EVOLVING PERSPECTIVES IN THE DEVELOPMENT OF INDIAN INFRASTRUCTURE EVOLVING PERSPECTIVES IN THE DEVELOPMENT OF INDIAN INFRASTRUCTURE Volume 1 Infrastructure Development Finance Company Limited ORIENT BLACKSWAN PRIVATE LIMITED Registered office 3-6-752 Himayatnagar, Hyderabad 500 029 (A.P.), India Email: [email protected] Other offices Bangalore, Bhopal, Bhubaneshwar, Chennai Ernakulam, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, New Delhi, Noida, Patna © Infrastructure Development Finance Company Limited 2012 First published 2012 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Orient Blackswan Private Limited. ISBN 978 81 250 4666 0 Typeset in Minion 11/14 by Trendz Phototypesetters, Mumbai 400 001 Printed in India at Aegean Offset Printers, Greater Noida Published by Orient Blackswan Private Limited 1/24 Asaf Ali Road New Delhi 110 002 E-mail: [email protected] The external boundary and coastline of India as depicted in the maps in this book are neither correct nor authentic. CONTENTS List of Tables, Figures and Boxes vii Foreword by Rajiv B. Lall xv Acknowledgements xvii Introduction xix List of Abbreviations xxiii ENERGY 1 Power Sector Reform: Policy Decisions in Distribution 3 2 Power Sector in India: A Summary Description 13 3 Power Sector Reform in Argentina: A Summary Description 22 4 Orissa Power Sector Reform: A Brief Overview of the Process 31 5 Power Sector Financing: A Note on Conditionalities 40 6 Six Steps to Accelerated Privatisation of Electricity Distribution 52 7 Regulation of Petroleum Product Pipelines 70 8 Incentives, Ownership and Performance in Power Sector: The Case of UP 108 9 Discussion Paper on Developing Power Markets 124 10 Captive Coal Mining by Private Power Developers: Issues and the Road Ahead 143 11 Power Distribution Reforms in Andhra Pradesh 163 12 Power Distribution Reforms in Maharashtra 181 13 Power Distribution Reforms in Gujarat 202 14 Barriers to Development of Renewable Energy in India and Proposed Recommendations: A Discussion Paper 222 15 Power Distribution Reforms in Delhi 273 16 Power Distribution: Being Driven to Insolvency by a Governance Crisis 290 17 India Solar Policy: Elements Casting Shadow on Harnessing the Potential 334 TELECOMMUNICATIONS 18 Telecom Sector Reform: Restructuring Telecommunications as if the Future Mattered 363 19 Transitioning from Administrative Allocation of Spectrum to a Market-based Approach 372 LIST OF TABLES, FIGURES AND BOXES Tables Table 3.1 Total production of electricity and the share of different types of generation 22 Table 6.1 Timeline for accelerated privatisation of distribution 68 Table 7.1 Supply/demand—petroleum products (in mmt) 74 Table 7.2 Supply/demand—natural gas (in mmscmd) 76 Table 7.3 Gas demand estimates of different government agencies 78 Table 7.4 Total gas supply potential—Tenth Plan (in mmscmd) 79 Table 7.5 Total gas supply potential post K–G Basin find (in mmscmd) 80 Table 7.6 Projections for POL consumption 2001–2008 (in ‘000 metric tonnes) 97 Table 7.7 List of LNG terminals 97 Table 7.8 List of crude pipelines 98 Table 7.9 List of gas pipelines 98 Table 7.10 List of refineries 99 Table 7.11 List of oil product pipelines 99 Table 7.12 List of ports handling oil/petroleum products 100 Table 8.1 Cumulative commercial losses of consolidated UPPCL 111 Table 8.2 Performance parameters 112 Table 8.3 Performance of UPRVUNL generating stations 114 Table 8.4 Reduction of AT&C loss in North Delhi Power Ltd 117 Table 8.5 Collection efficiency (%)—governmental and non-governmental categories 119 Table 9.1 Recommended loan conditions 132 Table 9.2 Trading margins 136 Table 10.1 Coal blocks identified for the power sector 144 Table 10.2 Criteria for allocation of coal blocks 146 Table 10.3 Pre-production approvals for allottees of coal blocks 147 Table 10.4 Comparison of mining leases in Australia, Canada and India 151 Table 10.5 Normative time limit ceilings as provided in guidelines for allocation of captive blocks and conditions of allotment through the screening committee, Ministry of Coal 156 viii | Indian Infrastructure: Evolving Perspectives Table 10.6 Minimum time frame of process 159 Table 11.1 Steps taken for power sector reforms in Andhra Pradesh 168 Table 11.2 Investment in infrastructure 172 Table 11.3 AT&C losses (%) of distribution companies 174 Table 11.4 Collection efficiency (%) of distribution companies 175 Table 11.5 Subsidy received 175 Table 11.6 Profit with and without subsidy 176 Table 11.7 Peak deficit and energy deficit in AP 177 Table 11.8 Subsidy received by distribution companies 178 Table 11.9 Sales mix (%) of distribution companies 179 Table 11.10 Revenue mix (%) of distribution companies 179 Table 11.11 Expenses as (%) of total cost for distribution companies 179 Table 12.1 Progress of Single Phasing Scheme 188 Table 12.2 Power scenario in Bhiwandi—before and after franchising 192 Table 12.3 Profits of MSEDCL 196 Table 12.4 MSEDCL’s arrears 196 Table 12.5 Sales mix (as percentage of total units sold) 200 Table 12.6 Revenue mix (as percentage of total revenue) 200 Table 12.7 Expenses as percentage of total expense 201 Table 13.1 AT&C losses for distribution companies 213 Table 13.2 Distribution losses of discoms 213 Table 13.3 Collection efficiency of distribution companies 214 Table 13.4 Subsidy received by distribution companies 215 Table 13.5 Gap between ARR and ACS for distribution companies without subsidy 216 Table 13.6 Profits of distribution companies without subsidy 216 Table 13.7 Profits of distribution companies with subsidy 216 Table 13.8 Gujarat state peak deficit and energy deficit 217 Table 13.9 Quality of Service parameters for discoms 218 Table 13.10 Sales mix of distribution companies 219 Table 13.11 Revenue mix of distribution companies 219 List of Tables, Figures and Boxes | ix Table 13.12 Expenses as percentage of total cost for distribution companies 219 Table 14.1 RE potential and target cumulative capacity addition (in MWeq) 225 Table 14.2 Mismatch between RE capacity envisaged under policy and capacity addition targeted 229 Table 14.3 Policy instruments for promotion of RE 232 Table 14.4 Regulatory framework for promotion of RE 234 Table 14.5 Penalties for non-achievement of RPO 235 Table 14.6 Status of RPO across Maharashtra 235 Table 14.7 RET capacity added across states with tariff orders/FiTs 236 Table 14.8 Year-wise wind power capacity addition in Andhra Pradesh (in MW) 236 Table 14.9 Salient features of the schemes proposed under the solar power purchase policy of JNNSM 248 Table 14.10 Summary of RPOs at state level for select states 264 Table 14.11 FiTs for wind energy and assumptions for FiTs across states 266 Table 14.12 FiITs for solar power across states 267 Table 14.13 FiTs for SHP and assumptions for FiTs across states 268 Table 14.14 FiTs for biomass and bagasse and assumptions for FiTs across states 269 Table 15.1 Accepted bid loss rejection trajectory; minimum bid loss rejection trajectory 276 Table 15.2 Profits 280 Table 15.3 QoS parameters 281 Table 15.4 Peak and energy deficit 282 Table 15.5 Loan to Transco 282 Table 15.6 Expenses break-up of discoms 284 Table 15.7 Capital expenditure by discoms 287 Table 15.8 AT&C loss reduction by discoms 287 Table 15.9 Sales and revenue mix 288 Table 16.1 States exhibiting increases in losses from distribution business 292 Table 16.2 States exhibiting profits or decrease in losses from distribution losses 293 x | Indian Infrastructure: Evolving Perspectives Table 16.3 Most utilities have shown considerable reduction in AT&C losses between 2005–06 and 2008–09 294 Table 16.4 Agricultural consumption continues to remain unmetered—status in select states 296 Table 16.5 Level of agricultural consumption in select states in 2008–09 297 Table 16.6 Status of implementation of select distribution reform initiatives as of April 2010 298 Table 16.7 Cost recovery in 2008–09 301 Table 16.8 Status of tariff revision in states/union territories at the end of 2009 307 Table 16.9 Increase in revenue gap without subsidy for utilities between 2005–06 and 2008–09 309 Table 16.10 Consumer tariffs as percentage of Average Cost of Supply approved by SERCs in FY 2008–09 311 Table 16.11 Funding of revenue gap of utilities in Uttar Pradesh 315 Table 16.12 Means of financing the revenue deficits of utilities (indicative) 318 Table 16.13 Outstanding bank loans and government guarantees in select states (Rs crore) 320 Table 16.14 Interest expenses disallowed by ERCs primarily on account of short-term loans taken by distribution utilities 323 Table 16.15 Estimated financial losses of utilities in 2012–13 325 Table 16.16 Tariff trends in UMPP bids 327 Table 17.1 Projected deployment of funds in SPSA 340 Table 17.2 List of projects selected under migration scheme of JNNSM 353 Table 17.3 List of projects selected under JNNSM for bundling scheme 354 Table 17.4 Allotment of solar capacities in Gujarat 356 Table 19.1 International experience in spectrum trading 379 Table 19.2 Example of spectrum trading with revenue share payments 384 Table 19.3 Example of revenue neutral differential pricing between SSUs 386 Table 19.4 Allocation of spectrum in other countries 388 Table 19.5 Allocation of spectrum in Indian telecom circles 389 Table 19.6 Public spectrum registry—example of contents 390 List of Tables, Figures and