Ashish Garg 21

Center for Advanced Management and Power Studies
NATIONAL POWER TRAINING INSTITUTE

(Under Ministry of Power, Govt. of India)
Summer Internship Report

On
Operational & Financial Viability of Distribution Utilities

in Major States of India
Under the Guidance of
Mr. Sunil Varma Marri (Head-Energy)
iMaCS(ICRA)
&
Mrs Indu Maheshwari, Director
National Power Training Institute, Faridabad
ICRA Management Consulting Services Ltd

Submitted by
Ashish Garg
Roll No 21, Batch 2012-14
MBA (POWER MANAGEMENT)
NATIONAL POWER TRAINING INSTITUTE
Affiliated to
MAHARSHI DAYANAND UNIVERSITY, ROTHAK
OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

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CERTIFICATE
National Power Training Institute (NPTI) | | ICRA Management Consulting Services Ltd (IMaCS)

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DECLARATION
I, Ashish Garg, Roll no. 21 / Semester 3rd / Class of 2012-14 of the MBA (Power Management)
of the National Power Training Institute, Faridabad hereby declare that the Summer Training
Report entitled:
Operational & Financial Viability of Distribution Utilities in Major States of India

is an original work and the same has not been submitted to any institute for the award of any
other degree.
Project In charge
(Faculty)
Signature of Candidate
Countersigned
Director/Principal of the Institute

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ACKNOWLEDGEMENT
The projects done by me under this internship program wouldnt have been completed, if not for
the active help and guidance of various people.
I express my sincere thanks to Mr. Sunil Varma Marri (Head Energy Sector), IMaCS for giving
me a great opportunity to work in such a dynamic organization and for guiding me in all stages of
the project. I am thankful to Mr. Rohit Singh (Analyst), IMaCS for his guidance and support. I
have a deep sense of gratitude and respect for the entire staff of IMaCS for sharing their knowledge
and for assisting me.
I would like to thank my Project In-charge Mrs. Indu Maheshwari, Director, NPTI, Faridabad for
her support and guidance throughout the course of summer internship.
A special thanks to Mr. S.K Choudhary, Director (CAMPS), Mrs. Manju Mam, Director, NPTI
for their guidance throughout my summer internship and all faculty members for arranging my
internship at iMacs and being a constant source of motivation and guidance throughout the course
of my internship.
Ashish Garg
MBA (Power Management)

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TABLE OF CONTENTS
CERTIFICATE ........................................................................................................................................... 1
DECLARATION......................................................................................................................................... 2
ACKNOWLEDGEMENT .......................................................................................................................... 3
LIST OF FIGURES .................................................................................................................................... 7
ABBREVIATIONS ..................................................................................................................................... 9
EXECUTIVE SUMMARY ...................................................................................................................... 10
CHAPTER 1: INTRODUCTION ............................................................................................................ 12
1.1
POWER DISTRIBUTION SECTOR-SNAPSHOT .............................................................................. 12
1.2 OBJECTIVE OF THE PROJECT: ............................................................................................................... 13

1.3 SCOPE OF THE PROJECT: ......................................................................................................................... 13
1.4 SIGNIFICANCE OF THE PROJECT:......................................................................................................... 14
CHAPTER 2: INTRODUCTION TO THE ORGANISATION ........................................................... 15

2.1 ABOUT THE ORGANISATION: ................................................................................................................. 15
2.1.1 CONSULTING SERVICES .............................................................................................................. 16
2.1.2 SOFTWARE DEVELOPMENT ....................................................................................................... 16
2.1.3 ONLINE SOFTWARE & KNOWLEDGE PROCESS OUTSOURCING .................................... 16
2.2 THE ICRA FACTOR: .................................................................................................................................... 17
2.3 IMACS-ENERGY: .......................................................................................................................................... 21
2.4 BRIEF DESCRIPTION ABOUT FUNCTIONAL AREAS: ....................................................................... 21
2.4.1 REFORM, REGULATION AND PUBLIC POLICY: .................................................................... 21
2.4.2 RISK MANAGEMENT: .................................................................................................................... 22
2.4.3 TRANSACTION SUPPORT:............................................................................................................ 22
2.4.4 STRATEGY & OPERATIONS: ....................................................................................................... 23
CHAPTER 3: REVIEW OF EXISTING LITERATURE & RESEARCH METHODOLOGY ....... 25

3.1 LITERATURE REVIEW ............................................................................................................................... 25
3.1.1 NATIONAL TARIFF POLICY: ....................................................................................................... 25
3.1.2 NATIONAL ELECTRICITY POLICY: .......................................................................................... 25
3.1.3 OTHER LITERATURES .................................................................................................................. 26
3.2. RESEARCH METHODOLOGY .................................................................................................................. 28
3.2.1 FILTERING OF DATA ..................................................................................................................... 28
3.3 APPROACH .................................................................................................................................................... 30
3.4 RISK PROFILING OF STATES ................................................................................................................... 30

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CHAPTER 4: FACTS AND ANALYSIS OF ANDHRA PRADESH ................................................... 31
4.1 OVERALL SCENARIO ................................................................................................................................. 31
4.1.1 General Background and Political Economy ................................................................................... 31
4.1.2 Power Sector Overview & Evolution of Reforms ......................................................................... 32
4.1.3. Current Industry Structure .............................................................................................................. 32
4.2 APNPDCL ........................................................................................................................................................ 33
(Northern Power Distribution Company of Andhra Pradesh Ltd.) ................................................................. 33
4.2.1 Operational Performance .................................................................................................................. 34
4.2.2 Financial Performance ....................................................................................................................... 35
4.3 APEPDCL ........................................................................................................................................................ 36
(Eastern Power Distribution Company of Andhra Pradesh Ltd.) .................................................................... 36
4.4 APCPDCL (Central Power Distribution Company of Andhra Pradesh Ltd) ........................................... 39
Chapter 5: FACTS AND ANALYSIS OF GUJARAT .......................................................................... 43

5.1.1 General Background & Political Economy ...................................................................................... 43
5.1.3 Current Industry Structure ............................................................................................................... 44
5.2 DGVCL (Dakshin Gujarat VIJ Company Ltd) ............................................................................................ 45
5.3 PGVCL (Paschim Gujarat Vij Company Ltd) ............................................................................................. 48
Chapter 6: FACTS AND ANALYSIS OF MAHARASHTRA ............................................................. 52

6.1.1 General Background & Political Economy ...................................................................................... 52
6.1.3. Current Industry Structure .............................................................................................................. 53
6.2 MSEDCL (Maharashtra State Electricity Distribution Company Ltd) ..................................................... 54

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CHAPTER 7: FINDINGS & RECOMMENDATIONS ........................................................................ 58
7.1 FINDINGS ....................................................................................................................................................... 58
7.2 RISK MATRIX ............................................................................................................................................... 59
7.3 RECOMMENDATIONS: ............................................................................................................................... 60
BIBLIOGRAPHY & REFERENCES ..................................................................................................... 61

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LIST OF FIGURES
Figure 1: Distribution Reforms-AP............................................................................................................. 32
Figure 2: Consumer Category-wise Number of Consumers, Connected Load (MW), Sales Mix and
Revenue from Sale of Power-APNPDCL (2011-12) .................................................................................. 33
Figure 3: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APNPDCL (2011-12) ...... 34
Figure 4:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APNPDCL (2011-12).................... 35
Figure 5: Consumer Category-wise Number of Consumers, Sales Mix and Revenue from Sale of PowerAPEPDCL (2011-12) .................................................................................................................................. 36
Figure 6: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APEPDCL (2011-12) ...... 37
Figure 7:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APEPDCL (2011-12) .................... 38
Revenue from Sale of Power-APCPDCL (2011-12) .................................................................................. 39
Figure 9: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APCPDCL (2011-12) ...... 40
Figure 10: Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APCPDCL (2011-12) ................. 41
Figure 11: SNAPSHOT ANDHRA PRADESH ...................................................................................... 42
Figure 12: Distribution Reforms-Gujarat.................................................................................................... 44
Revenue from Sale of Power-DGVCL (2011-12) ...................................................................................... 45
Figure 14: Category-wise Net Growth in Input Energy and Energy Sold (MU)-DGVCL (2011-12) ........ 46
Figure 15:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-DGVCL (2011-12) ...................... 47
Revenue from Sale of Power-PGVCL (2011-12) ....................................................................................... 48
Figure 17: Category-wise Net Growth in Input Energy and Energy Sold (MU)-PGVCL (2011-12) ......... 49

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Figure 18: Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-PGVCL (2011-12) ...................... 50
Figure 19: SNAPSHOT GUJARAT ........................................................................................................ 51
Figure 20: Distribution Reforms-Maharashtra ............................................................................................ 53
Figure 21: Consumer Category-wise, Sales Mix and Revenue from Sale of Power-MSEDCL (2011-12) 54
Figure 22: Category-wise Net Growth in Input Energy and Energy Sold (MU)-MSEDCL (2011-12) ...... 55
Figure 23:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-MSEDCL (2011-12).................... 56
Figure 24: SNAPSHOT MAHARASHTRA............................................................................................ 57
Figure 25: Operational & Financial Performance ....................................................................................... 58
Figure 26: Risk Matrix ................................................................................................................................ 59

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ABBREVIATIONS
APCPDCL
Central Power Distribution Company of Andhra Pradesh Limited
APEPDCL
Eastern Power Distribution Company of Andhra Pradesh Limited
APNPDCL
Northern Power Distribution Company of Andhra Pradesh Limited
APERC
Andhra Pradesh Electricity Regulatory Commission
ARR
Annual Revenue Requirement
AT&C
Aggregate Technical & Commercial Losses
CAGR
Compounded Annual Growth Rate
CEA
Central Electricity Authority
CPSU
Central Public Sector Undertakings
DFA
Distribution Franchisee Agreement
Discom
Distribution Company
DGVCL
Dakshin Gujarat Vij Company Limited
DMS
Distribution Management System
DPR
Detailed Project Report
DSM
Demand Side Management
DTR
Distribution Transformer
EA 2003
Electricity Act 2003
ERC
Electricity Regulatory
FY
Financial Year
GDP
Gross Domestic Product
GIS
Geographical Information System
kWh
kilowatt hours
MIS
Management Information System
MkWh
Million kilowatt hours
MSEDCL
Maharashtra State Electricity Distribution Company Limited
MYT
Multi-Year Tariff
O&M
Operation & Maintenance
PAT
Profit After Tax
PFC
Power Finance Corporation of India Limited
PGVCL
Paschim Gujarat Vij Company Limited
PPP
Public Private Partnership
R-APDRP
Restructured Accelerated Power Development & Reforms Programme
RGGVY
Rajiv Gandhi Grameen Vidyutikaran Yojana
SEBs
State Electricity Boards
SERC
State Electricity Regulatory Commission
SLDC
State Load Dispatch Centre
SOP
Standards of Performance
T&D
Transmission & Distribution Loss

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EXECUTIVE SUMMARY
Electricity is the fulcrum of economic development in any country. India has installed power
generation capacity of 210 GW as on November 30, 2012, which is about 154 times the installed
capacity in 1947 (1362 MW). Electricity generation growth has been steadily improving year after
year, and in the year 2011-12, the total electricity generation was about 876.8 billion units of
energy with a growth of around 8% over the previous year. During the XI plan, the power sector
made considerable progress with a capacity addition of approximately 58 GW which was
significantly more than the capacity commissioned in the previous plans. Such an improvement in
performance was possible mainly because of strong private sector participation.
However, India still faces the challenge of poor reliability and quality of electricity, leading to
occasional blackouts. Even as availability of power has increased substantially with significant
investments on the supply side, the demand has consistently outstripped supply.
Distribution and Retail Supply is the most critical link in the electricity market, which interfaces
with the end-customers and provides revenue for the entire value chain. It owes to the fact of
sustenance of other elements in the sector such as generation, transmission, equipment
manufacturing; which depends on its operational performance and commercial viability. However,
despite of its critical importance, generation segment has always been on the agenda of the
government, in light of high energy deficit, necessitating need of huge capacity addition. Lack of
focus has resulted in poor operational and financial performance of the sector, thereby creating
greater need of sector transformation, with high calls for private participation in terms of Private
Franchising, Public-Private-Partnership (PPP) and Equipment Suppliers. As a result, tremendous
opportunities lie on fore in the sector, for various stakeholders.
The weakest part of the power sector remains distribution, which is incurring large losses. AT&C
losses are reported to be around 24 percent. This leads to high financial losses. The constant losses
of State Electricity Boards have created a debt trap. The estimated total loss run up by the SEBs
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has been pegged at Rs 2.4 lakh Crores.These are likely to rise to even higher levels because of the
increasing share of short-term purchase of power at high prices and losses have been funded largely
by short-term loans from banks/financial institutions, and discoms with their weak financial
position seem incapable of repaying these loans.
The report will develop a better understanding of the reasons for continued under-performance of
the sector on key dimensions. This report aimed at identifying successful states utilities and
learning from their experience. More specifically, the review will examine the implementation of
reforms, current operational and financial scenario of states and risk profiling of these states on
the basis of these performances.
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CHAPTER 1: INTRODUCTION
1.1 POWER DISTRIBUTION SECTOR-SNAPSHOT
Distribution and retail supply is the most important cog in the power sector value chain which
interfaces with end customers and provides revenue for the entire value chain. Indian electricity
distribution caters to nearly 200 million consumers with a connected load of about 400 GW that
places the country among the largest electricity consumer bases in the world. The consumers are
served by around 73 distribution utilities 13 electricity departments, 17 private distribution
companies, 40 corporatized distribution companies and 3 State Electricity Boards. Sustenance of
other elements in the sector like generation, transmission, equipment manufacturing is dependent
on the commercial performance and financial viability of the distribution sector in India. Over the
past 15-16 years, a number of states have worked to improve the commercial performance of their
state utilities, unbundling state entities, creating independent regulatory systems, and putting in
place measures to control losses and theft. However, progress has been difficult, and slower than
envisaged
Indias power sector is a leaking bucket; the holes deliberately crafted and the leaks carefully
collected as economic rents by various stakeholders that control the system. The logical thing to
do would be to fix the bucket rather than to persistently emphasize shortages of power and forever
make exaggerated estimates of future demands for power. Most initiatives in the power sector
(IPPs and mega power projects) are nothing but ways of pouring more water into the bucket so
that the consistency and quantity of leaks are assured...
Twenty years after reforms were introduced in the Indian electricity sector, the above remark still
holds good. The bucket in the above remark is the Indian electricity distribution sector, which
consumes no matter how much is generated, without adequately compensating the producers of
electricity for the same.
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Recently, Planning Commission had appointed a High Level Panel headed by Shri V.K. Shunglu,
former Comptroller &Auditor General in July, 2010 to look into the financial problems of State
Electricity Boards and to identify corrective steps. The terms of reference of this Committee
included reviewing the accounts of State Electricity Boards and State Distribution Companies as
on March, 2010 and to project their losses by 2017, reviewing the electricity tariff and also
examining the role of the State Governments, Electricity Regulatory Commissions and
Distribution Companies, assessing system improvement measures accomplished in distribution of
power etc. and finally, to recommend a plan of action to achieve financial viability in distribution
of power by 2017. The Shunglu Committee presented its Report to the Deputy Chairman, Planning
Commission on 15 December, 2011.It is time that we look at the underlying problems of this sector
and constructively work towards removing the bottlenecks to make it more efficient and customer
oriented.
1.2 OBJECTIVE OF THE PROJECT:
To get a Policy & Regulatory Overview of the distribution sector in major states of India.
To analyze the operational and financial performance of the respective state SEBs and compare
them accordingly on various parameters.
1.3 SCOPE OF THE PROJECT:

The scope of this project includes the following:
This project covers 3 major states and 6 distribution utilities of India which play a key role in
distribution sector.
To study the various regulations and policies implemented by the state from time to time.
To assess comparatively, the operational and financial performance of various SEBs
Risk profiling of the states on the basis of operational and financial performance.
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1.4 SIGNIFICANCE OF THE PROJECT:

There have been huge financial losses incurring to the state SEBs in the recent years.
Reduction of AT&C losses remains a major problem in almost every state. It is also very important
that the state actually implements various policies and different regulations from time to time. This
study helps us to locate the various drawbacks of state utilities, their operational and financial
performance and a comparison among the state utilities finally shows where the utilities of the
states stand upon.
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CHAPTER 2: INTRODUCTION TO THE ORGANISATION

2.1 ABOUT THE ORGANISATION:
ICRA Management Consulting Services Limited (IMaCS) is a multi-line management consulting
firm headquartered in India. It has an established track record of 17 years in management and
development consulting across various sectors and countries. IMaCS has completed more than
1200 consulting assignments with about 600 clients and has worked in over 40 countries across
the globe. IMaCS is a wholly-owned subsidiary of ICRA Limited (ICRA), one of Indias leading
credit rating agencies. IMaCS operated as an independent division of ICRA till March 2005, when
it was de-merged from ICRA and became a standalone company in its present form.
Launched in 1991, ICRA has been set up by a number of prominent Indian financial institutions,
banks, and insurance companies. ICRA has subsidiaries in Indonesia and Sri Lanka. Group ICRA
comprises four businesses, namely, Credit Rating, Management Consulting, Information
Technology, and Outsourcing, offered by four different companies comprising ICRA and its three
subsidiaries, namely, IMaCS, ICRA Techno Analytics Ltd. (ICTEAS) and ICRA Online Limited.
ICRA is listed on the National Stock Exchange and the Bombay Stock Exchange in Mumbai, India.
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2.1.1 CONSULTING SERVICES
ICRA Management Consulting Services Limited (IMaCS), a wholly-owned subsidiary of ICRA

Limited, is a multi-line consulting firm with a global operating footprint. IMaCS offers Consulting
Services in Strategy, Risk Management, Regulatory Economics, Transaction Advisory, and
Process Re-engineering. IMaCS' clientele includes Banks & Financial Service Companies,
Corporate Entities, Institutional Investors, Governments, Regulators, and Multilateral Agencies.
Besides India, IMaCS has consulting experience across 35 countries in South East Asia, Northern
Asia, West Asia, Africa, Western Europe, and North America.
2.1.2 SOFTWARE DEVELOPMENT

ICRA Techno Analytics Limited (ICTEAS), a subsidiary of ICRA Limited, offers a complete
portfolio of Information Technology (IT) solutions to meet the dynamic needs of present-day
businesses. The services range from the traditional development of client-server, web-centric and
mobile applications to the generation of cutting-edge business analytics.
Axiom Technologies Private Limited, a wholly-owned subsidiary of ICTEAS specializes in
customization and implementation services on Oracle E-Business Suite. Its services include
process study, fitment analysis, customization, implementation, and post implementation
maintenance services.
2.1.3 ONLINE SOFTWARE & KNOWLEDGE PROCESS OUTSOURCING

ICRA Online Limited (Online) is a leading information services, outsourcing solutions provider
and technology solutions provider and caters for some of the biggest names in the financial services
sector in India and abroad, which is a testimony to its product quality, commitment and credibility.
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Online has two Strategic Business Units (SBUs) with a list of reputed global and domestic clients:
The Information Services and Technology Solutions Division (MFI Division)
The Knowledge Process Outsourcing Division (KPO Division)
The MFI Division leverages its domain expertise to provide high quality technology solutions, in
the form of products, to a large number of Banks, Mutual Funds, Financial Institutions, Third Party
Products Distributors, Insurance Companies, Investment Advisors, Portfolio Managers, Stock
Brokers, Treasury Managers, and Academic Institutions, among others.
The KPO Division of Online offers Knowledge Process Outsourcing services that combine
advanced analytical abilities and deep domain expertise to deliver value by translating data and
information into structured business inputs.
2.2 THE ICRA FACTOR:

Facilitating efficiency in business ICRA information products, Ratings, and solutions reflect
independent, professional and impartial opinions, which assist businesses enhance the quality of
their decisions and help issuers access a broader investor base and even lesser known companies
approach the money and capital markets. They strongly believe that quality and authenticity of
information are derivatives of an organizations research base. We have dedicated teams for
Monetary, Fiscal, Industry and Sector research, and a panel of Advisors to enhance our in-house
capabilities. Our research base enables us to maintain the highest standards of quality and
credibility committed to the development of the financial market.
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IMACS
(ICRA MANAGEMENT CONSULTING SERVICES LIMITED)
Two significant feature of IMaCS growth story are that their large
Number of repeat clients and a high level of referral work
IMaCS (ICRA Management Consulting Services Limited) is a wholly-owned subsidiary of ICRA

Limited (referred to as ICRA in this document)
IMaCS is a management consulting firm headquartered in India.
Seven offices in India and an operating footprint across 35 countries.
Over the past 15 years, IMaCS has completed about 900 projects with 400 clients.
IMaCS operated as a division of ICRA till March 31, 2005 when it was demerged.
The clients comprise Governments, multilateral agencies, regulators and banks, corporate
and institutional investors.
Three lines of service: (1) Consulting (2) Analytics (3) Transaction Advisory.
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Expertise in Strategy, Risk Analytics, Process Re-engineering, Corporate Finance,

Regulatory Economics, and Development Consulting.
IMaCS has executed assignments for multilateral agencies such as The World Bank, World
Bank Institute (WBI), Commonwealth Development Corporation (CDC), United Nations
Development Programme (UNDP), United States Agency for International Development
(USAID), Department for International Development (DfID), African Development Bank
(AfDB), Asian Development Bank (ADB) and International Finance Corporation (IFC).
The main driver for IMaCS growth has been a growing need for unbiased and
professional views on adopting best business practices arising from economic deregulation,
growing international trade & integration, and the increasing need to be globally
competitive. Building on a carefully nurtured knowledge bank of global benchmarks for
business and management practices and a repository of high-quality analytical talent,
iMaCS has executed over 700 consulting assignments for a variety of Indian and
international organizations, Governments, and regulatory authorities
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iMACS mainly focus upon six practices areas stated below:-
Strategy
Practice Areas
Risk
Management
Enhancing Competitiveness/Market Assessment/Improving

Effectiveness/Market Intelligence
Credit Risk/Market Risk/Operational Risk/EWRM/Risk
Analytics/Software
Process
Consulting
Cost Reduction/Process Re-engineering/Organisation Design
Transaction
Advisory
M & A/Due Diligence/Project Advisory/Bid Advisory/Financial

Restructuring
Policy &
Regulation
Regulatory Economics/PPP Models/Governance
Development
Consulting
Energy
Investment Climate/Institutional Strengthening/Capacity

Building/Poverty Allevation/Sustainable Development
Banking &
Insurance
Infrastructure
Corporate
Government/
Multilaterals
Business Groups
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2.3 IMACS-ENERGY:
IMaCS Consulting Services in the Power Sector
IMaCS Energy Group is a leading provider of policy, regulatory consulting and transaction
advisory services to various stakeholders in the Energy sector. With a core team of in-house
consultants and partnerships with national and international organizations, IMaCS Energy
Group strives to help its clients become more competitive, effective and successful. Service which
ICRA offers are grouped across the following four broad functional areas:
Reform & Regulation
Risk Management
Transaction/Project Advisory and
Strategy & Operations.
Their services in the Power sector include restructuring vertically integrated state owned
enterprises, privatization of utilities, building capacity of public institutions, developing PPP
mechanisms, assisting project developers by providing project/financial advisory services,
providing strategic advice to utilities, and in fuel management.
2.4 BRIEF DESCRIPTION ABOUT FUNCTIONAL AREAS:

2.4.1 REFORM, REGULATION AND PUBLIC POLICY:
IMaCS assists governments, regulators and utilities seeking to establish and strengthen energy
sector reforms, which involves
Policy analysis and formulation
Market structure and competition
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Regulatory frameworks
Pricing
Power sector restructuring
Institutional reform
Private sector participation
Financial and operational restructuring
2.4.2 RISK MANAGEMENT:
IMaCS offers diagnostic and advisory services to project sponsors, developers, regulators,
financiers, and other parties by making a comprehensive analysis of project risks, which includes
Risk assessment and mitigation
Assessment of project sponsors and JV partners
Credit risk assessment
Investment risk assessment for equity/debt
Payment security mechanisms
Evaluation of credit structure
Fuel price risk management
2.4.3 TRANSACTION SUPPORT:

IMaCS assists both governments in promoting private sector participation as well as private
developers to participate in infrastructure development through contract /project structuring,
designing / reviewing concession agreements, and structuring solutions for payment and security
mechanisms, developing financial models, assessing risks and providing assistance in bidding for
energy sector projects. Service offerings in this function include
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Investment advisory
Project valuation
Project / structured finance debt, equity, mezzanine finance, credit enhancement
Preparation of bid documents
Evaluation of bids
Preparation and review of contractual agreements
EPC bid-process management
Power Purchase Agreements
Fuel Supply Agreements
2.4.4 STRATEGY & OPERATIONS:

IMaCS helps its clients to decide which lines of business to pursue; to decide their entry strategy
into the energy sector, to divest assets no longer consistent with their strategy; to improve
operational efficiency and productivity and to develop sourcing, bidding, trading, and contracting
strategies. Service offerings include
Business plans for utilities
Power and fuel market assessment
Organizational design and restructuring
Performance measurement and benchmarking
Process improvement
Operational strategy
Competitiveness study
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IMACS OFFERING IN THE POWER SECTOR
Reform & Regulation
Risk Management
Transaction Advisory
Strategy & Operations
Pricing/Costing Models
Tariff Setting Process
Institutional Development &
Capacity Building
Regulatory Frameworks
Unbundling/Corporatisation
Demand Side Management
Creating Competitive
Wholesale & Retail Markets
Performance Improvement
Regulatory Information
Systems
Project Risk
Assessment/appraisal
Assessment Of Project
Sponsors & JV Partners
Payment Security
Mechanisms
Enterprise Risk Management
CounterParty Risk TM 1
Assessment (CPRA )
Techno-economic Feasibility
Studies
Bid Process Management
Bidding Advisory
Drafting & Negotiation Of
PPAs/FSAs
Financial Closure For Projects
Strategic Equity Partnerships
M&A Advisory
Due Diligence & Business
Valuation
Market Assessment/Demand
Estimation
Business Planning
Entry/growth Strategies
Diversification/Backward
Integration Strategies
Coping With Regulation
Performance Measurement
& Benchmarking
Power Procurement
Improving Competitiveness
Financial Strategy
Electricity
Fuels
Renewables
Trading
Transmission
Distribution
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CHAPTER 3: REVIEW OF EXISTING LITERATURE &

RESEARCH METHODOLOGY
3.1 LITERATURE REVIEW
3.1.1 NATIONAL TARIFF POLICY:
Supply of reliable and quality power of specified standards in an efficient manner and at reasonable
rates is one of the main objectives of the National Electricity Policy. The State Commission should
determine and notify the standards of performance of licensees with respect to quality, continuity
and reliability of service for all consumers. Making the distribution segment of the industry
efficient and solvent is the key to success of power sector reforms and provision of services of
specified standards. Therefore, the Regulatory Commissions need to strike the right balance
between the requirements of the commercial viability of distribution licensees and consumer
interests. Loss making utilities need to be transformed into profitable ventures which can raise
necessary resources from the capital markets to provide services of international standards to
enable India to achieve its full growth potential.
Implementation of MYT Framework
Framework for revenue and cost requirements
Tariff design: Linkage of cost to service
Cross subsidy surcharge and additional surcharge for open access
3.1.2 NATIONAL ELECTRICITY POLICY:

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. 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. A time-bound
programme should be drawn up by the State Electricity Regulatory Commissions (SERC) for
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segregation of technical and commercial losses through energy audits resort to cherry picking by
demanding unreasonable connection charges from consumers.
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.
The Act requires all consumers to be metered within two years. SCADA and data management
systems are useful for efficient working of Distribution Systems. 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 ratios keeping
in view the techno economic considerations.
3.1.3 OTHER LITERATURES

Anoop Singh in his studies - Policy Environment and Regulatory Reforms for Private and Foreign
Investment in Developing Countries: A Case of the Indian Power Sector undertook a review of the
policy and regulatory developments in the Indian power sector. A review of the literature and a
comparative policy analysis helped us to unravel some of the lessons to be learned for the process
of reform in developing countries in general. The initial phase of power sector reform in India
allowed commercially-oriented IPPs to sell power to financially weak SEBs, which do not rely on
sound commercial principles. This marriage of convenience is not sustainable. The experience of
private sector investment in Latin American countries relied on the introduction of commercial
interest in the bulk power market by inviting IPPs as well as introducing commercial principles at
the end of buyer utilities through their divestiture. The long-term interest of the consumers can
only be served if reasonably priced electricity is available over the long-run. Political interests
would best be served by depoliticizing tariffs, which would be beneficial to consumers in the longterm through improved quality and reliability of supply. Given the objective to electrify all villages
by 2010 and to double the generating capacity in the country by 2012, the need to improve the
policy environment and strengthen the regulatory framework cannot be ignored.
Sanjeeb Kumar Dey in his studies Revenue Sustainability through Electricity Distribution
Franchisee; suggested that after completing the infrastructure development, improving the quality
26

INDIA
of services than the third step of revenue sustainability i.e bridge the gap of revenue and
expenditure is again a mind boggling task. It is imperative to bridge the gap and there are three
easy ways: Increase the Tariff the consumer has to pay more impossible for the rural
consumers, Government Subsidies the taxpayer has to pay more not acceptable under the
present arena when the taxpayer are paying more and Utilities bearing the gap till the coffer
extinct- again U turn to the pre-reform era. To address the above its only imperative towards the
approach of Revenue sustainability. They also explain the distribution franchisee functioning with
the help of SHGs and contribution towards revenue sustainability in Electricity sector.
27

INDIA
3.2. RESEARCH METHODOLOGY

3.2.1 FILTERING OF DATA
Two way filtering has been applied one is for parameters and other is for states. This has been
done to provide more insights into the report.
3.2.1 (A) FILTERING OF PARAMETERS

To carry out the extensive research, all parameters identified are classified into three categorieselementary parameters, moderate parameters and crucial parameters. Elementary parameters make
the background of the research while more emphasize has been given to crucial parameters.
Elementary
Moderate
Crucial
Number of Consumers
Net Input Energy
Energy Sold
Collection Efficiency
Consumer Mix
Connected Load
Revenue from sale of power
Power Purchase Cost
Distribution Cost
Cost Coverage Ratio

AT&C Losses
Return on Equity
Profit after Tax
Net Worth
28

INDIA
3.2.1 (B) FILTERING OF STATES

Filtering of states has been done on the basis of anticipated
power supply position in FY-14.
From filtering, distribution utilities of top contributing states
has been taken for report which constitute majorly for the total
requirement of power in country.
However some distribution companies are not a part of this
report due to unavailability of their financial statements.
Anticipated Power Supply Position in

the Country during 2013-14
State/UT
Requirement (MU)
Maharashtra
118455
Andhra Pradesh
109293
Tamil Nadu
99765
Uttar Pradesh
97785
Gujarat
76808
Karnataka
75947
Rajasthan
59770
Madhya Pradesh
59431
Punjab
50850
West Bengal
48489
Haryana
44700
Orissa
27130
Delhi
26910
Kerala
22384
Chhattisgarh
21410
DVC
19605
Jammu & Kashmir
16240
Bihar
15268
Uttarakhand
12455
Himachal Pradesh
9425
Jharkhand
8609
Assam
7031
D.N. Haveli
5315
Goa
3219
Puducherry
2451
Daman & Diu
2115
Meghalaya
1905
Chandigarh
1750
Tripura
1216
Arunachal Pradesh
655
Manipur
596
Nagaland
591
Sikkim
531
Mizoram
430
Source: - CEA
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INDIA
3.3 APPROACH
Three Step Approach to Comprehensive Report
Identification
of Data
Filtering out
useful data
Data Sourcing
through review of
Distribution ARR &
Financial Statements
3.4 RISK PROFILING OF STATES

Finally risk profiling of states has been done on the basis of operational and financial risk of state
utilities
Methodology used for risk profiling:
Parameters used for operational risk are AT&C losses and Cost Coverage Ratio and
parameters used for financial risk are Profit After Tax and Networth.
Parameters has been classified on Interval scale into 4 categories for eg. AT&C losses
classified into 3 categories as:
Less than 15% Low Risk
15-20% Moderate Risk
Above 20% High Risk
On the basis of the heat map best performing and non performing states has been identified.
30

INDIA
CHAPTER 4: FACTS AND ANALYSIS OF ANDHRA PRADESH

4.1 OVERALL SCENARIO
4.1.1 General Background and Political Economy
In terms of geography, the state has a varied terrain because of
which the climate of Andhra Pradesh varies considerably
depending on the geographical region. The two main rivers are
the Godavari and Krishna of which Krishna roughly divides the
state into two parts, the northern and southern regions.
Andhra Pradesh receives heavy rainfall mostly in the months of
July to September. This heavy rainfall, in conjunction with its
agricultural based economy, helps it produce large amounts of
rice which account for 77% of its total crop production and earn
it the nickname, the rice bowl of India. In the financial year
2011-12 the state was second in nominal GDP, and in GDP per
capital it ranks fourth. Two of the mega cities of the state - Hyderabad and Visakhapatnam - were
listed among the top 15 cities contributing to India's overall product. Andhra Pradesh ranks tenth
compared to all Indian States in the Human Development Index scores with a score of
0.473.Andhra Pradesh had a series of governments headed by Indian National Congress (INC)
Party until 1982. N. Chandrababu Naidu held the record for the longest serving Chief Minister
(1995 to 2004).
Population
84665533
Number of consumers
22761686
Supply Area (Sq.KM)

275045
Per Capita Consumption (KWh)
966.99
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4.1.2 Power Sector Overview & Evolution of Reforms

Andhra Pradesh has the fourth largest power generating utility in the country, with an installed
capacity of around 10,650 MW. The two cheapest sources of thermal power generation coal and
natural gas are in abundance. The state has a large amount of coal reserves and it ranks first
nationwide in hydro electricity generation, with a national market share of over 11%.
The present reforms in the power sector in state evolved over a period of time. Here an attempt is
made to enumerate important stages in the evolution of these reforms and examine the process of
reforms in chronological order.
Figure 1: Distribution Reforms-AP
02/1999 Andhra Pradesh Government granted license to

APTRANSCO.
03/1999 Andhra Pradesh Electricity Regulatory Commission

constituted.
2000 APTRANSCO unbundled into 1 transmission

company & 4 discoms.
2005 Open Access Regulation.

2006 Multi year regime initiated.
4.1.3. Current Industry Structure
One generating company Andhra Pradesh power generation corporation (APGENCO);
One Transmission company Andhra Pradesh Transco Limited;
Four state owned Distribution utilities - APCPDCL, APEPDCL, APNPDCL, and

APSPDCL.
32

INDIA
4.2 APNPDCL
(Northern Power Distribution Company of Andhra Pradesh Ltd.)
APNPDCL was formed on March 30, 2000 to serve 5 districts of Andhra Pradesh viz. Warangal,
Karminagar, Khammam, Nizamabad and Adilabad. The Corporate Office and Headquarters of
APNPDCL is at Warangal. APNPDCL network spread across 64,759 sq.km with population
15422000. APNPDCL have asset base of 903 33/11 KV substations, 201743 km of line length,
and 156442 distribution transformers.
Figure 2: Consumer Category-wise Number of Consumers, Connected Load (MW), Sales Mix and Revenue
from Sale of Power-APNPDCL (2011-12)
Consumer Mix
Connected Load
Domestic
52%
Domestic
71%
Others
2%
Domestic
Commercial
6%
Industrial
Agriculture
20%
Agriculture
Others
11%
Industrial
1%
Commercial
14%
Commercial
Others
Domestic
Industrial
Industrial
16%
Agriculture
7%
Agriculture
Commercial
Others
Revenue Mix
Sales Mix
Agriculture
45%
Domestic
28%
Industrial
35%
Commercial
4%
Industrial
15%
Others
18%
Others
15%
Domestic
21%
Domestic
Industrial
Agriculture
Commercial
16%
Commercial
Others
Domestic
Industrial
Agriculture
Agriculture
3%
Commercial
Source: ARR & Annual Report APNPDCL
33
Others

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4.2.1 Operational Performance

Input Energy (MU)
Energy Sold (MU)
11913.8
Collection Efficiency (%)
10243.93
AT&C Losses (%)
97.74%
Employee Expense (Rs/Consumer)
22.47%
771.18
Figure 3: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APNPDCL (2011-12)
6.7%
7.2%
11914
10610
10463
10070
9203
8545
7748
2007-08
8943
2008-09
Input Energy
2009-10
Energy Sold
CAGR (Input Energy)
10244
9102
2010-11
2011-12
CAGR (Energy Sold)
Total energy input is increased from 9203 MU to 11914 MU over last 5 years with a CAGR of
6.7% and energy sold is increased from 7748 MU to 10244 MU over last 5 year with CAGR of
7.2%.
34

INDIA
Figure 4:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APNPDCL (2011-12)
6.00
5.00
5.2997
5.3037
Total Cost
Revenue/Unit
4.33
4.00
3.00
2.00
1.00
0.44
0.34
0.19
Distribution Cost
Depreciation
0.00
Power Purchase Cost
Other expenses &

Interest
Andhra Pradesh North Power Distribution Company Ltd. incurred 82% of the total cost to purchase
power.
4.2.2 Financial Performance

Total revenue of State distribution sector in 2007-08 was 1488.95Cr which has been increased to
2875.56 Cr in 2011-12 with 5 year CAGR of 17.89%.Excerpts of balance sheets and profit loss
statements of distribution utility are given below:
Equity Capital (Rs Cr)
Return on Equity (%)
274.76
Profit after Tax (Rs Cr.)
1.17%
Net worth (Rs Cr)
783. 87
3.21
Return on Net worth (%)
0.41 %
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4.3 APEPDCL
(Eastern Power Distribution Company of Andhra Pradesh Ltd.)
APEPDCL was formed on March 31, 2000 to serve 5 districts of Andhra Pradesh viz. West
Godavari, East Godavari, Srikakulam, Vizianagaram and Visakhapatnam. The Corporate Office
and Headquarters of APEPDCL is at Visakhapatnam. APEPDCL supplies power to over 47 lakh
consumers belonging to different categories through a network consisting of 558 Sub-stations of
33 KV level, 2188 feeders of 11 KV level and more than 1,16,566 distribution transformers of
different levels.
Figure 5: Consumer Category-wise Number of Consumers, Sales Mix and Revenue from Sale of PowerAPEPDCL (2011-12)
Sales Mix
Industrial
64%
Industrial
40%
Revenue Mix
Agriculture
1%
Domestic
27%
Agriculture
16%
Others
11%
Domestic
Industrial
Commercial
6%
Agriculture
Commercial
Domestic
20%
Others
Domestic
Industrial
Others
3%
Agriculture
Commercial
Consumer Mix
Domestic
88%
Source: ARR & Annual Report APEPDCL
Others
2%
Domestic
Commercial Agriculture
Industrial
8%
1%
1%
Industrial
Agriculture
Commercial
Others
Commercial
12%
36
Others

INDIA
Input Energy (MU)
Energy Sold (MU)
12595
11725.82
97.14%
AT&C Losses (%)
12.9%
939.45
Figure 6: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APEPDCL (2011-12)
8.02%
9.83%
12595
11603
11261
9889
9251
8692
8059
2007-08
Input Energy
2008-09
Energy Sold
9869
2009-10
CAGR (Input Energy)
11726
10366
2010-11
2011-12
CAGR (Energy Sold)
9.83%.
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Figure 7:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APEPDCL (2011-12)
6.00
5.00
5.41
5.43
Total Cost
Revenue/Unit
4.43
4.00
3.00
2.00
1.00
0.51
0.19
0.29
Depreciation
Other expenses &

Interest
0.00
Power Purchase Cost
Distribution Cost
Andhra Pradesh Eastern Power Distribution Company Ltd. incurred 82% of the total cost to
purchase power.

Total revenue of State distribution sector in 2007-08 was 2766.23 Cr which has been increased to
5508.23 Cr in 2011-12 with 5 year CAGR of 18.79%.Excerpts of balance sheets and profit loss
121.26
20.82%
Net worth (Rs Cr)
413.3
25.24
6.1 %
38

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4.4 APCPDCL (Central Power Distribution Company of Andhra

Pradesh Ltd)
APCPDCL was formed on April 1, 2000 to serve 7 districts of Andhra Pradesh viz. Anantapur,
Kurnool, Mahaboobnagar, Nalgonda, Medak and Rangareddy .The Corporate Office and
Headquarters of APCPDCL is at Hyderabad. APCPDCL has a vast infrastructure facility in its
operating area with 1,338 Nos. of 33/11 KV substations, 2,039 Nos. of power transformers, 720
Nos. of 33 KV feeders, 5,257 Nos. of 11 KV feeders and around 246426 Nos. of distribution
transformers of various capacities.
from Sale of Power-APCPDCL (2011-12)
Connected Load
Consumer Mix
Domestic
75%
Domestic
49%
Others
4%
Others
1%
Commercial
10%
Domestic
Industrial
Industrial
1%
Agriculture
13%
Agriculture
Commercial
Commercial
22%
Others
Domestic
Industrial
Sales Mix
Domestic
Industrial
Agriculture
Commercial
Others
Commercial
Industrial
53%
Commercial
24%
Commercial
12%
Others
3%
Domestic
19%
Agriculture
3%
Agriculture
Revenue Mix
Agriculture
29%
Industrial
37%
Industrial
22%
Others
Domestic
18%
Domestic
Commercial
Agriculture
1%
Others
4%
Industrial
Agriculture
Source: ARR & Annual Report APCPDCL
39
Others

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Input Energy (MU)
Energy Sold (MU)
37161
31597
98.01%
AT&C Losses (%)
18.7%
1095.07
Figure 9: Category-wise Net Growth in Input Energy and Energy Sold (MU)-APCPDCL (2011-12)
9.07%
37161.75
9.73%
34082
31933
29324
26257
24492
21793
2007-08
26610
2008-09
Input Energy
2009-10
Energy Sold
CAGR (Input Energy)
31597.2
28741
2010-11
2011-12
CAGR (Energy Sold)
9.73%.
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INDIA
Figure 10: Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-APCPDCL (2011-12)
6.00
5.00
4.78
4.79
Total Cost
Revenue/Unit
4.01
4.00
3.00
2.00
1.00
0.35
0.12
0.30
Depreciation
Other expenses &

Interest
0.00
Power Purchase Cost
Distribution Cost
Andhra Pradesh Central Power Distribution Company Ltd. incurred 84% of the total cost to
purchase power.

Total revenue of State distribution sector in 2007-08 was 2766.23 Cr which has been increased to
5508.23 Cr in 2011-12 with 5 year CAGR of 18.79%. Excerpts of balance sheets and profit loss
728.48
0.56%
Net worth (Rs Cr)
2197.80
4.09
0.18 %
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Figure 11: SNAPSHOT ANDHRA PRADESH
S No
1
Initiation of Energy Audits for segregation of Yes

technical and commercial losses
2.
Extent of metering for 11 KV feeders
100%
3.
Metering for individual customers
100%
4.
Notification of Open access regulations
Yes
5.
Determination of Cross subsidy surcharge
Yes
6.
Determination of Wheeling charges
Yes
7.
Determination of Transmission charges
Yes
8.
MYT
ARR Filings
Yes
Proposed investments
Yes
9.
Intra state ABT Notified
Yes
10.
Specification of long term trajectory for Yes

reduction of AT&C losses by SERC
11.
TOD Tariff implementation
12.
Eligible towns under RAPDRP
Yes
i IT
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ii. SCADA
iii.PART B
43
42

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Chapter 5: FACTS AND ANALYSIS OF GUJARAT

5.1.1 General Background & Political Economy
Gujarat has an area of 196,204 km2 (75,755 sq mi) with a
coastline of 1,600 km (990 mi), most of which lies on the
Kathiawar peninsula, and a population in excess of 60
million. The state is bordered by Rajasthan to the north,
Maharashtra to the south, Madhya Pradesh to the east, and
the Arabian Sea as well as the Pakistani province of Sindh
on the west. Its capital city is Gandhinagar, whilst its largest
city is Ahmedabad. Gujarat is home to the Gujarati-speaking
people of India.
Gujarat has some of the largest businesses in India includes
cotton, groundnuts (peanuts), dates, sugar cane, milk and milk products. Industrial products
include cement and petrol. The world's largest shipbreaking yard is in Gujarat near Bhavnagar at
Alang. Indias only Liquid Chemical Port Terminal at Dahej. On 20 December 2012, the BJP won
the state elections in Gujarat for the fifth time in a row and Narendra Modi again returned to power
by achieving a hat-trick and has completed 11 years of governance on 7 October 2012 in the state
by winning the state assembly elections.
Population
Supply Area (Sq.KM)
60383628
196024
Number of consumers
1, 18, 14,349

1615.24
43

INDIA

Figure 12: Distribution Reforms-Gujarat
09/1998 Gujarat Electricity Regulatory Commission

constituted
07/2004 Gujarat Electricity Board unbundled
2005
04/2011
Open Access Regulation
Multi Year Tariff Regulations
5.1.3 Current Industry Structure

One holding company- Gujarat Urja Vikas Nigam Ltd;
One generating company Gujarat State Electricity Corporation Limited (GSECL);
One Transmission company Gujarat Energy Transmission Corporation Ltd. (GETCO);
Four state owned Distribution utilities DGVCL, UGVCL, PGVCL and MGVCL.
44

INDIA
5.2 DGVCL (Dakshin Gujarat VIJ Company Ltd)

DGVCL incorporated under the Companies Act, 1956 in Sept-2003. The Company became
commercially operational since April-2005. DGVCL is responsible to supply of power to 7
districts namely Bharuch, Narmada, Surat (except part of Surat City), Tapi, Dangs, Navsari and
Valsad in South Gujarat. DGVCL has around 70000 km length of lines and around 50000 Nos. of
distribution transformers of various capacities.
from Sale of Power-DGVCL (2011-12)
Connected Load
Consumer Mix
Domestic
83%
Industrial
51%
Domestic
29%
Others
1%
Domestic
Commercial Agriculture
4%
10%
Industrial
Agriculture
Others
3%
Industrial
2%
Commercial
Others
Domestic
Industrial
Industrial
Commercial
Others
Industrial
78%
Industrial
71%
Domestic
Agriculture
Revenue from Power
Sales Mix
Domestic
16%
Agriculture
8%
Commercial
9%
Agriculture
6%
Commercial
Others
3%
4%
Agriculture
Commercial
Others
Domestic
13%
Domestic
Industrial
Agriculture
2%
Others Commercial
3%
4%
Agriculture
Commercial
Source: ARR & Annual Report DGVCL
45
Others

INDIA

Input Energy (MU)
Energy Sold (MU)
12365
10563
AT&C Losses (%)
97.01%
19.44%
838.82
Figure 14: Category-wise Net Growth in Input Energy and Energy Sold (MU)-DGVCL (2011-12)
5.67%
10563
10331
9918
2007-08
9837
8959
8305
7979
7.27%
12365
11704
11266
2008-09
Input Energy
2009-10
Energy Sold
CAGR (Input Energy)
2010-11
2011-12
CAGR (Energy Sold)
7.27%.
46

INDIA
Figure 15:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-DGVCL (2011-12)
7.00
6.00
5.90
5.95
Total Cost
Revenue/Unit
5.49
5.00
4.00
3.00
2.00
1.00
0.19
0.10
0.13
Distribution Cost
Depreciation
Other expenses &

Interest
0.00
Power Purchase Cost
Dakshin Gujarat Vij Company Ltd. incurred 90% of the total cost to purchase power.

Total revenue of DGVCL in 2007-08 was 3361.85 Cr which has been increased to 6290.46 Cr in
2011-12 with 5 year CAGR of 16.96%.Excerpts of balance sheets and profit loss statements of
distribution utility are given below:
28.51%
267.73
Net worth (Rs Cr)
1582.14
76.32
4.82 %
47

INDIA
5.3 PGVCL (Paschim Gujarat Vij Company Ltd)

PGVCL incorporated under the Companies Act, 1956 in Sept-2003.The Company became
commercially operational since April-2005. PGVCL is responsible to supply of power to 8 district
of Gujarat namely Rajkot, Jamnagar, Junagadh, Porbandar, Bhuj, Bhavnagar, Surendranagar and
Amreli. PGVCL covers an area of 99771 Sq. Kms and population of 176 lakh people.
from Sale of Power-PGVCL (2011-12)
Connected Load
Consumer Mix
Domestic
72%
Industrial
27%
Agriculture
32%
Domestic
29%
Commercial
11%
Others
1%
Others
1%
Commercial
13%
Domestic
Sales Mix
Industrial
Agriculture
33%
Industrial
Commercial
Others
Industrial
61%
Domestic
17%
Domestic
Agriculture
Revenue from Power
Industrial
44%
Others
3%
Industrial
Agriculture 2%
12%
Commercial
3%
Agriculture
Domestic
16%
Others
3%
Commercial
Others
Domestic
Commercial
4%
Industrial
Agriculture
Agriculture
16%
Commercial
Source: ARR & Financial Reports PGVCL
48
Others

INDIA

Input Energy (MU)
Energy Sold (MU)
21915
15807
AT&C Losses (%)
99.45%
29.89%
1120.80
Figure 17: Category-wise Net Growth in Input Energy and Energy Sold (MU)-PGVCL (2011-12)
8.58%
21915
19718
18588
10.13
15807
13901
13032
2009-10
2010-11
Input Energy
Energy Sold
CAGR (Input Energy)
2011-12
CAGR (Energy Sold)
10.13%.
49

INDIA
Figure 18: Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-PGVCL (2011-12)
5.46
5.32
Total Cost
Revenue/Unit
4.80
Power Purchase Cost
0.29
0.17
0.20
Distribution Cost
Depreciation
Other expenses & Interest
Paschim Gujarat Vij Company Ltd. incurred 88% of the total cost to purchase power.

Total revenue of PGVCL in 2008-09 was 5527.204 Cr which has been increased to 8404.986 Cr
in 2011-12 with 4 year CAGR of 14.99%.Excerpts of balance sheets and profit loss statements of
2.01%
715.04
Net worth (Rs Cr)
2329.24
9.3
0.40 %
50

INDIA
Figure 19: SNAPSHOT GUJARAT
S No
1
100%
2.
100%
3.
Yes
4.
Yes
5.
Yes
6.
7.
MYT
ARR Filings
Yes
Yes
8.
Yes
9.

10.
11.
Yes
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ii. SCADA
iii.PART B
63
51

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Chapter 6: FACTS AND ANALYSIS OF MAHARASHTRA

6.1.1 General Background & Political Economy
Maharashtra is the second most populous state after Uttar
Pradesh and third largest state by area in India.
Maharashtra is the richest state in India, contributing 15%
of the country's industrial output and 13.3% of its GDP
(20062007). Mumbai, the capital city of the state, is
India's largest city and the financial capital of the nation.
Nagpur is the second capital of the state.
Favourable economic policies in the 1970s led to
Maharashtra becoming India's leading industrial state in
the last quarter of 20th century. Maharashtra's gross state
domestic product for 2011 is at $224.12 billion. The state's
debt is estimated to be about 209,000 crore, i.e. about 17 percent of GDP.
After India's independence, most of Maharashtra's political history was dominated by the Indian
National Congress. The party enjoyed near unchallenged dominance of the political landscape
until 1995 when Shiv Sena and BJP secured an overwhelming majority in the state to form a
coalition.
Population
112374333
Number of consumers
19300000
Supply Area (Sq.KM)

307713
1028.22
52

INDIA

Figure 20: Distribution Reforms-Maharashtra
1999
Maharashtra Electricity Regulatory Commission

constituted
2004
Distribution Open Access Regulation
2004 MERC (Terms & Conditions of Tariff) Regulations

2005
Maharashtra State Electricity Board unbundled
2011
MERC (Multi Year Tariff) Regulations
6.1.3. Current Industry Structure
One generating company Maharashtra State Power Generation Company Limited

Mahagenco);
One Transmission company Maharashtra State Transmission Company Limited

(Mahatransco);
One distribution utility - Maharashtra State Electricity Distribution Company Limited

(MSEDCL)
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INDIA
6.2 MSEDCL (Maharashtra State Electricity Distribution Company

Ltd)
Technical specifications of Distribution Company are as follows:
Erstwhile Maharashtra State Electricity Board was looking after Generation, Transmission &
Distribution of Electricity in the State of Maharashtra barring Mumbai. But with enactment of
Electricity Act 2003, MSEB was unbundled into 4 Companies viz. MSEB Holding Co. Ltd.,
Maharashtra State Electricity Distribution Co. Ltd., Maharashtra State Power Generation Co.
Ltd. and Maharashtra State Electricity Transmission Co. Ltd. on 6th June 2005. MSEDCL supplies
electricity to a staggering 1.93 crore consumers across the categories all over Maharashtra
excluding the island city of Mumbai.
In terms of infrastructure, MSEDCL operates a vast far flung network comprising of 33 KV,
22 KV & 11 KV lines, sub-stations and distribution transformers spread over 3.08 lakh sq.km
geographical area of Maharashtra covering 41,095 villages and 457 towns. It has 34,151
substations (33 KV) with 55,218 MVA of transformation capacity, 10334 HV feeders, and several
thousand circuit kms of HT and LT lines.
Figure 21: Consumer Category-wise, Sales Mix and Revenue from Sale of Power-MSEDCL (2011-12)
Sales Mix
Consumer Mix
Domestic
73%
Industrial
40%
Others
1% Agriculture Industrial
17%
2%
Domestic
Commercial
Industrial
Commercial
5%
Commercial
7%
Agriculture
Others
Domestic
Domestic
18%
Commercial
Industrial
Agriculture
29%
Others
8%
Agriculture
Revenue from Power

Industrial
48%
Commercial
12%
Domestic
Domestic
15%
Commercial
Agriculture
12%
Others
13%
Industrial
Agriculture
Others
Source: ARR & Annual Report MSEDCL
54
Others

INDIA
Figure 22: Category-wise Net Growth in Input Energy and Energy Sold (MU)-MSEDCL (2011-12)
6.7%
95,433
74560
73400
2007-08
2008-09
2009-10
Input Energy
Energy Sold
9.5%
80,132
70,677
63,941
58171
55716
86,170
80,526
2010-11
Linear (Input Energy)
2011-12
Linear (Energy Sold)
9.5%.

Input Energy (MU)
Energy Sold (MU)
95433
80132
AT&C Losses (%)

18.36%
98.30%
Employee expense (Rs/ customer)

1121.61
55

INDIA
Figure 23:Cost-wise Break up of ACS and ACS-ARR Gap (Rs/Kwh)-MSEDCL (2011-12)
6.0000
5.0000
5.0927
5.052
Total Cost
Total Revenue
4.3828
4.0000
3.0000
2.0000
1.0000
0.3602
0.2868
0.0628
0.0000
Power Purchase Cost
Distribution Cost
Depreciation
Other expenses &

Interest
MSEDCL incurred 86% of the total cost to purchase power.

Total revenue of PGVCL in 2008-09 was 5527.204 Cr which has been increased to 8404.986 Cr
in 2011-12 with 4 year CAGR of 14.99%.Excerpts of balance sheets and profit loss statements of
15.20%
5316.93
Net worth (Rs Cr)
10489.41
807.920
7.70 %
56

INDIA
Figure 24: SNAPSHOT MAHARASHTRA
S No
1
100%
2.
100%
3.
Yes
4.
Yes
5.
Yes
6.
Yes
7.
MYT
ARR Filings
Yes
Yes
8.
Yes
9.

10.
11.
Yes
i IT
130
ii. SCADA
iii.PART B
125
57

INDIA
CHAPTER 7: FINDINGS & RECOMMENDATIONS

7.1 FINDINGS
Most State Discoms have weak operational and financial risk profiles, because of higher AT&C
losses, ARR-ACS gap. All the major parameters are shown to ascertain the impact of State
Discoms exposures on Market participants.
Operational and Financial parameters of state discoms has been vetted with the help of concrete
parameters viz. Profit/Loss after tax, AT&C Losses, Cost Coverage Ratio etc.
Figure 25: Operational & Financial Performance
State
Andhra Pradesh
Andhra Pradesh
Andhra Pradesh
Gujarat
Gujarat
Maharashtra
Distribution Utlities AT&C Loss Cost Coverage Ratio Profit After Tax Networth Return on Equity
NPDCL
EPDCL
CPDCL
DGVCL
PGVCL
MSEDCL
22.47%
12.90%
18.70%
19.44%
29.89%
18.36%
98.29%
95.74%
99.20%
98.74%
99.63%
83.33%
3.21 783.87
25.24 413.3
4.09 2197.8
76.32 1582.14
9.3 2329.24
807.92 10489.41
1.17%
20.82%
0.56%
28.51%
2.01%
15.20%
58

INDIA
7.2 RISK MATRIX

Two-dimensional heat map has been prepared to juxtapose the operational risk to the financial risk
of the state.
The X-axis represents the financial risk, risk has been classified into low, moderate and high risk
based on a combination of two factors: Profit/Loss after tax, Net worth.
The Y-axis represents operational risk, risk has been classified into low, moderate and high risk
based on a combination of two factors: Cost coverage ratio (ratio for average revenue to average
cost of supply) and aggregate technical and commercial (AT&C) losses.
Figure 26: Risk Matrix
Moderate
Risk
Operational Risk
High Risk
PGVCL
NPDCL
DGVCL
CPDCL
MSEDCL
Low Risk
EPDCL
Low Risk
Moderate
Risk
High Risk
Financial Risk
59

INDIA
7.3 RECOMMENDATIONS:
The distribution utilities have taken proactive measures for accountability,
measurability and governance which are better than compared to operational and
financial parameters of utilities.
The adequate tariff determination is a key challenge given the critical need for
tariff revision to improve the financial position of the utilities, and also in view
of the interests of the consumers to avoid any tariff shock.
Substantial improvement in business planning and forecasting to manage its
finances and operations better.
The distribution sector needs to improve its network forecasting, planning,
and execution skills on an accelerated pace. Networks need to be strengthened
to ensure that power distribution capabilities are adequate and efficient
In the short term, government has to bail out the distribution utilities from the
existing financial losses by providing operational autonomy, restructuring
debts, and infusing equity.
Utilities should continuously focus on network strengthening in terms of asset
mapping, theft reduction schemes like HVDS and ABC cable implementation,
asset augmentation. Adoption of information technology application systems
is become a necessity.
Customer Awareness is another key factor as change of mindsets among
citizens and society at large on theft is the most challenging aspect.
60

INDIA
BIBLIOGRAPHY & REFERENCES

1. CRISIL Infrastructure Advisory Report, Study of various Power Distribution Models in
India Jul-2011.
2. Planning Commission - GoI; Report of Sub-group on PPP in distribution of Electricity
Oct-2011
3. The Electricity Act GoI, 2003
4. Feedback Ventures Pvt. Ltd.; Final Report on Standardization of Distribution Franchisee
Model FoR Report; Sep-2009
5. Planning Commission - GoI; Report of Sub-group on PPP in distribution of Electricity
Oct-2011
6. Anoop Singh, Policy Environment and Regulatory Reforms for Private and Foreign
Investment in Developing Countries: A Case of the Indian Power Sector Asian
Development Bank, Research Paper 64, April-2007
7. http://www.apdrp.gov.in/Eligible_Town_Utility/Towns_Part-B.aspx
8. http://www.apdrp.gov.in/Eligible_Town_Utility/SCADA_Towns.aspx
9. http://www.apdrp.gov.in/Eligible_Town_Utility/Towns_IT.aspx
10. http://www.pfcindia.com/writereaddata/userfiles/file/ResearchReport/Performance_Repo
rt_State_Power_Utilities_forfy_2008-09to2010-11_03102012.pdf
11. aperc.gov.in/
12. www.apnpdcl.in/
13. www.apeasternpower.com/
14. www.apcentralpower.com/
61

INDIA
15. http://gercin.org/
16. http://www.dgvcl.com/
17. http://www.pgvcl.com/
18. http://www.mercindia.org.in/
19. www.mahadiscom.in
62

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Center for Advanced Management and Power Studies

NATIONAL POWER TRAINING INSTITUTE

Summer Internship Report

Operational & Financial Viability of Distribution Utilities

ICRA Management Consulting Services Ltd

MAHARSHI DAYANAND UNIVERSITY, ROTHAK

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

Operational & Financial Viability of Distribution Utilities in Major States of India

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

POWER DISTRIBUTION SECTOR-SNAPSHOT .............................................................................. 12

1.2 OBJECTIVE OF THE PROJECT: ............................................................................................................... 13

CHAPTER 2: INTRODUCTION TO THE ORGANISATION ........................................................... 15

CHAPTER 3: REVIEW OF EXISTING LITERATURE & RESEARCH METHODOLOGY ....... 25

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

Chapter 5: FACTS AND ANALYSIS OF GUJARAT .......................................................................... 43

Chapter 6: FACTS AND ANALYSIS OF MAHARASHTRA ............................................................. 52

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

BIBLIOGRAPHY & REFERENCES ..................................................................................................... 61

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

Central Power Distribution Company of Andhra Pradesh Limited

Eastern Power Distribution Company of Andhra Pradesh Limited

Northern Power Distribution Company of Andhra Pradesh Limited

Andhra Pradesh Electricity Regulatory Commission

Annual Revenue Requirement

Aggregate Technical & Commercial Losses

Compounded Annual Growth Rate

Central Electricity Authority

Central Public Sector Undertakings

Distribution Franchisee Agreement

Dakshin Gujarat Vij Company Limited

Distribution Management System

Detailed Project Report

Demand Side Management

Electricity Act 2003

Gross Domestic Product

Geographical Information System

Management Information System

Million kilowatt hours

Maharashtra State Electricity Distribution Company Limited

Operation & Maintenance

Profit After Tax

Power Finance Corporation of India Limited

Paschim Gujarat Vij Company Limited

Public Private Partnership

Restructured Accelerated Power Development & Reforms Programme

Rajiv Gandhi Grameen Vidyutikaran Yojana

State Electricity Boards

State Electricity Regulatory Commission

State Load Dispatch Centre

Transmission & Distribution Loss

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

1.2 OBJECTIVE OF THE PROJECT:

1.3 SCOPE OF THE PROJECT:

To assess comparatively, the operational and financial performance of various SEBs

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF

1.4 SIGNIFICANCE OF THE PROJECT:

OPERATIONAL & FINANCIAL VIABILITY OF DISTRIBUTION UTILITIES IN MAJOR STATES OF