International Conference on Global Participation in Indian National Grid, Energy Management and Convergence
August 17-18, 2001

Keynote Address by Shri A.K. Basu, Secretary, Ministry of Power, Government of India

Hon'ble Union Minister of Power Shri Suresh Prabhu,
Hon'ble Minister of State for Power, Smt. Jayawanti Mehta,
Acting Ambassador of France,
our Partner Country,
distinguished delegates from India and abroad,
ladies and gentleman,

I extend a warm and sincere welcome to all of you at this very important seminar. The Conference is being held at a time when India is passing through and exciting phase of reforms and restructuring in the power sector.

It is appropriate that this meet is taking place in Mumbai, the commercial capital of India.

This sector has been identified as a critical area for growth of the Indian economy. We have drawn up a plan to add around 1,00,000 MW of additional generation capacity, along with the associated transmission and distribution network, by the end of 11th Plan i.e. by the year 2012. This would require an investment of about US$ 200 billion in the power sector. Foreign investment will be important source of funding for this ambitious programme. The thrust of the capacity addition. A decision has now been taken to accord equal emphasis on development of transmission and distribution sector to match the generation programme. It is estimated that an investment to the tune of US$ 50 billion in the transmission sector alone, will be needed to match the capacity addition programme.

The Power Sector in India is undergoing a dramatic transformation and the vertically integrated utilitles which have till now dominated the scene, are being exposed to the forces of competition. To ensure transparency in tariff setting sixteen States have either set up Regulatory Commissions or are in the process of doing so. Many states have already unbundled vertically integrated utilities and formed distribution companies which are being privatized. Nine Regulatory Commissions have issued tariff orders. With the restructured power sector, and with steps such as 100% metering, billing and improvement in collection efficiency, and energy audit, it is expected that T&D losses would go down to acceptable levels. We are according high priority to Demand Side Management, and a new Energy Conservation Bill is awaiting Parliament approval.

Today, 100% Foreign Direct Investment is allowed in the Power Sector. Till date, a total of 27 private sector power projects with capacity of around 5500 MW have been commissioned. A total of 19 projects of around 5850 MW are under construction. Though this is much less than we would like to have, there has been a significant change in the environment for development of private power projects. In a landmark development in private sector participation, a Memorandum of Agreement was initialed between financial institutions and Andhra Pradesh Government last week for financing of selected Independent Power Producers (IPPs) in Andhra Pradesh without insisting on an immediate escrow, but on the basis of an alternative security mechanism linked to achievement of reform milestones. The Government of India has also been actively pursuing the Mega projects. To overcome the problems encountered for such large projects, the Government is also considering a revised payment security mechanism.

Government has recently decided to elecided to electrify all villages feasible to be connected with the Grid by the year 2007. It is also proposed to encourage decentralized systems run on more efficient lines, to supply to compact areas and communities, particularly in remote areas. The Small decentralized networks could be subsequently linked to a more reliable National Grid. Enabling provisions in this regard are proposed to be made in the Electricity Bill.

The responsibility for developments of transmission systems including establishment of a countrywide National Grid has been entrusted to Power Grid Corporation of India Ltd, which has also been designated as the Central Transmission Utility(CTU). POWERGRID is presently responsible for operating and maintaining EHV transmission network of over 40,000 kms with an availability consistently exceeding 98%, at par with international standards. Around 40% of total power generated in the country is being wheeled through this network. The capacity for inter-regional transfer of power would be augmented from about 5000 MW at present to about 30,000 MW by the year 2012 when the National Grid is fully established. We have also undertaken implementation of the state-of -the art Unified Load Dispatch and Communication (ULDC) facilities in the country on real time basis for economic dispatch of power. An investment of about US$ 15 billion is envisaged in Central transmission. An equivalent amount is also expected from Transmission companies in the States which have been designated as State Transmission Utilities. Out of this, about US$ 6 billion is expected to be brought in by private investors.

"Convergence" in power and telecom is driving both the key sectors to integrate and offer unique opportunities for growth with marginal investments. In keeping with the international trend, POWERGRID will be establishing a state-of-the art optical fibre telecom network of about 14,000 Kms in the next two years at an estimated cost of about US$ 225 million and covering over 56 cities. The Government of India has already granted POWERGRID an Infrastructure Provider-II license i.e. to lease capacity (bandwidth). The revenue generated from this venture would help in expeditious establishment of the country wide National Grid.

Transmission has been recognized as a distinct activity Guidelines have also been announced for private sector participation in the transmission sector. This is being done either through formation of Joint Ventures (JVs) or through Independent Power Transmission Companies (IPTCs). A basket of projects has already been identified for private sector participation, with an investment of about US$ 4.8 billion. To provide comfort to private investors, POWERGRID shall be obtaining all the initial clearances including right-of-way, forest clearances etc. for the initial projects to be offered to the private sector. A transparent level playing field is also now available along with an Independent regulatory mechanism for promoting private participation in the transmission sector. The central Regulator has already circulated the draft guidelines for competitive bidding which are expected to lead to more transparent and objective selection procedures. The Grid Code has already been notified by Central Regulator, and this is a first step towards more disciplined and regulated working of the Grid. CERC is also expected to shortly finalize the conditions of transmission licenses.

This Conference marks the shifting of policy gears to transmission and distribution. The coming years will be years of greater investment in transmission and distribution. The test will be for POWERGRID to attract and hold private investments by identifying transmission lines, creating an enabling for private investment and synergising the basic strengths of the Central Transmission Utility with the dynamism and resources of the private investor.

Transmission, Energy Management and Convergence in India today offer immense possibility of private and foreign investment. The necessary enabling provisions and procedures are all in place. From Government of India, we may assure you of our fullest support and assistance in investment in India. It is a vast and expanding market, and I have no doubt that you will take full advantage of the emerging opportunities.