X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Power: Search for light… - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 18, 2002

    Power: Search for light…

    As per the economic survey of 2001-02, India’s power generating capacity stood at 102,907 MW (mega watts) in October 2001. Out of this, it approximately managed to generate only 58,676 MW (or 57%) of electricity during FY02. What’s more, the pace of growth in electricity generation seems to have slowed down in FY02. Last year India generated nearly 499.6 bn kWh of electricity (up 3.9% YoY). Power generation during April-December, 2001 stood at 383.2 bn KWh (up 2.8% over the corresponding period in 2000), which is worrying.

    India has adopted a blend of thermal, hydel and nuclear sources to increase the availability of electricity. Thermal plants at present account for 80% of the total power generation, hydro electricity plants contribute 16% and nuclear plants account for the rest. Thermal and nuclear generation grew by 3.5% and 17.1% respectively, while hydro generation decreased by 3.6%.

    Capacity addition and generation…
    Year Capacity Addition
    (MW)
    % change Generation
    (BkWH)
    % change
    FY93 3,550 - 301 -
    FY94 4,565 28.6% 324 7.5%
    FY95 4,605 0.9% 351 8.2%
    FY96 2,135 -53.6% 380 8.4%
    FY97 2,624 22.9% 396 4.2%
    FY98 3,283 25.1% 421 6.4%
    FY99 2,747 -16.3% 449 6.5%
    FY00 2,907 5.8% 493 9.8%
    FY01 3,776 29.9% 500 1.4%
    FY02* 2,357 -37.6% 514 2.8%
    Source: CMIE
    *estimates

    On an average, India’s transmission and distribution losses (T&D) exceed 20% of total power generation compared to around 10% for developed economies. In fact, T&D losses in some states like Orissa and Karnataka are shockingly very high (49% and 37-40% respectively).

    This is however, only a part of the problem. India has to generate an incremental 10,000 MW of electricity every year for the next 10 years to plug the demand-supply gap. More importantly it has to bring transmission and distribution (T&D) at par with power generation. India’s T&D to generation ratio stands at a dismal 0.3:1, as compared to an international benchmark of 1:1.

    The main problem for all parties concerned is to mitigate risk. The poor financial health of the SEBs became a bone of contention between the investors and the respective state government’s. The shifting stand regarding the security package offered by the government of India in its policy has led to uncertainty in the minds of the institutions (foreign as well as domestic). Conflicting demands also came from these institutions, as they keep on adjusting their demands depending on the nature of the project, the state in which it is being set up and the changing stance of the government.

    Owing to heavy T&D losses suffered by State Electricity Boards (SEBs), low user charges and operational and technical efficiencies, the power system in the country is experiencing great difficulty. This has taken a toll on the power generation growth in India. In FY02, India managed to add approximately only 2,357 MW of capacity, against the 10,000 MW per annum needed. Most of the capacity addition took place in the public sector.

    But it will be wrong to say that India remains ignorant of the problems and its needs. Reforms are gradually picking up momentum. In order to make states more responsible, the centre promulgated new scheme namely the Accelerated Power Development Program (APDP) to provide financial assistance to states for undertaking renovation and modernization programs of power stations and also for strengthening transmission and distribution network. Under this scheme, a focused investment program has been initiated in 63 identified distribution circles that would be developed as centre of excellence in the first phase of the APDP program. An amount of Rs 9.8 bn was provided to SEBs during FY01. An amount of Rs15 bn has been budgeted for release to states during FY02 under APDP, and proposals are under consideration for the sanction of funds.

    In simple terms, APDP is an incentive given to the states by the centre wherein the centre is willing to write off the states past electricity losses, and help them develop power infrastructure. But in lieu of this, the states have to give an undertaking that SEB losses will be a thing of the past and T&D losses will be checked. If the state fails on this objective then losses incurred will be adjusted against the state’s planned outlay.

    One more important change in the government’s stance has been its focus. From now on transmission and distribution would be the focus of planned development and not generation. This bodes well for the sector as a whole as it is aimed at stemming the losses arising out of T&D as well as improving the existing utilisation of capacity.

    These measures should improve investments in the power sector. One only hopes that these measures are executed in spirit at the ground level.

     

     

    Equitymaster requests your view! Post a comment on "Power: Search for light…". Click here!

      
     

    More Views on News

    NTPC: Higher Tax Provision Impacts Profits (Quarterly Results Update - Detailed)

    Mar 30, 2017

    NTPC declared results for the quarter ended December 2016. The company reported revenue growth of 10.9% while profits declined by 7.5% YoY.

    NTPC: Capacity Addition a Key to Earnings Going Ahead (Quarterly Results Update - Detailed)

    Nov 23, 2016

    NTPC declared results for the quarter ended September 2016. Here is our analysis of the results.

    Power Grid: Robust Performance Continues (Quarterly Results Update - Detailed)

    Nov 23, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended September 2016. The company reported a revenue and profit growth of 28% YoY and 32% YoY respectively.

    Power Grid: Steady Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended June 2016. The company reported a revenue and profit growth of 31% YoY and 35% YoY respectively.

    NTPC: Good Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    NTPC declared results for the quarter ended June 2016. Here is our analysis of the results.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE POWER


    Aug 18, 2017 (Close)

    S&P BSE POWER 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS