464.5	3134	-	4598.50
1995-96	987.00	806.55	330	2123.55
1996-97	823.50	548.5	252.4	1624.50
1997-98	333.00	1676	1217.5	3226.50
1998-99	991.6	1675.4	1575	4242
1999-00	1615.4	2329.1	588	4532.5
2000-01	659.0	2525.77	864.20	3848.97
2001-02	905.0	1393.95	816.30	3115.25

4.0 PLANT LOAD FACTOR (PLF)

The PLF figures since 1994-95 are as under: (Figures in %)

Year	Centre	State	Overall
1994-95	69.2	55.0	60.0
1995-96	71.0	58.1	63.0
1996-97	71.1	60.3	64.4
1997-98	70.4	60.9	64.7
1998-99	71.1	60.7	64.6
1999-00	73.6	63.7	68.9
2000-01	74.3	65.6	73.0
2001-02	74.3	67.0	69.9

5.0 RESTRUCTURING OF STATE ELECTRICITY BOARDS

i) Presently, restructuring and regulatory reforms are contemplated with a view to bring about reforms in the SEBs through establishment of State Electricity Regulatory Commissions.

ii) The establishment of Regulatory commissions, as provided in the Act passed by the Parliament, would lead to rationalization of tariff and also provide for transparency in the provision of subsidies, wherever required. The State Government can exercise the option of providing subsidies, over and above those recommended by the Regulatory Commissions, on condition that the State Governments compensate the SEBs by providing adequate budgetary support. When tariffs are rationalised and budgetary support is provided, SEBs are expected to improve their financial position.

iii) The Government of Orissa has already introduced a reform programme by enacting the Orissa Electricity Reform Act, by setting up Orissa State Electricity Regulatory Commission and by unbundling the SEB into Orissa Power Generating Company (OPGC), Orissa Hydel Power Corporation (OHPC) and Grid Corporation of Orissa (GRIDCO). The Government of Orissa has initiated privatisation of distribution sector by accepting the bid of BSES for Western, North-Eastern and Southern Electricity Supply companies. The Government of Haryana has also enacted the Haryana Electricity Reforms Act and has restructured the SEB into a Power Transmission Company (Haryana Vidyut Prasaran Nigam Limited) and a generation company (Haryana Power Generation Corporation Limited). The State Government has also set up the State Electricity Regulatory Commission. Similarly, Andhra Pradesh has also enacted the State Reforms Act and has set up the State Electricity Regulatory Commission. The APSEB has also been corporatised to form Andhra Pradesh Generation Company Limited (APGENCO) and Andhra Pradesh Transmission Company (APTRANSCO). Karnataka has promulgated the State Electricity Reforms Ordinance. Uttar Pradesh has also drafted the State Electricity Reforms Bill.

6.0 CONFERENCE OF CHIEF MINISTERS ON POWER

The Chief Ministers/Power Ministers met on 18th December, 1998 to discuss and deliberate upon the critical issues pertaning to the power sector. Recognising that significant changes have taken place in India=s power sector after the adoption of the Common Minimum National Action Plan for Power, it was decided that a new initiative needs to be taken to move India=s power sector into the next phase of reforms. It was concluded that reform of the power sector is essential not only to facilitate additional investments but also improve the availability of reasonably priced power to the common man. With this end in view, the following plan of action was adopted for implementation:

i. State Electricity Regulatory Commissions

Each State/ Union Territory shall constitute SERC before 31st March, 1999 to enable rationalization of tariffs and improvement of the financial health of State Electricity Boards and to avail the interest subsidy on loans by the Power Finance Corporation as well as other incentives available.

ii. Power Sector Reform Bill

Orissa, Haryana and Andhra Pradesh have already enacted the Reform Bills outlining a reform plan for their power sectors. Each State/Union Territory shall announce a power sector reform policy and initiate steps for drawing up a Reform Bill wherever necessary in a time bound manner.

iii. Corporatisation

State/Union Territories will endeavour to take steps to corporatise and commercialise generating companies, transmission companies and distribution companies so that they are able to operate on commercial principles, generate the required resources and ensure availability of reasonably priced power to the common man.

iv. Distribution Reforms

In view of the urgent need to reduce transmission and distribution losses, facilitate higher investments in system improvement and ensure availability of reliable power to the consumers, reform of the distribution sector will be initiated by establishing distribution companies in different regions of each State. The entry of private investors will be encouraged wherever feasible. To begin with, at least 25% of the State will be taken up for distribution reform. The whole state will be covered in 4 years.

v. Mega Projects

To take advantage of the benefits of mega projects, each State/Union Territory will take steps to facilitate setting up of mega projects in accordance with the guidelines issued by Govt. of India.

vi. Commercial arrangements for payment for power

Having regard to the large investments required to be undertaken by CPSUs for generation and transmission projects, State/Union Territories will adopt commercial arrangements such as opening of LCs of the required amount for payment of power from generating and transmission agencies and for prompt settlement of dues.

vii. Securitization

To enable CPSUs to take up new projects for generation and transmission and in accordance with the Government of India policy of securitization of the outstanding debts of Central Public Sector Undertakings. State Governments will take steps to facilitate orderly securitization of such debts.

viii. Hydel Projects

Recognising the need for expeditious development of hydel potential in the country, the State Governments will take necessary steps (i) to complete languishing projects, (ii) and to take up the execution of hydroelectric projects by resolving outstanding inter-State issues. The State Governments will also provide assistance to the CPSUs in acquiring land and other clearances/approvals to take up the execution of the hydel projects in the Central Sector for benefits in the 10th Plan(2002-2007).

ix. National Power Grid

Keeping in view the imperative need to speedily develop a National Power Grid with appropriate transmission linkages at the state level for optimum utilisation of available generation within the various regions, the Central and State Sectors will substantially step up investment in transmission to complete the critical transmission lines and overcome the present mismatch in investment between generation and transmission of power.

x. Energy Conservation

Realising the need to conserve energy, each State/Union Territory will formulate and launch an Action Plan for energy conservation. Government of India will introduce an Energy Conservation Bill in Parliament shortly.

xi. Increase in Power Generation

In order to increase power generation quickly and reduce power shortages, at least ten power projects will be enabled to achieve financial closure and start construction by March 1999.

xii. Electricity Tariff for Railways

Realising the need to maintain viability of Railways and State Electricity Boards, it will be the endeavour of the State Governments to rationalise Railway Tariff. Simultaneously, the Railway Ministry would look into and rationalise the cost structure of Coal movement for Power projects.

Initiatives taken by Ministry of Power

I. Major Legislative initiatives

The New Electricity Bill

In keeping with the comprehensive approach, The Union Ministry of Power decided to come up with a comprehensive legislation so as to put together in one place all the legislative measures required to push the sector onto a trajectory of sound commercial growth and to enable the States and the Centre to move in harmony and coordination. It takes into account the move towards a competitive scenario, where regulators on the one hand and private power utilities on the other shall play increasingly significant roles. The Bill provides a comprehensive yet flexible legislative framework for power development. The salient features of the Bill are:

The Central Government to prepare a National Electricity Policy in consultation with State Governments.
A thrust to complete rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc.
Generation to be delicensed and captive generation to be freely permitted. Hydro projects would, however, need approval of the state governments and clearance from the Central Electricity Authority.
Transmission Utility at the Central as well as State level, to be a Government company-with responsibility for planned and coordinated development of transmission network. Provision for private transmission licensees.
Open access in transmission from the outset with provision for surcharge for taking care of current level of cross subsidy with the surcharge being gradually phased out.
Distribution licensees would be free to undertake generation and generating companies would be free to take up distribution licensees.
The State Electricity Regulatory Commission is a mandatory requirement.
Provision for license free generation and distribution in the rural areas.
The SERCs may permit open access in distribution in phases with surcharge for current level of cross subsidy to be gradually phased out along with cross subsidies and obligation to supply.
Provision for payment of subsidy through budget.
For rural and remote areas stand alone systems for generation and distribution would be permitted.
Trading as a distinct activity is being recognized with the safeguard of the Regulatory Commission being authorized to fix ceilings on trading margins, if necessary.
The State Governments have flexibility to unbundle the SEBs or continue with them as distribution licensees and State Transmission Utility.
The Bill does not prescribe any reform model, instead provides flexibility to the State Government to choose the model suiting to their conditions.
Metering of all electricity supplied made mandatory.
An Appellate Tribunal to hear appeals against the decision of CERC and SERCs.
Provisions relating to theft of electricity made more stringent

Energy Conservation Act, 2001 and other Demand Side Management Measures

Enacted on October 1, 2001, the Energy Conservation Act lays down concrete measures to ensure efficient use of energy and its conservation. The Act came into effect on March 1, 2002. A Bureau of Energy Efficiency (BEE) has been set up to make wide ranging regulations to further the objectives of the Act. Also, Central and State Governments have been empowered to facilitate and enforce efficient use of energy and its conservation. There are Provisions of penalties for failures and on the system of adjudication.

Standards and Labeling (S&L) have been identified as a key area for energy efficiency improvement in line with the experience of the developed countries.
Standards and Codes (S&C) would be taken up for commonly used equipment in industries such as pumps, fans, blowers, compressors, boilers, etc. Efficiency increases to the order of 10% are foreseen in most of the industrial equipment.
Market Development Mechanism including Project Development will be taken up in the following areas:

Rural agricultural substation with private management.
Municipal / Metro water pumping efficiency improvement.
Programme for energy efficiency improvement in Government buildings, commercial buildings, railways, defence establishments, etc.

Besides implementing the provision of the Act, a detailed Action Plan on Demand Side Management is being prepared.

II. Policy measures / initiatives taken

Accelerated Power Development & Reform Programe

Accelerated Power Development & Reform Programme (APDRP), introduced in February 2001 is being used in a structured way in the areas of Distribution reforms and transition phase financing of State Electricity Boards undertaking reforms. The objectives in the distribution reform segment of the program are to achieve 100% metering, energy audit, better HT/LT ratio, replacement of distribution transformers, IT solutions relating to power flow at critical points to ensure accountability at all levels. These should lead to a qualitative improvement at the consumers end so as to raise the level of satisfaction besides improving revenue realization for the utilities.

63 circles have been selected at present in the country (in many cases one circle is bigger than a district) which are being developed as �Centre of Excellence� for distribution reforms. The plan is to cover all the circles in a country in a phased manner.

States have been asked to form District Level Committees for distribution and generation resource planning. A comprehensive technical manual on preparation of projects for improvement in distribution network has been brought out.

States have to prepare detailed project reports for the identified circles, the progress of which is being closely monitored. In these 63 circles, efforts are on to supplement the efforts of the States for carrying out necessary improvements for which teams from certain central utilities are working in close coordination with the States. MOAs have been entered into with the States so that funds are released based on the performance of clearly specified and achievable milestones.

One Time Settlement of SEBs dues to central undertakings

Most of the SEBs are on verge of financial collapse. As a result they have not been able to pay for the power supplied to them. Their total outstanding dues to central power utilities have risen to more than Rs. 41,000 Cr.

After the Chief Ministers Conference in March'01 an Expert Group was constituted. The recommendations of the Expert Group have been endorsed by the Empowered Group of Chief Ministers and have been approved by the Union Council of Ministers in March 2002. Thus the recommendations have been operationalised. As per the recommendations, the outstanding dues of SEBs towards CPSUs are being securtised by concerned States with the clear understanding that they will pay their current dues. This would help the States to clean up their books and enable them to raise resources to fund their development schemes. In addition the Central Utilities would also be able to meet the equity requirements and leverage them for their expansion schemes. The scheme is making headway as a substantial number of State Governments have consented to it in the context of meeting their payment obligations to NTPC, the CPSU with the largest accumulated receivables from the SEBs and successor utilites. The States have been given incentives to make it attractive for them.

Environment Management

Seized of the current and emerging pressure, both local and global, on the front of environment management for the electricity sector, the Union Ministry of Power has taken a number of new initiatives in addition to strengthening the existing ones. Special Purpose Vehicle has been set up to effect compensatory afforestation to facilitate expeditious clearance from Ministry of Environment and Forests (MOEF) for new power projects. An MOU in this regard with MOEF is under finalization. An Action Plan on Clean Development Mechanism has been approved and TERI has been asked to prepare a pipeline of projects. A Fly Ash Utilization Action Plan is proposed to be formulated after discussions with all stakeholders.

Facilitating Private Investment

No ceiling on foreign equity participation in the power sector.

Alternative Payment Security Mechanism evolved to accelerate to accelerate Private sector investment in power sector.

Financing of IPPs linked to progress of reforms undertaken by State Govts.

Regarding private investment in power sector, there is a action plan to ensure financial closures of IPPs and this is being monitored by the Crisis Resolution Group chaired by the Union Minister for Power and attended by major financial institutions / Ministries and promoters of IPPs. Foreign Direct Investment (FDI) in transmission is being encouraged through two routes i.e. Joint Venture (JV) and Independent Private Transmission Co. (IPTC) with specific schemes having been identified under each head.

Encouraging FDI in Transmission - Two routes identified for encouraging private sector participation in transmission i.e. JV and IPTC routes. Specific transmission lines / schemes identified for execution under both the routes.

International Conference cum Business meets

To deliberate on the critical issues and to enlist support and optimise investment in the power sector from foreign and domestic investors, five international conferences-cum-business meets were held through CII, FICCI and CPSUs of the power sector. The areas on which the conferences were held included:

i. Transmission, Energy Management & Convergence

ii. Distribution

iii. Non fossil Fuel Generation

iv. Optimizing Existing capacity (R&M)

v. Fossil Fuel Generation

The conferences brought together several ideas concerning the entire range of power development related issues. The business meets showcased the investment opportunity in the power sector. The response was encouraging. As an example business opportunities with ongoing bids of Rs.1800 crore were offered by NHPC and Tehri Hydro Development Corporation(THDC). Also pre-bid conference for Main Plant Package of NTPC Sipat Thermal Power Project offered business worth Rs. 6,000 crore.

Facilitating Captive Power Capacity

Guidelines have been issued to all the States on Captive power development. This has been done keeping in view the needs of industry, the present availability of generating capacity including facilities for evacuation and the gestation time for creation of additional generation capacity with the objective that the industry should not suffer due to shortage of power in the overall interest of the economy.

Standing Committee on Training and Development

has submitted its report on National Training Action Plan for the Power Sector.

A Standing Committee on Research and Development

constituted to draw up a perspective Research and Development plan for the next fifteen years.

Rural Electrification Action Plan

formulated for 62000 villages to be electrified by 2007 and 18000 remote villages to be electrified using renewable sources by 2012.

A Committee constituted to study to reduce the cost of delivered power has submitted its report and is under implementation

Developing broad political consensus on Reforms

The Meeting of the Chief Ministers on Power held in March 2001 helped in convergence of views not only on broad parameters but also on certain methods to be adopted in different areas of reforms alongwith indicative time frames. The follow up actions have been going on and despite some resistance from certain pockets, the reform agenda has been moving forward. Structural changes have been given momentum and 22 States have signed MOUs under Accelerated Power Development & Reform Programme (APDRP) as an example of political convergence on reforms.

Countrywide Awareness Campaign

A Mass campaign was launched to create general awareness amongst the public on the need for reforms in power sector. More than 2000 Road shows were held in the months of October-November 2001 in this regard. Students, opinion makers and common consumers were informed and sensitized about the need for reforms, especially distribution reforms and checking for power theft. A very encouraging response was received from the grassroot level from all over the country.

III. Administrative steps undertaken

Projects formulation and implementation

A Committee set up for financing of power projects for capacity addition during Xth and XIth Plans.
Monitoring mechanism strengthened with setting up of Power Projects Monitoring Committee under Sp. Secy. (Power) for identification of projects, scheduling and monitoring the implementation.
A Coordination Committee for Power set up for close interaction amongst the related Ministries ; MOP, MNES, DAE, Deptt. of Coal

Plan for National Grid

For all the generating plants likely to be commissioned during the 10th Plan, transmission projects have been identified and in some cases are already under execution. The objective is to ensure that the inter-regional power transmission capability increases from the present level of 4850 MW to 30,000 MW by year 2012 and realize the objectives of National Grid.

Towards the objective of formation of National Grid, a number of inter-regional schemes have been planned for phased development. In order to further strengthen the interconnection between regions, some more schemes have been approved which are under different stages of implementation and are expected to be commissioned by 2003.

Looking into the future demand and availability of generation resources, a Perspective Transmission Plan has been drawn up indicating the major inter-regional transmission highways to be developed by 2011-12. This will ultimately lead to the formation of a strong National Grid. These highways are proposed to be established in phases matching with the requirement of inter-regional power transfer.

Action Plan for Xth plan period formulated for R&M of old thermal and hydro units.

Ranking Study for Prioritizing Hydro Power Development and other Allied Measures

A preliminary ranking study of 399 hydro schemes has been prepared. These schemes, with an aggregate installed capacity of about 107,000 MW, have been prioritized in all the six River Systems of the country. This will be the document for basin-wise development of hydro capacity. The policy thrust is to improve the hydro-thermal mix so as to optimally meet the peak and base load requirements. Some procedural improvements have been brought about to curtail the gestation period of hydro projects and further improvements are under consideration. The thrust is to improve the hydro-thermal mix so as to optimally meet the peak and base load requirements. Some procedural improvements have been brought about to curtail the gestation period of hydro projects and further improvements are under consideration. The Preliminary Ranking Study has been released on 5th February 2002. The identified potential hydroelectric sites in the various river basins have been prioritized in the reports in the order of their attractiveness for implementation. The ranking study would serve as guide to the potential developers to choose hydro schemes for investigations and implementation.

Development of mini hydro and run of river projects Action initiated with MNES for development of mini hydro and run of river projects.

Power Reforms : Focus on Distribution Reforms

In the Chief Ministers Conference held in March 2001 all States have agreed for reforms and restructuring of power sector.
Development of 63 Distribution Circles as Centre of Excellence for distribution reforms. Funds being provided under APDRP. These centres would act as model for replication in other districts.

Funds under APDRP, cumulative as till end April �02 :

Sanctioned Rs. 1435 Cr.

Disbursals Rs. 1404 Cr.

100% metering and effective Management Information System (MIS) for monitoring at feeder level backed up by detailed energy audit to bring accountability into system at all levels.
Tariff rationalisation by SERCs (21 States have set up SERCs and 12 have issued tariff orders).
Tariff policy for Regulators Committee formed under Secretary (Power) with Chairman, CEA to workout the policy.
District Level Committees proposed for Distribution Reforms monitoring and development of energy resources. Letters have been sent to all CMs of States.
Two years Action Plan is being chalked out for turnaround of SEBs by eliminating revenue deficits.
Distribution improvement plans/ projects for all districts in the country - Technical manuals have been finalized and submitted by CEA. It is also being converted into users/ management manuals.
A Committee has been set up to suggest strategies and measures for attracting private sector in distribution and drawing up guidelines for privatization.
I.T. enabled solution is being worked out by Committee headed by MD, Infosys for Model MIS for monitoring at feeders level and fixation of responsibility.

Facilitating Power trading

PTC role being strengthened to facilitate trading of power. It has already started operations.

Sustainable power development

Action Plan has been finalized on CDM (Clean Development Mechanism)
Action Plan on Fly Ash utilization is under finalization.

V. Other measures / steps taken

All NTPC stations have achieved ISO 14001 certification except for Unchahar & Tanda, which are in process.
A committee set up in CEA for working of Energy Security and Fuel policy. Inter ministerial reviews being held for finalization of the report.
Transparency and guidelines in hydro tenders - A Committee formed under Shri Harish Salve, the Solicitor General of India for recommending guidelines for hydroelectric power projects vis a vis contracting & executing procedures, to enable control time & cost overrun & ensure greater transparency in contracting as well as execution.

http://www.natcomindia.org/reports_ministries/power/scenario.htm

17 JUL, 2011, 10.08PM IST,REUTERS

Global consumer confidence at lowest since late 2009 due to uncertain economic outlook, euro zone debt crisis & rising inflation

LONDON: Global consumer confidence fell in the second quarter to its lowest level in a year and a half as an uncertain economic outlook, a deepening euro zone debt crisis and rising inflation made people more cautious, a survey showed on Sunday.

Consumer sentiment in the United States was weaker than in the second half of 2009 at the height of the global recession, according to The Nielsen Company's quarterly survey of global consumers.

Globally, consumers plan to tighten their belts in coming months for everything from stock investing to buying clothes, taking holidays and upgrading technology, after being slightly less cautious over the past 12 months, the survey showed.

Thirty one percent of U.S. consumers said they have no spare cash for discretionary spending, along with 25 percent of consumers in the Middle East and Africa and 22 percent of Europeans.

Confidence dipped in China, due to rising inflation, as well as in the Middle East where an initial bounce in consumer morale after social uprisings in the first quarter gave way to caution as the political outlook became unclear and rising prices curbed spending power. Egypt and Saudi Arabia posted the biggest falls from the first quarter in Nielsen's ranking of confidence in 56 countries worldwide.

Confidence was lowest in euro zone countries engulfed by a deepening debt crisis with Greece coming bottom of the global ranking . Portugal, Ireland, Spain and Italy were also in the bottom 10 although while confidence fell from the first quarter in Spain and Italy it rose slightly in Portugal and Ireland.

Indian consumers were still the most bullish globally but less so than in the first quarter. Consumers in Asia generally remained much more optimistic than in other regions - with the notable exception of the Japanese and South Koreans who were among the most pessimistic globally - but rising inflation tempered Asian purchasing power.

India's score in the Nielsen Global Consumer Confidence Index fell 5 points from the previous quarter to 126. It was well below the country's record 137 index reading in the second half of 2006, the highest reading for any country in the index's six-year history.

The index's global average reading dipped 3 points from the first quarter to 89, its lowest since the fourth quarter of 2009.

A score below 100 signals pessimism about the outlook. "Weak economic figures, slowing manufacturing performance and inflation in Asia, an intensifying debt crisis in Europe and continuing political instability in the Middle East, combined with rising household expenses in the U.S., have taken their toll on consumers' fragile confidence," said Venkatesh Bala, chief economist at The Cambridge Group, a unit of Nielsen.

"Hopes for full global recovery in the next 12 months substantially weakened in the second quarter as the majority of consumers around the world remained in a recessionary mindset."

Todd Hale, a senior vice-president at Nielsen in the United States, said U.S. consumers had been knocked by a series of negative factors.

"With rapidly rising gas prices, inflationary pressures at check-out, continued woes in the housing market with home foreclosures and declining property values, unsettling weather patterns creating flooding and tornado damage, and a stagnant job market, confidence among U.S. consumers fell in the second quarter," Hale said.

The UK and France, in contrast, saw a bounce in confidence in the second quarter although the level of morale in both countries remained below the European average.

The survey was taken between May 20 and June 7, covering 31,000 consumers in 56 countries. The survey is based on consumers' confidence in the job market, status of their personal finances and readiness to spend.

To promote competition, efficiency and economy in bulk power markets, improve the quality of supply, promote investments and advise government on the removal of institutional barriers to bridge the demand supply gap and thus foster the interests of consumers. More...

Grant of Connectivity, Long Term Access and Medium-term Open Access in inter-State Transmission and related matters (Second Amendment) Regulations, 2011. (Date extended upto:- 15-07-2011)

Analysis of Weekly Reporting by Licensed Traders for June

Report for May 2011.

CERC (Sharing of Transmission Charges and Losses), Regulations, 2010 Related orders.

Terms and Conditions of Tariff (Second Amendment) Regulation, 2011

Terms and Conditions of Tariff (First Amendment) Regulation, 2011

Fees and charges of Regional Load Despatch Centre and other related matters (First Amendment) Regulations, 2011

"Procedure for the Implementation of the Mechanism of Renewable Regulatory Fund" under Regulation 6.1 (d) of CERC (Indian Electricity Grid Code), Regulation 2010.

Extension of the date of operation of Clauses 5 and 7 of Annexure-I of the CERC (Indian Electricity Grid Code) Regulations, 2010

Hearing on 22-07-2011 on draft Central Electricity Regulatory Commission (Payment of Fees) Regulation, 2011

Hearing on 19-07-2011on Suo-Motu Order (142/2011) on Determination of Forbearance and Floor Price for REC framework to be applicable from 1st April, 2012.

http://www.cercind.gov.in/

sunday, june 12, 2011

DARKNESS

It has become a common sight that angry citizens take to the streets in protesting against the abysmal power situation. Some of the areas receive only an hour of electricity every day. Police has to control the law and order situation on account of people's agitation.

State governments blame Centre for not allocating enough electricity to their states. The Governments try to blame its predecessor. The people do not buy this excuse. Who is to blame for the abysmal power situation this summer?

Those in Government find it easiest to pass the buck. The states blame the Centre. The Centre blames the states. Power is on the Concurrent List of the Constitution. Both the Centre and

The Centre must take the rap for the shortage in generation of power. The peak power deficit-the gap between demand and supply in the summer of 2010-according to the Government's own calculations was 10.8 per cent. The responsibility for distributing available power inefficiently falls on the states. Losses in distribution average over 30 per cent across India.

At the Centre, the power, environment, coal and heavy industries ministries have in various ways acted as obstacles to the addition of capacity. In the states, populist governments and spineless electricity regulators have done little to reform ailing distribution networks. The situation is expected to get worse before it gets better.

The Central Electricity Authority (CEA), the main advisory body to the Union power minister, has set a target of 100,000 mw of additional power generation in the period of the 12th five-year plan between 2012 and 2017. That is what is needed to meet the power demand of an economy forecast to grow at 9 per cent per annum. The Planning Commission accepts this target but Environment Ministry does not which says that the target is "ecologically unsustainable".

Environment Ministry is worried about the impact this additional generation will have on climate change. Seventy per cent of this additional capacity is to be added through coal-based thermal power. Given the dismal record over the past 20 years, Environment Ministry need not worry about the Government m

Every major political formation has governed the country in that period none has much to be proud of in terms of performance in the power sector. The target for the 11th plan (2007-2012) has already been revised downwards from 78,700 mw to 62,374 mw. With a year and a half to go until the end of 2012, only around 50 per cent of that revised target has been achieved. Realistically speaking, the Government will do well to hit 60 per cent of its original target by the end of 2012.

The most serious bottleneck in generation is the shortage of coal. At the end of 2007, the gap between the demand and supply of coal was 35 million tonnes. It is expected to be around 83 million tonnes at the end of 2012. Says the mid-term appraisal document of the Planning Commission: "The shortage would have been even more had all the planned coal-based power plants been commissioned on time." By 2017, the shortage is forecast to be 200 million tonnes.

As per the government the shortage of domestic/imported coal affected thermal generation. Some of the blame for the shortage can be laid at the door of the environment minister whose controversial 'no-go' policy announced in 2009 imposed a ban on mining in heavily forested areas. It declared 35 per cent of forest area in nine major coal-mining zones as 'no-go' zones. That led to an immediate halt of mining activity in 203 blocks which had a potential capacity of over 600 million tonnes.

Coal Ministery argued that this ban could affect power generation to the tune of 1,30,000 mw. The matter is now before a Group of Ministers (GOM) on mining.

The fallout of the nuclear accident in Japan means that thermal power is back at the forefront. Hydro pow

Another serious bottleneck to generation is the shortage of equipment. According to a 2010 report prepared by consulting firm KPMG on the power sector, equipment shortages have been a significant reason for India missing its capacity addition targets for the 10th five-year plan. The shortage has been primarily in the core components of boilers, turbines and generators.

What may also deter private investors in the future is the inability of state electricity boards (SEB) to buy power at commercially viable rates. When India's largest thermal power generator, the Government-owned National Thermal Power Corporation (NTPC) recorded a mere 1 per cent growth in net profits in 2010-11, NTPC made the power stations available, but the SEBs did not draw power from those projects. This led to less generation of power and therefore less revenue. The drawdown in generation by NTPC led to a loss of 13 billion units (bu) of electricity in 2010-11. India's annual generation of power is estimated at around 800 billion units. NTPC's drawdown is 1.6 per cent of this total. If selling power to SEBs is a problem for NTPC, it is likely to be a problem for everyone else.

The combined losses of SEBs currently stands at Rs 70,000 crore. The 13th Finance Commission has forecast this figure rising to over Rs 1 lakh crore by 2014.

We cannot sustain the improvement in the quality of power supply unless tariffs are revised. Delhi's distribution companies lose Rs 1.79-1.93 per unit of power supplied to consumers. Planning Commission calculations of the financial performance of distribution companies in 20 major states (excluding Delhi and Orissa) shows that the average loss per unit supplied to the consumer was 90 paise in 2009-10. The loss per unit sold has hovered steadily between 80 paise and Re 1 between 2005 and 2010. Contrary to popular perception, Indian consumers on average pay much less for a unit of electricity than countries which are richer, both in terms of income and resources. In India, the average tariff charged is eight US cents per unit compared to 12-15 cents in Canada, South Africa and the US and 19-20 cents in much of Europe and the developing world.

India will have to start thinking like a developed country. It is imperative that tariffs are regularized.

A committee headed by former Comptroller and Auditor General V.K. Shunglu is working to recommend ways to reduce losses suffered by distribution companies. On top of the list of recommendations is reportedly the need to take action against inactive state electricity regulatory authorities which actually set the tariff.

The regulatory authorities have statutory independence but usually act under pressure from state governments. In Tamil Nadu, for example, tariffs have not been revised for seven years. In Delhi, they have not been revised for three years. That needs to change. Politicians, regulators and citizens need to recognize the need for viable tariffs.

The transmission network needs to be strengthened to encourage private investors is the principle of "open access" where they are not captive to any one SEB for sales. SEBs are also free to look outside their state to buy electricity.

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wednesday, may 25, 2011

ROLE OF ESCO IN ENERGY CONSERVAION

Seeing the huge scope of energy conservation the GoI with state governments is promoting investments through public-private partnerships in tapping renewable energy resources from mini hydro, solar, biomass, urban/industrial waste, cogeneration, etc. For this purpose the State Governments are notifying nodal agencies for carbon credits under the Clean Development Mechanism (CDM).

All project developers (private as well as Government) can have assistance of these designated agencies in terms of seeking carbon credits under CDM for both supply new and renewable sources of energy as well as demand (energy efficiency) side projects.

With a view to intensifying efforts towards Energy Conservation Action Plan to pursue a harmonious growth in energy efficiency different state government has nominated different organization to act as nodal agency the purpose of these is to implement energy efficiency programmes as per guide lines of BEE.

The major objectives of the Energy Conservation Action Plan are to:

· Raise the profile of energy conservation movement with the active participation of the stakeholders, in consonance with the national objectives of reducing the energy intensity of the economy.

· Identify and implement cost-effective energy efficiency programs through a sustainable mechanism;

· Encourage energy efficiency activities by drawing upon the prevailing best practices relevant to the state and keeping in mind the national programs and activities being launched by BEE. These include the concerns of state electricity regulator in the domain of energy end-use efficiencies and focused demand-side man agement (DSM) initiatives.

· Encourage a spurt towards professional activities with adequate emphasis on self regulation and market principles, and monitoring and evaluation of programs through quantitative metrics (performance indicators).

· Create consumer awareness vis-à-vis energy conservation and energy efficiency consumer information and provide training opportunities for key professionals such as energy managers and auditors, building designers, government officials, and facility managers.

· Protect and enhance the local, national and global environment.

Towards the implementation of the Energy Efficiency Program the different states are taking up Governmental Buildings to begin with. The governmental building sector offers substantial energy saving potential in both new and existing building constructions. One of the major drivers for energy efficiency will come from the Energy Conservation Building Code (ECBC) launched by BEE in May 2007. The Governments are announcing the mandatory following measures applicable to the governmental sector:-

· Issuing notifications regarding the mandatory use of solar water heating systems,

· Use of compact fluorescent lamps,

· Use of BIS marked pump sets in government and private buildings, including industries and

· Use of solar water heating systems made mandatory in buildings having an area of more than 500 sq yard.

Towards the beginning the state governments are going ahead with replacement of incandescent bulbs with compact fluorescent lights (CFLs) in all government buildings and offices, including government guest houses, offices of board, corporations, cooperative organizations and municipalities. Further the SDAs are adopting strategies related to existing buildings in addition to ECBC to tap the energy saving potential in new construction/ existing buildings

SDAs play an important role in developing better guidance on conducting building energy audits and developing commercial building energy use benchmarks (kWh/sq. m.) that would help in screening potential retrofit projects and help organizations set performance targets against peer benchmarks.

There is a vast scope to improve energy efficiency in office buildings, hospitals, schools and universities. Several studies have shown that avenues to curtail energy use to the extent of 30-50% in end uses such as lighting, cooling, ventilation, refrigeration, etc. The potential is largely untapped partly because of lack of an effective delivery mechanism. Performance contracting through ESCOs is an innovative process.

An energy service company (acronym: ESCO or ESCo) is a commercial business providing a broad range of comprehensive energy solutions including designs and implementation of energy savings projects, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.

The ESCO performs an in-depth analysis of the property, designs an energy efficient solution, installs the required elements, and maintains the system to ensure energy savings during the payback period. The savings in energy costs is often used to pay back the capital investment of the project over a five- to twenty-year period, or reinvested into the building to allow for capital upgrades that may otherwise be unfeasible. If the project does not provide returns on the investment, the ESCO is often responsible to pay the difference.

There is a draw back in this concept particularly to energy sector in India as in most of the cases the base line data of energy consumption is not available, for example if the ESCO is appointed say for replacement of all agriculture pumps with energy efficient pump sets (EEPS), investment is to be made by ESCO, it has to replace all inefficient pumps and then also it has to take care of their replacement within specified payback period, the saving thus achieved is to be distributed between ESCO and the employing agency. But here comes the main problem who will tell the saving? How the saving can be calculated as the base line data is not available. Most of the supply in agriculture sector is un-metered at consumer end even the sub station meters of secondary substation are not having proper metering. Even if the meter is working properly then there is no maintenance of records. Further most of the feeders has a mixed load so there is no method to calculate the net saving in energy after energy efficient device is installed by the ESCO. Same is the case with street lights where lies a huge potential by replacing sodium vapor lamps with LED, here again no base line data is not available for the purpose of evaluation.

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monday, april 18, 2011

Energy Efficiency In SME Sector

As per the energy policy of GoI power to be made available to all by 2012. One of the strategies to improve power scenario includes promotion of energy efficiency and its conservation in the country, this is found to be the most cost effective option to augment the gap between demand and supply. Nearly 25,000 MW of capacity creation through energy efficiency in the electricity sector alone has been estimated in India.

National Productivity Council (NPC), an autonomous organization under the Ministry of Commerce, Government of India, was asked by BEE to undertake the study of energy saving potential in all 35 states / UTs. The study focused only on estimation of the total electricity consumption and saving potential in different sectors of each state / UT. The potential for savings is about 15% of the electricity consumption. The sector wise aggregated potential at the national level is as under:

S.No.	Sector	Consumption (Billion KWh)	Saving Potential (Billion KWh)
1.	Agriculture Pumping	92.33	27.79
2.	Commercial Buildings/ Establishments with connected load > 500 KW	9.92	1.98
3.	Municipalities	12.45	2.88
4.	Domestic	120.92	24.16
5.	Industry (Including SMEs)	265.38	18.57
	Total	501.00	75.36

The BEE study pertaining to SME revealed the overall saving potential of the clusters is about 72,432 TOE (Tonnes of oil equivalents) which is 27.4 per cent of the total energy consumption in SMEs.

Though, large numbers of SMEs, located in clusters in various states of the countries, have large potential for energy savings, there is not much authentic information and data available with respect to their energy consumption and energy saving opportunities.

Energy Efficiency in the SME sector assumes importance because of the prevailing high costs of energy and supply related concerns.

Bureau of Energy Efficiency (BEE) is implementing a program (BEE's SME Program) to improve the energy performance in selected SME clusters.

The project will conduct situation assessment of 35 (maximum) clusters in the country to assess the situation vis-à-vis the number of operating units, energy usage, potential for saving energy and probable impact of intervention. This will lead to identification of clusters for intervention. A Technology and Energy Use Analysis in identified clusters will be carried out that will identify in detail the prevalent technologies in the sector, audits them for energy use on a sample basis and identify opportunities for energy saving through either changes in technology or through best practices. This study will also identify possible sources of technology and/or expertise in different clusters as the case may be.

Because of the similar characteristics like geographical location, markets, products manufactured, technology, development issues and common pool of resources, cluster based approach has been undertaken while working with SMEs. Generally this has been found to be resource efficient and effective.

The project will pool available resources as those from WB and UNDP which have already shown interest in partnerships with BEE for undertaking work on EE with the MSME sector in India. Thus the project will limit drawing of GoI to such levels as may be required after financing from WB UNDP-GEF has been made available

Ministry of Micro, Small and Medium Enterprises (MoMSME) has agreed in principal to capitalise on the DPRs prepared under the BEE's SME program. MoMSME proposes to provide financial support for implementation of the technologies identified in these DPRs.

Small Industries Development Bank of India (SIDBI) will also act on similar lines and will provide subsidized finance for implementation of energy efficiency technologies as identified in the DPRs. A MoU in this regard has already been signed.

BEE is also the Implementing Agency for GEF (Global Environment Facility) 'Programmatic Framework for Energy Efficiency in India in which World Bank & UNIDO are the GEF agencies working on Energy Efficiency in SME clusters. World Bank would work in 5 clusters & UNIDO in 12 clusters.

Bureau of Energy efficiency has taken a nationwide energy efficiency program covering 25 SME clusters. Which include Cold Storage, Carpet, Pottery, Brass, Foundry and Glass Clusters.

Stake Holders for implementing EE in SME are-

Government.
Development Agencies.
Energy Consultants.
ESCOs.
Manufacturing Companies
Lenders.

Role of the Government is to encourage the SME to adapt EE measures, educate them, give them incentives for taking up energy efficiency, encourage them to identify EE projects The role of ESCO is also very important as it has to adopt modern technology for implementation of the EE project it has to educate the SME by telling him the benefits of the EE project. ESCO has to prepare the DPR with simple calculation for the payback and debt serving feasibility. The DPR should be easily understood by SME and the lender. The most important stake holder is the SME, as he is the ultimate beneficiary. Therefore he must have the orientation to implement the EE program and motivation and inclination towards EE program, he must understand the project. It is therefore important to-

motivate the SME.
motivate other stakeholders.

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7:12 am

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Enron scandal

From Wikipedia, the free encyclopedia

Enron Corporation

Type	Defunct / Asset-less Shell Formerly public
Industry	Formerly energy
Founded	Omaha, Nebraska, 1985
Headquarters	Houston, Texas, United States
Key people	Kenneth Lay, Founder, former Chairman and CEO Jeffrey Skilling, former President, CEO and COO Andrew Fastow, former CFO Rebecca Mark-Jusbasche, former Vice Chairman, Chairman and CEO of Enron International Stephen F. Cooper, Interim CEO and CRO John J. Ray, III, Chairman
Revenue	$101 billion (in 2000)
Website	http://www.enron.com/

The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution ofArthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron was attributed as the biggest audit failure.^[1]

Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth. Several years later, when Jeffrey Skilling was hired, he developed a staff of executives that, through the use of accounting loopholes, special purpose entities, and poor financial reporting, were able to hide billions in debt from failed deals and projects. Chief Financial Officer Andrew Fastow and other executives not only misled Enron's board of directors and audit committee on high-risk accounting practices, but also pressured Andersen to ignore the issues.

Shareholders lost nearly $11 billion when Enron's stock price, which hit a high of US$90 per share in mid-2000, plummeted to less than $1 by the end of November 2001. The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a fire sale price. The deal fell through, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom's bankruptcy the following year.^[2]

Many executives at Enron were indicted for a variety of charges and were later sentenced to prison. Enron's auditor, Arthur Andersen, was found guilty in a United States District Court, but by the time the ruling was overturned at the U.S. Supreme Court, the firm had lost the majority of its customers and had shut down. Employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices. As a consequence of the scandal, new regulations and legislation were enacted to expand the accuracy of financial reporting for public companies.^[3] One piece of legislation, the Sarbanes-Oxley Act, expanded repercussions for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders.^[4] The act also increased the accountability of auditing firms to remain unbiased and independent of their clients.^[3]

[edit]Rise of Enron

Kenneth Lay in a July 2004 mugshot

In 1985, Kenneth Lay merged the natural gas pipeline companies of Houston Natural Gas andInterNorth to form Enron.^[5] In the early 1990s, he helped to initiate the selling of electricity at market prices and, soon after, the United States Congress passed legislation deregulating the sale of natural gas. The resulting markets made it possible for traders such as Enron to sell energy at higher prices, thereby significantly increasing their revenue.^[6] After producers and local governments decried the resultant price volatility and pushed for increased regulation, strong lobbying on the part of Enron and others, was able to keep the free market system in place.^[6]^[7]

As Enron rose to become the largest seller of natural gas in North America by 1992, its gas contracts trading earned earnings before interest and taxes of $122 million, the second largest contributor to the company's net income. The November 1999 creation of the EnronOnline trading website allowed the company to better manage its contracts trading business.^[8]

In an attempt to achieve further growth, Enron pursued a diversification strategy. The company owned and operated a variety of assets including gas pipelines, electricity plants, pulp and paper plants, water plants, and broadband services across the globe. The corporation also gained additional revenue by trading contracts for the same array of products and services it was involved in.^[9]

As a result, Enron's stock rose from the start of the 1990s until year-end 1998 by 311% percent, a significant increase over the rate of growth in the Standard & Poor 500 index. The stock increased by 56% in 1999 and a further 87% in 2000, compared to a 20% increase and a 10% decline for the index during the same years. By December 31, 2000, Enron's stock was priced at $83.13 and its market capitalization exceeded $60 billion, 70 times earnings and six times book value, an indication of the stock market's high expectations about its future prospects. In addition, Enron was rated the most innovative large company in America in Fortune's Most Admired Companies survey.^[10]

[edit]Causes of downfall

Enron's nontransparent financial statements did not clearly depict its operations and finances with shareholders and analysts.^[11]^[12] In addition, its complex business model and unethical practices required that the company use accounting limitations to misrepresent earnings and modify the balance sheet to portray a favorable depiction of its performance.^[13] According to McLean and Elkid in their book The Smartest Guys in the Room, "The Enron scandal grew out of a steady accumulation of habits and values and actions that began years before and finally spiraled out of control."^[14] In an article by James Bodurtha, Jr., he argues that from 1997 until its demise, "the primary motivations for Enron's accounting and financial transactions seem to have been to keep reported income and reported cash flow up, asset valuesinflated, and liabilities off the books."^[15]

The combination of these issues later led to the bankruptcy of the company, and the majority of them were perpetuated by the indirect knowledge or direct actions of Lay, Jeffrey Skilling, Andrew Fastow, and other executives. Lay served as the chairman of the company in its last few years, and approved of the actions of Skilling and Fastow although he did not always inquire about the details. Skilling, constantly focused on meeting Wall Street expectations, pushed for the use of mark-to-market accounting and pressured Enron executives to find new ways to hide its debt. Fastow and other executives "...created off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people can understand them even now."^[14]

[edit]Revenue recognition

Main article: Revenue recognition

Enron and other energy suppliers earned profits by providing services such as wholesale trading and risk management in addition to building and maintaining electric power plants, natural gas pipelines, storage, and processing facilities.^[16] When taking on the risk of buying and selling products, merchants are allowed to report the selling price as revenues and the products' costs as cost of goods sold. In contrast, an "agent" provides a service to the customer, but does not take on the same risks as merchants for buying and selling. Service providers, when classified as agents, are able to report trading and brokerage fees as revenue, although not for the full value of the transaction.^[17]

How Fastow's Partnerships Worked (based on Enron 10-K)

Although trading firms such as Goldman Sachs and Merrill Lynch used the conventional "agent model" for reporting revenue (where only the trading or brokerage fee would be reported as revenue), Enron instead elected to report the entire value of each of its trades as revenue. This "merchant model" approach was considered much more aggressive in the accounting interpretation than the agent model.^[17] Enron's method of reporting inflated trading revenue was later adopted by other companies in the energy trading industry in an attempt to stay competitive with the company's large increase in revenue. Other energy companies such as Duke Energy, Reliant Energy, and Dynegy joined Enron in the top 50 of the Fortune 500 mainly due to their adoption of the same trading revenue accounting approach as Enron.^[18]

Between 1996 to 2000, Enron's revenues increased by more than 750%, rising from $13.3 billion in 1996 to $100.8 billion in 2000. This extensive expansion of 65% per year was unprecedented in any industry, including the energy industry which typically considered growth of 2–3% per year to be respectable. For just the first nine months of 2001, Enron reported $138.7 billion in revenues, which placed the company at the sixth position on the Fortune Global 500.^[19]

[edit]Mark-to-market accounting

Main article: Mark-to-market accounting

In Enron's natural gas business, the accounting had been fairly straightforward: in each time period, the company listed actual costs of supplying the gas and actual revenues received from selling it. However, when Skilling joined the company, he demanded that the trading business adopt mark-to-market accounting, citing that it would reflect "... true economic value."^[20] Enron became the first non-financial company to use the method to account for its complex long-term contracts.^[21] Mark-to-market accounting requires that once a long-term contract was signed, income was estimated as the present value of net future cash flows. Often, the viability of these contracts and their related costs were difficult to judge.^[22] Due to the large discrepancies of attempting to match profits and cash, investors were typically given false or misleading reports. While using the method, income from projects could be recorded, which increased financial earnings. However, in future years, the profits could not be included, so new and additional income had to be included from more projects to develop additional growth to appease investors.^[20] As one Enron competitor pointed out, "If you accelerate your income, then you have to keep doing more and more deals to show the same or rising income."^[21] Despite potential pitfalls, the U.S. Securities and Exchange Commission (SEC) approved the accounting method for Enron in its trading of natural gas futures contracts on January 30, 1992.^[20] However, Enron later expanded its use to other areas in the company to help it meet Wall Street projections.^[23]

For one contract, in July 2000, Enron and Blockbuster Video signed a 20-year agreement to introduce on-demand entertainment to various U.S. cities by year-end. After several pilot projects, Enron recognized estimated profits of more than $110 million from the deal, even though analysts questioned the technical viability and market demand of the service.^[22] When the network failed to work, Blockbuster pulled out of the contract. Enron continued to recognize future profits, even though the deal resulted in a loss.^[24]

[edit]Special purpose entities

Main article: Special purpose entity

Enron used special purpose entities—limited partnerships or companies created to fulfill a temporary or specific purpose—to fund or manage risks associated with specific assets. The company elected to disclose minimal details on its use of special purpose entities.^[25] These shell firms were created by a sponsor, but funded by independent equity investors and debt financing. For financial reporting purposes, a series of rules dictates whether a special purpose entity is a separate entity from the sponsor. In total, by 2001, Enron had used hundreds of special purpose entities to hide its debt.^[22]

The special purpose entities were used for more than just circumventing accounting conventions. As a result of one violation, Enron's balance sheet understated its liabilities and overstated its equity, and its earnings were overstated.^[25] Enron disclosed to its shareholders that it hadhedged downside risk in its own illiquid investments using special purpose entities. However, the investors were oblivious to the fact that the special purpose entities were actually using the company's own stock and financial guarantees to finance these hedges. This setup prevented Enron from being protected from the downside risk.^[25] Notable examples of special purpose entities that Enron employed were JEDI, Chewco, Whitewing, and LJM.

[edit]JEDI and Chewco

Main article: Chewco

In 1993, Enron set up a joint venture in energy investments with CalPERS, the California state pension fund, called the Joint Energy Development Investments (JEDI).^[26] In 1997, Skilling, serving as Chief Operating Officer (COO), asked CalPERS to join Enron in a separate investment. CalPERS was interested in the idea, but only if they could be removed as a partner in JEDI.^[27] However, Enron did not want to show any debt from taking over CalPERS' stake in JEDI on its balance sheet. Chief Financial Officer (CFO) Fastow developed the special purpose entity Chewco Investments L.P. which raised debt guaranteed by Enron and was used to acquire CalPER's joint venture stake for $383 million.^[25] Because of Fastow's organization of Chewco, JEDI's losses were kept off of Enron's balance sheet.

In fall 2001, CalPERS and Enron's arrangement was discovered, which required the discontinuation of Enron's prior accounting approach for Chewco and JEDI. This disqualification revealed that Enron's reported earnings from 1997 to mid-2001 would need to be reduced by $405 million and that the company's indebtedness would rise by $628 million.^[28]

[edit]Whitewing

The White-winged Dove is native to Texas, and was also the name of a special purpose entity used as financing vehicle by Enron.^[29] In December 1997, with funding of $579 million provided by Enron and $500 million by an outside investor, Whitewing Associates L.P. was formed. Two years later, the entity's arrangement was changed so that it would no longer be consolidated with Enron and be counted on the company's balance sheet. Whitewing was used to purchase Enron assets, including stakes in power plants, pipelines, stocks, and other investments.^[30] Between 1999 and 2001, Whitewing bought assets from Enron worth $2 billion, using Enron stock as collateral. Although the transactions were approved by the Enron board, the assets transfers were not true sales and should have been treated instead as loans.^[31]

[edit]LJM and Raptors

Main article: LJM (Lea Jeffrey Michael)

In 1999, Fastow formulated two limited partnerships: LJM Cayman. L.P. (LJM1) and LJM2 Co-Investment L.P. (LJM2), for the purpose of buying Enron's poorly performing stocks and stakes to improve its financial statements. LJM 1 and 2 were created solely to serve as the outside equity investor needed for the special purpose entities that were being used by Enron.^[28] Fastow had to go before the board of directors to receive an exemption from Enron's code of ethics (as he held the title of CFO) in order to run the companies.^[32] The two partnerships were funded with around $390 million provided by Wachovia, J.P. Morgan Chase, Credit Suisse First Boston, Citigroup, and other investors. Merrill Lynch, which marketed the equity, also contributed $22 million to support the entities.^[28]

Enron transferred to "Raptor I-IV", four LJM-related special purpose entities named after the velociraptors in Jurassic Park, more than "$1.2 billion in assets, including millions of shares of Enron common stock and long term rights to purchase millions more shares, plus $150 million of Enron notes payable" as disclosed in the company's financial statement footnotes.^[33]^[34]^[35] The special purpose entities had been used to pay for all of this using the entities' debt instruments. The footnotes also declared that the instruments' face amount totaled $1.5 billion, and the entities notional amount of $2.1 billion had been used to enter into derivative contracts with Enron.^[34]

Enron capitalized the Raptors, and, in a manner similar to the accounting that's employed when a company issues stock at a public offering, then booked the notes payable issued as assets on its balance sheet while increasing the shareholders' equity for the same amount.^[36] This treatment later became an issue for Enron and its auditor Arthur Andersen as removing it from the balance sheet resulted in a $1.2 billion decrease in net shareholder equity.^[37]

Eventually the derivative contracts worth $2.1 billion lost significant value. Swaps were established at the point the stock price hit its high points. Over a year the value of the portfolio under the swaps fell by $1.1 billion as the stock prices dropped (the loss in value meant that the special purpose entities technically now owed Enron $1.1 billion under the contracts). Enron, which used a "fair value" accounting method, claimed a $500 million gain on the swap contracts in its 2000 annual report. The gain was responsible for offsetting its stock portfolio losses and was attributed to nearly a third of Enron's earnings for 2000 (before it was properly restated in 2001).^[38]

[edit]Corporate governance

Main article: Corporate governance

Healy and Palepu write that a well-functioning capital market "creates appropriate linkages of information, incentives, and governance between managers and investors. This process is supposed to be carried out through a network of intermediaries that include assurance professionals such as external auditors; and internal governance agents such as corporate boards."^[10] On paper, Enron had a model board of directors comprising predominantly outsiders with significant ownership stakes and a talented audit committee. In its 2000 review of best corporate boards, Chief Executive included Enron among its top five boards.^[39] Even with its complex corporate governance and network of intermediaries, Enron was still able to "attract large sums of capital to fund a questionable business model, conceal its true performance through a series of accounting and financing maneuvers, and hype its stock to unsustainable levels."^[40]

[edit]Executive compensation

Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the setup of the system contributed to a dysfunctional corporate culture that became obsessed with a focus only on short-term earnings to maximize bonuses. Employees constantly looked to start high-volume deals, often disregarding the quality of cash flow or profits, in order to get a higher rating for their performance review. In addition, accounting results were recorded as soon as possible to keep up with the company's stock price. This practice helped ensure deal-makers and executives received large cash bonuses and stock options.^[41]

The company was constantly focusing on its stock price. Management was extensively compensated using stock options, similar to other U.S. companies. This setup of stock option awards caused management to create expectations of rapid growth in efforts to give the appearance of reported earnings to meet Wall Street's expectations. The stock ticker was located in lobbies, elevators, and on company computers.^[42] At budget meetings, Skilling would develop target earnings by asking "What earnings do you need to keep our stock price up?" and that number would be used, even if it was not feasible.^[23] At December 31, 2000, Enron had 96 million shares outstanding understock option plans (approximately 13% of common shares outstanding). Enron's proxy statement stated that, within three years, these awards were expected to be exercised.^[43] Using Enron's January 2001 stock price of $83.13 and the directors' beneficial ownership reported in the 2001 proxy, the value of director stock ownership was $659 million for Lay, and $174 million for Skilling.^[39]

Skilling believed that if employees were constantly cost-centered, it would hinder original thinking.^[44] As a result, extravagant spending was rampant throughout the company, especially among the executives. Employees had large expense accounts and many executives were paid sometimes twice as much as competitors.^[45] In 1998, the top 200 highest-paid employees received $193 million from salaries, bonuses, and stock. Two years later, the figure jumped to $1.4 billion.^[46]

[edit]Risk management

Main article: Risk management

Before its fall, Enron was lauded for its sophisticated financial risk management tools.^[47] Risk management was crucial to Enron not only because of its regulatory environment, but also because of its business plan. Enron established long-term fixed commitments which needed to be hedged to prepare for the inevitable fluctuation of future energy prices.^[48] Enron's bankruptcy downfall was attributed to its reckless use of derivatives and special purpose entities. By hedging its risks with special purpose entities which it owned, Enron retained the risks associated with the transactions. This setup had Enron implementing hedges with itself.^[49]

Enron's aggressive accounting practices were not hidden from the board of directors, as later learned by a Senate subcommittee. The board was informed on the rationale for using the Whitewing, LJM, and Raptor transactions, and after approving them, received status updates on the entities' operations. Although not all of Enron's widespread improper accounting practices were revealed to the board, the practices were dependent on board decisions.^[50] Even though Enron extensively relied on derivatives for its business, the company's Finance Committee and board did not have comprehensive backgrounds in derivatives to grasp what they were being told. The Senate subcommittee argued that had there been a detailed understanding of how the derivatives were organized, the board would have prevented their use.^[51]

[edit]Financial audit

Main article: Financial audit

Enron's auditor firm, Arthur Andersen, was accused of applying reckless standards in their audits because of a conflict of interest over the significant consulting fees generated by Enron. In 2000, Arthur Andersen earned $25 million in audit fees and $27 million in consulting fees (this amount accounted for roughly 27% of the audit fees of public clients for Arthur Andersen's Houston office). The auditors' methods were questioned as either being completed solely to receive its annual fees or for their lack of expertise in properly reviewing Enron's revenue recognition, special entities, derivatives, and other accounting practices.^[52]

Enron hired numerous Certified Public Accountants (CPA) as well as accountants who had worked on developing accounting rules with theFinancial Accounting Standards Board (FASB). The accountants looked for new ways to save the company money, including capitalizing on loopholes found in Generally Accepted Accounting Principles (GAAP), the accounting industry's standards. One Enron accountant revealed "We tried to aggressively use the literature [GAAP] to our advantage. All the rules create all these opportunities. We got to where we did because we exploited that weakness."^[53]

Andersen's auditors were pressured by Enron's management to defer recognizing the charges from the special purpose entities as their credit risks became clear. Since the entities would never return a profit, accounting guidelines required that Enron should take a write-off, where the value of the entity was removed from the balance sheet at a loss. To pressure Andersen into meeting Enron's earnings expectations, Enron would occasionally allow accounting firms Ernst & Young or PricewaterhouseCoopers to complete accounting tasks to create the illusion of hiring a new firm to replace Andersen.^[54] Although Andersen was equipped with internal controls to protect against conflicted incentives of local partners, they failed to prevent conflict of interest. In one case, Andersen's Houston office, which performed the Enron audit, was able to overrule any critical reviews of Enron's accounting decisions by Andersen's Chicago partner. In addition, when news of SEC investigations of Enron were made public, Andersen attempted to cover up any negligence in its audit by shredding several tons of supporting documents and deleting nearly 30,000 e-mails and computer files.^[52]^[55]^[56]

Revelations concerning Andersen's overall performance led to the break-up of the firm, and to the following assessment by the Powers Committee (appointed by Enron's board to look into the firm's accounting in October 2001): "The evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron's financial statements, or its obligation to bring to the attention of Enron's Board (or the Audit and Compliance Committee) concerns about Enron's internal contracts over the related-party transactions".^[57]

[edit]Audit committee

Main article: Audit committee

Corporate audit committees usually meet for just a few times during the year, and their members typically have only a modest background in accounting and finance. Enron's audit committee had more expertise than many. It included:^[58]

Robert Jaedicke of Stanford University, a widely respected accounting professor and former dean of Stanford Business School;
John Mendelsohn, President of the University of Texas M.D. Anderson Cancer Center
Paulo Pereira, former president and CEO of the State Bank of Rio de Janeiro in Brazil
John Wakeham, former United Kingdom Secretary for Energy
Ronnie Chan, a Hong Kong businessman
Wendy Gramm, former Chair of U.S. Commodity Futures Trading Commission

Enron's audit committee was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to properly question the auditors on accounting questions related to the company's special purpose entities. The committee was also unable to question the company's management due to pressures placed on the committee.^[59] The Permanent Subcommittee on Investigations of the Committee on Governmental Affairs' report accused the board members of allowing conflicts of interest to impede their duties as monitoring the company's accounting practices. When Enron fell, the audit committee's conflicts of interest were regarded with suspicion.^[60]

[edit]Other accounting issues

Enron made a habit of booking costs of cancelled projects as assets, with the rationale that no official letter had stated that the project was cancelled. This method was known as "the snowball", and although it was initially dictated that snowballs stay under $90 million, it was later extended to $200 million.^[61]

In 1998, when analysts were given a tour of the Enron Energy Services office, they were impressed with how the employees were working so vigorously. In reality, Skilling had moved other employees to the office from other departments (instructing them to pretend to work hard) to create the appearance that the division was bigger than it was.^[62] This ruse was used several times to fool analysts about the progress of different areas of Enron to help improve the stock price.

[edit]Timeline of downfall

Main article: Timeline of the Enron scandal

"At the beginning of 2001, the Enron Corporation, the world's dominant energy trader, appeared unstoppable. The company's decade-long effort to persuade lawmakers to deregulate electricity markets had succeeded from California to New York. Its ties to the Bush administration assured that its views would be heard in Washington. Its sales, profits and stock were soaring."

A. Berenson and R. A. Oppel, Jr. The New York Times, Oct 28, 2001.^[63]

In February 2001, Chief Accounting Officer Rick Causey told budget managers: "From an accounting standpoint, this will be our easiest year ever. We've got 2001 in the bag."^[64] On March 5, Bethany McLean's Fortune article Is Enron Overpriced?questioned how Enron could maintain its high stock value, which was trading at 55 times its earnings.^[65] She pointed out how analysts and investors did not know exactly how Enron was earning its income. McLean was first drawn to the company's situation after an analyst suggested she view the company's 10-K report, where she found "strange transactions", "erratic cash flow", and "huge debt."^[66] She called Skilling to discuss her findings prior to publishing the article, but he brushed her off, calling her "unethical" for not properly researching the company.^[67] Fastow cited toFortune reporters that Enron could not reveal earnings details as the company had over 1,200 trading books for assorted commodities and did "... not want anyone to know what's on those books. We don't want to tell anyone where we're making money."^[65]

In a conference call on April 17, 2001, now-Chief Executive Officer (CEO) Skilling verbally attacked Wall Street analyst Richard Grubman,^[68]who questioned Enron's unusual accounting practice during a recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied "Well, thank you very much, we appreciate that ... asshole."^[69] This became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's lack of tact, with slogans such as "Ask Why, Asshole".^[70] However, Skilling's comment was met with dismay and astonishment by press and public, as he had previously brushed off criticism of Enron coolly or humorously, and many believe that this lack of restraint symbolized a downward spiral that would unravel the company's deceptive practices.

By the late 1990s Enron's stock was trading for $80–90 per share, and few seemed to concern themselves with the opacity of the company's financial disclosures. In mid-July 2001, Enron reported revenues of $50.1 billion, almost triple year-to-date, and beating analysts' estimates by 3 cents a share.^[71] Despite this, Enron's profit margin had stayed at a modest average of about 2.1%, and its share price had dropped by over 30% since the same quarter of 2000.^[71]

As time passed, a number of serious concerns confronted the company. Enron had recently faced several serious operational challenges, namely logistical difficulties in running a new broadband communications trading unit, and the losses from constructing the Dabhol Power project, a large power plant in India. There was also mounting criticism of the company for the role that its subsidiary Enron Energy Serviceshad played in the power crisis of California in 2000–2001.

"There are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues. I think I can honestly say that the company is probably in the strongest and best shape that it has probably ever been in."

Kenneth Lay answering an analyst's question on August 14, 2001.^[72]

On August 14, Skilling announced he was resigning his position as CEO after only six months. Skilling had long served as president and COO before being promoted to CEO. Skilling cited personal reasons for leaving the company.^[73] Observers noted that in the months leading up to his exit, Skilling had sold at minimum 450,000 shares of Enron at a value of around $33 million (though he still owned over a million shares at the date of his departure).^[73] Nevertheless, Lay, who was serving as chairman at Enron, assured stunned market watchers that there would be "no change in the performance or outlook of the company going forward" from Skilling's departure.^[73] Lay announced he himself would re-assume the position of chief executive officer.

The next day, however, Skilling admitted that a very significant reason for his departure was Enron's faltering price in the stock market.^[74]The columnist Paul Krugman, writing in The New York Times, asserted that Enron was an illustration of the consequences that occur from the deregulation and commodification of things such as energy.^[74] A few days later, in a letter to the editor, Kenneth Lay defended Enron and the philosophy behind the company:^[75]

The broader goal of [Krugman's] latest attack on Enron appears to be to discredit the free-market system, a system that entrusts people to make choices and enjoy the fruits of their labor, skill, intellect and heart. He would apparently rely on a system of monopolies controlled or sponsored by government to make choices for people. We disagree, finding ourselves less trusting of the integrity and good faith of such institutions and their leaders.
The example Mr. Krugman cites of "financialization" run amok (the electricity market in California) is the product of exactly his kind of system, with active government intervention at every step. Indeed, the only winners in the California fiasco were the government-owned utilities of Los Angeles, the Pacific Northwest and British Columbia. The disaster that squandered the wealth of California was born of regulation by the few, not by markets of the many.

On August 15, Sherron Watkins, vice president for corporate development, sent an anonymous letter to Lay warning him about the company's accounting practices. One statement in the letter said "I am incredibly nervous that we will implode in a wave of accounting scandals."^[76] Watkins contacted a friend who worked for Arthur Andersen and he drafted a memo to give to the audit partners over the points she raised. On August 22, Watkins individually met with Lay and gave him a six-page letter further explaining Enron's accounting issues. Lay questioned her as to whether she had told anyone outside of the company and then vowed to have the company's law firm, Vinson & Elkins, review the issues, although she argued that using the firm would present a conflict of interest.^[77]^[78] Lay consulted with other executives, and although they wanted to fire Watkins (as Texas law did not protect company whistleblowers), they decided against it to prevent a lawsuit.^[79]On October 15, Vinson & Elkins announced that Enron had done nothing wrong in its accounting practices as Andersen had approved each issue.^[80]

[edit]Investors' confidence declines

Something is rotten with the state of Enron.

—The New York Times, Sept 9, 2001.^[81]

By the end of August 2001, his company's stock still falling, Lay named Greg Whalley, president and COO of Enron Wholesale Services and Mark Frevert, to positions in the chairman's office. Some observers suggested that Enron's investors were in significant need of reassurance, not only because the company's business was difficult to understand (even "indecipherable")^[81] but also because it was difficult to properly describe the company in financial statements.^[82] One analyst stated "it's really hard for analysts to determine where [Enron] are making money in a given quarter and where they are losing money."^[82] Lay accepted that Enron's business was very complex, but asserted that analysts would "never get all the information they want" to satisfy their curiosity. He also explained that the complexity of the business was due largely to tax strategies and position-hedging.^[82]Lay's efforts seemed to meet with limited success; by September 9, one prominent hedge fund manager noted that "[Enron] stock is trading under a cloud."^[81] The sudden departure of Skilling combined with the opacity of Enron's accounting books made proper assessment difficult for Wall Street. In addition, the company admitted to repeatedly using "related-party transactions," which some feared could be too-easily used to transfer losses that might otherwise appear on Enron's own balance sheet. A particularly troubling aspect of this technique was that several of the "related-party" entities had been or were being controlled by CFO Fastow.^[81]

After the September 11, 2001 attacks, media attention shifted away from the company and its troubles; a little less than a month later Enron announced its intention to begin the process of shearing its lower-margin assets in favor of its core businesses of gas and electricity trading. This move included selling Portland General Electric to another Oregon utility, Northwest Natural Gas, for about $1.9 billion in cash and stock, and possibly selling its 65% stake in the Dabhol project in India.^[83]

[edit]Restructuring losses and SEC investigation

Enron announced on October 16 that restatements to its financial statements for years 1997 to 2000 were necessary to correct accounting violations. The restatements for the period reduced earnings by $613 million (or 23% of reported profits during the period), increased liabilities at the end of 2000 by $628 million (6% of reported liabilities and 5.5% of reported equity), and reduced equity at the end of 2000 by $1.2 billion (10% of reported equity).^[25] Additionally, Enron asserted that the broadband unit alone was worth $35 billion, a claim also mistrusted. An analyst at Standard & Poor's said "I don't think anyone knows what the broadband operation is worth."^[84]

Enron's management team claimed the losses were mostly due to investment losses, along with charges such as about $180 million in money spent restructuring the company's troubled broadband trading unit. In a statement, Lay revealed, "After a thorough review of our businesses, we have decided to take these charges to clear away issues that have clouded the performance and earnings potential of our core energy businesses."^[84] Some analysts were unnerved. David Fleischer at Goldman Sachs, an analyst called previously 'one of the company's strongest supporters' asserted that the Enron management "... lost credibility and have to reprove themselves. They need to convince investors these earnings are real, that the company is for real and that growth will be realized."^[84]^[85]

Fastow disclosed to Enron's board of directors on October 22 that he earned $30 million from compensation arrangements when managing the LJM limited partnerships. That day, the share price of Enron fell to $20.65, down $5.40 in one day, following the announcement by the SEC that it was investigating several suspicious deals struck by Enron, characterizing them as "some of the most opaque transactions with insiders ever seen".^[86] Attempting to explain the billion-dollar charge and calm investors, Enron's disclosures spoke of "share settled costless collar arrangements," "derivative instruments which eliminated the contingent nature of existing restricted forward contracts," and strategies that served "to hedge certain merchant investments and other assets." Such puzzling phraseology left many analysts feeling ignorant about just how Enron ran its business.^[86] Regarding the SEC investigation, chairman and CEO Lay said, "We will cooperate fully with the S.E.C. and look forward to the opportunity to put any concern about these transactions to rest."^[86]

[edit]Liquidity concerns

Concerns about Enron's liquidity prompted Lay to participate in a conference call on October 23, in which he attempted to reassure investors that the company's cash resources were ample and no further "one-time charges" loomed. Secondly, Lay adamantly insisted there were no improprieties regarding Enron's transactions with partnerships run by Fastow and emphasized his support for the CFO.^[85] David Fleischer, the analyst at Goldman, was again skeptical, telling Lay and Fastow, "There is an appearance that you are hiding something." Nevertheless, Fleischer persisted in recommending the stock, arguing that he didn't "think accountants and auditors would have allowed total shenanigans."^[85] Lay also attempted to reassure the conferees by stressing that all of Enron's financial and accounting maneuvers had been scrutinized by their auditor, Arthur Andersen. After several questioners pressed the issue, Lay stated Enron management would "look into providing" more detailed statements for the end of better understanding the company's relationship with the special entities as those run by Fastow.^[85]

Two days later, on October 25, despite his reassurances days earlier, Lay removed Fastow from his position, citing "In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy as CFO."^[87] However, with Skilling and Fastow now both departed, some analysts feared that shedding light on the company's practices would be made all the more difficult.^[87] Enron's stock was now trading at $16.41, having lost half its value in a little over a week.^[87]

On October 27 the company began buying back all its commercial paper, valued at around $3.3 billion, in an effort to calm investor fears about Enron's supply of cash. Enron financed the re-purchase by depleting its lines of credit at several banks. While the company's debt rating was still considered investment-grade, its bonds were trading at levels slightly below, making future sales problematic.^[88]

As the month came to a close, serious concerns were being raised by some observers regarding Enron's possible manipulation of accepted accounting rules; however, analysis was claimed to be impossible based on the incomplete information provided by Enron.^[89] Industry analysts openly feared that Enron was the new Long-Term Capital Management, the hedge fund whose collapse in 1998 threatened systemic failure in the international financial markets. Enron's tremendous presence worried some about the consequences of the company's possible collapse.^[63] Enron executives were tight-lipped, accepting questions in written form only.^[63]

[edit]Credit rating downgrade

The central short-term danger to Enron's survival at the end of October 2001 seemed to be its credit rating. It was reported at the time thatMoody's and Fitch, two of the three biggest credit-rating agencies, had slated Enron for review for possible downgrade.^[63] Such a downgrade would force Enron to issue millions of shares of stock to cover loans it had guaranteed, a move that would bring down the value of existing stock further. Additionally, all manner of companies began reviewing their existing contracts with Enron, especially in the long term, in the event that Enron's rating were lowered below investment grade, a possible hindrance in future transactions.^[63]

Analysts and observers continued their chorus of complaints regarding Enron's difficulty or impossibility of properly assessing a company whose financial statements were so mysterious. Some feared that no one at Enron apart from Skilling and Fastow could completely explain years of mysterious transactions. "You're getting way over my head," said Lay in late August 2001 in response to detailed questions about Enron's business, a reaction that worried analysts.^[63]

On October 29, responding to growing concerns that Enron might have insufficient cash on hand, news spread that Enron was seeking a further $1–2 billion in financing from banks.^[90] The next day, as feared, Moody's lowered Enron's credit rating from Baa1 to Baa2, two levels above junk status. Standard & Poor's also lowered Enron's rating to BBB+, the equivalent of Moody's rating. Moody's also warned that it would downgrade Enron's commercial paper rating, the consequence of which would likely prevent the company from finding the further financing it sought to keep solvent.^[91]

November began with the disclosure that the SEC was now pursuing a formal investigation, prompted by questions related to Enron's dealings with "related parties". Enron's board also announced that it would commission a special committee to investigate the transactions, headed by William C. Powers, the dean of the University of Texas law school.^[92] The next day, an editorial in The New York Times called for an "aggressive" investigation into the matter.^[93] Enron was able to secure an additional $1 billion in financing from cross-town rival Dynegy on November 2, but the news was not universally admired in that the debt was secured by assets from the company's valuable Northern Natural Gas and Transwestern Pipeline.^[94]

[edit]Proposed buyout by Dynegy

Sources claimed that Enron was planning to explain its business practices more fully within the coming days, as a confidence-building gesture.^[95] Enron's stock was now trading at around $7, as investors worried that the company would not be able to find a buyer.

After it received a wide spectrum of rejections, Enron management apparently found a buyer when the board of Dynegy, another energy trader based in Houston, voted late at night on November 7 to acquire Enron at a fire-sale price of about $8 billion in stock.^[96] Chevron Texaco, which at the time owned about a quarter of Dynegy, agreed to provide Enron with $2.5 billion in cash, specifically $1 billion up front and the rest when the deal was completed. Dynegy would also be required to assume nearly $13 billion of debt, plus any other debt hitherto occluded by the Enron management's secretive business practices,^[96] possibly as much as $10 billion in "hidden" debt.^[97] Dynegy and Enron confirmed their deal on November 8, 2001.

Commentators remarked on the different corporate cultures between Dynegy and Enron, and on the "straight-talking" personality of the CEO of Dynegy, Charles Watson.^[7] Some wondered if Enron's troubles had not simply been the result of innocent accounting errors.^[98] By November, Enron was asserting that the billion-plus "one-time charges" disclosed in October should in reality have been $200 million, with the rest of the amount simply corrections of dormant accounting mistakes.^[99] Many feared other "mistakes" and restatements might yet be revealed.^[100]

Another major correction of Enron's earnings was announced on November 9, with a reduction of $591 million over the stated revenue of years 1997–2000. The charges were said to come largely from two special purpose partnerships (JEDI and Chewco). The corrections resulted in the virtual elimination of profit for fiscal year 1997, with significant reductions for the other years. Despite this disclosure, Dynegy declared it still intended to purchase Enron.^[99] Both companies were said to be anxious to receive an official assessment of the proposed sale from Moody's and S&P presumably to understand the effect the completion of any buyout transaction would have on Dynegy and Enron's credit rating. In addition, concerns were raised regarding antitrust regulatory hurdles leading to possible divestiture, along with what to some observers were the radically different corporate cultures of Enron and Dynegy.^[97]

Both companies pushed aggressively for the deal, and some observers were hopeful; Watson was praised for his vision in attempting to create the biggest presence on the energy market.^[100] At the time, Watson said "We feel [Enron] is a very solid company with plenty of capacity to withstand whatever happens the next few months."^[100] One analyst called the deal "a whopper [...] a very good deal financially, certainly should be a good deal strategically, and provides some immediate balance-sheet backstop for Enron."^[101]

Credit issues were becoming more critical, however. Around the time the buyout was made public, Moody's and S&P both lowered Enron's rating to just one notch above junk status. Were the company's rating to fall below investment-grade, its ability to trade would be severely limited if there was a reduction or elimination of its credit lines with competitors.^[100] In a conference call, S&P affirmed that, were Enron not to be taken over, S&P would cut its rating to low BB or high B, ratings noted as being within junk status.^[102] In addition, many traders had limited their involvement with Enron, or stopped doing business altogether, fearing more bad news. Watson again attempted to re-assure, attesting at a presentation to investors that there was "nothing wrong with Enron's business".^[101] He also acknowledged that remunerative steps (in the form of more stock options) would have to be taken to redress the animosity of many Enron employees for management after it was revealed that Lay and other top officials had sold hundreds of millions of dollars worth of stock in the months leading up to the crisis.^[101]The situation was not helped by the disclosure that Lay, his "reputation in tatters",^[103] stood to receive a payment of $60 million as a change-of-control fee subsequent to the Dynegy acquisition, while many Enron employees had seen their retirement accounts, which were largely based on Enron stock, decimated as the price fell 90% in a year. An official at a company owned by Enron stated "We had some married couples who both worked who lost as much as $800,000 or $900,000. It pretty much wiped out every employee's savings plan."^[104]

Watson assured investors that the true nature of Enron's business had been made clear to him: "We have comfort there is not another shoe to drop. If there is no shoe, this is a phenomenally good transaction."^[102] Watson further asserted that Enron's energy trading part alone was worth the price Dynegy was paying for the whole company.^[105]

By mid-November, Enron announced it was planning to sell about $8 billion worth of underperforming assets, along with a general plan to reduce its scale for the sake of financial stability.^[91] On November 19 Enron disclosed to the public further evidence of its critical state of affairs. Most pressingly that the company was facing debt repayment obligations in the range of $9 billion by the end of 2002. Such debts were "vastly in excess" of its available cash.^[106] Also, the success of measures to preserve its solvency were not guaranteed, specifically as regarded asset sales and debt refinancing. In a statement, Enron revealed "An adverse outcome with respect to any of these matters would likely have a material adverse impact on Enron's ability to continue as a going concern."^[106]

Two days later, on November 21, Wall Street expressed serious doubts that Dynegy would proceed with its deal at all, or would seek to radically renegotiate. Furthermore Enron revealed in a 10-Q filing that almost all the money it had recently borrowed for purposes including buying its commercial paper, or about $5 billion, had been exhausted in just 50 days. Analysts were unnerved at the revelation, especially since Dynegy was reported to also have been unaware of Enron's rate of cash use.^[107] In order to walk away from the proposed buyout, Dynegy would need to legally demonstrate a "material change" in the circumstances of the transaction; as late as November 22, sources close to Dynegy were skeptical that the latest revelations constituted sufficient grounds.^[108]

The SEC announced it had filed civil fraud complaints against Andersen.^[109] A few days later, sources claimed Enron and Dynegy were renegotiating the terms of their arrangement.^[110] Dynegy now demanded Enron agree to be bought for $4 billion rather than the previous $8 billion. Observers were reporting difficulties in ascertaining whether or which of Enron's operations, if any, were profitable. Reports described an en masse shift of business to Enron's competitors for the sake of risk exposure reduction.^[110]

[edit]Bankruptcy

Line chart showing the gradual fall (illustrated by a red line) from a high point of $90 to evenutally less than a dollar.

Enron's stock price (former NYSE ticker symbol: ENE) from August 23, 2000 ($90) to January 11, 2002 ($0.12). As a result of the drop in the stock price, shareholders lost nearly $11 billion.^[2]

On November 28, 2001, Enron's two worst-possible outcomes came true. Dynegy Inc. unilaterally disengaged from the proposed acquisition of the company and Enron's credit rating fell to junk status. Watson later said "At the end, you couldn't give it [Enron] to me."^[111] The company, having very little cash with which to run its business, let alone satisfy enormous debts, imploded. Its stock price fell to $0.61 at the end of the day's trading. One editorial observer wrote that "Enron is now shorthand for the perfect financial storm."^[112]

Systemic consequences were felt, as Enron's creditors and other energy trading companies suffered the loss of several percentage points. Some analysts felt Enron's failure highlighted the risks of the post–September 11 economy, and encouraged traders to lock in profits where they could.^[113] The question now became how to determine the total exposure of the markets and other traders to Enron's failure. Early figures put the number at $18.7 billion. One adviser stated, "We don't really know who is out there exposed to Enron's credit. I'm telling my clients to prepare for the worst."^[114]

Enron was estimated to have about $23 billion in liabilities from both debt outstanding and guaranteed loans. Citigroup and JP Morgan Chase in particular appeared to have significant amounts to lose with Enron's fall. Additionally, many of Enron's major assets were pledged to lenders in order to secure loans, throwing into doubt what if anything unsecured creditors and eventually stockholders might receive in bankruptcy proceedings.^[115]

Enron's European operations filed for bankruptcy on November 30, 2001, and it sought Chapter 11 protection two days later on December 2. It was the largest bankruptcy in U.S. history (before being surpassed by WorldCom's bankruptcy the following year), and resulted in 4,000 lost jobs.^[2]^[116] The day that Enron filed for bankruptcy, the employees were told to pack up their belongings and were given 30 minutes to vacate the building.^[117] Nearly 62% of 15,000 employees' savings plans relied on Enron stock that was purchased at $83 in early 2001 and was now practically worthless.^[118]

In its accounting work for Enron, Andersen had been sloppy and weak. But that's how Enron had always wanted it. In truth, even as they angrily pointed fingers, the two deserved each other.

Bethany McLean and Peter Elkind in The Smartest Guys in the Room.^[119]

On January 17, 2002 Enron fired Arthur Andersen as its auditor, citing its accounting advice and the destruction of documents. Andersen countered that they had already severed ties with the company when Enron entered bankruptcy.^[120]

[edit]Trials

[edit]Enron

Main article: The trial of Kenneth Lay and Jeffrey Skilling

Fastow and his wife, Lea, both pleaded guilty to charges against them. Fastow was initially charged with 98 counts of fraud, money laundering, insider trading, and conspiracy, among other crimes.^[121] Fastow pleaded guilty to two charges of conspiracy and was sentenced to ten years with no parole in a plea bargain to testify against Lay, Skilling, and Causey.^[122] Lea was indicted on six felony counts, but prosecutors later dropped them in favor of a single misdemeanor tax charge. Lea was sentenced to one year for helping her husband hide income from the government.^[123]

Lay and Skilling went on trial for their part in the Enron scandal in January 2006. The 53-count, 65-page indictment covers a broad range of financial crimes, including bank fraud, making false statements to banks and auditors, securities fraud, wire fraud, money laundering, conspiracy, and insider trading. District Judge Sim Lake had previously denied motions by the defendants to hold separate trials and to move the case out of Houston, where the defendants argued the negative publicity surrounding Enron's demise would make it impossible to get a fair trial. On May 25, 2006, the jury in the Lay and Skilling trial returned its verdicts. Skilling was convicted of 19 of 28 counts of securities fraud and wire fraud and acquitted on the remaining nine, including charges of insider trading. He was sentenced to 24 years and 4 months in prison.^[124]

Lay pleaded not guilty to the eleven criminal charges, and claimed that he was misled by those around him. He attributed the main cause for the company's fall to Fastow.^[125] Lay was convicted of all six counts of securities and wire fraud for which he had been tried, and he faced a total sentence of up to 45 years in prison.^[126] However, before sentencing was scheduled, Lay died on July 5, 2006. At the time of his death, the SEC had been seeking more than $90 million from Lay in addition to civil fines. The case surrounding Lay's wife, Linda, is a difficult one. She sold roughly 500,000 shares of Enron ten minutes to thirty minutes before the information that Enron was collapsing went public on November 28, 2001.^[127] Linda was never charged with any of the events related to Enron.^[128]

Although Michael Kopper worked at Enron for over seven years, Lay did not know of Kopper even after the company's bankruptcy. Kopper was able to keep his name anonymous in the entire affair, as the spotlight remained on Fastow.^[129] Kopper was the first Enron executive to plead guilty.^[130] Chief Accounting Officer Rick Causey was indicted with six felony charges for disguising Enron's financial shape during his tenure.^[131] After pleading not guilty, he later switched to guilty and was sentenced to seven years in prison.^[132]

All told, sixteen people pleaded guilty for crimes committed at the company, and five others, including four former Merrill Lynch employees, were found guilty. Eight former Enron executives testified—the star witness being Fastow—against Lay and Skilling, his former bosses.^[116]Another was Kenneth Rice, the former chief of Enron Corp.'s high-speed Internet unit, who cooperated and whose testimony helped convict Skilling and Lay. In June 2007, he received a 27-month sentence.^[133]

[edit]Arthur Andersen

Main article: Arthur Andersen LLP v. United States

Arthur Andersen was charged with and found guilty of obstruction of justice for shredding the thousands of documents and deleting e-mails and company files that tied the firm to its audit of Enron.^[134] Although only a small number of Arthur Andersen's employees were involved with the scandal, the firm was effectively put out of business; the SEC is not allowed to accept audits from convicted felons. The firm surrendered its CPA licensed on August 31, 2002, and 85,000 employees lost their jobs.^[135]^[136] The conviction was later overturned by theU.S. Supreme Court due to the jury not being properly instructed on the charge against Andersen.^[137] The Supreme Court ruling theoretically left Andersen free to resume operations. However, the damage to the Andersen name has been so great that it has not returned as a viable business even on a limited scale.

[edit]NatWest Three

Main article: NatWest Three

Giles Darby, David Bermingham, and Gary Mulgrew worked for Greenwich NatWest. The three British men had worked with Fastow on a special purpose entity he had started called Swap Sub. When Fastow was being investigated by the SEC, the three men met with the BritishFinancial Services Authority (FSA) in November 2001 to discuss their interactions with Fastow.^[138] In June 2002, the U.S. issued warrants for their arrest on seven counts of wire fraud, and they were then extradited. On July 12, a potential Enron witness scheduled to be extradited to the U.S., Neil Coulbeck, was found dead in a park in north-east London.^[139] The U.S. case alleged that Coulbeck and others conspired with Fastow.^[140] In a plea bargain in November 2007, the trio plead guilty to one count of wire fraud while the other six counts were dropped.^[141] Darby, Bermingham, and Mulgrew were each sentenced to 37 months in prison.^[142] In August 2010, Bermingham and Mulgrew retracted their confessions.^[143]

[edit]Aftermath

[edit]Employees and shareholders

Enron's headquarters in Downtown Houston was leased from aconsortium of banks who had bought the property for $285 million in the 1990s. It was sold for $55.5 million, just before Enron moved out in 2004.^[144]

Enron's shareholders lost $74 billion in the four years before the company's bankruptcy ($40 to $45 billion was attributed to fraud).^[145] As Enron had nearly $67 billion that it owed creditors, employees and shareholders received limited, if any, assistance aside from severance from Enron.^[146] To pay its creditors, Enron held auctions to sell assets including art, photographs, logo signs, and its pipelines.^[147]^[148]^[149]

More than 20,000 of Enron's former employees in May 2004 won a suit of $85 million for compensation of $2 billion that was lost from their pensions. From the settlement, the employees each received about $3,100.^[150] The following year, investors received another settlement from several banks of $4.2 billion.^[145] In September 2008, a $7.2-billion settlement from a $40-billion lawsuit, was reached on behalf of the shareholders. The settlement was distributed among the lead plaintiff, University of California (UC), and 1.5 million individuals and groups. UC's law firm Coughlin Stoia Geller Rudman and Robbins, received $688 million in fees, the highest in a U.S. securities fraud case.^[151] At the distribution, UC announced in a press release "We are extremely pleased to be returning these funds to the members of the class. Getting here has required a long, challenging effort, but the results for Enron investors are unprecedented."^[152]

[edit]Sarbanes-Oxley Act

In the Titanic, the captain went down with the ship. And Enron looks to me like the captain first gave himself and his friends a bonus, then lowered himself and the top folks down the lifeboat and then hollered up and said, 'By the way, everything is going to be just fine.'

U.S. Senator Byron Dorgan.^[153]

Main article: Sarbanes-Oxley Act

Between December 2001 and April 2002, the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services held multiple hearings about the collapse of Enron and related accounting and investor protection issues. These hearings and the corporate scandals that followed Enron led to the passage of the Sarbanes-Oxley Act on July 30, 2002.^[154] The Act is nearly "a mirror image of Enron: the company's perceived corporate governance failings are matched virtually point for point in the principal provisions of the Act."^[155]

The main provisions of the Sarbanes-Oxley Act included the establishment of the Public Company Accounting Oversight Board to develop standards for the preparation of audit reports; the restriction of public accounting firms from providing any non-auditing services when auditing; provisions for the independence of audit committee members, executives being required to sign off on financial reports, and relinquishment of certain executives' bonuses in case of financial restatements; and expanded financial disclosure of firms' relationships with unconsolidated entities.^[154]

On February 13, 2002, due to the instances of corporate malfeasances and accounting violations, the SEC called for changes to the stock exchanges' regulations. In June 2002, the New York Stock Exchange announced a new governance proposal, which was approved by the SEC in November 2003. The main provisions of the final NYSE proposal include:^[154]

All firms must have a majority of independent directors.
Independent directors must comply with an elaborate definition of independent directors.
The compensation committee, nominating committee, and audit committee shall consist of independent directors.
All audit committee members should be financially literate. In addition, at least one member of the audit committee is required to have accounting or related financial management expertise.
In addition to its regular sessions, the board should hold additional sessions without management.

[edit]See also

Houston portal

The Crooked E: The Unshredded Truth About Enron – television film about the rise and fall of Enron
Enron: The Smartest Guys in the Room – documentary based on a book about the scandal
ENRON – 2009 play by British playwright Lucy Prebble about the scandal
Fun with Dick and Jane – comedy film parodying 2000s corporate scandals, including a reference to the scandal
Arthur Andersen LLP v. United States – conviction in United States District Court subsequently overturned by United States Supreme Court
The Enron Corpus – a database of over 500,000 emails between Enron executives, made public and used extensively in social networking research

[edit]Notes

^ Bratton, William W. (May 2002). "Does Corporate Law Protect the Interests of Shareholders and Other Stakeholders?: Enron and the Dark Side of Shareholder Value" (PDF). Tulane Law Review(New Orleans: Tulane University Law School) (1275): 61. Retrieved 2010-10-12.
^ ^a ^b ^c Benston, George J. (November 6, 2003). "The Quality of Corporate Financial Statements and Their Auditors Before and After Enron" (PDF). Policy Analysis (Washington D.C.: Cato Institute) (497): 12. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ ^a ^b Ayala, Astrid; Giancarlo Ibárgüen, Snr. (March 2006). "A Market Proposal for Auditing the Financial Statements of Public Companies" (PDF). Journal of Management of Value(Universidad Francisco Marroquín): 1. Archived from the originalon 2010-10-17. Retrieved 2010-10-17.
^ Cohen, Daniel A.; Dey Aiyesha and Thomas Z. Lys (February 2005). Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods. Evanston, Illinois: Kellogg School of Management. p. 5. Retrieved 2010-10-13.
^ Healy, Paul M.; Krishna G. Palepu (Spring 2003). "The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 3. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ ^a ^b Gerth, Jeff; Richard A. Oppel, Jr. (2001-11-10). "Regulators struggle with a marketplace created by Enron". The New York Times. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ ^a ^b Banerjee, Neela (2001-11-09). "Surest steps, not the swiftest, are propelling Dynegy past Enron". The New York Times. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ Healy, Paul M.; Krishna G. Palepu (Spring 2003). "The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 7. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ Healy, Paul M.; Krishna G. Palepu (Spring 2003). "The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 5. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ ^a ^b Healy, Paul M.; Krishna G. Palepu (Spring 2003). "The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 1. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ Bratton, William W. (May 2002). "Does Corporate Law Protect the Interests of Shareholders and Other Stakeholders?: Enron and the Dark Side of Shareholder Value" (PDF). Tulane Law Review(New Orleans: Tulane University Law School) (1275): 6. Retrieved 2010-10-12.
^ Mack, Toni (2002-10-14). "The Other Enron Story". Forbes. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
^ Healy, Paul M.; Krishna G. Palepu (Spring 2003). "The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 9. Archived from the original on 2010-10-17. Retrieved 2010-10-17.
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[edit]References

McLean, Bethany; Peter Elkind (2003). The Smartest Guys in the Room. New York: Portfolio Trade. ISBN 1-59184-008-2.
Dharan, Bala G.; William R. Bufkins (2004) (PDF). Enron: Corporate Fiascos and Their Implications. Foundation Press. ISBN 1-58778-578-1.

[edit]Further reading

Bryce, Robert (December 17, 2008). Pipe Dreams: Greed, Ego, and the Death of Enron. PublicAffairs. ISBN 1-586-48201-7.
Collins, Denis (May 24, 2006). Behaving Badly: Ethical Lessons from Enron. Dog Ear Publishing, LLC. ISBN 1-598-58160-0.
Cruver, Brian (September 1, 2003). Anatomy of Greed: Telling the Unshredded Truth from Inside Enron. Basic Books. ISBN 0-786-71205-8.
Eichenwald, Kurt (December 27, 2005). Conspiracy of Fools: A True Story. Broadway Books. ISBN 0-767-91179-2.
Fox, Loren (December 22, 2003). Enron: The Rise and Fall. John Wiley & Sons. ISBN 0-471-47888-1.
Fusaro, Peter C.; Ross M. Miller (June 21, 2002). What Went Wrong at Enron: Everyone's Guide to the Largest Bankruptcy in U.S. History. John Wiley & Sons. ISBN 0-471-26574-8.
Salter, Malcolm S. (June 30, 2008). Innovation Corrupted: The Origins and Legacy of Enron's Collapse. Harvard University Press. ISBN 0-674-02825-2.
Swartz, Mary; Sherron Watkins (March 9, 2004). Power Failure: The Inside Story of the Collapse of Enron. Broadway Business. ISBN 0-767-91368-X.
Toffler, Barbara Ley; Jennifer Reingold (April 13, 2004). Final Accounting: Ambition, Greed and the Fall of Arthur Andersen. Broadway Business. ISBN 0-767-91383-3.

[edit]External links

[hide]Corporate scandals

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Nuclear power in India
From Wikipedia, the free encyclopedia

Nuclear power is the fourth-largest source of electricity in India after thermal, hydroelectric and renewable sources of electricity.^[1] As of 2010, India has 20 nuclear reactors in operation in six nuclear power plants, generating 4,780 MW^[2] while 5 other plants are under construction and are expected to generate an additional 2,720 MW.^[3] India's nuclear power industry is undergoing rapid expansion with plans to increase nuclear power output to 64,000 MW by 2032.^[4] The country is involved in the development of nuclear fusion reactors through its participation in the ITER project and is a global leader in the development of thorium-based fast breeder reactors.^[5]

India's domestic uranium reserves are small and the country is dependent on uranium imports to fuel its nuclear power industry. Since early 1990s, Russia has been a major supplier of nuclear fuel to India.^[6] Due to dwindling domestic uranium reserves,^[7] electricity generation from nuclear power in India declined by 12.83% from 2006 to 2008.^[8] Following a waiver from the Nuclear Suppliers Group in September 2008 which allowed it to commence international nuclear trade,^[9] India has signed bilateral deals on civilian nuclear energy technology cooperation with several other countries, including France,^[10] the United States,^[11] the United Kingdom,^[12] and Canada.^[13] India has also uranium supply agreements with Russia,^[14]^[15] Mongolia,^[16] Kazakhstan,^[17] Argentina^[18] and Namibia.^[19] An Indian private company won a uranium exploration contract in Niger.^[20]

India now envisages to increase the contribution of nuclear power to overall electricity generation capacity from 4.2% to 9% within 25 years.^[21] In 2010, India's installed nuclear power generation capacity will increase to 6,000 MW.^[22] As of 2009, India stands 9th in the worldin terms of number of operational nuclear power reactors. Indigenous atomic reactors include TAPS-3, and -4, both of which are 540 MW reactors.^[23] India's US$717 million fast breeder reactor project is expected to be operational by 2010.^[24]

Following the Fukushima I nuclear accidents, many are questioning the mass roll-out of new plants in India, including the World Bank, the Indian Environment Minister, Jairam Ramesh, and the former head of the country's nuclear regulatory body, A. Gopalakrishnan. The largeJaitapur Nuclear Power Project is the focus of concern and it has attracted many protests.^[25]

Contents
[hide]

1 Nuclear Power Growth in India

1.1 New Uranium Deposits In Andhra Pradesh

1.2 Nuclear power plants

2 Accidents

3 Anti-nuclear protests

4 References

[edit]Nuclear Power Growth in India

The Indian nuclear power industry is expected to undergo a significant expansion in the coming years thanks in part to the passing of theU.S.-India Civil Nuclear Agreement. This agreement will allow India to carry out trade of nuclear fuel and technologies with other countries and significantly enhance its power generation capacity.^[26] When the agreement goes through, India is expected to generate an additional 25,000 MW of nuclear power by 2020, bringing total estimated nuclear power generation to 45,000 MW.^[27]

India has already been using imported enriched uranium for light-water reactors that are currently under IAEA safeguards, but it has developed other aspects of the nuclear fuel cycle to support its reactors. Development of select technologies has been strongly affected by limited imports. Use of heavy water reactors has been particularly attractive for the nation because it allows Uranium to be burnt with little to no enrichment capabilities. India has also done a great amount of work in the development of a thorium centered fuel cycle. While Uranium deposits in the nation are limited (see next paragraph) there are much greater reserves of thorium and it could provide hundreds of times the energy with the same mass of fuel. The fact that thorium can theoretically be utilized in heavy water reactors has tied the development of the two. A prototype reactor that would burn Uranium-Plutonium fuel while irradiating a thorium blanket is under construction at theMadras/Kalpakkam Atomic Power Station.

Uranium used for the weapons program has been separate from the power program, using Uranium from indigenous reserves. This domestic reserve of 80,000 to 112,000 tons of uranium (approx 1% of global uranium reserves) is large enough to supply all of India's commercial and military reactors as well as supply all the needs of India's nuclear weapons arsenal. Currently, India's nuclear power reactors consume, at most, 478 metric tonnes of uranium per year.^[28] Even if India were quadruple its nuclear power output (and reactor base) to 20GW by 2020, nuclear power generation would only consume 2000 metric tonnes of uranium per annum. Based on India's known commercially viable reserves of 80,000 to 112,000 tons of uranium, this represents a 40 to 50 years uranium supply for India's nuclear power reactors (note with reprocessing and breeder reactor technology, this supply could be stretched out many times over). Furthermore, the uranium requirements of India's Nuclear Arsenal are only a fifteenth (1/15) of that required for power generation (approx. 32 tonnes), meaning that India's domestic fissile material supply is more than enough to meet all needs for it strategic nuclear arsenal. Therefore, India has sufficient uranium resources to meet its strategic and power requirements for the foreseeable future.^[28]

[edit]New Uranium Deposits In Andhra Pradesh

Large deposits of natural uranium, which promises to be one of the top 20 of the world's reserves, have been found in the Tummalapalle belt in the southern part of the Kadapa basin in Andhra Pradesh in March 2011. The Atomic Minerals Directorate for Exploration and Research (AMD) of India, which explores uranium in the country, has so far discovered 44,000 tonnes of natural uranium (U3O8) in just 15 km of the 160-km long belt.^[29]

[edit]Nuclear power plants

Currently, twenty nuclear power reactors produce 4,780.00 MW (2.9% of total installed base).^[30]^[31]

Power station Operator State Type Units Total capacity (MW)
Kaiga NPCIL Karnataka PHWR 220 x 4 880
Kakrapar NPCIL Gujarat PHWR 220 x 2 440
Kalpakkam NPCIL Tamil Nadu PHWR 220 x 2 440
Narora NPCIL Uttar Pradesh PHWR 220 x 2 440
Rawatbhata NPCIL Rajasthan PHWR 100 x 1
200 x 1
220 x 4 1180
Tarapur NPCIL Maharashtra BWR (PHWR) 160 x 2
540 x 2 1400
Total 20 4780
Following the Fukushima disaster, many are questioning the mass roll-out of new plants in India, including the World Bank, the former Indian Environment Minister, Jairam Ramesh, and the former head of the country's nuclear regulatory body, A. Gopalakrishnan. The massiveJaitapur Nuclear Power Project is the focus of concern - "931 hectares of farmland will be needed to build the reactors, land that is now home to 10,000 people, their mango orchards, cashew trees and rice fields". Fishermen in the region say their livelihoods will be wiped out.^[32]

The projects under construction are:^[33]^{[citation needed]}

Power station Operator State Type Units Total capacity (MW)
Kudankulam NPCIL Tamil Nadu VVER-1000 1000 x 2 2000
Kalpakkam BHAVINI Tamil Nadu PFBR 500 x 1 500
Kakrapar NPCIL Gujarat PHWR 700 x 2 1400
Rawatbhata NPCIL Rajasthan PHWR 700 x 2 1400
Banswara NPCIL Rajasthan PHWR 700 x 2 1400
Total 9 6700
[edit]Accidents

Main article: Nuclear accidents by country

See also: Lists of nuclear disasters and radioactive incidents

Several nuclear accidents have occurred in India:^[34]

Nuclear power plant accidents in India^[35]^[36]
Date Location Description Cost
(in millions
2006 US$)
4 May 1987 Kalpakkam, Tamil Nadu, India Fast Breeder Test Reactor at Kalpakkam refueling accident that ruptures the reactor core, resulting in a two-year shutdown. 300
10 September 1989 Tarapur, Maharashtra, India Operators at the Tarapur Atomic Power Station find that the reactor had been leaking radioactive iodine at more than 700 times normal levels. Repairs to the reactor take more than a year. 78
13 May 1992 Tarapur, Maharashtra, India A malfunctioning tube causes the Tarapur Atomic Power Station to release 12 curies of radioactivity. 2
31 March 1993 Bulandshahr, Uttar Pradesh, India The Narora Atomic Power Station suffers a fire at two of its steam turbine blades, no damage to the reactor. All major cables burnt. 220
2 February 1995 Kota, Rajasthan, India The Rajasthan Atomic Power Station leaks radioactive helium and heavy water into the Rana Pratap Sagar dam, necessitating a two-year shutdown for repairs. 280
22 October 2002 Kalpakkam, Tamil Nadu, India Almost 100 kg radioactive sodium at a fast breeder reactor leaks into a purification cabin, ruining a number of valves and operating systems. 30
It is estimated that before the accident at Tarapur, lack of proper maintenance exposed more than 3000 Indian personnel to "very high" and "hazardous" radiation levels. Researchers at the American University calculated at least 124 "hazardous incidents" at nuclear plants in India between 1993 and 1995.^[34]

[edit]Anti-nuclear protests

Environmentalists, local farmers and fishermen have been protesting for months over the planned six-reactor nuclear power complex on the plains of Jaitapur, 420km south of Mumbai. If built, it would be one of the world's largest nuclear power complexes. Protests have escalated in the wake of Japan's Fukushima I nuclear accidents. During two days of violent rallies in April 2011, a local man was killed and dozens were injured.^[37]

[edit]References

^ "~6429693.xls" (PDF). Retrieved 2010-08-22.

^ "India's 20th nuclear power plant goes critical". Hindustan Times. 2010-11-27. Retrieved 2011-03-13.

^ Verma, Nidhi (2008-08-18). "Westinghouse, Areva eye India nuclear plants-paper". Reuters. Retrieved 2010-08-22.

^ "India eyeing 64,000 MW nuclear power capacity by 2032: NPCIL". The Economic Times. 2010-10-11.

^ Pham, Lisa (2009-10-20). "Considering an Alternative Fuel for Nuclear Energy". New York Times.

^ "Russia fulfis promise, supplies uranium to India". Expressindia.com. Retrieved 2010-08-22.

^ "Uranium shortage holding back India's nuclear power drive - Corporate News". livemint.com. 2008-06-30. Retrieved 2010-08-22.

^ "Ministry of Power". Powermin.gov.in. Retrieved 2010-08-22.

^ "news.outlookindia.com". Outlookindia.com. Retrieved 2010-08-22.

^ "India, France agree on civil nuclear cooperation". Rediff.com. Retrieved 2010-08-22.

^ "Bush signs India-US nuclear deal into law - Home". livemint.com. 2008-10-09. Retrieved 2010-08-22.

^ "UK, India sign civil nuclear accord". Reuters. 2010-02-13. Retrieved 2010-08-22.

^ "Canada, India reach nuclear deal". Montrealgazette.com. 2009-11-29. Retrieved 2010-08-22.

^ "India to get 510 tonnes of uranium from Kazakhstan, Russia". Hindu Business Line.

^ "South Asia | Russia agrees India nuclear deal". BBC News. 2009-02-11. Retrieved 2010-08-22.

^ "India, Kazakhstan sign nuclear pact". Financial Express.

^ Sanjay Dutta, TNN, Jan 23, 2009, 01.35am IST (2009-01-23). "Kazakh nuclear, oil deals hang in balance - International Business - Business - The Times of India". Timesofindia.indiatimes.com. Retrieved 2010-08-22.

^ India, Argentina ink agreement on peaceful uses of N-energy, the Hindu

^ "India, Namibia sign uranium supply deal".

^ "Indian firm acquires uranium mining rights in Niger | Uranium, Niger, Company, Bajla, Government". taurianresources.co.in. Retrieved 2010-12-22.

^ "Slowdown not to affect India's nuclear plans". Business-standard.com. 2009-01-21. Retrieved 2010-08-22.

^ "Nuclear power generation to touch 6,000 Mw by next year". Business-standard.com. Retrieved 2010-08-26.

^ (http://www.npcil.nic.in/PlantsInOperation.asp

^ "India's fast breeder reactor nears second milestone". Chennai, India: Hindu.com. 2009-06-16. Retrieved 2010-08-26.

^ Ben Doherty (April 23, 2011). "Indian anti-nuclear protesters will not be deterred". Sydney Morning Herald.

^ [1]^{[dead link]}

^ "At G-8, Singh, Bush reaffirm commitment to nuclear deal - Economy and Politics". livemint.com. 2008-07-10. Retrieved 2010-08-22.

^ ^a ^b http://www.carnegieendowment.org/files/atomsforwarfinal4.pdf

^ Subramanian, T. S. (20 March 2011). "Massive uranium deposits found in Andhra Pradesh". The Hindu (Chennai, India).

^ "Nuclear Power Plants In India - Nuclear Power Corporation of India Limited". Npcil.nic.in. Retrieved 2011-01-21.

^ "India's 20th nuclear reactor connected to power grid". The Times of India. 2011-01-19. Retrieved 2011-01-22.

^ Ben Doherty (April 23, 2011). "Indian anti-nuclear protesters will not be deterred". Sydney Morning Herald.

^ "Projects Under Construction - Nuclear Power Corporation of India Limited". Npcil.nic.in. Retrieved 2011-01-22.

^ ^a ^b Benjamin K. Sovacool. A Critical Evaluation of Nuclear Power and Renewable Electricity in Asia, Journal of Contemporary Asia, Vol. 40, No. 3, August 2010, p. 380.

^ Benjamin K. Sovacool. A Critical Evaluation of Nuclear Power and Renewable Electricity in Asia, Journal of Contemporary Asia, Vol. 40, No. 3, August 2010, pp. 393–400.

^ Benjamin K. Sovacool (2009). The Accidental Century - Prominent Energy Accidents in the Last 100 Years

^ Amanda Hodge (April 21, 2011). "Fisherman shot dead in Indian nuke protest". The Australian.

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[hide]v · d · eNuclear energy in Asia
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Categories: Nuclear energy in India

Power station	Operator	State	Type	Units	Total capacity (MW)
Kaiga	NPCIL	Karnataka	PHWR	220 x 4	880
Kakrapar	NPCIL	Gujarat	PHWR	220 x 2	440
Kalpakkam	NPCIL	Tamil Nadu	PHWR	220 x 2	440
Narora	NPCIL	Uttar Pradesh	PHWR	220 x 2	440
Rawatbhata	NPCIL	Rajasthan	PHWR	100 x 1 200 x 1 220 x 4	1180
Tarapur	NPCIL	Maharashtra	BWR (PHWR)	160 x 2 540 x 2	1400
			Total	20	4780

Power station	Operator	State	Type	Units	Total capacity (MW)
Kudankulam	NPCIL	Tamil Nadu	VVER-1000	1000 x 2	2000
Kalpakkam	BHAVINI	Tamil Nadu	PFBR	500 x 1	500
Kakrapar	NPCIL	Gujarat	PHWR	700 x 2	1400
Rawatbhata	NPCIL	Rajasthan	PHWR	700 x 2	1400
Banswara	NPCIL	Rajasthan	PHWR	700 x 2	1400
			Total	9	6700

Nuclear power plant accidents in India^[35]^[36]
Date	Location	Description	Cost (in millions 2006 US$)
4 May 1987	Kalpakkam, Tamil Nadu, India	Fast Breeder Test Reactor at Kalpakkam refueling accident that ruptures the reactor core, resulting in a two-year shutdown.	300
10 September 1989	Tarapur, Maharashtra, India	Operators at the Tarapur Atomic Power Station find that the reactor had been leaking radioactive iodine at more than 700 times normal levels. Repairs to the reactor take more than a year.	78
13 May 1992	Tarapur, Maharashtra, India	A malfunctioning tube causes the Tarapur Atomic Power Station to release 12 curies of radioactivity.	2
31 March 1993	Bulandshahr, Uttar Pradesh, India	The Narora Atomic Power Station suffers a fire at two of its steam turbine blades, no damage to the reactor. All major cables burnt.	220
2 February 1995	Kota, Rajasthan, India	The Rajasthan Atomic Power Station leaks radioactive helium and heavy water into the Rana Pratap Sagar dam, necessitating a two-year shutdown for repairs.	280
22 October 2002	Kalpakkam, Tamil Nadu, India	Almost 100 kg radioactive sodium at a fast breeder reactor leaks into a purification cabin, ruining a number of valves and operating systems.	30

India Nuclear Energy

Sun Shines on Modules in India
India presents an attractive market for solar module makers, says EAI study
Latest news reports suggest significant interest among Indian companies to enter the solar PV module production segment.
With the presence of a local content requirement that mandates the use of locally produced solar modules for the solar PV power plants under the National Solar Mission, there could be a significant increase in the demand for solar PV modules made in India.

Projections by EAI suggest that while the current installed capacity for modules in India is about 1000 MW, this installed capacity is set to grow significantly over the next two years. EAI predicts that the country will have a total installed capacity of about 2400 MW of modules by 2013, showing a CAGR of over 50% for the period 2011-13. This capacity will cater to the enhanced requirements in the Indian market for solar PV power plants, and, with the fast growth in the global installed capacity of solar PV power plants, to the international markets as well.

These prospects have made solar PV module making an attractive business opportunity for Indian companies, and a number of Indian entrepreneurs and businesses are keenly exploring this segment for investments.
To know more about the solar PV module market in India, have a look at the special report India Solar PV Module Market Report published by EAI -
http://www.eai.in/ref/reports/solar/
solar_pv_module.html

Introduction

In 1934, an Italian scientist named Fermi and his colleagues bombarded uranium with slow moving neutrons and he realized that it produced much higher radioactivity than any other element treated the same way. Five years later Fermi discovered that the nucleus of uranium 235, if hit by a neutron, would split down the middle in two very similar fragments. This process was to be known as nuclear fission and it resulted in strong energy emission at the expense of the nucleus' initial mass. The use of nuclear fission for civilian uses bases itself on the ability of controlling the chain reaction of such a process. In nuclear plants, the process of fission is tightly controlled through the use of special materials such as cadmium that are able to absorb neutrons and regulate the heat produced. India has a streamlined nuclear power program and expects to have 20,000 MWe nuclear capacities on line by 2020. It aims to supply 25% of electricity from nuclear power by 2050. Since India is outside the Nuclear Non-Proliferation Treaty due to its weapons program, it had been largely excluded for 34 years from trade in nuclear plant or materials, which has hindered its development of civil nuclear energy until 2009. After the NSG approval the problems have been rectified. India's vision is to become a world leader in nuclear technology due to its expertise in fast reactors and thorium fuel cycle.

Technology[ii]

sunday, march 27, 2011

Agriculture Demand Side Management (Ag DSM)

Bureau of Energy Efficiency (BEE) is a statutory body under Ministry of Power, Government of India. The mission of BEE is to institutionalize energy efficiency services, enable delivery mechanism in the country and provide leadership to energy efficiency in all the sectors. The primary goal of the Bureau is to reduce the energy intensity in the Indian economy.

Seeing the supply and demand gap the DSM has become the need of the hour. Maharastra State Electricity Distribution Co. Ltd (MSEDCL), called Mahadiscom or Mahavitran in short has taken a lead towards DSM, the company started taking measures towards load management in 2005 by increasing the tariff for increased consumption and decrease in tariff for reduced consumption compared to the last year.

The Maharastra Electricity Regulatory Commission has provided for a Charge as well as a Rebate, consumers were incentivised to reduce demand through better planning and utilization of electricity, rather than by fiat. Since then the MSEDCL has a provision of LMC (Load Management Charges) in its tariff. It has been observed that rural areas has a tremendous scope in load management as the pump sets used for irrigation purpose are highly inefficient and since the tariff applicable for them is flat rate tariff the farmers have least interest in efficiency of the equipments hence there is a need of Agriculture DSM. State of UP has yet to incorporate LMC.. UPERC in its tariff order has emphasized the need of DSM, as per ERC "The effect of Demand Side Management should reflect in lesser purchase of costly power due to effective energy conservation measures. This shall reduce the revenue requirement of the DISCOMS. The cost of such DSM projects would be offset by the savings in power purchase cost due to reduction in demand. This should be represented as a separate cost element which shall be allowed by the Commission as a part of the Annual Revenue Requirement of the DISCOMS".

In order to accelerate energy efficiency measures in agriculture sector, BEE has initiated an Agriculture Demand Side Management (Ag DSM) programme in which pump set efficiency upgradation would be carried out through Public Private Partnership (PPP) mode. The objective of the program is to create appropriate framework for market based interventions in agricultural pumping sector by facilitating conducive policy environment to promote Public Private Partnership (PPP) to implement the projects.

Under this scheme of BEE, first Pilot Ag DSM project was launched at Mangalwedha subdivision of Solapur Circle in Maharashtra. This first pilot Ag DSM project covers 3530 agricultural pumps connected on five feeders (Bramhapuri, Nandeshwar, Borale, Bhose & Kharatwadi) in Mangalwedha & Pandharpur subdivisions. (All the five feeders are segregated agricultural feeders, feeding power to mostly agriculture pumps under the service areas)

The Detailed Project Report (DPR) is prepared after an exhaustive survey and detailed energy audit study of the pump sets in the pilot area. During the energy audit study detailed information (about all the agricultural consumers) such as details about pumps (number, Type, make, age and rating), water requirements / consumption, status of meter installation, number of harvesting

cycles, cropping pattern, underground water level in different seasons, power supply pattern and socio-economic conditions etc. is collected and analyzed.

This detailed project report provides an insight to Pump manufacturers / Energy Service Company for making investments in implementing energy efficiency measures on rural pump set feeders. The intervention would lead to lower energy supply on the feeder, and hence, could result in lower subsidized energy sale by utilities and lessen the subsidy to be paid by the State Government.

The salient features of the DPR are as below-

• Most of the pump motors (60-70%) have been rewound one or two times.

• Low voltage up to 290 V at consumer end is observed for few DTR.

• The workmanship quality for pump set installation was poor. No capacitors Connected to agricultural pumps.

• Even though the power availability is for 10 to 12 hours, intermittent power failures are observed frequently.

• It is also observed that most of the DTR's are overloaded leading to frequent transformer failures.

• The major reasons for pump set failure and lower discharge output was erratic power supply and cases of extreme low voltage.

Due to huge gap in the demand – supply situation of the state power grid, the agriculture feeders are faced with severe load shedding.Thus, whenever power is available most of the pump sets are automatically switched ON to supply water for irrigation. The farmers have made provisions for automatic starting of pumps. This is carried out either by auto-starter or starter is kept in on condition, continuously during the season, defeating interlocks.

Actual Pump set rating higher than name plate rating: It is also been observed that even though sanctioned demand is 3 HP or 5 HP, power rating of most of the pump sets is higher than sanctioned demand. The reason for measured power consumption rating higher than sanctioned demand is that most of the farmers have rewound the pump sets suitably to draw more power and deliver higher water discharge. Since farmers are charged on flat HP basis this results in potential revenue loss to DISCOM. This is the major reason for no encouragement for deployment of more efficient pumps. It is difficult to make the farmers agree to have their pumps replaced, as it requires repeated efforts to make the farmers fully conversant to the objectives of the project. Hence social opposition is expected for metering of power supply at pump level. But there will not be that much opposition for metering at transformer level.

The farmers have reported extreme low voltage as the major cause for motor burnouts and lower pump output. The pump set selection by farmers is mainly driven by voltage constraint (Voltage imbalance) and water level variations.

Pump set Installations: The pump sets installation is inappropriate with lack of proper foundation and footings. The ground surface water pump sets are merely placed on wooden planks and not properly anchored to the ground. The pump sets are observed with high vibration levels, which also contribute to lower operating efficiency.

The efficiency measured for these pumps is in the range of 15 % to 30 %. Only a small fraction of pump sets have efficiency below 10 % and above 55%. Pumps with efficiency below 10% are due to a combination of several factors like use of frequently rewound motors, non standard pumps, no maintenance, poor selection of pump, extremely low water depth, low voltage supply leading to lower output and higher power consumption. Pumps with higher efficiency than 55 % are due to recent installations and are very few in numbers.

Parameters Affecting Pump Set Efficiency Performance

There are various parameters that could affect the pump set efficiency performance. Parameters identified that could affect the pump performance are listed below -

• Energy Inefficient Pump Sets

• Improper pump selection and usage.

• Undersized pipes.

• Suction head Variations and large discharge lengths.

• Inefficient foot valves and piping system.

• Motor rewinding and low voltage profile

• Water table variations

• Other common causes

Energy Inefficient Pump Sets

· Due to lack of awareness about energy efficiency and flat HP based tariff structure for agricultural sector, energy aspect is overlooked by the farmers while selecting the pump sets.

· For conventional pump sets the efficiency variation with respect to change in flow and head is very high. At both the extreme ends of the pump curves (head Vs flow) the efficiency of the pump set is low. However better designed Energy Efficient Pump Sets (EEPS) have a flat top efficiency characteristic, so that any reduction in efficiency away from the 'Best Efficiency Point' (BEP) is small. As guaranteed by energy efficient pump manufacturers the difference in best efficiency of a good design is marginal and at the most up to 3% to 4%. The energy efficient pump sets could be selected to match the capacity and head requirements and to operate at BEP during the normal operating conditions. This will result in maximum energy savings, as compared to present inefficient pumps. Improper Pump Selection and Usage

· The educational level of the Indian farmers is not adequate to understand the technological aspects of pump operation. This leads to lack of awareness on pump selection, operation & maintenance. The improper selection and operation leads to poor efficiencies and wastage of energy.

· Field study has indicated that average overall efficiency of the pump sets is around 28%.

· The lower efficiency is also due to improper selection of pumps and mismatching prime movers and due to inferior quality of the pumps being marketed. The selection of the pumps should be governed by the characteristic curves i.e. the efficiencies in the various ranges of flow and head valves and for normal operating condition, the efficiency should be maximum.

Baseline Energy Consumption

For implementing the Ag DSM it is most important to know the base line energy consumption (BEC) of specified pump sets connected on pilot project feeder. The BEC was estimated for FY 2009 (Base year) by two different approaches specified below. One approach is based on past consumption data whereas other approach will be based on the detailed audit study undertaken in the region.

1. Approach 1: Here baseline energy consumption of existing pump sets connected on pilot project feeder lines is estimated based on last three year annual consumption data and monthly consumption data of metered consumers in the region (Mangalvedha sub division).

· In this approach the average consumption norms for metered consumers are applied to the non metered consumers in pilot project to arrive at their monthly consumption. This approach is also approved by MERC in determining the tariff of agricultural consumers.

· The baseline energy consumption for 2221 agriculture pumps operating under the 4 feeders has been arrived based on data available from MSEDCL.

· The metered consumers are categorized on the basis of sanctioned HP load and their monthly average consumption is taken as representative for that particular HP category pump consumption norms to arrive at the total consumption of 2221 pump sets considered under the pilot project. For the purpose, 2221 pump sets are segregated based on their sanctioned demand on HP basis.

· The baseline energy consumption arrived at Approach 1 is cross verified based on last three year annual energy consumption by project feeder lines. The four pilot project feeders are segregated agricultural feeders supplying power to agriculture consumers. However there are few residential consumers that are also connected on these feeders.

· The annual energy consumption for all the four project feeder lines for last 3 years is provided by MSEDCL. The last three year average energy consumption and average distribution loss levels for Maharashtra state is used for estimating the baseline energy consumption, the annual average energy consumption for all four project feeder lines is 21.16 MU at the MSEDCL substation end which also includes distribution losses. MSEDCL average distribution losses are 26.2 %. The baseline consumption attributable for 2221 pump sets is arrived at after deducting the losses from last three year annual energy consumption. Thus the baseline consumption is about 15.62 MU.

2. Approach 2: As per this approach, baseline energy consumption of existing pump sets of pilot Ag DSM project is estimated based on detailed audit study. The average operating efficiency and average input power in kW, for existing pump sets of different types such as monoblock, submersible and flexible coupling and for different HP ratings are estimated after analyzing the field study measurements.

· This average energy efficiency and average input power norms along with assumptions of average operating hours has been applied to total no of pump sets categorized as per their ratings and types to arrive at baseline energy consumption by total 2221 number of pumps sets connected on project feeder lines.

· As discussed in earlier sections, even though the supply isavailable for 8 to 10 hours on daily basis, not all the pump sets operate continuously. The reasons identified for not all the pump sets operating continuously are, varying irrigation requirements, non availability of water in the well, non availability of farmer to switch the pump set on and pump sets under repairs. Hence annual average operating hours are used to estimate the baseline energy consumption of all the pump sets connected on project feeder lines.

· Based on last 3 years annual average energy consumption of 21.16 MU recorded at the substation end of project feeder lines and MSEDCL distribution losses of 26.2% the energy consumption for 2221 pump sets is arrived at 15.62 MU. Where as baseline energy consumption as per approach 1 is 16.49 MU. The sum of average input power for all the pump sets is around 9523 kW based on energy audit study. Average operating hours for all the pump sets is estimated based on this information as provided below,

Annual Average Operating Hours=Energy Consumption ,15.62 MU *10^6

= 1640

Sum of average input power for all the pump sets, 9523 kW

Annual Average Operating Hours =Energy Consumption ,16.49 MU * 10^6= 1732

Sum of average input power for all the pump sets, 9523 kW

· Thus the annual average operating hours for all the pump sets connected on project feeder lines are estimated as 1640 and 1732. However, to be on conservative side average operating hours are assumed to be 1640.

· The annual average operating hours of 1640 are multiplied by the average input power per pump set and total number of pump sets for each categorized based on rating and type to estimate the baseline energy consumption.

· As per load shedding protocol electricity supply hours of MSEDCL can not be less than 8 hours per day i.e. 2920 hrs per annum. In addition analysis of historical data for past several years with regards to water availability, seasonal variation and cropping pattern, indicate that the water availability and seasonal variation will remain the same in future years and will not have any impact on pump set operating hours. Hence the assumption of 1640 annual average operating hours stands appropriately.

· Thus the baseline energy consumption based on approach 2 is 15.23 MU. Since the baseline consumption estimate based on approach 2 is on very conservative side it is used in the preceding sections to estimate energy saving potential.

Estimates of Energy Saving Potential

1. The energy could be saved by improving the overall system efficiency either by partial rectification or by complete replacement.

2. The partial rectification covers the options other than replacement of pump sets (Motor & Pump) as listed below,

• Replacement of inefficient foot valves

• Removal of unnecessary pipe lengths

• Removal of unnecessary bends

• Reduction in height of pipe above the ground

• Replacement of GI pipes with HDPE/PVC pipes

• Installation of capacitor banks for improving power factor

3. With partial replacement, farmers benefit in terms of more water discharge from the existing pumping system. However the reduction in energy requirement is marginal.

4. The complete replacement also covers the replacement of existing pump set with energy efficient pump set along with the options covered under partial rectification. Even though the complete rectification requires huge investment it leads to significant energy savings and reduced line loadings. In the DPR the option of replacement of exiting pump sets with energy efficient pump sets along with the replacement of foot valves is considered.

5. The rating of energy efficient pump sets for the replacement of existing pump sets is arrived at after analyzing the maximum possible head and current water discharge requirement. With the help of pump set manufacturers each pump set data is analyzed to propose energy efficient pump set along with its efficiency value. The energy efficient pump sets are selected in a way so as to operate in the range where the pump set efficiency curve is almost flat. As per the pump manufacturers, the maximum variation in the efficiency of these new pump sets will not be more than 3% to 4 %. The overall weighted average operating efficiency for energy efficient pump sets is arrived at 48.9%. However, to be on conservative side overall average operating efficiency for energy efficient pump sets is considered as 45 % (whereas that of non standard pump set is only 28%) to estimate the energy saving potential by replacement of all 2221 pump sets. The assumption of 45 % of overall average operating efficiency which is 4 % less than the actual, provides enough margin for the actual efficiency variation due to water level variations.

6. The overall average operating efficiency of 45% is used to arrive at revised average input power rating for energy efficient pump sets. The energy saving potential is estimated only for improvement in the system efficiency due to replacement of existing pump sets with energy efficient pump sets. The detail estimates of energy saving potential shows that the Overall consumption of existing pump sets is work out to be 15,617,923 units, where as with energy efficient pump sets the consumption will go down to 9,487,825 units for same average operating hours. This leads to the savings of 6,130,098 units i.e. 6.13 MU, The replacement of existing pump sets with energy efficient pump sets would lead to energy saving.

The percentage energy saving is calculated based on estimates-

Percentage Energy Savings= [(Energy Consumption by Existing Pump sets – Energy Consumption by Energy Efficient Pump Sets ) * 100]/(Energy Consumption by Existing Pump sets)= 40%

Thus implementations of Ag DSM projects offer opportunity to reduce overall energy consumption, cut down energy bill to the farmers, reduces subsidy burdens on then distribution companies and state governments and mitigate the energy short situation while improving the water extraction efficiency. However for sustainable investment in Ag DSM projects it is required to develop business models to assure sustainability of the savings for loan repayments and to provide adequate incentives to the investors.

MSEDCL utilizes a part of Load Management Charge (LMC) Fund collected under a tariff regulation for replacement of old inefficient pumps with new higher energy efficiency pump sets and contract out repair and maintenance of pumps and certain aspects of project works to a project contractor (DISCOM Mode).

7. With the above-noted background in mind and after taken in to account the possible financing options, different business models have been developed and categorized as DISCOM Mode, ESCO Mode and HYBRID Mode as described below,

· MSEDCL utilizes a part of Load Management Charge (LMC) Fund collected under a tariff regulation for replacement of old inefficient pumps with new higher energy efficiency pump sets and contract out repair and maintenance of pumps and certain aspects of project works to a project contractor (DISCOM Mode). (100% investment by the DISCOM)

· An ESCO which has a contract with MSEDCL finances and implements the project; the ESCO would borrow the project debt and repay it from project revenues (ESCO Mode). (100% investment by the ESCO). In this model benefit savings to be retained by ESCO is 95%.

· ESCO provides part of project funds through debt & equity and sign a contract with MSEDCL, whereas part of the project fund would be contributed by MSEDCL through LMC fund (HYBRID Mode). (67% investment by the DISCOM, 33% investment by the ESCO). In this model benefit savings to be retained by ESCO is 55%.

Since HVDS has not been implemented on the selected feeders, electric motors may burn out frequently due to poor voltage profile. Therefore, the risks involved for ESCOs/Project Contractors in the above discussed business models (DISCOM Mode and ESCO Mode) are high, which may lead to low participation from the interested bidders (ESCOs) for project implementation.

8. In order to motivate ESCOs to undertake the project, a hybrid solution has been proposed in which MSEDCL will be required to contribute upfront a portion of total investment from the LMC fund so that ESCOs and their lenders' risks are minimized. This would be a significant amount and may be an important factor for an ESCO to get loan from the lender.

Monetary Savings/ Benefit to MSEDCL

1. The major benefit of pump set efficiency improvement is to farmers by way of either increased water discharge output per unit of power consumed or same water discharge with lower power consumption.

2. Replacement of existing pump sets with correctly selected, better designed energy efficient pumps having higher efficiency for the same head range will give same water output and consumes lesser power. Benefits to MSEDCL due to lower power consumption by energy efficient agriculture pumps are estimated for sale of energy to all consumers at an average cost of supply.

3. MSEDCL revenue billed per unit is used as a proxy to average tariff. Average Cost of Supply for FY 08 is estimated from actual revenue from sale of power and actual energy sales to all consumers as provided comes out to be Rs 3.62 / kWh. Agricultural consumers are supplied at subsidized metered tariff of Rs 1.10 per kWh whereas average power tariff is Rs 3.62 / kWh. Hence MSEDCL is benefited due to reduction in agricultural energy consumption. In addition to this the revenue realization or collection efficiency from agricultural consumers in Mangalvedha sub division is only 18 %, which also leads to additional financial losses to MSEDCL, and could be avoided due to saved energy. Thus the saved energy could be sold to other consumers at an average rate of Rs. 3.62 per kWh (FY 08 Actual). The benefit analysis from MSEDCL's perspectives, considering the benefits of sale of saved energy to other consumers and reduction in financial losses pertaining to lower collection efficiency from agricultural consumers is provided in Table 31 below. However, at conservative side the collection efficiency of 60 % is assumed to estimate revenue collection loss due to saved energy.

As per calculations in the DPR the total investment needed for replacement of 2,221 existing pump sets will be Rs 432.8 Lakh, whereas MSEDCL's revenue from sale of saved energy to other consumers at Rs 3.62 / kWh is Rs. 221.91 Lakh. However there is reduction in MSEDCL's revenue at collection efficiency of 60 %, due to reduction in energy sale to agricultural consumers due to energy saved. At unit rate of Rs 1.10 /kWh for agricultural consumers and at collection efficiency of 60 % revenue from agricultural consumers comes out to be Rs. 40.46 Lakh. In addition to this, to ensure sustainable savings MSEDCL has to ensure proper R&M. The annual R&M cost is Rs 35.72 Lakhs, employee cost is Rs 6.6 Lakh and annual testing cost is Rs. 1.1 Lakh. Thus the net annual benefit to MSEDCL is Rs. 138.02 Lakh. This work out to be a simple payback period of 3 years.

PILOT AG-DSM PROJECT AT SOLAPUR

Based on these estimates, the detailed project financial analysis for a period of 10 years is carried out for project implementation through ESCO Mode and DISCOM Mode, whereas for HYBRID Mode financial analysis is carried out for 5 years. The project cash flows and summary benefits for all the three business models is provided in sections below.

1. The financial model indicates the economic viability for implementation of Ag DSM pilot project through ESCO Mode with Project IRR of 19.21% for a project cycle of 10 years(Simple payback Period – 5 years). Where as project implementation through DISCOM Mode by MSEDCL utilising LMC fund, the Project IRR is 33.5% for a project cycle of 10 years (Simple Pay Back Period – 3 years).

2. Implementation of project through HYBRID Mode, where ESCO invests 33% of total investment (Rs. 4.33 Crores) and retains 55% of net savings, the project IRR is 27.27% for ESCO where as for MSEDCL the project IRR is 12.83% for a project cycle of 5 years (Simple Pay Back Period – 4 years).

3. 1 The cash flow statements over a ten year period for ESCO Mode & DISCOM Mode business model have been worked out. Where as for HYBRID Mode business model the cash flow statements are worked out for five year period .

4. For all the three business models, provision of tax on profits has been considered at the rate of 33.99%. Project implementation through HYBRIDE Mode business model provides a reasonable IRR of 27.27 % for ESCO & 12.83 % for DISCOM for project cycle period of five years. Where as for other business models the project cycle is 10 years. Hence HYBRIDE Mode business model indicate good financial viability and ensures minimum risk for project investors.

5. In the context of the agricultural DSM project, energy consumption in the baseline and project scenarios and consequently energy savings can be determined under two different approaches:

· One is the project monitoring and verification (M&V) approachthat determines energy savings based on monitored values of efficiency parameters like head, flow and energy consumption.

· Other approach uses standard values of pumping efficiency (baseline and project pumps) and usage hours to arrive at energy savings called the deemed savings approachContractually; ESCOs must stand behind technical performance and specific efficiency of the systems and equipment they install. These are key values in the M&V savings calculation. Other values in the savings equation, i.e., operating hours can be estimated using baseline energy consumption data and then stipulated in the project contract. In this way, the ESCO is not exposed to uncontrollable risks, but does assume responsibility for system efficiency. The Discom and State Government in effect, assume the uncontrollable risks. If the ESCO is paid based on the agreed value of its capital investment and delivered services, this formulation can produce equitable results.

· For this reason, from the point of view of the ESCO and its lender, a Deemed savings approach may be appropriate. This would involve pre- and post performance demonstration of a sample of pumps by a third-party firm to estimate savings per pump set basis. This information is then be used to stipulate savings based on the operating hours estimated using baseline energy consumption data for the entire project area. Periodic sampling of pump set efficiencies during the course of the contract period is important to account for any deterioration of savings and to confirm that the ESCO is meeting its warranty obligations. Even if a Deemed savings approach is used to determine payments to the ESCO, the Discom can implement a monitoring and verification savings approach for all feeders and pump sets to gather the most accurate information.

Carbon Credit Benefits

a. The responsibility of registering the pilot project for availing carbon credits will be with the ESCO.

b. The ESCO shall prepare the Project Design Document and obtain required approval from the United Nations Framework Convention on Climate Change (UNFCCC).

c. All required and relevant data, technical support and necessary documents will be provided to the ESCO by MSEDCL on a timely basis to support the ESCO's application for carbon credit.

d. The benefits of carbon credits as applicable can be solely availed by the ESCO.

Based on above DPR the MSEDCL invited RFP for implementing Ag DSM in the state of Maharastra.

Proposed structure of the project

Hybrid Business Model has been proposed with AgIA (Agriculture Implementing Agency) providing the initial capital investment through debt & equity, whereas MSEDCL would be providing the support through annual payment from LMC fund and energy savings.( MSEDCL utilizes a part of Load Management Charge (LMC) Fund collected under a tariff regulation for replacement of old inefficient pumps with new higher energy efficiency pump sets and contract out repair and maintenance of pumps and certain aspects of project works to a project contractor (DISCOM Mode).

Brief Roles and Responsibilities of the AgIA

The AgIA shall be responsible for dismantling the existing pump sets, procurement of new EEPS. (Electricity Efficient Pumps)
Installation, maintenance and repair/replacement. AgIA shall also be responsible for financing, implementing and operating the Project. The AgIA shall procure EEPS and install them with following minimum specifications:-

· BEE Star rated Pump sets - 4star & above as per the existing available models in the Market

Wide-voltage (should be operating at low voltage) Monoblock , open well submersible and bore well Submersible pump sets.
The discharge rate of the EEPS shall not be lower than the existing pump sets of the farmers.
EEPS installed shall be of the same type (Monoblock / Open well Submersible /Bore well Submersible) as the existing pump sets.
Low-friction foot valves conforming to relevant ISI Standard & specification and

The AgIA shall install EEPS with capacitor banks of relevant ratings as per the pump set requirement.
Farmers shall be provided EEPS free of cost. They will also be provided with free installation of the EEPS. The EEPS shall be procured with a minimum warranty of 12 months (1 year) by pump set manufactures. The total R&M of 60 months shall be provided with no cost to the farmers by the AgIA.
The AgIA shall dismantle the existing pumps and keep an inventory of old pumps (with proper tagging of consumer ID) for one year. Disposal of old pumps should then be undertaken in a manner that precludes their use or reinstallation in any form anywhere in India. The AgIA shall provide a written assurance to MSEDCL describing the manner of disposal. MSEDCL shall have the right to audit or hire a third-party auditor to confirm the appropriate disposal of all old pumps. The disposal of old pumps shall be carried\ out in the following manner:

· Photograph of old and new pump-set with consumer details shall be taken

· Before disposal of old pump sets, a hole of appropriate size shall be made in the pump set in the presence of Third Party Request for Proposal Ag DSM Pilot Project MSEDCL

The term of the project shall be for a period of five years from the Effective Date of completion of replacement of all the existing pumps with EEPS. The start date shall be when all EEPS have been commissioned by AgIA.
The AgIA shall be responsible for dismantling the existing pump sets, planning the procurement, installation and initial testing of new EEPS within six months from the date of signing of the contract with MSEDCL.
A Third Party agency in the presence of AgIA and MSEDCL shall test all the existing pump sets as well as the new EEPS at the time of replacement. The base-line and energy savings for the first six months shall be estimated based on this initial testing & average annual hours of operation of pump sets - 1640 Hrs (deemed savings approach).
For subsequent period of the project, a stratified random sampling technique shall be used to select the pump sets to be tested. Stratification criteria shall be the type and the rating of the pump sets. An estimated size of 10% of the total no. of pump sets shall be tested randomly every year.
The sample pump sets shall be tested by Third Party in the presence of MSEDCL and AgIA annually for demonstrating the savings. The pump sets shall be selected randomly every year based on the approach mentioned in above clause.
This information is then be used to stipulate annual savings based on the estimate of the average operating hours / annum (1640 Hrs) (Deemed Saving Approach)
Third party monitoring and verification agency could be a local NGO / Technical Institute etc.

Support given by MSEDCL

1. MSEDCL shall provide to the AgIA the data and support necessary for implementing the tasks stated above.

2. MSEDCL shall install meters on all pump sets connected on five project Feeders.

3. MSEDCL shall make payments on quarterly basis to the AgIA based on "guaranteed savings demonstrated/achieved as per following-

a. Energy savings sharing %

The percentage sharing between MSEDCL andAgIA shall be as follow,

Draft Contract/Agreement Ag DSM Pilot Project

1. % retained with MSEDCL: .........70%.................

2. % shared with AgIA: ………30%………..

b. Base level energy consumption

Baseline energy consumption is estimated based on KW measured at the motor input terminal of all the pumps prior to the replacement of the existing Pump sets multiplied by operating hours of 1640 Hrs per annum as specified in bidding documents / DPR. The baseline established remains same for 5 years of the project. Energy consumption by EEPS For first six months of the term - based on the initial testing & average annual hours of operation of pump sets of 1640 Hrs. For subsequent period of the project – based on the testing of sample of 10% of EEPS selected randomly every year & average annual hours of operation of pump sets ofb1640 Hrs. Quantum of energy saved or "guaranteed annual energy savings" Base level energy consumption minus the Energy Consumption by EEPS (Item no.5-Item no.6)

c. Periods for Demonstration of "guaranteed annual energy savings

i. Initially, at the time of replacement of all the old pumps by EEPS

ii. After a period of six months from the start date of the project

iii. Then every year from the second demonstration for the balanced project period

d. Pricing of energy savings

i. "Energy savings shall be priced at Rs 2.70 / kWh for a project period of five years

4. MSEDCL shall ensure good power supply quality and load management system in pilot area.

5. MSEDCL shall provide necessary support to the AgIA at the field level, as may be required by AgIA from time to time, including, amongst others, regarding access to consumer premises, replacement of existing pump sets, recovering old pump sets and signing ownership agreement with the farmer/consumer.

Implementation of Ag DSM in Other States

About 50% of Indian populations are farmers. About 20% of the farmers have electric pumps. Hence, only 10% of population directly benefit from agricultural electricity use. Lack of perennial rivers made ground water tapping a prerequisite in irrigation in south India. This has led to an increase in consumption of electricity by agricultural sector. 73% of Indian population depends directly or indirectly on agriculture.. In most of the states, agricultural consumption is un-metered. Consumers pay a flat rate tariff which is also highly subsidized. As a result there is further wastage of electricity by using sub standard pump sets.

On the basis of the DPR prepared by Mahrastra for implementing Ag DSM the potential of energy saving is upto 40% and as per estimation of BEE Overall electricity savings(from 20 million pumps) all over India is estimated at 62.1 billion units annually.

Taking the case of state of Uttar Pradesh ( For the basis of calculation to apply for all India for analysis purpose) based on the approved ARR, the average cost of supply for FY 2009-10 works out to Rs. 4.17/kWh (Rs 17,791 cr/ 42,661 MUs). Thus earning by sale of this saved energy to other consumers can be calculated as following-

ACS= Rs 4.17/unit

Cost of supply to Ag= Rs 1.10 /unit

Cost saving =4.17-1.10=Rs 3.07/unit

Total revenue earning by sale to other consumer = 62.1*10^9*3.07/10^7

= Rs.19065 Cr

For above saving the following investment shall be required towards implementing Ag DSM-

As per the DPR of Mahavitran for connected pumping load of 9523 kW investment required = Rs 583.2 Lakh

Taking the above to be true for India scenario the investment required may be to the tune of 1,00,000 Cr.

In case the project is implemented through an ESCO mode, the energy savings would be shared between ESCO and Discom. Assuming 95% of the proposed energy savings is shared with ESCO for 10 years. The financial model indicates the economic viability for implementation of Ag DSM pilot project throughESCO Mode with Project IRR of 19.21% for a project cycle of 10 years(Simple payback Period – 5 years). With CDM Benefits taken in to account the project IRR improves to 22.8%.

posted by anil tiwari at 7:51 am 0 comments

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2 JUN, 2011, 02.26AM IST, SARITA C SINGH,ET BUREAU

Five companies bid for NTPC's Rs 9,000-crore tender

NEW DELHI: Five firms, including one from South Korea , have bid for NTPC's Rs 9,000-crore tender for supply of nine units of supercritical power equipment.

A senior NTPC official said Bharat Heavy Electricals, L&T-Mitsubi

shi Heavy Industries, Thermax-Babcock & Wilcox, Alstom-Bharat-Forge and BGR-Hitachi, and South Korea's Doosan Heavy Industries had placed bids.

"We would evaluate the five bids and call for price bids in 1-2 months," the official said.

In February, the country's largest power producer had initiated bulk bidding for procuring boilers and turbine generators for three projects in the states of Karnataka, Orissa and Chhattisgarh, which have a total capacity of 7,200 mw. Technical bids for a Rs 9,000-crore boiler tender was opened on Wednesday.

Ansaldo Caldaie India , which is locked in a legal battle with the NTPC over a similar equipment contract, did not participate.

Foreign companies had stayed away from NTPC's previous round of bulk contracts for 660-mw projects because of a precondition that requires bidders to have manufacturing facility in India. Doosan, South Korea's largest power equipment company, qualified as it is setting up a facility in Haryana for producing 3,000-mw equipment a year.

Another Rs 9,000-crore tender for procuring turbine generators will open on Friday.

Supercritical technology, a forte of Chinese, Korean and Russian companies, is a relatively new area for Indian manufacturers. As per estimates of the Central Electricity Authority, about 60% of coal-based power projects in the 12th plan period and 90% coal-based capacity in 13th plan period are likely to be based on supercritical technology.

Last year, Russia's Power Machines had bid for a tender to supply 660 mw turbine generators.

The company was disqualified when it refused to set up a manufacturing facility in India.

http://economictimes.indiatimes.com/news/newsbyindustry/energy/power/Five-companies-bid-for-NTPCs-Rs-9000-crore-tender/articleshow/8686856.cms

3 MAY, 2011, 10.28AM IST,ET BUREAU

NTPC to lose Rs 10.4 crore a day if contracts not placed in time; stock down

NEW DELHI: State-run NTPC told Supreme Court on Monday that the company would lose 10.40 crore per day if equipment supply contracts for 5 projects worth 53,000 crore are not placed in time.

At 10:27 am, shares of the company were trading 0.19% down at Rs 181.05 on the Bombay Stock Exchange.

The apex court has turned down NTPC's plea to go ahead with the bidding procedure before next hearing, Ansaldo Caldaie India counsel Prashant Kumar said. A bench comprising Justices Altamas Kabir and Cyriac Joseph would start the final hearing over NTPC's plea from July 20.

NTPC moved Supreme Court last month against Delhi high court ruling preventing it from disqualifying Ansaldo Caldaie India from 11,000-crore equipment supply tender. The Delhi high court had on March 1 ruled against NTPC's decision to disqualify Ansaldo Caldaie India, a 73% subsidiary of Gammon India . An NTPC official said, "Pleadings of both sides are complete. We have emphasised on importance of the matter, which the court has appreciated." NTPC has alleged that Ansaldo Caldaie is making efforts to delay the matter causing loss to the exchequer.

"The estimated total cost of these projects is approximately 53,000 crore and each day delay of these projects cause a generation loss of approximately 148 million units of electricity. Further, this will cause approximately 10.40 crore per day loss on return on equity employed," the company said in its rejoinder submitted before the court.

NTPC had disqualified Ansaldo Caldaie from the boiler bulk tender, saying it does not have competence to supply evaporator, water wall - a critical component in boilers. Ansaldo said supplying self-designed evaporators' was not mentioned as qualifying criteria in NTPC notice inviting tender.

The legal tussle between NTPC and Ansaldo Caldaie has held the bidding process seeking bulk supply of 11 sets of 660-mw boilers. Bharat Heavy Electricals Ltd , Larsen & Toubro and BGR Energy have qualified in the first phase of bidding.

NTPC scrapped original bulk tenders for boilers issued in October 2009 and called fresh bids in June 2010, as Bhel was the only bidder left in race after L&T's disqualification. Anslado was not eligible for participating in the tenders in October 2009 and had sought extension of bid deadline then.
http://economictimes.indiatimes.com/markets/stocks/stocksinnews/NTPC-to-lose-Rs-104-crore-a-day-if-contracts-not-placed-in-time-stock-down/articleshow/8149836.cms
Nationwide movement if Lokpal demands not met: Agnivesh
BANGALORE: Civil society members of the committee to draft the Lokpal Bill will launch a non-violent campaign throughout the country if the government's final version does not incorporate all their suggestions, social activist Swami Agnivesh said here on Sunday.

"The civil society team is waiting the final draft. We will meet (Anna) Hazare in Delhi tomorrow. If government does not agree to our demands, a new non-violent programme will be launched all over the country. Maybe it will have somebody like Hazare taking to fast... but all will depend on the final draft," he said at function here.

He said the government's June 21 draft given to them was better than that of December 2010, but still there is no 'full satisfaction' on some contentious issues.

Agnivesh said "there will be no looking back on including Prime Minister within the ambit of draft of Lokpal bill, otherwise another struggle under Anna Hazare may become inevitable".

He said keeping the Prime Minister out of Lokpal would take away all its credibility. "This is because a Prime Minister usually keeps a dozen or more portfolios for himself. Currently most scams like the 2G, Cauvery-Godavari, which are now coming up relate to Prime Minister's Office ".

If government decides to keep the Prime Minister out of the Lokpal ambit, it will not just be a loss of credibility of Lokpal, but also "reflect very badly on the present prime minister," he said.

He recalled how former Prime ministers V P Singh and A B Vajpayee offered themselves to be under this law.

"Manmohan Singh had earlier offered to come under Lokpal. What has gone wrong now? Why is the government suddenly backing out? We do not understand," he asked.

Electricity sector in India

From Wikipedia, the free encyclopedia
The electricity sector in India supplies the world's 6th largest energy consumer, accounting for 3.4% of global energy consumption by more than 17% of global population. the Energy policy of India is predominantly controlled by the Government of India's, Ministry of Power, Ministry of Coal and Ministry of New Renewable Energy and administered locally by Public Sector Undertakings (PSUs).

Ramagundam Thermal Power Station, Andhra Pradesh

About 64.75%[1] of the electricity consumed in India is generated bythermal power plants, 21.73%[2] by hydroelectric power plants, 2.78% by nuclear power plants.[3] and 10.73% by Renewable Energy Sources. More than 50% of India's commercial energy demand is met through the country's vast coal reserves.[4] The country has also invested heavily in recent years in renewable energy utilization, especially wind energy.[5] In 2010, India's installed wind generated electric capacity was 13,064 MW.[6] Additionally, India has committed massive amount of funds for the construction of various nuclear reactors which would generate at least 30,000 MW.[7] In July 2009, India unveiled a $19 billion plan to produce 20,000 MW of solar power by 2022.[8]
Rapid economic growth has created a growing need for dependable and reliable supplies of electricity, gas and petroleum products. [9] Due to the fast-paced growth of India's economy, the country's energy demand has grown an average of 3.6% per annum over the past 30 years.[4] In December 2010, the installed power generation capacity of India stood at 165,000 MW [10] and per capita energy consumption stood at 612 kWh.[11] The country's annual energy production increased from about 190 billion kWh in 1986 to more than 680 billion kWh in 2006.[12] The Indian government has set a modest target to add approximately 78,000 MW of installed generation capacity by 2012 which it is likely to miss.[13][14] The total demand for electricity in India is expected to cross 950,000 MW by 2030.[15] Four major economic and social drivers characterize the energy policy of India: a rapidly growing economy, increasing household incomes, limited domestic reserves of fossil fuels and the adverse impact on the environment of rapid development in urban and regional areas. [16]
According to a research report published by Citigroup Global Markets, India is expected to add up to 113 GW of installed capacity by 2017. Further, renewable capacity might increase from 15.5 GW to 36.0 GW. In the private sector, major capacity additions are planned in ReliancePower (35 GW) and CESC (7 GW).[17]

[hide]

1 Administration

6.2.1 Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)

[edit]Administration

The Ministry of Power is the apex body responsible for coordination administration of the electrical energy sector in India. This ministry started functioning independently from 2 July 1992; earlier, it was known as the Ministry of Energy. The Union Minister of Power at present isSushilkumar Shinde of the Congress Party who took charge of the ministry on 28 May 2009.

[edit]Technical

Major PSUs involved in the generation of electricity include National Thermal Power Corporation (NTPC), Damodar Valley Corporation (DVC),National Hydroelectric Power Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level corporations, such as Andhra Pradesh Power Generation Corporation (APGENCO) in Andhra Pradesh, Tamil Nadu Electricity Board(TNEB) in Tamil Nadu, Maharashtra State Electricity Board(MSEB)in Maharashtra, Kerala State Electricity Board(KSEB) in Kerala, in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL four distribution Companies and one controlling body GUVNL, and one generation company GSECL and one transmission company GETCO), are also involved in the generation and intrastate distribution of electricity. The PowerGrid Corporation of India is responsible for the inter-state transmission of electricity and the development of national grid.

[edit]Funding

The Ministry of Power provides funding to national schemes for power projects via Rural Electrification Corporation Limited (REC Ltd) and Power Finance Corporation Limited (PFC Ltd) These Central Public Sector Enterprises provide loans for both public sector and private sector companies/ projects involved in building power infrastructure.

[edit]Demand

Electricity losses in India during transmission and distribution are extremely high and vary between 30 to 45%.[18] In 2004-05, electricity demand outstripped supply by 7-11%.[19] Due to shortage of electricity, power cuts are common throughout India and this has adversely effected the country's economic growth.[20][21] Theft of electricity, common in most parts of urban India, amounts to 1.5% of India's GDP.[22][23] Despite an ambitious rural electrification program,[24] some 400 million Indians lose electricity access during blackouts.[25] While 80 percent of Indian villages have at least an electricity line, just 52.5% of rural households have access to electricity. In urban areas, the access to electricity is 93.1% in 2008. The overall electrification rate in India is 64.5% while 35.5% of the population still live without access to electricity.[26] According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.[27] Multi Commodity Exchange has sought permission to offer electricity future markets.[28]

[edit]Generation

Total Installed Capacity (as on 28-02-2011) is 171,926.40 MW[29].[30]

[edit]Thermal Power

Main article: National Thermal Power Corporation
Current installed capacity of Thermal Power as of February 28, 2011 is 111,324.48 MW which is 64.75% [31]of total installed capacity.

Current installed base of Coal Based Thermal Power is 92,418.38 MW which comes to 53.75% of total installed base.
Current installed base of Gas Based Thermal Power is 17,706.35 MW which is 10.3% of total installed capacity.
Current installed base of Oil Based Thermal Power is 1,199.75 MW which is 0.9% of total installed capacity.

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

Indira Sagar Dam partially completed in 2008

Indian nuclear power plants

[edit]Hydro Power

Main article: Hydroelectric power in India
India was one of the pioneering countries in establishing hydro-electric power plants. The power plants at Darjeeling and Shimsha(Shivanasamudra) were established in 1898 and 1902 respectively and are among the first in Asia.
The installed capacity as of 28-2-2011 was approximately 37,367.4 MW.[32] The public sector has a predominant share of 97% in this sector.[33]

[edit]Nuclear Power

Main article: Nuclear power in India
Currently, twenty nuclear power reactors produce 4,780 MW[34]

Wind turbiness in Tamil Nadu

[edit]Renewable Energy

Main article: Renewable energy in India
Renewable energy in India is a sector that is still undeveloped. India was the first country in the world to set up a ministry of non-conventional energy resources, in early 1980s. However its success has been very spotty. In recent years India has been lagging behind other nations in the use of renewable energy (RE). The share of RE in the energy sector is less than 8% of India's total energy needs. Renewable energy in India comes under the purview of the Ministry of New and Renewable Energy.

[edit]Solar power

Main article: Solar power in India
The first Indian solar thermal power project (2X50MW) is in progress in Phalodi (Rajasthan), and is constructed by CORPORATE ISPAT ALLOY LTD. The solar thermal power plant has cost 4 times as much as the coal based steam thermal power plant, CIAL carried this 2x850 crore solar thermal project. It is the "pioneering of solar energy" in india. India is densely populated and has high solar insolation, an ideal combination for using solar power in India. Much of the country does not have an electrical grid, so one of the first applications of solar power has been for water pumping, to begin replacing India's four to five million diesel powered water pumps, each consuming about 3.5 kilowatts, and off-grid lighting. Some large projects have been proposed, and a 35,000 km² area of the Thar Desert has been set aside for solar power projects, sufficient to generate 700 to 2,100 gigawatts.
The Indian Solar Loan Programme, supported by the United Nations Environment Programme has won the prestigious Energy Globe World award for Sustainability for helping to establish a consumer financing program for solar home power systems. Over the span of three years more than 16,000 solar home systems have been financed through 2,000 bank branches, particularly in rural areas of South India where theelectricity grid does not yet extend.[35][36]
Launched in 2003, the Indian Solar Loan Programme was a four-year partnership between UNEP, the UNEP Risoe Centre, and two of India's largest banks, the Canara Bank and Syndicate Bank.[36]
Announced in November 2009, the Government of India proposed to launch its Jawaharlal Nehru National Solar Mission under the National Action Plan on Climate Change with plans to generate 1,000 MW of power by 2013 and up to 20,000 MW grid-based solar power, 2,000 MW of off-grid solar power and cover 20 million sq metres with collectors by the end of the final phase of the mission in 2020.[37]

[edit]Wind Power

Main article: 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, a combination of domestic policy support for wind power and the rise ofSuzlon (a leading global wind turbine manufacturer) have led India to become the country with the fifth largest installed wind power capacity in the world.[38]
As of June 2010 the installed capacity of wind power in India was 12009.14 MW, mainly spread across Tamil Nadu (4132.72 MW),Maharashtra (1837.85 MW), Karnataka (1184.45 MW), Rajasthan (670.97 MW), Gujarat (1432.71 MW), Andhra Pradesh (122.45 MW),Madhya Pradesh (187.69 MW), Kerala (23.00 MW), West Bengal (1.10 MW), other states (3.20 MW) [39] It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012.[40] Wind power accounts for 6% of India's total installed power capacity, and it generates 1.6% of the country's power.[41]

[edit]Strategies

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 sector.

Conservation 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 general public awareness.,

[edit]Rural Electrification

Jharkhand, Bihar, Uttar Pradesh, Orissa, Uttranchal, and Madhya Pradesh are some of the states where significant number (more than 10%) of villages are yet to be electrified.

Number of Villages (1991 Census) - 593,732
Villages Electrified (30 May 2006) - 488,173
Village level Electrification % - 82.2%

[edit]Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)

Main article: Rural Electrification Corporation Limited
Ministry of Power (Government of India) has launched nation-wide scheme for development of rural and household electrification in 2005 towards the National Common Minimum Programme goal of providing access to electricity to all. REC Ltd is the nodal agency for the mega-scheme. Under the scheme, 90% capital subsidy is provided by Government of India for overall cost of projects. Cumulatively till FY10, works in 190,858 villages have been completed and free connections to over 10 million below poverty line (BPL) households have been released.

[edit]See also

*	Energy portal

[edit]Notes

^ indianpowersector.com
^ indianpowersector.com
^ Electricity Outlook India: 2008
^ a b World Coal Institute - India
^ Winds of change come to country plagued by power blackouts
^ World Wind Energy Association (February 2009). "World Wind Energy Report 2008". Report. Retrieved 16-March-2009.
^ India commits Rs 180k cr to nuclear trade
^ India to unveil 20GW solar target under climate plan, Reuters, July 28, 2009
^ India: Can she make the most of her opportunities, Power Engineering international, March 2010, by Ravi Krishnan [1]
^ http://cea.nic.in/
^ Key World Energy Statistics-2007
^ Energy Information Administration - India
^ India to miss power capacity addition targets
^ Power generation figures were unrealistic,scaled down
^ India envisages about 950,000 MW power requirement by 2030
^ http://www.krishnaninc.com/Power_India_01.pdf
^ Citigroup Power Report: India: 2010
^ Indian prime minister sets 2012 as deadline to end power shortage in the country
^ "Information on Indian Infrastructure & Core Sectors". India Core. Retrieved 2010-08-26.
^ Electricity and power shortage holding India back
^ India Faulted for Failure to Improve Power Supply
^ "India struggles with power theft". BBC. 15 March 2006. Retrieved 3 January 2010.
^ "Reforming the Power Sector: Controlling Electricity Theft and Improving Revenue" (PDF). The World Bank.
^ Rural electrification in India
^ Revkin, Andrew C. (9 April 2008). "Money for India's 'Ultra Mega' Coal Plants Approved". The New York Times. Retrieved 1 May 2010.
^ http://www.iea.org/weo/database_electricity/electricity_access_database.htm
^ "Housing condition in India: Household amenities and other characteristics (July - September 2002)". Government of India.
^ "MCX move to launch electricity future faces legal hurdle". The Financial Express.
^ indianpowersector.com
^ Central Electric Authority, Ministry of Power
^ indianpowersector.com
^ "Highlights of Power Sector during month". Cea.nic.in. Retrieved 2010-08-26.
^ Hydropower Development in India: A Sector Assessment
^ Nuclear Capacity
^ Consumer financing program for solar home systems in southern India
^ a b UNEP wins Energy Globe award
^ Sethi, Nitin (November 18, 2009). "India targets 1,000mw solar power in 2013". Times of India.
^ "World Wind Energy Report 2008"
^ http://www.windpowerindia.com/statstate.html
^ India to add 6,000 mw wind power by 2012; but below target
^ http://www.peopleandplanet.net/doc.php?id=3357

[show]v · d · eElectricity sector in Asia

[show]v · d · e Nuclear power in India

Categories: Energy in India | Electric power in India

Govt plans to raise Rs 15,000 cr via maritime bonds

KOLKATA: The government is contemplating setting up a dedicated financial institution for maritime sector and raising about Rs 15,000 crore by way of bonds to ease flow of funds into the sector.

"We have a plan to raise Rs 15,000 crore through maritime bonds but before that we need a dedicated financial institution for the sector to raise resources," National Shipping Board Chairman P V K Mohan told PTI.

He said the process of consultation to decide on the model of the institution had begun.

"It can be a complete government institution or may be government-private initiative. A financial institution promoted jointly with private might help in fast rollout and implementation," Mohan said.

The government might think of using part of the money available with major port trusts to float the institution, port sources said.

The bonds would be in line with infrastructure bonds and utilised according to priority areas like coastal shipping, ship acquisition or development of port facilities, he said.

Commercial banks in the country are generally averse to funding port and maritime projects because of their long-gestation period which doesn't allow a suitable repayment schedule.

Investment of Rs 2.87 lakh crore by 2020, is envisaged in the port sector, the growth of which is key to the country's ambition to increase in foreign trade manifold.
A corporate state?
June 22, 2011
By Vandana Shiva

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2010 was the year of scams — 2G Spectrum, Commonwealth Games, Adarsh Housing Society etc.

2011 has emerged as the year of the fight against corruption — with social activist Anna Hazare's fast for a Lokpal Bill and Baba Ramdev's fast to bring back black money stashed away in foreign banks.

The midnight police crackdown on Baba Ramdev's satyagraha with 100,000 followers was yet another signal of the undemocratic tendency of the government to crush social movements and social protests.

At the same time, when Ramdev's satyagraha was attacked in Delhi, 20 police battalions were being used to crush the anti-Posco movement in Odisha and destroy the betel-vine gardens that are the basis of people's prosperous living economy, earning small farmers Rs 400,000 per acre.

The use of force has become the norm for the government dealing with people's protests.
In a democracy, which is supposed to be by the people, of the people and for the people, protests and movements are supposed to signal what people want or do not want.
Listening to people is the democratic duty of governments. When governments fail to listen to the people and use force against peaceful movements they become undemocratic; they become dictatorships.
When, in addition, governments that are supposed to represent the peoples' will and interests in a representative democracy start to represent the will and interests of corporations and big business, the government mutates from being of the people, by the people and for the people to becoming of the corporations, by the corporations and for the corporations. The state is becoming a corporate state. And this mutation transforms democracy into fascism.

Neo-liberal economic policies have a political fallout of inducing this mutation of government from a democratic representative of peoples' interests to an undemocratic representative of corporate interests. Not only is neo-liberalism leading to the privatisation of seed and land, water and biodiversity, health and education, power and transport, it is also leading to the privatisation of government itself. And a privatised corporate state starts to see people fighting for public good and economic democracy as a threat.

It is in this context that we need to read the repeated statements of government ministers that peoples' protests and social movements are a threat to democracy. Social movements are raising issues about economic justice and economic democracy. Corruption is a symptom of the deepening trends of economic injustice and undermining of economic democracy.

We need to connect the dots between the diverse social movements of tribals and farmers fighting to defend their land and natural resources, the movements of workers fighting to defend jobs and livelihoods, and the new anti-corruption movements whose faces are Mr Hazare and Baba Ramdev.

Corruption is the unjust, illegal and private appropriation of public resources and public wealth, be it natural wealth, public goods and services or financial wealth. The ecology movements and tribal and farmers' movements are fighting against the corruption involved in the massive resource grab and land grab taking place across the country for the mining of bauxite, coal and iron ore, for mega steel plants and power plants, for super highways and luxury townships.

Farmers fighting the land grab along the Yamuna Expressway were killed on May 7. While they received a mere Rs 300 per sq. m. for their land the developers who grab the land in partnership with government using the 1894 colonial land acquisition law sell it for Rs 600,000 per sq. m. This is corporate corruption.

I have just received an SMS:
* Lush Green Farmhouses in Noida Expressway
* 10 minutes from South Delhi
* Clubs, Swimming Pool, Cricket Stadium
* Government Electricity and Roads
Farmhouses of farmers are burnt and destroyed to create "farmhouses" for the rich. Farms are destroyed to create Formula 1 race tracks and swimming pools for the elite. This obscene, violent, unjust land grab is the cruellest face of corruption in today's India.

The privatisation of our seed, our food, our water, our health, our education, our electricity and mobility is another facet of corporate corruption. In the case of the privatisation of seed, farmers are paying with their very lives. Seed costs rise and farmers are trapped in debt. Farmer suicides need to be seen as part of the web of privatisation as corruption.

The government of Maharashtra has signed memorandums of understanding with Monsanto to hand over seed, the genetic wealth of farmers' research and the knowledge wealth of society to a seed MNC. This is corporate corruption. The government of India wants to totally dismantle the public distribution system to benefit agribusiness and corporate retail. Undermining the right to food is corporate corruption.

The appropriation of public and national wealth through bribes and black money is the third facet of corruption. It is when all the streams of the fight for economic justice and economic democracy join as one will we have a strong and vibrant movement for defending and deepening democracy. Social movements are the life blood of democracy.

The government will, of course, try its best to crush democracy to protect the private economic interests it represents. The two faces of government who most frequently make statements about social movements subverting democracy are the human resources development minister, Mr Kapil Sibal and the home minister, Mr P. Chidambaram, both of whom have represented corporations against the public interest in their legal career.

They carry these corporate loyalties into their political career. They will do their very best to use every undemocratic means to crush movements for democracy and justice. Operation Green Hunt in tribal areas and the midnight crackdown on Baba Ramdev's satyagraha are just two examples of the use of violence to protect corrupt corporate interests.

The corrupt militarised, totalitarian power of the corporate state is not democracy. Peoples' vibrant movements fighting the concentration of economic and political power and the corrupt means used for concentration of that power are at the heart of democracy. It is people and social movements who have kept and will keep democracy alive in India.

The author is the executive director of the Navdanya Trust

http://www.deccanchronicle.com/editorial/dc-comment/corporate-state-845

DIRECTIONLESS ECONOMY
Misguided policies
By S L Rao
The worst legacy is the power of the bureaucracy which occupies most influential positions in govt and regulatory bodies.

In twenty years the Indian economy has been transformed: Few recall that the 'Hindu rate of growth' was 3 per cent per annum for over two decades. Direct and indirect taxation have been rationalised and despite lower rates, tax revenues have boomed. Economic growth and higher tax revenues allow much greater social welfare expenditures than at any time in India's history. Exports are showing a healthy trend. India's economy has raised its stature in the world. As the London 'Economist' wrote in the early 1990s the Indian Tiger was let out of the cage of licensing and control raj and is now roaring. Many even dream of India as a superpower. But many of those who manage our economy today were the same reformers who had executed policies of the command and control economy. Most of our higher bureaucracy and politicians were brought up to suspect the private sector, prefer ex-government servants for key positions and for advice on policy. Despite apparent change, these old mindsets remain. In addition is the fixation to match China's growth miracle. High economic growth is the goal. Double digit inflation might hurt the poor, growing inequalities, corruption, black money, illegal holdings abroad, are undesirable, but will not be controlled because that will hurt growth. Getting volatile foreign institutional investment is easier than foreign direct investment, and loopholes are provided to encourage it. Policy legacies include a predilection for government ownership of key infrastructure and manufacturing sectors and a preference for disinvesting shares than privatisation and giving up control. Also an unwillingness to distance government ministers and bureaucracies from management of government owned enterprises. Results are the loot of public enterprises (for example, Air India and formerly Indian Airlines), technological backwardness as in BHEL, Coal India, Indian Telephones, energy shortages because of unforeseen shortages of coal, etc. Continued misguided policies like product reservations for small-scale sector and labour laws that discourage labour intensive industries to go for scale, adversely affect manufacturing competitiveness, and exports. Reluctance to give up government control also has led to preference for foreign shareholdings (institutional investments, also used to launder illegal earnings, and volatile foreign fund inflows) over foreign direct investment. The worst legacy is the power of the bureaucracy and its capture of most influential positions in government and independent regulatory bodies. High levels of corruption at every level of government and unwillingness to close the policy loopholes that enable it are a result, encouraged by vast and tempting government expenditures. Expensive procedures The other important impediment is the time consuming and expensive procedures making India one of the most difficult countries to start a business in. Privatisation of state owned enterprises would add to non-tax revenues, eliminate government support to inefficient undertakings, and improve the overall efficiencies in the economy. State electricity boards, BHEL, BSNL, and most other public enterprises could then benefit the economy. A pitiful neglect is of agriculture, employing 60 per cent of population, adding less than 20 per cent to GDP, and a major cause for mass poverty. Declining productivity, backward technologies, inadequate storage and transportation facilities, exploitative government pricing, export bans, are responsible but corrective action is absent because of vested interests. China, despite absence of private land ownership, does far better and agricultural productivity is lower in India for almost all produce compared to most Asian countries. Absence of policies for farmer oriented procurement, fragmentation of land holdings, contract farming, conserving ground water, utilising and pricing irrigation waters, are some major areas demanding corrective policies. After the Left withdrew support, the UPA government targeted high levels of economic growth (10 per cent has been mentioned), almost ignoring any other problems. Inflation especially of food products, consequent raising of interest rates, large volatile foreign fund inflows and resultant large swings in share prices and the external value of the rupee, large illegal fund out flows, many other issues that affect the macroeconomic balance, were given far less importance. India unlike China has been unable to focus on labour intensive industries since any sizeable employment is subject to stringent labour laws that make the industries uncompetitive. Nor has it, unlike China, encouraged foreign investment in assembly industries with small value-added, which in China ultimately became advanced technology oriented industries. This policy has made China the largest manufacturing country in the world and absorbed much rural labour. Indian bureaucracy is not accountable and has captured all the key levers in government including those of investigation and regulation. The result is massive waste in public expenditures, poor quality of work and non-inclusion of many deserving people in social benefits. Schemes are so designed as to enable vast siphoning off of funds by different levels in the bureaucracy. Instead of appropriate targeting and letting beneficiaries pay and be reimbursed for benefits, we continue to procure and deliver them physically. We need a transformation in mindsets of those in government. The young should replace the aged with their old mindsets. We must have strong institutional mechanisms for individual accountability, investigation, prosecution and more severe punishment for corruption. For this we need a younger and more savvy political leadership. http://www.deccanherald.com/content/172540/misguided-policies.html

IV Online magazine : IV438 - July 2011

Japan

A first turning point in the crisis

Pierre Rousset

Every day brings new revelations on the gravity of the nuclear accident at Fukushima Daichi and on the mendacious policies which covered the activity of the nucleocrat lobby, on the breadth of the risks imposed on the population by the choice of the atom, on the denial of democracy. The shock wave of scandal spreads across the Japanese archipelago. It could be said that the Japanese crisis has reached a turning point.

Initially, only small minorities mobilised against the social and energy policies of the government. Subject to incessant calls for national unity, the population was initially traumatised by the brutality and the violence of the triple disaster: earthquake, tsunami and nuclear crisis. Then the feeling of having been fooled by the sorcerers' apprentices spread, lighting the fires of popular anger. Faced with rising opposition, rather than apologising, the employers showed a clear will to let nothing go. Lines of confrontation are taking shape; the political issues of the months to come are emerging.

Fukushima: today's lies

Tepco, the operator of Fukushima 1, and the Japanese authorities have had to recognise that from the beginning of the crisis, the core of three of the six reactors of the power station had melted; that – contrary to previous affirmations – the earthquake damaged the buildings and that the tsunami was not alone responsible; that in drowning the fissile material to cool it, they had created a new major problem: a mass of radioactive water which spread on the site and made it impossible to work there; that they were totally unprepared for such an accident. Industry and administration have also not been capable of coordinating their action effectively faced with the disaster.

Note that the lack of preparation was not only Japanese. The international nuclear authorities never envisaged the Fukushima scenario: the simultaneous accident of four reactors with the conjuncture of an earthquake and a tsunami. A myth collapses, according to which "everything is planned for", "everything will remain under control". A truth is imposed: the scientific body (the physicists), the experts and the media have been complicit in a criminal lie. Indeed, most particularly in Japan, a country condemned to suffer violent earthquakes, the support of the population for the nuclear industry depends on confidence in "expertise ". It is this confidence which is being shattered.

Nuclear power: yesterday's lies

A sign of the times – although with delay and much timidity – the Japanese press is beginning to offer more critical information on the ongoing nuclear crisis [1].Progressively the veil is being lifted also on the history of nuclear lies in the archipelago. A Pandora's Box is opening.

The deployment of the nuclear industry is above all imposed on peoples on the basis of a dishonest promise: access to unlimited energy, cheap, risk-free, the basis of a continuous economic development and social progress. However, to make it accepted in Japan, it has been necessary to surmount two obstacles: the trauma of Hiroshima-Nagasaki and the concern aroused by the seismic instability of the archipelago.

To promote the nuclear industry in the 1950s, and conceal their culpability in the mega war crime of Hiroshima and Nagasaki, the United States opposed "atoms for peace" to "atoms for war"" – blurring the organic link between the two, with civil nuclear energy producing what the military need to produce the Bomb. As occupying power they obtained the active collaboration of the Japanese government to pass on the message, with a certain success: the figureheads of the movement against atomic weapons in Japan became fervent defenders of civil nuclear energy.

Another big lie, the affirmation that all was anticipated, all would remain under control, whereas the nuclear risk was created for hundreds, thousands of years and still more. It is enough to glance at past history to know that the history to come will bring natural disasters, industrial accidents, governmental crises, economic collapse, wars, revolutions and counter revolutions. However few journalists and scientists have derided this claim to keep fission (which cannot be cut off like electricity) and the emission of radioactivity (that cannot be destroyed) eternally under control. Dissident voices were rendered inaudible thanks to the backing contributed to the nucleocrat enterprise by the body of physicists and experts, relayed by the opinion formers, who have played a truly criminal role. Cracks appear today in the academic front, whereas the people doubts the experts. Beyond its specificities the history of nuclear lies in Japan greatly resembles what has happened in other countries, France most particularly.

The end of received ideas

A more surprising aspect of the consequences of the disaster of March 11 is that the lack of preparation of the Japanese authorities does not concern only the nuclear aspect of the crisis, as shown by a report prepared by the UNO which the Japan Times [2] has published.

The combination of the earthquake, its repeated aftershocks, the tsunami and the nuclear emergency, notes the report, provoked a simultaneous "multisectoral" collapse of infrastructures – a type of collapse generally associated with less developed countries: incapacity to rapidly supply water, food and shelter to those affected or to re-establish the functioning of communications and services. Although Japan's level of preparation for earthquakes certainly saved numerous lives, the authorities have not wished to invest in protection from events deemed to be improbable.

One figure illustrates the breadth of the problem: in the mid May note of Yomiuri Shimbun [3] in average only 30% of the aid passing through official channels reached the victims, so great was the disorganisation.

Employers in battle order

The Japanese crisis makes no exception to the rule: in time of humanitarian disaster class domination strengthens more than it is blurred in the name of solidarity. The bosses have made it known that they would not challenge the choice of nuclear energy, that they considered that Tepco and the nuclear industry were neither guilty nor responsible, that the indemnification of the victims should be financed by taxes or increased electricity prices – pushing to its end that very capitalist logic according to which profits are privatised and losses socialised.

The Japanese economy has entered into recession and for the first time since 1980, in April the trade balance was in deficit. The employers argue the crisis justifies a cut in social aid, increased taxes borne by the population, and the reduction of protection against layoffs. The bosses are leading a head on offensive on the nuclear question and on social rights. The résistance should also link the two questions.

The rise of resistance

In the nuclear area, there has been a loss of confidence in the "experts" among the public, while the people have been particularly shocked by the cynicism of the government, which has increased the legal rates of radiation; and this not only for the personnel working in the Fukushima 1 power station, but also for the school students of the region. "Can the government guarantee the health of our children?" ask the parents [4].

As in France, the nuclear industry in Japan uses the weapon of financial blackmail, to silence opposition, manipulating taxes and subsidies in the localities where the power stations are established. The government has nonetheless had to agree to temporarily close the reactors at Hamaoka, an installation particularly poorly prepared for a tsunami. Other scandals have come to light, like that of the breeder reactor at Monju, in the bay of Tsuruga. It is situated on a very active seismic fault and had been closed in 1995 following a serious sodium leak. Reopened in May 2010, it experienced a new accident three months later when a part of the cover fell in the pit of the reactor. Since, no solution has been found and one of the site managers has killed himself, leaving a testament whose content is kept secret.

Today, the anti nuclear movement has taken off. After sometimes significant demonstrations (17,500 in Tokyo in two places), a call was made to pass from local action to national and international action, with June 11 a world day of mobilisations [5].

This passage from local to national resistance remains to be carried through on the social terrain. Initiatives are being taken in defence of workers in the nuclear industry, subject to radioactive risk. Village dwellers express dissidence. Refugees denounce their conditions. Radical trades unionists fight in defence of social rights. But there is not for the moment, a call to makes these struggles converge.

Radical activists, however, are making the link between the social and anti-nuclear struggles [6]. Innovative initiatives like the sit-in before Tepco headquarters have been initiated by trades unionists

The political stakes

Activists from political, associative and trade union backgrounds took part in the anti nuclear mobilisations. But the latter are largely dominated by youth without prior commitments, using the social networks as a mode of keeping in touch. They also now involve parents concerned for the future of their children. The entry into action of milieus without political traditions gives strength and vitality to the emergent movement of resistance. Without a precedent for forty years in the Archipelago, it shows that we are witnessing a turning point in the political situation of the country.

The Japanese crisis is not "sectoral"; it does not concern "only" nuclear energy or "only" social issues. It is a crisis of confidence, a democratic crisis, a legitimacy crisis for the government, a national crisis. It will not be easy for the elites to overcome it. But it is also a crisis without a ready constituted alternative and it will not be easy for the rank and file to give form to a real political alternative.

For the first time, certainly, plans for ending nuclear power are being drawn up. But in the event that the administration would be forced to withdraw on this terrain (for now it has renounced plans to increase the share of nuclear power in electricity production from 30 to 50%), the industry would propose its own alternatives, productivist, chosen for the profit that they can generate and not for their social and ecological rationality. It is not enough to close existing power stations. It is necessary also to change the energy paradigm – which cannot be done without attacking its dominant economic logic (capitalist) and the established powers. It should be hoped that the disaster at Fukushima does not get worse; but even in the most optimistic hypothesis, the affected power stations will continue for a very long time to emit radioactivity. As to the social conflict, it is only beginning and will accompany the whole period of post-tsunami reconstruction. It is to solidarity in the long term that we must look.

The internationalisation of the stakes

The shock wave from Fukushima has been felt well beyond the Japanese archipelago. It has stimulated other mobilisations as in Jaitapur in India against the construction of a giant nuclear power station. It strengthens public rejection of nuclear power where this was already strong as in Germany, and reduces public support where it was predominant, as in France.

The political context has changed following Fukushima. Also from the point of view of industry, the economic profitability of investment in nuclear power is challenged, given the price of the new safety demands that the Japanese disaster, after that of Chernobyl, will impose. It is symptomatic that the German company Siemens has just decided to withdraw from this sector, and the Swiss authorities have announced an end to nuclear power, while other governments hesitate. For its part, the French government maintains an unbridled defence of the nuclear options

Unfortunately at an excessively high price, the disaster of March 11 has opened a breach in the wall of nucleocracy. The Japanese people must simultaneously face the consequences of the earthquake, the tsunami and the Fukushima disaster. At this difficult time they need our solidarity.

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Pierre Rousset is a member of the leadership of the Fourth International particularly involved in solidarity with Asia. He is a member of the NPA in France.

NOTES

[1] There is a reflection of this in the numerous articles from the Japanese press in English that we put on line at ESSF. None of the big Japanese media outlets are anti-nuclear. "Asahai" or "Asahi Shinbun" is a centrist national daily which produces an English language weekly and puts some articles in English online and "Mainichi Shimbun" has a similar position. The "Japan Times", a little more left wing, is a daily published in English only. "Yomiuri Shimbun", very much more right wing, is strongly pro-nuclear. This group also produces a newspaper in English, the "Daily Yomiuri". "Nikkei" or "Nihon Keizai Shinbun" ("Japan Economic Newspaper") is the Japanese equivalent of the "Financial Times" in Britain of the "Wall Street Journal" in the USA. The group produces a weekly in English and an online service

[2] Japan Times, May 27, 2011. On ESSF (article 21728): "Japan/Tohoku: U.N. cites 'synchronous' infrastructure failure"

[3] "Yomiuri Shimbun", May 24, 2011. On ESSF (article 21679): "Japan/Tohoku: Only 30% of donations reaches victims"

[4] see articles from the Japanese press on ESSF (article 21704

[5] See on ESSF (article 21553): "A Call From Japan – Action June 11: No Nuclear Power"

[6] [See for example, "Japan: Let's defend our lives and employment through the unity and solidarity among workers!" ESSF (article 21609

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