LN COLLEGE OF MANAGEMENT & TECHNOLOGY

MALAD (WEST) MUMBAI – 64.

ACADEMIC YEAR

(2007-2008)

SEMESTER I

PROJECT ON

“PROBLEM OF ELECTRICITY IN MAHARASHTRA”

PROJECT GUIDE

PROF. RANJIT KRISHNAN

SUBMITTED BY

HEMANT PALAV

ROLL NO. F029

MBA (FULL TIME)

DECLARATIONDECLARATION

I, HEMANT M. PALAV. Student of MBA {full time} LN COLLEGE

OF MANAGEMENT & TECHNOLOGY (Semester IST) hereby

declare that I have completed this project “PROBLEM OF

ELECTRICITY IN MAHARASHTRA” in the academic year 2007-

2008. The information submitted is true and original to the best of my

knowledge.

HEMANT M. PALAV.

MBA (FULL TIME)

ROLL NO. FO29

CERTIFICATECERTIFICATE

I, PROF. RANJIT KRISHNAN hereby certify that Mr. HEMANT M.

PALAV student of LN COLLEGE OF MANAGEMENT &

TECHNOLOGY MBA {Full Time} (Semester IST) has completed

project in the academic year 2007-2008.The information submitted is

true and original to the best of my knowledge.

SIGNATURE OF PROJECT GUIDE

ACKNOWLEDGEMENT

2

It gives me pleasure to present this project on “PROBLEM OF

ELECTRICITY IN MAHARASHTRA”. The subject matter is made more

compact and logical.

I am gratefully acknowledged the valuable efforts, suggestion and

clarifications provided by many by making this project practical.

It would be rather unfair on my part for not thanking our college LN College

Management & Technology for having shown their continuous faith on

me.

I take this opportunity to express our sincere appreciation and gratitude to

our college administrative staff that helped me.

I express my grateful thanks to every one who have contributed even in a

small way towards successful completion of this project.

3

CONTENTS

Sr no. Particulars Page

no.

1. INTRODUCTION 5

2. SHORTAGE OF ELECTRICITY IN MAHARASHTRA 7

3. PROBLEMS OF ELECTRICITY IN MAHARASHTRA 8.

4. PLANS 9.

5. UNION BUDGET 2007-08 AT A GLANCE - POWER 10.

6. SHORTFALL IN FIVE YEAR PLAN & FACE TO

FACE WITH UNION POWER MINISTER

MR.S.S.SHINDE

11.

7. SUGGESTION

8. CURRENT SITUATION IN MAHARASHTRA POWER

SECTOR

14.

4

9. ACCLERATED POWER DEVELOPMENT &

REFORMS PROGRAMME (APDRP)

21.

10. RURAL ELECTRIFICATION 22.

11. ALL INDIA INSTALL CAPACITY (in MW) 23.

INTRODUCTION

The power sector in MAHARASHTRA was organized as a separate

electricity board in mid 1950’s, after the 1948 Supply Act was passed. It

is being realized that the existing set up of SEBs are not enough to keep

pace with the growth in demand. The Electricity Act 03 (EA, 2003) has,

in particular, made ‘restructuring’ of SEBs on functional basis,

monetary.

5

MSEB (Maharashtra State Electricity Board) was restructured in June

2005 into four companies, which were incorporated under the

Companies Act, 1956. These were:

A generation company: Maharashtra state power Generation

Company Limited (MAHAGENCO)

A transmission company: Maharashtra state Electricity Transmission

Company Limited (MAHATRANSCO)

A distribution company: Maharashtra state electricity distribution

Company Limited (MAHADISCO) and

A holding company: MSEB Holding Company Limited holding

Government’s equity in these three companies.

SR NO. NAME OF

COMPANY

MANAGING

DIRECTOR

DIRECTOR

(FINANCE)

DIRECTOR

(OPERATION)

1 MSEDCL Dr.AJAYBHUSHAN

PANDEY

ARVIND

GHOSH

ANIL

PALAMWAR

2 MSPGCL AJOY MEHTA GULABSINGH

GIRASE

VINAY

BAPAT

3 MSETCL SUBRATO RATHO KHANDALKAR SHRISH

TAMOTIA

4 MSEB HCL SUBRATO RATHO VINAYAK RAO --

6

Restructuring has been done on the basis of a provisional Transfer Scheme

wherein the valuation of assets is based on book value of assets.

Government of Maharashtra’s resolution of January 2005, states that the

valuation of the assets of MSEB to be transferred to the companies should

finally be based on revenue potential of the assets transferred. The assets

would be revalued within a period of one year and this revaluation would be

effective retrospectively from the date of transfer. The financial restructuring

after revaluation, was to be determined in such a manner that the consumers

would face minimum increase in tariff.

7

MAHARASHTRA STATE FACES 5700 MW POWER SHORTAGE

The western region of the country comprising Maharashtra, Gujrat,

Madhya Pradesh, Chhatisgarh, is facing acute power shortage of nearly

10000 MW, which is mainly due to increase in demand. Maharashtra faces

maximum shortage of more than 5,700 MW followed by Gujrat (3,000

MW), Madhya Pradesh (1,000 MW) and Chhatisgarh (300 MW)

8

PROBLEMS OF ELECTRICITY IN MAHARASHTRA

There are five major problems face by electricity companies in

MAHARASHTRA

1) LOSSES BETWEEN GENERATION AND TRANSIMISSITION:

It is the major problem faced by the companies that there is loss in

transportation between the electricity generation and transimissition. First

generation company generate the electricity through power station like

PARLI, CHANDRAPUR, URAN (GTPS), KHAPERKHEDA etc. then it

transport to the transmission company. In that process there is loss of

electricity cause of infrastructure, technology

2) THEFT:

It is the serious and major problem face by the electricity

companies. In June 2007 PM MANMOHAN SINGH was addresses to the

MD of all state electricity companies about this problem. In

MAHARASHTRA the rate of electricity theft is near about 28%. There are

11 zones in MAHARASHTRA like AMRAVATI, AURANGABAD,

BHANDUP, KALYAN, KOKAN, KOLHAPUR, LATUR, NAGPUR,

NAGPUR (U), NASHIK, and PUNE. Out of 11 zones every zone has the

problem of electricity theft.

9

3) TENDENCY OF EMPLOYEES:

The electricity companies are formerly MSEB and now it’s the

public undertaking companies. The employees of state government are not

interested in the work and the management level also neglects the

performance of employees. There for there is not optimum utilization of

human resources and it resulted into the losses of companies

4) SHORTAGE OF PERSONNEL:

The electricity companies have problem of the shortage of personnel

because the decision of the recruitment is depend upon the state government.

Electricity companies have the workload and it is increases day-to-day.

Cause of the

5) LACK OF FINANCIAL HELP FRON CENTRAL:

After a dismal performance in the 10th plan, the power sector is facing

a similar fate in the 11th plan. There is a shortfall of 4,50,000 crore during

2007-12, which is nearly 45% of the total funds requirement.

MAHARASHTRA STATE PLANS NEW POWER TRADING

COMPANY

The holding company is planning to set up new state power trading

company. Though this company; it can buy power from independent power

producers. Power purchase agreement can be signed more easily without the

gestation period. The state is also looking at JVs with private players in

transmission sector. On the background of severe power shortage in the

10

state, the government will encourage and focus small power projects of 50-

100 MW where PPAs can be signed quickly.

RISING STEEL PRICES AFFECT MILLS POWER PLANS

The state government’s plans to tap sugar factories as an alternatives

source of power are affected due to rising steel price. The use of sugarcane

bagasse as a source of energy for production of power would have helped to

overcome huge power deficit in the range of 5000-6000 MW. Last year, the

state government in association with IL&FS launched ‘URJANKUR

NIDHI’ of Rs 418 crore for this purpose. The main aim of this fund was to

help sugar co-operatives in the state to set up their own co-generation plants

based on bagasse. Under the scheme, SPV was to be created which would

own the plant. The fund managers found proposals of 16 sugar factories,

which had, potential of generating 350-400 MW. However, there is hike

almost 20% in steel prices in last one year, which has made setting of power

to MSEDCL at Rs3.05 costly. The steel components in co-generation plant

is almost 60% and cost of commissioning such a plant is around 4.5 to 5

crore Rs, which is almost equivalent to any thermal plant.

11

UNION BUDGET 2007-08 AT A GLANCE (POWER SECTOR)

- Electricity generation has recorded a growth rate of 7.5 % in April to

December

- MOP has awarded two Ultra Mega Power projects (UMPP) in sasan

and Mudra. Seven more UMPPs are under process. Two more Ultra

Mega Power Projects to be added by July. 2007.

- The Ministry of power will facilitate setting up of merchant power

plants by private developers and private participation in transmission

projects.

-APDRP is being restructured to cover all district headquarters and

towns with a population of more than 50000. Allocation of funds to

APDRP hiked from Rs 650 crore to Rs 800 crore.

-19,758 villages have been covered so far under Rajiv Gandhi Grameen

Vidyutikaran Yojna. Allocation of funds to RGGVY increased from Rs

3000 crore in 06-07 to Rs 3983 crore in 07-08

12

SHORT FALL IN POWER FOR 11TH PLAN

After a dismal performance in the 10th plan, the power sector is facing a

similar fate in the 11th plan with the centers, states and private companies’

estimates to fall short by 4,50,000 crore during 2007-12, which is nearly

45% of the total funds requirement. The needs about Rs. 10, 31,600 crore to

add more than 70000 MW of generation capacity, besides creating and

upgrading transmission and distribution systems. However the sector will

have a shortfall of Rs 451607 crore, as stated in the report of the working

group on power for the 11th plan.

The major portion of the shortage is for states which are stated to make

total capacity additions of around 24000 MW in the 11th plan and need Rs

514167 crore. Out of Rs 359917 crore of total debt required the states can

arranged for 164973 crore. This leaves a gap of close to Rs 270000 crore in

debt and equity for the states taken together, after considering an additional

Rs 80000 crore in funding by special schemes such as APDRP and RGGVY.

According to the report of the working group, the centers needs total

funds of Rs 300000 crore, including Rs 90000 crore in equity. Of this, it is

facing a shortfall of Rs 26897 crore in equity and Rs 50807 crore in debt.

13

Power Minister Mr. Sushil Kumar Shinde, talks on the 10th Five Year

Plan, National Capacity Addition, Energy Conservation Union

Initiatives and his Vision for India.

IEEMA RESEARCH GROUP

Question- Unlike 8th and 9th five year plans, the 10th five year plan has a

greater achievement in terms of capacity addition. According to you, what

will be the figure achieved against the targeted addition pf 41,100 MW to

the Generation capacity.

Answer. Sometime back it was reported in the print media that due to delay

in some of the projects the slippage would be of the order of about 10000

MW in the 10th plan to examine why we had gone down in achievement as

compared to the target

Whatever we have achieved even after slippage of 10000 MW in the 10th

plan, we have achieved greater addition in capacity as compared to 8th and

9th plans we could add approximately 20000 MW. However, in the 10th plan,

we have done capacity addition of 30000 MW.

14

When I went into details, I noticed that there was slippage since the gas

based plants could not come on line as LNG was not available, though it was

expected that the LNG would be available from the foreign countries. Also

the gas was not available either locality or from foreign countries.

QUESTION – Though govt has opened doors for private developers in

transmission sector, there are very few takers. Do you feel we need more

private or public-private partnership in transmission sector?

ANSWER- Yes, absolutely we have opened the transmission sector also for

private or as joint ventures. In Himalayan range, there has been public-

private partnership. So far, we have 9,500 MW and we intend to go up to

27000 MW. We have covered all regions- east, west, north and south. This

shows that we have connected to each other so that the electricity generated

at a particular place can be taken to other places. We have to speed up this

now and we are doing so. I must tell you that our powergrid is doing

excellent work in this area.

QUESTION -Rajiv Gandhi Gamin Vidyutikaran Yojna (RGGVY) is the

most notable initiative taken by the Ministry of Power for the creation of

rural electricity backbone. With the current pace of progress, do you feel 1

crore house hold i.e. 125 lakhs villages electrified by 2009?

ANSWER- we are committed to giving electricity to each and every body by

the year 2012, every home in the country by 2009. Even village will be

electrified in the country. In the 10th plan, we have spent about rupees 5000

15

on the initiatives and in the beginning itself, we have electrified more than

28000 villages and this work is allotted not only to the utilities, but also to

central utilities like NTPC, POWERGRID and other power organizations.

QUESTION -Your message to the countrymen for power saving?

ANSWER- Power saving is very important. I have been telling that if we

save 20% of power, we save Rs 80000 crores and you see the perspective of

this problem. I am quite sure that if we make people aware of the problem

and discuss the same with them, it can be solved. I am quite confident that

those who are using electricity unnecessarily will also stop using when not

required.

IMPORTANTS:

- “If a state is having power shortage then the central government should not

come and give it to them. It is the responsibility of the state to look after the

problems of the people."

- “After the UPA government came into power, under the leadership of our

PM Manmohan singhiji, we took the decision to restart ENRON”

- “Power saving is a very important thing. I have been telling this if you

save 80000 crore and you see the perspective of this problem

16

MERC SUGGESTS PRIVATE PARTICIPATION TO LESSEN

POWER SHORTAGE

To improve power supply situation in the state, MERC has suggested

some changes in power sector. The commission in its communication

with the state government has suggested for adopting a franchisee

model where private sector entities would be allowed to set up small

power plants at various places undertake distribution and collect

payment from the consumers. As per estimate, the franchisee model

plants could generate over 7000 MW of power.

MERC has started that with increasing power crunch, there is need to

augment power production and installation of short gestation

generation capacity. It has recommended use renewable energy sources

such as biomass, small hydro and wind along with conventional energy

sources such as liquid fuel. The new system will help to reduce

technical losses and it will also allow private sector to function with

relative independence.

ECO-HOUCING GAINS MARKET ACCEPTANCE AND BANK-

SUPPORT IN THE STATE

The eco-houcing program, installed in Pune with USAID support in

the last two years, has successfully addressed the factors influencing

the scale-up of sustainable houcing development. Policy and market

17

intervention led by IIEC in the first phase, have helped accelerated the

adoption of energy efficient technologies and practices in the

residential sector and have setup stage for expansion of the program at

a national level.

UNEP SCHEME TO LIGHT HOMES IN RURAL PARTS OF

THE STATE

United Nations Environment Programme (UNEP) with the help of

Bank Of Maharashtra is bringing loan scheme for solar system in rural

parts of the state. The similar scheme has been already successful in

Karnataka. This scheme would be ray of hope to many houses in rural

Maharashtra where power situation is worsening day day. There is

large market for solar lighting products.

Mr. D. Mallya, CMD, Bank Of Maharashtra said that BoM has

designed a scheme called Mahadeep for financing solar home system

by providing finance without collateral. The objective is to reach out to

more than 2000 beneficiaries in the state by March 2008. UNEP has

identified around seven vendors to run this loan programme across

eight districts, which include Ahmednagar, Kolhapur, Nashik, Pune,

Ratnagiri, Satara, Sangli and Sindhudurg.

CURRENT SITUATION OF MAHARASHTRA POWER

SECTOR

18

1) SEB’s rating

State Government Parameters

Haryana, Delhi, Goa, Gujarat , Karnataka and Uttar Pradesh have

scored higher than the rest of the states on account of good structural

adjustment support provided to the utilities along with above average

subsidy payment track-record and satisfactory progress against targets

laid down in MoU / MoA with Ministry of Power (MoP). Many states

are gearing up provide aggressive financial and structural assistance to

the respective power sectors taking the next step in reforms in the

19

sector. These include formulation of Restructuring Plans and

unbundling on functional lines. With these developments in view, the

scores are expected to go up in the next review exercise

The states need to proactively address the issues of addition to

the power generation capacity in the state to cope up with the

increasing demand in the sector. Most of the Electricity Departments in

the North East and the Electricity Department in Sikkim, despite

having taken limited steps in terms of reforming the sector, have been

able to secure decent scores against the parameter ‘subsidy payable’ -

since the Non-Plan expenses to the Departments for meeting cash

shortfall is being treated as ‘subsidy’ payment. However, for most of

these states, the non-plan allocation for meeting the expenses of the

department are stagnating, implying curtailing of power purchases

unless cash collections are steeped up significantly

`1) ENERGY SHORTAE

MAHARASHTRA   POWER SECTOR PROFILE

ENERGY SHORTAGE (%)  & PEAK DEFICIT(%)

20

2)TRANSMISSION AND DISTRIBUTION LOSSES

TRANSMISSION & DISTRIBUTION LOSSES   (%)

21

3) SHARE OF POWER SECTOR IN MAHARASHTRA

MAHARASHTRA   POWER SECTOR PROFILE

SHARE OF POWER SECTOR OUTLAY IN MAHARASHTRA AS %OF

TOTAL OUTLAY

  VII PLAN - 26.14%

VIII PLAN - 21.70%

  IX PLAN - 15.20%

4) Comparative Performance during last five years (1998-2003)

Five year block: 1998-99 to 2002-03

Over

1993-94 to 1997-98

Generation (BU) during the period

Improvement of + 6.5%

yearly generation

22

 

Plant Load Factor (%) at end of

period

Improvement of + 7.4%

(during five years)

 

Capacity addition (MW)

+ 19.5% improvement in

Yearly addition [3750 MW

over 3138 MW]

 

Transmission lines addition (ckm)

23

+ 36.5% improvement in

Yearly addition [7011 ckm

over 5136 ckm]

 

H.T. Transformation (Substations)

addition (MVA/ MW)

+ 39.7% improvement in

Yearly addition

[11577MVA over 8282

MVA]

 

inter-regional transfer capacity

addition (MW)

Five fold improvement in

Yearly addition

[1080 MW over 220 MW ]

 

24

Fresh capacity approvals

TEC accorded to generation

projects (MW)

+ 5.2% increase on yearly

average

 

Power deficit (MU) at end of period

Improvement of 2.5% over

five years

 

Peak shortfall (MW) at end of

period

Improvement of 3% over

five years

25

 

Undertakings under Ministry of

Power

+ 16.5% increase yearly

 

+14.4% increase yearly

 

 

5) Accelerated Performance during last five years (1998-2003)

Electricity Generation

Enhanced generation performance during current five year block period of

2474 BU Compared to 1871 BU during the previous block.

Yearly generation at beginning of the five year block of 421 BU has improved to

531 BU (average yearly growth rate of more than 5%) while generation from

Central stations has improved by more then 6%.

26

Plant Load Factor of thermal stations has increased in the country from 64.7% in

1997-98 to 72.1% in 2002-03 and in Central sector stations from 70.4% to 77.1%.

Plant Load factor (%)

 

During last 9 months of current year

2003-04

  Generatio

n

- Overall -411 BU

  -Central

stations

-167 BU

     

PLF Overall -70.8%

27

  Central

stations

-76.3%

Improved performance in fresh additions with more than 18,000 MW of new

generating capacity and 35,000 ckm of H.T. transmission lines added during

the five years block against 16,000 MW and 26,000 ckm in previous five

years block period.

Accelerated Power Development & Reforms Programme (APDRP) has been

initiated to provide financial assistance to States for strengthening of

Transmission & Distribution networks.

Cumulative sanctions Rs. 16,647 cr. and releases Rs, 3,113 cr. till end

Mar.'03 it includes Rs. 379 cr. as incentive paid during 2002-03 to

Maharashtra, Gujarat and Haryana for exhibiting loss reduction.

- During 2002-03, under incentive component of APDRP; states of

Maharashtra, Gujarat and Haryana reduced their losses by over Rs.

1661 cr. and therefore claimed incentives of Rs. 830 cr.

- During 2003-04 budget allocation of Rs. 1750 cr each for Investment

and incentive component.

28

Turnaround plan for State power utilities: Introduced system of

rating of SEBs w.r.t. reforms process.

Six level intervention strategy - A six level intervention strategy

formulated for distribution reforms at National, State, SEB,

Distribution Circle, Feeder & Consumers levels" to ensure

accountability, deliverability and performance at all levels.

Anti Power -Theft Provisions - For curbing the theft and pilferage of

power, the States of Andhra Pradesh, Karnataka, Madhya Pradesh,

Uttar Pradesh and West Bengal have already enacted the Anti-Theft

Legislation. Further, Maharashtra, Punjab, Bihar, Kerala and Gujarat

have also taken steps in theft control resulting in increase in revenue

collection and reduction in commercial losses.

Acceleration in feeder metering

: Overall 86% of 11 KV feeders metering achieved with 100% in 10

States and more than 90% in 5 States.

Consumer metering: 100% completed in 7 States, more than 90% in 5 States.

Reliability index of power

supply being established: 17 towns/ cities reported

 Reliability index more than

96%.

AT&C losses in majority of identified circles have started

exhibiting reduction.

29

Rural Electrification

There are 80,000 villages, which are still unelectrified out of which 18,000

are situated in remote and inaccessible areas.

#Complete village electrification by end of Xth Plan.

# full household coverage by end of XIth Plan.

Villages electrified

Deteriorating performance, cause of concern, turnaround achieved in

year 2002-03

 

Rural electrification included under "Pradhan Mantri Gramodaya

Yojana"

States allowed to access 'Rural Infrastructure Development Fund,

RIDF.

Accelerated Rural Electrification Programme initiated with focus

on unelectrified villages, dalit bastis and hamlets at low cost funds;

subsidy to extent of Rs. 564 cr. to cover 4% Interest subsidy during

Xth Plan

Implementation of Kutir Jyoti intensified

- Budget provision of Rs. 100 cr. (for about 7.2 lakh single point

connections)

30

Allocation enhanced from Rs. 175 cr. to Rs. 600 cr. under "Minimum

Needs Programme, MNP".

Rs. 500 cr. annual allocation for loan assistance by REC for villages and

hamlets electrification at 3% and tribal and dalit basis electrification at

1 % which will be waived off on successful project implementation.

- Rural Electricity Supply Technology (REST) Mission constituted with

emphasis on decentralized distributed generation for electrification of rural

areas.

- The Mission has been set up to develop the indigenous technologies for

meeting the needs of the rural power supply and operationalize the schemes

on commercially feasible terms.

- Distributed Generation has been identified as one of the mechanism for

ensuring supply of power in rural areas by way of setting up small

generating units based on a variety of local fuels alongwith localized

distribution.

- A Workshop on Rural electrification through Distributed Generation

System organized on 27th Aug.’03 was attended by representatives from

States. The audiences were given presentations by the Technology providers

and select NGOs were also called to share their experiences.

- REST Mission has evolved Short Term, Medium Term & Long Terms

strategy for rural electrification by using different technologies

31

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