indian energy sector
TRANSCRIPT
INDIA: ENERGY SECTOR September 2010
2
Contents … (1/3)
Executive Summary
Industry overview – power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
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Contents … (2/3)
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Contents … (3/3)
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
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List of tables … (1/8)
Gross Domestic Product from Electricity Supply
Energy Indicators
Fuel-wise Generation Capacity
Sector-wise Installed Utility Capacity
Capacity of Thermal Power Plants by Fuel
Hydroelectric Potential and Development
RES Potential and Achievements
Growth in Transmission Lines (Ckm)
Growth in Sub-stations (MVA)
Growth in Inter-regional Transmission Capacity
INDIA: ENERGY SECTOR September 2010
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List of tables … (2/8)
Rural Electrification
Electricity Consumption
Electricity Demand and Supply
Projected Requirement of Electricity
Installed Capacity Addition Plan
Projected Transmission Line Length
Energy Saving Potential
Fund Requirement for R & M Activities
Fund Requirement for Distribution and Rural Electrification
FDI in Energy Equipment and Related Industries
INDIA: ENERGY SECTOR September 2010
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List of tables … (3/8)
Investments as of March 2010
Major Projects Expected to be Complete in 2010
Types of Utility and Industrial Boilers
Production of Boilers
Production, Import, Export and Consumption of Boilers
Technological Partnership for Supercritical Technology
Production of Various Types of Cables and Wires
Export and Import of Cables and Wires
Production of Transformers
Imports and Exports of Transformers
INDIA: ENERGY SECTOR September 2010
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List of tables … (4/8)
Production,Trade and Consumption of Turbines
Snapshot of Power Generation Scenario
Production of Switchgears and Circuit Breakers
Exports and Imports of Switchgears
Domestic Production of Transmission Towers
Exports of Transmission Towers
Installed Wind Power Capacity
Export and Import of Wind Turbine Generators
Production, Imports, Exports and Consumption of Diesel Engines
Production of Capacitors
INDIA: ENERGY SECTOR September 2010
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List of tables … (5/8)
Production of Energy Meters
Production, Import and Export of Storage Batteries
Gross Energy Generated
GDP from Petroleum Sector
Realisation of Excise and Customs Duties
Employment in Petroleum Sector
FDI Inflows to Petroleum Sector
Proven and Indicated Crude Oil Reserves
Basin-wise Hydrocarbon Area
NELP and CBM Achievements
INDIA: ENERGY SECTOR September 2010
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List of tables … (6/8)
The Krishna-Godavari Basin
Recent Discoveries
Planned Petroleum and Natural Gas Demand-Supply
Gas Production – Eleventh Five-Year Plan Projection
Projected Natural Gas Demand – Eleventh Plan Period
LNG Supply – Eleventh Five-Year Plan Projection
Crude Oil Production – Eleventh Five-Year Plan Projections
Crude Oil Imports
Net Exports of Petroleum Products
Import and Export of Crude Oil and Petroleum Products
INDIA: ENERGY SECTOR September 2010
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List of tables … (7/8)
Product Import Price vs Gross Export Realisation
Consumption of Petroleum Products
Natural Gas Demand Sectors
Share of Fuel Imports in Total Merchandise Imports
India‟s Share in World Oil and Gas Market
Percentage Demand Met from Domestic Sources
Refinery Capacity
Domestic Production of Petroleum Products
Gross Refining Margins for Domestic Refineries
NCI of Domestic Refineries
INDIA: ENERGY SECTOR September 2010
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List of tables … (8/8)
Crude Oil Production
Natural Gas Production
LNG Imports
Major Equipment Players
Major Energy Sector Players
INDIA: ENERGY SECTOR September 2010
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List of figures
Structure of Indian Power Sector and Ownership
Hydroelectric Electricity Generation Capacity
Nuclear Power Capacity
Category wise growth in Consumption
Fuel-wise capacity addition in Eleventh Plan Period
Price Revisions in Delhi
INDIA: ENERGY SECTOR September 2010
14
Contents
Executive Summary
Industry overview – power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
15
Executive Summary … (1/2)
The average growth rate of India‟s gross domestic product (GDP) during the period 2006-09, was about
8.6 per cent. The corresponding average growth rates of net national income and personal disposable
income were 14.5 per cent and 14.7 per cent, respectively. The average growth in the index of industrial
production (IIP) during this period was 7.2 per cent. IIP growth was 10.2 per cent in 2009-10. A high-
growth economy has resulted in increasing demand for energy.
In terms of purchasing power parity (PPP), Indian economy is the fourth-largest in the world. The country
accounts for over 17 per cent of the total global population and about 7 per cent of world‟s GDP.
However, according to the International Energy Agency (IEA), India‟s energy production accounts for just 4
per cent of the global energy production. The country accounts for 5 per cent of the total global energy
consumption.
According to the Central Electricity Authority (CEA), the average per capita electricity consumption in
India is about 704 kWh as compared to global world wide per capita consumption of 2,752 kWh. The
Government of India is keen to increase per capita consumption of energy to raise living standards in the
country. An average Indian consumes 0.53 tonnes of oil equivalent (TOE) of energy compared to the global
average of 1.82 TOE.
Higher economic growth is driving income growth, which in turn is driving up industrial investment and
fuel consumption. In general, demand exceeds supply and there is a broad-based energy shortage, which is
either met by imports or remains unmet.
India: Energy Sector September 2010
EXECUTIVE SUMMARY
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Executive Summary … (2/2)
Energy reforms and policy changes in recent years have not only opened up avenues for investments in the
sector, but have also resulted in private participation across its various segments. To attract foreign
investment in infrastructure, including energy, foreign direct investment (FDI) norms have been relaxed over
the years. Government of India has not only allowed 100 per cent FDI in the energy sector but also
amended previous norms and practices to provide a climate conducive to investment. The reforms of last
twenty years have yielded positive results.
By 2012, India requires an installed capacity of about 200,000 MW, which entails a huge capital investment.
This has created opportunities in the power generation, transmission, and distribution segments. Private
participation and public-private partnerships are being encouraged to pool in investments and expertise.
Apart from conventional fuel-based plants, renewable energy development has been placed on equal priority.
Significant opportunities in the oil and gas sector relate to exploration and discoveries under the New
Exploration Licensing Policy (NELP), refinery product and natural gas transmission infrastructure
development, and market development for oil and gas products.
The overall growth in India‟s energy sector has drawn investments into the electrical equipment industry, not
only in the form of capacity expansions and green field projects from existing players, but overseas as well.
The scope for expansion is significant as the energy sector itself offers investment opportunities in the next
decade and beyond.
India: Energy Sector September 2010
EXECUTIVE SUMMARY
17
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
18
Industry overview – Power … (1/5)
India‟s power sector has had a remarkable growth in past few decades. There has been a significant push
towards opening the electricity sector to competition and to redesign the electricity markets to achieve
more efficient outcomes. Consequently, the sector has moved from a mostly vertically integrated structure –
with the state electricity boards (SEB) owning the generation, transmission and distribution businesses – to a
more unbundled corporate structure.
As compared to 23 integrated utilities, i.e. SEBs, that existed before the electricity reforms began in the
1990s, there are now more than 80 utilities or companies with varied ownership structures and mandates,
viz., central government‟s power generation and transmission companies; state governments‟ generation,
transmission and distribution utilities; city-specific private utilities; captive power units of companies; and
independent power producers (IPP).
Intra-state power transmission is the sole responsibility of the state transmission utilities (STU) while inter-
state and inter-region transmission is entrusted to Power Grid Corporation of India Limited (PGCIL), a
central public sector unit (CPSU).
Distribution of power is mostly controlled by state distribution companies (discoms) though there are also a
few private companies in this business in a few states and cities. To comply with the provisions of Electricity
Regulatory Commission Act, 1998, most states have set up state electricity regulatory commissions (SERCs),
which regulate tariffs for the generation, transmission and distribution companies. The Central Electricity
India: Energy Sector September 2010
INDUSTRY OVERVIEW-POWER
Background
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Industry overview – Power … (2/5)
Regulatory Authority (CERC) fulfils this responsibility for the central power utilities. There is an appellate
tribunal for disputes resolution. There are also a few power trading companies that facilitate the exchange
of power between regionally separated companies and utilities at a price/margin determined by CERC.
Section 246 of the Indian Constitution puts power sector on the `concurrent list‟, which implies that both
the state legislatures and the Parliament have the power to create policies for the sector. However, in the
event of a conflict, the central law prevails. In recent decades, the Government of India has focused on
infrastructure development with top priority given to the power sector.
India: Energy Sector September 2010
INDUSTRY OVERVIEW-POWER
Power Sector Utilities:
Generation companies:
SEBs, State -owned gencos
IPPs
CPSUs
Private licensees
Captive units
Transmission companies:
SEBs
STUs
PGCIL
Private companies
Distribution companies:
SEBs
Private licensees
State discoms
Figure 1: Structure of Indian Power Sector and Ownership
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Industry overview – Power … (3/5)
The history of governance in the sector dates back to The Electricity Act, 1910, which provided the initial
legal framework. It was followed by an amended Electricity (Supply) Act, 1948, which provided the overall
regulatory framework for the sector. Recognising the need for accelerating reforms, the Electricity Act,
2003 was enacted in June 2003. It repealed and replaced the earlier laws. Although, since then several
additional rules and laws have been passed to regulate the sector, the Electricity Act, 2003, remains the
basis for all legal provisions and guiding principles for the sector.
India: Energy Sector September 2010
INDUSTRY OVERVIEW-POWER
Importance to Economy
Electricity is a key driver of rapid economic growth and industrialisation of the country. Decades of
economic planning have placed significant emphasis on developing the power sector. Rapid economic
growth and higher standards of living depend considerably on the availability of adequate and reliable
power at an affordable price.
The gross domestic product (GDP) from electricity supply at constant prices was US$ 14.71 billion in
2008-09, accounting for 1.63 per cent of GDP. The employment generated by the sector is in excess of 1
million.
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Industry overview – Power … (4/5)
India: Energy Sector September 2010
INDUSTRY OVERVIEW-POWER
External investment in India‟s electricity sector has also had a strong growth. Despite global economic
problems, India has had only marginal variation in FDI inflows, and the inflows to power sector increased
from US$ 157 million in 2006-07 to US$ 1.44 billion in 2009-10.
However, as demand growth and power supply shortages increase, there is scope for even more
investment in the sector. The average per capita electricity consumption in India is only 704 kWh as
compared to worldwide per capita consumption of 2,752 kWh.
Table 1: Gross Domestic Product from Electricity Supply
(US$ million)
2004-05 2005-06 2006-07 2007-08 2008-09
Constant Prices 11,159.29 12,046.67 14,380.95 16,395.52 14,723.91
Current Prices 11,158.85 12,262.44 14,980.24 16,722.14 15,078.91
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Industry overview – Power … (5/5)
India: Energy Sector September 2010
INDUSTRY OVERVIEW-POWER
Empirical analyses have confirmed that demand for electricity is closely linked to changes in GDP and this
relationship is remarkably stable and broadly linear. The Central Electricity Authority (CEA) has identified
that at a GDP growth rate of 9 per cent, the power sector must grow at over 7.2 per cent, annually.
Table 2: Energy Indicators
Indicator Unit India World
Energy Production MTOE 450.92 11,939.53
Energy Consumption TWh 609.74 18,186.94
Total Primary Energy
Supply (TPES)MTOE 594.91 12,029.27
TPES/Population TOE/capita 0.53 1.82
TPES/GDP (PPP) TOE/2 million US$ 0.15 0.3
Electricity Consumption* kWh/capita 704.4 2,752
CO2/TPES Tonne CO2/TOE 2.23 2.51
CO2/Population Tonne CO2/capita 1.18 4.38
Source: International Energy Agency – 2007 indicators, CEA
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Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
24
Generation … (1/10)
India: Energy Sector September 2010
GENERATION
The total generation capacity of the grid-connected power utilities was 159,398 megawatts (MW) as of
March 2010. The thermal power capacity of utilities was 102,453.98 MW, followed by hydropower
(36,863.40 MW), renewable energy sources or RES (15,521.11 MW) and nuclear power (4,560 MW). The
following table summarizes the growth in installed capacity.
Overview
Table 3: Fuel-wise Generation Capacity
FY Capacity (MW) Share (%)
Thermal Hydro Nuclear RES Total Thermal Hydro Nuclear RES
2003 76,762 26,767 2,720 1,628 107,877 71.2 24.8 2.5 1.5
2004 77,969 29,507 2,720 2,488 112,683 69.2 26.2 2.4 2.2
2005 80,902 30,942 2,770 3,811 118,426 68.3 26.1 2.3 3.2
2006 82,411 32,326 3,360 6,191 124,287 66.3 26 2.7 5
2007 86,015 34,654 3,900 7,761 132,329 65 26.2 2.9 5.9
2008 91,907 35,909 4,120 11,125 143,061 64.2 25.1 2.9 7.8
2009 93,998 36,878 4,120 13,243 148,238 63.4 24.9 2.8 8.9
2010 102,454 36,863 4,560 15,521 159,398 64.3 23.1 2.9 9.7
Source: CEA, IMaCS Research
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Generation … (2/10)
India: Energy Sector September 2010
GENERATION
As of March 2010, the state government utilities owned 49.8 per cent of the total installed generation
capacity of 159.39 gigawatts (GW). The remaining was owned by central utilities (32 per cent) and private
utilities (18.2 per cent).
In the past decade there has been a shift in the trend of capacity addition. After many decades of near
monopoly of state utilities in fresh capacity creation, private utilities‟ share has grown significantly. Clearly,
the reforms have succeeded in inducing private investment in the sector.
Table 4: Sector-wise Installed Utility Capacity
At end-FY 2002 2003 2004 2005 2006 2007 2008 2009 2010
State 62,995 66,582 67,380 65,942 70,184 70 095 74 689 76,388 79,392
Central 31,335 29,944 32,979 38,790 39,959 45,121 48,361 48,971 50,993
Private 10,717 11,351 12,325 13,688 14,144 17,108 20,010 22,879 29,014
Total 105,047 107,877 112,684 118,420 124,287 132,324 143,060 148,238 159,398
Source: CEA, IMaCS Research
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Generation … (3/10)
India: Energy Sector September 2010
GENERATION
India‟s electricity generation capacity is mainly coal-based. It is considered good for base-load power
generation. An estimated 82.2 per cent of the installed thermal power capacity is based on coal as the fuel.
In fact, the power sector accounts for about 75 per cent of India‟s coal demand.
Thermal Generation
Table 5: Capacity of Thermal Power Plants by Fuel
FY 1985 1997 2002 2003 2004 2005 2006 2007 2008 2009 2010
MW 27,030 61,010 74,429 76,762 77,969 80,902 82,411 86,014 91,907 93,725 102,454
Coal 26,311 54,154 62,131 63,951 64,956 67,791 68,519 71,121 76,049 77,649 84,198
Gas 542 6,562 11,163 11,633 11,840 11,910 12,690 13,691 14,656 14,877 17,056
Diesel 177 294 1,135 1,178 1,173 1,202 1,202 1,202 1,202 1,200 1,200
Share (%) 63.5 71.1 70.9 71.2 69.2 68.3 66.3 65.0 64.0 63.4 64.3
Coal 61.8 63.1 59.1 59.3 57.6 57.2 55.1 53.7 53.2 52.4 52.8
Gas 1.3 7.6 10.6 10.8 10.5 10.1 10.2 10.3 10.2 10.2 10.7
Diesel 0.4 0.3 1.1 1.1 1.0 1.0 1.0 0.9 0.8 0.8 0.8
Source: CEA, IMaCS Research
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Generation … (4/10)
India: Energy Sector September 2010
GENERATION
The dominance of coal in India‟s generation capacity is mainly because of significant domestic reserves. As of
April 2009, the coal reserves of India (to the depth of 1,200 m) have been estimated at 266 billion tonnes by
the Geological Survey of India. The proven reserves are of 105 billion tonnes, indicated reserves of 123
billion tonnes and inferred reserves of 38 billion tonnes. India‟s proven reserves at current levels of
production are enough to last about 200 years.
Natural gas is now finding a greater role in India‟s energy mix. Its share in the total installed power
generation capacity has increased from 4.4 per cent at end of 1991-92 to 10 per cent at end of 2008-09.
Compared to coal-based plants, natural gas plants emit only about half as much carbon dioxide (CO2) per
kWh. Also, with production starting at some recently developed gas fields in India, there is a greater
potential for development of gas-based power plants.
Hydroelectricity is clean and its generation is largely free of the concerns of fuel supply and price volatility of
imported fuels. However, its share in the fuel mix for power generation has declined because of high initial
costs and development risks. In recent years, the government has tried to address many of the concerns in
hydroelectric power project development to improve the share of hydropower in the hydro-thermal
electricity generation mix.
Hydroelectric Power
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Generation … (5/10)
India: Energy Sector September 2010
GENERATION
India‟s hydroelectric potential has been estimated to be 600 billion kWh per annum, corresponding to a
capacity of 148.7 GW. States with high potential are Arunachal Pradesh (50.3 GW), Himachal Pradesh (18.8
GW), Uttarakhand (18.2 GW), and Jammu & Kashmir (14.1 GW). However, only 23 per cent of the potential
has been realised so far.
Figure 2: Hydroelectric Electricity Generation Capacity
Source: CEA, IMaCS Research
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Generation … (6/10)
India: Energy Sector September 2010
GENERATION
A vision paper prepared by the Ministry of Power envisages harnessing the entire hydro potential of 148.7
GW by 2025-26. Moreover, renovation, modernisation, up-rating and life extension of some of the existing
hydropower plants are expected to yield additional capacity of 4,300 MW during the Eleventh Five-Year Plan
period (2007-2012).
Table 6: Hydroelectric Potential and Development
April 2009
RegionPotential
(MW)
Capacity
Developed
Per cent of
Potential
Capacity under
Construction
Per cent of
Potential
North 53,395 13,772 25.8 7,064 13.3
West 8,928 5,804 65 400 4.5
South 16,458 9,395 57.1 786 4.8
East 10,949 3,049 27.9 2,211 20.2
North-East 58,971 1,203 2 2,724 4.6
Total 148, 701 33,223 22.3 13,185 8.7
Renewable Energy
Renewable energy sources (RES) have great potential to contribute to improving energy security of the
country and reducing green-house gas (GHG) emissions. Using renewable sources to generate electricity has
several advantages –a perennial energy source, potential for lower reliance on imported fossil fuels and
lower CO2 emissions. However, at present, the principal constraint facing rapid expansion of renewable
Source: CEA, IMaCS Research
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Generation … (7/10)
India: Energy Sector September 2010
GENERATION
power is high initial cost as compared to the competing fuels. India‟s renewable energy resources are
summarised below.
Table 7: RES Potential and Achievements
(MW)
Source/System PotentialAchieved as of March 31,
2010
Grid Interactive Renewable Power
Bio-power (woody biomass) 62,000 866
Wind Power 45,000 11,807
SHP 15,000 2,735
Cogeneration – Bagasse 5,000 1,334
Waste to Energy 5,000 65
Solar Power 4-7 kWh/sq m/day 10
Sub Total 132,000 16,817
Distributed Renewable Power
Rural 30,000405
Captive generation-industrial, commercial 20,000
Sub Total 50,000 405
Total 222,000 17,222
Source: Ministry of New & Renewable Energy, IMaCS Research
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Generation … (8/10)
India: Energy Sector September 2010
GENERATION
India is among the five largest wind power generators in the world. The share of RES in the country‟s total
generation capacity has increased from 1.1 per cent at the end of 2001-02 to about 9.7 per cent at the end of
2009-10. The total renewable capacity is expected to increase to 23,476 MW by the end of March 2012. Wind
power is expected to contribute almost 74 per cent of this capacity.
Nuclear Power
India‟s nuclear power self-sufficiency runs across the entire value chain: uranium exploration and mining, fuel
fabrication, heavy water production, reactor design and construction, reprocessing and waste management.
India‟s reserves in the reasonably assured resources (RAR) category are estimated at 77,185 tonnes of U308,
the estimated additional resources (EAR)-I reserves are about 23,525 tonnes of U308. The remaining
reserves are categorised as speculative resources (SR), which could become available for nuclear power
programme with further exploration. After accounting for various losses, including mining (15 per cent),
milling (20 per cent), and fabrication (5 per cent), the net uranium available for power generation is about
61,000 tonnes. The available uranium has electricity potential of 328 GWe of pressurised heavy water type
reactors (PHWR) and 42,231 GWe of fast breeder reactors (FBR).
The Atomic Energy Act, 1962, allows setting up of nuclear power stations only by government companies.
Two government companies, Nuclear Power Corporation of India Limited (NPCIL) and Bharatiya Nabhikiya
Vidyut Nigam Limited (BHAVINI), are responsible for setting up and operating nuclear power reactors.
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Generation … (9/10)
India: Energy Sector September 2010
GENERATION
As of March 2010, nuclear power plants accounted for 2.9 per cent of the total installed capacity. Though
nuclear power is under government-controlled entities, options are being explored to attract investment
from private sector.
Figure 3: Nuclear Power Capacity
Source: CEA, IMaCS Research
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Generation … (10/10)
India: Energy Sector September 2010
GENERATION
The Planning Commission‟s expert committee on an Integrated Energy Policy has suggested in its report
that there is a possibility of reaching a nuclear power capacity of 21-29 GW by 2020 and 48-63 GW by 2030
through a mix of indigenous PHWRs, FBRs, and light water reactors (LWR).
In July 2005, India and the US signed a joint statement designed to give India access to the global market for
nuclear fuel and reactors. This was followed by a nuclear exports waiver by the Nuclear Suppliers Group
(NSG) in September 2008. Subsequently, India has entered into deals with France and Russia to source fuel
for its existing nuclear plants.
34
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
35
Transmission and distribution … (1/7)
India: Energy Sector September 2010
TRANSMISSION AND DISTRIBUTION
Adequate capacity addition and optimum utilisation are important aspects of power sector development.
Commensurate with the capacity addition, an extensive network of transmission and distribution has been
developed for evacuation of power and supply to consumers. Notwithstanding the substantial progress, many
regions in the country still suffer from shortage of electricity. The new generation capacity additions as well
as targeted increase in per capita consumption call for further strengthening and expansion of the
transmission system.
The capacity additions to transmission lines (220 kV and above) until the end of 2008-09 are indicated in the
following table.
Power Transmission
Table 8: Growth in Transmission Lines
(Ckm)
Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan Up to 2nd year
of 11th Plan
765 kV - - - 1,160 2,184 3,118
± 500 kV HVDC - 1,634 1,634 4,738 5,872 7,172
400 kV 6,029 19,824 36,142 49,378 75,722 89,496
220 kV 46,005 59,631 79,600 96,993 114,629 112,960
Source: CEA, IMaCS Research
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Transmission and distribution … (2/7)
India: Energy Sector September 2010
TRANSMISSION AND DISTRIBUTION
With adoption of new technology, there has been a significant addition of transmission capacity at the extra-
high voltage levels of over 500 kV. The 765 kV and 500 kV-HVDC technologies have raised grid efficiency and
have strengthened the grid at the inter-regional links.
Table 9: Growth in Sub-stations (MVA)
Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan Up to 2nd year
of 11th Plan
765 kV - - - - - 4,500
± 500 kV HVDC
Converter/BTB Station- - - 5,200 8,200 8,700
400 kV 9,330 21,580 40,865 60,380 92,942 111,202
220 kV 37,291 53,742 84,177 116,363 156, 497 177,189
Source: CEA, IMaCS Research
At present, the country has five regional grids - one each for the Northern, North-Eastern, Southern,
Eastern and the Western region. Except for the Southern region, all other regional grids have been
synchronised. Expansion of the regional transmission networks is essential for transmission of power across
the country, from the abundant generation areas to deficit areas. As part of its ambitious mission to provide
electricity to the entire country by 2012, the Government has set a target of adding over 60,000 circuit
kilometres (37,200 miles) of new transmission lines at a cost of about US$ 146 million. The integrated grid is
expected to carry as much as 60 per cent of the power generated in the country. The government is also
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Transmission and distribution … (3/7)
India: Energy Sector September 2010
TRANSMISSION AND DISTRIBUTION
Table 10: Growth in Inter-regional Transmission Capacity
(Ckm)
carrying out US$ 126-million expansion of the five regional systems as well as the inter-regional grid to
boost transmission capacity from 17,000 MW to 37,000 MW.
Year 2,002 2,005 2,007 2,010 2,012
765 kV - - 1,100 2,200 9,200
400 kV 1,000 2,400 7,800 11,400 16,400
HVDC bi-pole - 2,000 2,500 2,500 6,500
HVDC B-T-B 2,000 3,000 3,000 3,000 3,000
HVDC mono-pole 200 200 200 200 200
220 kV 1,850 1,850 1,850 1,850 1,850
Total 5,050 9,450 16,450 21,150 37,150
To facilitate greater private sector participation in transmission and to leverage advantages of competition,
the central and state electricity regulatory commissions have harmonised their regulations for grant of
transmission licenses. These regulations provide the framework for procurement of transmission licenses
through competitive bidding.
Source: CEA, IMaCS Research
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Transmission and distribution … (4/7)
India: Energy Sector September 2010
TRANSMISSION AND DISTRIBUTION
Overall, the CEA has estimated a fund requirement of US$ 33.33 billion for implementation of transmission
schemes during the Eleventh Plan period. This includes requirement of US$ 17.86 billion for the regional and
the national grid transmission schemes and US$ 15.48 billion for the state sector transmission schemes.
Distribution is a vital component of the electricity-supply chain, but this segment has lagged in operational
efficiency as well as financial performance. Under-recovery of costs and poor collection efficiency of the
power utilities have been a key concern. The consequent deterioration in operational efficiency has further
aggravated the situation. With the restructuring of electricity utilities from their monolithic structures to
separation of generation, transmission and distribution, the focus has finally shifted to making the distribution
segment more efficient and financially viable. This has created significant opportunities in the segment.
Recognizing the urgent need for reforms in the distribution sector, the Government of India introduced the
Accelerated Power Development Programme (APDP) in 2001. The APDP was aimed at strengthening
transmission and distribution networks and reduction in aggregate technical and commercial (AT&C) losses.
Subsequently, incentive financing was integrated with the existing investment programme to achieve
commercial viability of SEBs and power utilities and link it to the reform process. APDP was renamed
Accelerated Power Development & Reforms Programme (APDRP) in 2002-03 for Tenth Plan period (2003-
07). The main objectives of the programme were to achieve financial viability of state utilities, reduce AT&C
losses, improve customer satisfaction, and increase the reliability and quality of power supply. After a re-
examination of the APDRP, The Cabinet Committee on Economic Affairs (CCEA) approved a restructured
Power Distribution
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Transmission and distribution … (5/7)
India: Energy Sector September 2010
TRANSMISSION AND DISTRIBUTION
APDRP (R-APDRP) for the Eleventh Plan period as a central sector scheme in July 2008. The focus of this
programme is on actual, demonstrable performance in terms of AT&C loss reduction.
Projects under the scheme are to be taken up in three parts. The activities covered under the three parts
are:
• Part A: Preparation of baseline data for project area, covering consumer indexing, geographic
information system (GIS) mapping, metering of distribution transformers and feeders, automatic data
logging for all distribution transformers and feeders, supervisory control and data acquisition (SCADA)
and distribution management system (DMS).
Initially, 100 per cent of the funds for the approved projects are to be provided through loans from the
Government of India on terms decided by Ministry of Finance. The amount allocated for these activities
is US$ 2.48 billion.
• Part B: Renovation, modernization and strengthening of 11 kV level substations,
transformers/transformer centres, re-conductoring of lines at 11 kV and lower levels, urban-rural load
bifurcation, feeder separation, load balancing, HVDS (11 kV); laying aerial bunched conductor in high
population-density areas; replacement of electromagnetic energy meters with tamper-proof electronic
meters; installation of capacitor banks and establishing mobile service centres.
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TRANSMISSION AND DISTRIBUTION
Initially, up to 25 per cent funds for the projects are to be provided through loans from the Government of
India on terms decided by Ministry of Finance. For special category states, loan amount would be 90 per
cent of the project cost. However, the project-wise requirement of gross budgetary support is to be decided
by a Steering Committee. The remaining funds are to be raised from financial institutions. The amount
allocated for these activities is US$ 9.95 billion.
• Part C: Funding of activities related to promoting reforms in the power sector. The fund allocated for
these enabling activities is US$ 292.78 million.
Guided by various regulatory and policy initiatives for efficiency improvements in the distribution sector,
several Public Private Partnership (PPP) models have been proposed. Successful PPP models include first
corporate distribution franchise model in Bhiwandi and distributed-generation based franchise in Pune. The
franchisee model is being promoted by state governments that are keen to improve their networks and
collection efficiencies without complete privatisation. Private companies have also shown interest in
distribution franchises offered by several states.
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TRANSMISSION AND DISTRIBUTION
In April 2005, the Government of India launched the Rajiv Gandhi GrameenVidyutikaranYojana (RGGVY), a
scheme for developing rural electricity infrastructure and household electrification. The scheme was aimed
at achieving the incumbent government‟s National Common Minimum Programme (NCMP) promise of
providing access to electricity to all households in five years. Rural Electrification Corporation (REC) is the
nodal agency for implementation of the scheme. A capital subsidy of US$ 1.2 billion was budgeted for
implementation of Phase I of the scheme during the Tenth Plan period. The scheme was reviewed towards
the end of plan period and modifications were made for its implementation during the Eleventh Plan period.
Accordingly, the Ministry of Power approved a capital subsidy of US$ 6.6 billion in February 2008. The
current status of rural electrification is as mentioned in the following table:
Rural Electrification
Table 11: Rural Electrification
Rural Electrification Status*
Total No of Villages 593,732
No of Villages Electrified 498,080
% of Village electrified 83.9%
Source: CEA, Ministry of Power
*As of May 2010
42
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
43
Demand-supply position … (1/5)
India: Energy Sector September 2010
DEMAND-SUPPLY POSITION
For the past two decades, India has had to face increasing deficit in power supply, both for meeting its
normal energy requirements as well as its peak load demand. The problem is acute during peak hours and
summers, and necessitates planned load shedding by many utilities to maintain the grid in a healthy state. The
average all-India shortages in 2009-10 were at 10 per cent in terms of normal energy requirement and about
13 per cent in terms of peak load.
Overview
Table 12: Electricity Demand and Supply
FY
Energy Peak Demand
(MU) (MW)
Demand Availability Shortage % Demand Met Shortage %
2002-03 545,983 497,890 48,093 8.8 81,492 71,547 9,945 12.2
2003-04 559,264 519,398 39,866 7.1 84,574 75,066 9,508 11.2
2004-05 591,373 548,115 43,258 7.3 87,906 77,652 10,254 11.7
2005-06 631,024 578,511 52,513 8.3 93,214 81,792 11,422 12.3
2006-07 693,057 624,716 68,341 9.9 100,715 86,818 13,897 13.8
2007-08 737,052 664,660 72,392 9.8 108,866 90,793 18,073 16.6
2008-09 777,039 691,038 86,001 11.1 109,809 96,785 13,024 11.9
2009-10 830,594 746,644 83,950 10.1 118,472 102,725 15,747 13.3
Source: CEA
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DEMAND-SUPPLY POSITION
With the shortage at both the normal and the peak levels, Indian power industry does not exhibit much
cyclicality. Further, with assured returns, the margins of players and their profitability is almost independent
of the economic cycles.
Electricity is the most important component of primary energy. India‟s electricity consumption has grown at
an average rate of 7.3 per cent during the period 2002-07 to about 577.9 TWh. Consumption has increased
at a faster rate since 2002-03, reflecting buoyant industrial demand. Industrial consumers are the largest
group of electricity consumers, followed by the domestic, agricultural and commercial consumers, in that
order. India‟s per capita electricity consumption increased from 178 kWh in 1985-86 to 704.4 kWh in 2007-
08. Over the period, 2001-08, per capita consumption has increased at an average rate of 4.45 per cent. It is
still much lower compared to the international standards.
Table 13: Electricity Consumption
FY Consumption (GWh)
Dom. Comml. Indl. Agri. Others Total
2003-04 89,736 28,201 181,970 87,089 31,338 418,334
2004-05 95,659 31,381 199,488 88,555 32,950 448,033
2005-06 100,090 35,965 214,121 90,292 33,983 474,451
2006-07 111,002 40,220 241,216 99,023 34,210 525,671
2007-08 120,981 46,685 265,407 104,182 40,706 577,960
Source: CEA, IMaCS Research
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DEMAND-SUPPLY POSITION
The demand for power is expected to increase to 975 billion kWh by 2011-12. However, at an average GDP
growth rate of 8 per cent, the overall demand is expected to increase to about 1,097 billion kWh in 2011-
12, including the demand from non-utilities.
Electricity Requirement
Table 14: Projected Requirement of Electricity
Source: IMaCS Research
Energy Requirement Peak Demand Installed Capacity Required
(Billion kWh) (GW) (GW)
GDP growth at 8.0% 9.0% 8.0% 9.0% 8.0% 9.0%
2003-04 633 633 89 89 131 131
2006-07 761 774 107 109 153 155
2011-12 1,097 1,167 158 168 220 233
2016-17 1,524 1,687 226 250 306 337
2021-22 2,118 2,438 323 372 425 488
2026-27 2,866 3,423 437 522 575 685
2031-32 3,880 4,806 592 733 778 960
The 17th Electric Power Survey (EPS) has forecast a peak demand of 152,746 MW for 2010-11. That means
a capacity addition requirement of about 72,000 MW during the Eleventh Plan period. Though the target
set for capacity addition during the Eleventh Plan period is 78,700 MW, only 62,000 MW is expected to be
added by the end of the period.
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DEMAND-SUPPLY POSITION
The following table provides the Eleventh Plan targets for adding generation capacity. In a reversal of the
trend witnessed during the 1990s, a substantial contribution is expected from the hydropower sector. Also,
the private sector is expected to account for 15 GW of the planned capacity addition of 78.7 GW during
this period.
Capacity Addition Plan
Table 15: Installed Capacity Addition Plan
(MW)
Sector Thermal Hydro Nuclear Grand Total
11th Plan Total 59,693 15,627 3,380 78,700
Central 24,840 8,654 3,380 36,874
State 23,301 3,482 - 26,783
Private 11,552 3,491 - 15,043
Recognising the large potential of coal reserves in the country as an economic and readily available
resource, a significant proportion of the future capacity additions is expected to be based on coal. Further,
to reduce the environmental impact and to increase efficiency, the strategies proposed by the power
ministry include introduction of large-sized units (660-800 MW) employing the super-critical technology. The
source-wise capacity addition as envisaged under Eleventh Plan period is as given below:
Source: CEA, IMaCS Research
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DEMAND-SUPPLY POSITION
Figure 5: Fuel-wise capacity addition plan (2007-2012) (%)Additional generation capacity would require
commensurate investments in transmission
infrastructure as well. Huge transmission capacity
enhancement is required under Phase-III of National
Grid Programme, which targets an inter-regional
exchange capacity of 37,700 MW by 2012. With
rapid industrialization and growing power
requirements, many states have decided to set up
high-capacity intra-state power transmission
systems. PPP model is being adopted by many
utilities to attract private investment in transmission
sector. The future capacity addition plan envisaged is
as given in the table below:
76%
20%
4%
Thermal
Hydro
Nuclear
Table 16: Projected Transmission Line Length (Ckm)
Sector 11th Plan 12th Plan
765 kV 5,428 8,000
500 kV HVDC 5,206 4,500
400 kV 49,278 51,000
220 kV 35,371 50,000
Total 95,283 113,500
Source: CEA, IMaCS Research
48
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
49
Government policy and reforms … (1/10)
India: Energy Sector September 2010
GOVERNMENT POLICY AND REFORMS
Prior to 1991, power markets in the country were completely in the hands of the State Electricity Boards
(SEBs). Their poor financial health and the wide-spread inefficiencies in the system resulted in the initiation
of reforms in 1991.
The reforms initially focussed on the generation side of the business. Power was removed from the list of
activities reserved for the public sector in the Industrial Policy Resolution, and the Electricity Supply Act,
1948 was amended to lift many of the regulatory impediments to private investment in the sector. The
policy allowed full local and foreign private ownership of power companies and offered a thirty-year license
with the prospect of twenty-year renewals and higher financial returns.
Subsequently, it was felt that reforms were also required on the distribution side of the business, as the SEBs
were in a poor financial condition and unable to invest in fresh capacity. In addition to direct loans to SEBs,
the state governments also provided substantial guarantees to financial institutions for enabling SEBs to raise
requisite resources. Reform of power distribution was, and still is, a fundamental requirement for improving
commercial performance and financial viability of the power sector in India and attracting public and private
investment. Improvement in cost recovery in power sector also assumed significance, particularly in the
context of provision of free or subsidised power to certain consumer segments by the state governments.
The setting up of CERC and the state electricity regulatory commissions (SERC) was a key element of the
reform process, whereby the regulatory control was passed on to independent regulators. The commissions
Overview
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GOVERNMENT POLICY AND REFORMS
are mandated to regulate the tariffs charged to consumers, promote investment and advise the government
on power sector policies.
The next step was separating the generation, transmission and distribution functions of the integrated SEBs.
Starting with Orissa, many states have unbundled their SEBs to form separate entities. This has enabled
independent functioning of the three segments in terms of every-day operations, investment assessment,
project identification and deployment of funds.
Key Policies
The Electricity Act, 2003
The Electricity Act, 2003, provides a comprehensive yet flexible legislative framework for power sector
development. The key objectives of the Electricity Act, 2003 are as follows:
• Consolidation of the laws relating to generation, transmission, distribution, trading and use of
electricity with broad measures conducive to development of the entire electricity industry
• Promotion of competition in the industry
• Protection of consumers‟ interest and facilitation of electricity supply in all areas
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GOVERNMENT POLICY AND REFORMS
• Rationalisation of electricity tariffs
• Ensuring transparency of subsidies
• Promotion of efficiency and environmentally benign policies
• Constitution of CEA, regulatory commissions and establishment of an appellate tribunal
National Electricity Policy, 2005
The National Electricity Policy (NEP), 2005 aims to achieve accelerated development of the power sector,
supply of electricity to all, and protection of interests of consumers and other stakeholders. It has tried to
address the issues pertaining to availability of energy resources, technologies for using those resources,
economics of generation using different resources, and the country‟s energy security. The salient objectives
of the policy are as follows:
• Access to electricity for all households in next five years
• Power demand to be fully met by 2012
• Energy and peaking shortages to be overcome and spinning reserve to be made available
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GOVERNMENT POLICY AND REFORMS
• Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates
• Per capita availability of electricity to be increased to over 1,000 units by 2012
• Minimum lifeline consumption of 1 unit/household/day by year 2012
• Financial turnaround and commercial viability of the electricity sector
• Protection of consumers‟ interests
The policy requires the state governments to prepare a five-year plan with annual milestones to bring down
AT&C losses. It also aims to facilitate investment in distribution by ensuring adequate returns for utilities.
National Electricity Policy, 2005
In January 2006, the Government of India notified the National Tariff Policy, 2006, which aims to ensure the
following:
• Financial viability of the power sector
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GOVERNMENT POLICY AND REFORMS
• Attract investments
• Availability of electricity to consumers at reasonable rates
• Transparency and consistency in regulatory approach to tariff determination
The regulatory commissions are guided by the Tariff Policy, which stipulates that procurement of future
requirement of power is to be done through competitive bidding. A two-part tariff structure is to be
followed for awarding all long-term contracts to facilitate merit order despatch. Furthermore, power
purchase agreements (PPA) are required to ensure adequate and bankable payment security mechanism to
mitigate the risk of default.
Integrated Energy Policy, 2006
The broad vision behind the Integrated Energy Policy is to meet the energy demand of all, including the
lifeline energy needs of vulnerable households. The emphasis is on safe and convenient energy at the least
cost in a technically efficient, economically viable and environmentally sustainable manner.
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GOVERNMENT POLICY AND REFORMS
National Action Plan on Climate Change
In 2008, India announced its first National Action Plan on Climate Change (NAPCC) outlining existing and
future policies and programmes to address climate change mitigation and adaptation. The plan includes the
National Solar Mission, National Mission for Enhanced Energy Efficiency, National Mission on Sustainable
Habitat, National Water Mission, National Mission for Sustaining the Himalayan Ecosystem, National Mission
for a “Green India”, National Mission for Sustainable Agriculture and National Mission on Strategic
Knowledge for Climate Change.
Industrial Policy for Renewable Energy
The Government of India is promoting medium, small, mini and micro enterprises for manufacturing and
servicing of various types of renewable energy systems and devices. The industrial policy measures include
the following:
• Exemption from industrial clearance for setting up renewable energy units.
• Exemption from CEA clearance for power generation projects of up to US$ 238.1 million.
• Five-year tax holiday for renewable energy power generation projects.
• Soft loan made available through IREDA for renewable energy equipment manufacturing.
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GOVERNMENT POLICY AND REFORMS
• Facilities for promotion of export-oriented units for renewable energy industry.
• Financial support extended to renewable energy units for taking up R&D projects in association with
technology institutions.
• Permission to private sector companies to operate as distribution licensees or generating entities.
• Custom duty concession given for renewable energy parts and equipment, including for machinery
required for renovation and modernisation of power plants. Excise duty on a number of capital goods and
instruments in the renewable energy sector has been reduced or exempted.
• Excise duty reduction or exemption on a number of capital goods and instruments used in the renewable
energy sector.
The Mega Power Policy
Under the Mega Power Policy, projects of more than 500 MW (and 350 MW in special category states) with
inter-regional power transmission capabilities qualify to receive financial incentives. Under the policy, a
qualifying project can avail of financial concessions such as zero customs duty on import of capital equipment
and deemed export benefits under the Foreign Trade Policy and income tax holiday under Section 80-IA of
the Income Tax Act. Tax holidays are available to such projects for 10 years within 15 years of commissioning.
States can also provide exemptions on local taxes and duties. Projects in the public sector get 15 per cent
price preference.
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GOVERNMENT POLICY AND REFORMS
The Ultra Mega Policy
The government has launched an initiative for developing 4,000 MW coal-based ultra mega power projects
(UMPPs). The objective behind this initiative is to obtain cheaper tariffs using economies of scale and
mitigate the risks related to acquisition of land, fuel, water and statutory clearances. These projects are
awarded to developers on the basis of tariff-based competitive bidding. Project-specific shell companies
(SPVs) have been set up as wholly-owned subsidiaries of Power Finance Corporation Limited to tie up
necessary inputs such as land, captive mining blocks for fuel and water, and to facilitate in-principle
environment and forest clearances. Each SPV is transferred to the selected developer along with the
clearances obtained and resources secured. So far, nine sites have been identified by CEA for the proposed
UMPPs. These include four pit-head sites, each, in Madhya Pradesh, Jharkhand, Orissa and Chhattisgarh, and
five coastal sites, each in Gujarat, Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka. Some states are
keen to have additional UMPP sites.
The New Hydro Policy, 2008
A new hydro policy was approved by the Union Cabinet in January 2008. The key features of the policy are as
follows:
• Both the public sector and the private sector developers can be allocated projects without having to go
through the tariff based competitive bidding route. The tariff would be decided by the appropriate
regulatory commission.
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GOVERNMENT POLICY AND REFORMS
• The developers have been allowed merchant sales of up to 40 per cent of the saleable energy. This allows
them the flexibility of diversifying revenue realisations instead of being bound by fixed PPAs.
• The policy allows 12 per cent free power to the local state government and an additional 1 per cent for a
local area development fund that would provide a regular source of income to build replacement
infrastructure for the displaced people and to fund welfare schemes for them.
• For the families affected by projects, the policy provides for 100 units of free electricity per month for a
period of 10 years. In addition, the policy stipulates that at every project site, an industrial training institute
would be set up six months before the beginning of the project work to train the affected people to
undertake skilled and semi-skilled jobs on project.
The 50,000 MW Hydroelectric Power Initiative
The Central Government launched a 50,000 MW hydropower initiative in May 2003. It was felt that an ideal
hydro-thermal mix in the ratio of 40:60 is necessary for building flexibility in power system operations to suit
varying load patterns during a year. Both base-load and peak-load requirements can be sufficiently met with
such a mix while maintaining the grid stability.
The Electricity Act, 2003, requires hydropower developers to obtain approval from CEA, which in turn is
required to assess whether a proposed project‟s river works could jeopardize the prospects of the best
development of the river or its tributaries for power generation while being consistent with the
requirements of drinking water, irrigation, navigation, flood-control or other public purposes. CEA must
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GOVERNMENT POLICY AND REFORMS
make this assessment in consultation with the central and the concerned state governments.
Under this initiative, a pre-feasibility report (PFR) is completed by CEA before a project is offered to a
developer. PFRs have been prepared for 162 projects with a cumulative capacity of 34,020 MW and now
detailed project reports (DPR) are under preparation. The projects are located in Andhra Pradesh, Arunachal
Pradesh, Chhattisgarh, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra,
Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim and Uttaranchal.
Open Access and Power Trading
Open access is a key feature of the Electricity Act, 2003. Open access to transmission and distribution on
payment of charges to utilities enables a variety of licensees to use spare capacities to transmit power from
generation points to load centres. Power trading through the open access system allows freedom to buy and
sell electricity. This has also helped develop power exchanges in the country.
59
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
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Opportunities in The Indian power sector … (1/10)
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Regional Cooperation
South Asian countries have a great potential for electricity generation and have complementary endowments
on a contiguous landmass, which is a prerequisite for developing an integrated power infrastructure,
including power grids and gas pipelines. If India has an edge in producing coal-based energy, Pakistan and
Bangladesh have the benefit of gas-based power generation, while Nepal and Bhutan have abundant potential
for hydropower.
These regional complementarities can be exploited for mutual benefit. A regional network of gas pipelines
and power grid is expected to enhance energy security of India. It is also likely to significantly benefit the
neighbours by reducing their cost of fuel transportation and help them in harnessing their energy resources
optimally.
Bangladesh has substantial reserves of gas – about 22.9 trillion cubic feet (TCF) – of which 16 TCF is proven
reserves. There is potential for Bangladesh to export gas to India. There is a huge potential for
hydroelectricity in the Hindukush-Himalayan region, of which only 11 per cent has been exploited so far.
Bhutan has hydroelectric potential to generate 30,000 MW and Nepal could produce 43,000 MW, and the
two could export power to India and Bangladesh.
India is in the process of upgrading transmission lines to fetch power from Nepal and Bhutan to its states of
West Bengal, Bihar and Uttar Pradesh. However, it may require a corridor through Bangladesh for
transmission lines.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Merchant Power
Merchant power plants (MPP) are a product of the restructured electricity industry. MPPs fill different niches
in the market: some provide steady supply to the grid while others fire up only when there is high peak-
demand. Given this strong incentive of high returns, MPPs strive to produce power efficiently and supply to
locations where it is needed the most. Private sector interest in power also stems from the possibility of
selling power at high prices in the present supply-constrained scenario.
Renewable Energy Option
The country has an estimated renewable energy potential of 85,000 MW from commercially exploitable
sources. The potential for wind power is 45,000 MW, for small hydro 15,000 MW and for biomass and bio-
energy it is 25,000 MW. In addition, India has the potential to generate 35 MW per sq km using solar
photovoltaic and solar thermal energy.
The Central Government has proposed an addition of 15,000 MW of renewable energy generation
capacities during the Eleventh Five-Year Plan period. The total investment on development of renewable
energy sources during the plan period is expected to be about US$ 2 billion. The renewable energy industry
is identified as a priority lending sector by the Reserve Bank of India.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Government Incentives
• SERCs have been mandated to promote renewable energy through renewable purchase obligations, which
require distribution companies to source up to 10 per cent of their power from such sources.
• The key incentives for wind energy include a provision for 80 per cent accelerated depreciation in the first
year, a 10-year tax holiday, income tax waiver on power sold to utilities and privileged tariffs.
• Projects that do not claim accelerated depreciation benefits are entitled to generation-based incentive of
US$ 0.011 for each kWh of power sold to IPPs with capacity of more than 5 MW.
• India offers several subsidies to solar power products, such as solar lanterns, home lighting systems besides
generation-based incentives of up to US$ 0.286/kWh to solar power plants.
• For small hydropower projects (less than 3 MW), incentives include concessions on customs duty, capital
subsidies, 10-year tax holiday and other state-level incentives such as exemptions from sales and electricity
tax and preferential tariffs.
• Incentives for biomass energy include accelerated depreciation, import duty concessions, excise duty
exemption, capital subsidies and a 10-year tax holiday.
Several export incentives have made India a key player in the global market for wind turbine generators
(WTG) and solar photovoltaic cells and panels.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Policy Incentives
• 100 per cent accelerated depreciation in the first year of the installation of projects and systems
• No excise duty on manufacture of most of the finished products
• Low import tariffs for capital equipment and most of the materials and components
• Soft loans to manufacturers and users for commercial and near commercial technologies
• Five-year tax holiday for power generation projects
• Remunerative price for grid-feeding renewable energy units under the alternate power purchase policy of
state governments
• Facility for banking and wheeling of power
• Facility for third-party sale of renewable energy
• Financial incentives and subsidies for devices with high initial cost
• Involvement of women in implementation of renewable energy programmes
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
• Encouragement to NGOs and small entrepreneurs
• Special thrust on renewable energy in the North-Eastern region of the country; 10 per cent of planned
funds earmarked for North-East for enhanced and special subsidies
• For municipal waste-to-energy projects, allotment of land on long-term basis at token lease rent and supply
of municipal waste at project site free of cost
In addition, the Central Government gives financial assistance to develop solar cities in the following manner:
• Up to US$ 0.12 per city for a period of five years
• Up to US$ 0.03 million for preparation of a master plan
• Up to US$ 0.03 million for institutional arrangements
• Up to US$ 0.5 million for awareness generation, capacity building and other promotional activities
• Up to US$ 0.03 million for oversight of implementation during five years
The government has created a liberal environment for foreign investment in renewable energy projects. Key
highlights of the foreign investment policy are:
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
• Permission for foreign investors to form joint ventures with Indian partners for financial and/or technical
collaboration and for setting up of renewable power generation projects
• Liberalised foreign investment approval regime for easy investment and technology flows to joint
ventures
• Automatic approval for proposals for up to 74 per cent foreign equity participation in a joint venture
• Permission for 100 per cent foreign equity with special approval from the Foreign Investment Promotion
Board (FIPB)
• Permission for setting up liaison offices in India
• Encouragement for foreign investment in renewable energy generation projects on build-own-operate
basis
State governments have also announced promotional policy packages in the form of wheeling, banking and
buyback guarantee in addition to considerable tariff escalations for energy from wind, co-generation, small
hydro, and biomass projects. In order to promote the sector, some state governments provide concession
and exemption in state sales tax and octroi. In addition, state renewable energy development agencies play a
hand-holding role in the development of renewable energy projects.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Private Participation
To enable the private companies to enter the power sector, the government has introduced many policies
and regulations under the Electricity Act and the National Electricity Policy.
By 2012, India requires an installed capacity of about 200,000 MW. A huge capital investment is required to
meet this target. This has created investment opportunities in power generation, transmission, and
distribution through the PPP mode. India‟s power sector is still ridden with a large demand-supply gap. This
has necessitated some strategic initiatives. There are strong opportunities in transmission network area –
additional 60,000 ckm of transmission network is expected to come up by 2012 with a total investment of
about US$ 200 billion.
Coal Linkages
In 2003, the Government of India issued guidelines for allocation of coal blocks to power plants to
ensure commensurate fuel supply for sustained generation at cheaper prices. Coal blocks are allocated
to projects of CPSUs, state PSUs, joint venture companies, IPPs, UMPPs, captive power plants supplying
at least 25 per cent of their capacity to the grid and MPPs:
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
• Projects proposed to be executed by the CPSUs, state PSUs and SEBs are accorded the first priority.
Moreover, their expansion projects get a higher priority over new projects.
• Joint venture projects between the centre and a state or between the two states have the next priority.
Joint ventures between private sector and the centre or a state have the same priority if the public sector
partner has substantial say in the management.
Carbon Credit Market
The Clean Development Mechanism (CDM) is well accepted in India, which is among the leaders in the
carbon credit market. The country is expected to generate 573 million Certified Emission Reduction (CER),
or carbon credits, by 2012.
The Government of India and industry have been very proactive in their approach to the carbon credit
market. This has helped India gain an early mover advantage in CDM. As of July 2010, 520 projects have been
registered, which is 22.5 per cent of the total projects registered with CDM Executive Board of UNFCCC.
The majority of the CDM projects have come from renewable energy industry. Most of the CDM projects in
India are undertaken on a unilateral basis – developed independently by local stakeholders. Indian companies
in the power sector are involved in development of alternative sources of energy and have reaped benefits
from carbon trading.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Energy Efficiency and Conservation
Under the Energy Conservation Act, the Bureau of Energy Efficiency (BEE) has begun to enforce
mandatory energy audits and establish consumption norms for nine specified energy-intensive industries.
In addition to government policies, efforts of multilateral and bilateral organizations to conserve energy
across a wide range of sectors have attracted new domestic and international energy efficiency
companies to this market. The increasing appeal of energy efficient processes and products over the past
few years has led to investors‟ interest in funding the energy efficiency sector.
The potential for energy savings is enormous: an estimated 183.5 billion kWh per year, according to
reports prepared by the Asian Development Bank and the BEE. The sector-wise energy consumption on
an all-India basis for the year 2007-08 is given in the following table. A conservative estimate of potential
for savings from energy efficiency is about 15 per cent of the electricity consumption.
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OPPORTUNITIES IN THE INDIAN POWER SECTOR
Table 17: Energy Saving Potential
(Billion kWh)
Sector Consumption Saving Potential
Agriculture Pumping 92.33 27.79
Commercial Buildings* 9.92 1.98
Municipalities 12.45 2.88
Domestic 120.92 24.16
Industry (Including SMEs) 265.38 18.57
Total 501.00 75.36
Source: Bureau of Energy Efficiency, IMaCS Research
*Establishments with connected load >500 kW
70
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
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Investment opportunities … (1/3)
India: Energy Sector September 2010
INVESTMENT OPPORTUNITIES
Investment in Power Sector
Government of India‟s estimate of the required investment in the power sector to meet the targets of the
Eleventh Plan period is US$ 245.62 billion. It comprises funds required for adding power generation capacity,
renovation and modernisation of existing power plants, expansion and up-gradation of transmission and
distribution infrastructure, and decentralized distributed generation. The total requirement of funds for
generation projects during the Eleventh Plan period is estimated at US$ 97.83 billion. Of that, US$ 48.11
billion are required by the central government projects, US$ 29.47 billion by state government projects and
US$ 20.25 billion by the private sector.
Opportunities in Generation, Transmission and Distribution
According to the 17th Electric Power Survey (EPS) of CEA, electricity demand is expected to grow to 968.7
billion kWh in 2011-12 and is further expected to grow to 1,392.06 billion kWh by the end of Twelfth Five-
Year Plan period (2012-17).
The estimated cost of non-conventional energy sources and captive power projects during the Eleventh Plan
period is estimated as follows:
• Non-conventional energy sources (13,500 MW at US$ 0.95/MW) US$ 16.07 billion
• Captive power plants (12,000 MW at US$ 1.19/MW) US$ 11.43 billion
Generation
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INVESTMENT OPPORTUNITIES
The Government of India has identified coal blocks with reserves of 3.2 billion tonnes for allotment by the
screening committee of Ministry of Coal for MPPs and captive power plants. About 10,000 MW is expected
to be developed through this initiative. The estimated funds required for this initiative are US$ 9.52 billion, at
1.19 per MW. Based on current prices, the fund requirement for renovation and modernisation (R&M) of
thermal and hydro power stations for the Eleventh Plan period is estimated as US$ 3.78 billion.
Table 18: Fund Requirement for R & M Activities
ParticularsCapacity
(MW)
Estimated Cost
(US$ Billion)
R & M of Hydropower 11,278.00 0.83
R & M of Thermal Power 12,389.00 2.95
Total Funds Requirement 3.78
Transmission
Total fund requirement for inter-state transmission system has been estimated at US$ 17.9 billion and for
intra-state transmission at US$ 15.5 billion. In order to mobilise resources from private sector, the
Government of India issued guidelines for private sector participation in transmission sector in January 2000.
These guidelines envisaged two distinct routes for private sector participation in transmission: the joint
venture route (wherein the CTU/STU shall own at least 26 per cent equity and the remaining is to be
contributed by the joint venture partner) and the Independent Private Transmission Company (IPTC) route
(wherein 100 per cent equity shall be owned by the private entity).
Source: CEA, IMaCS Research
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INVESTMENT OPPORTUNITIES
Distribution
It is estimated that to transmit the increased generation capacity, as envisaged in Eleventh Plan, to
consumers, a matching distribution network of about 1,500,000 ckm of 33 kV, 11 kV and LV lines and
292,000 MVA of distribution transformer capacity will be needed. Installation of capacitors and re-
conductoring of sub-transmission/ distribution network of about 3,000,000 ckm, and augmentation of
distribution capacity of 198,000 MVA of various sub-stations would also be required. In addition to these,
the estimated fund requirement of various other initiatives such as RGGVY under rural electrification and
APDRP is as follows:
Table 19: Fund Requirement for Distribution and Rural Electrification
ParticularsAmount
(US$ billion)
Sub-transmission and Distribution 46.90
RGGY 9.52
APDRP & Other Schemes 9.52
Others 2.38
Total Fund requirement 68.33
Source: Ministry of Power, IMaCS Research
74
Contents
Executive Summary
Industry overview – Power
Generation
Transmission and distribution
Demand-supply position
Government policy and reforms
Opportunities in the Indian power sector
Investment opportunities
Industry overview – equipment industry
INDIA: ENERGY SECTOR September 2010
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India: Energy Sector September 2010
INDUSTRY OVERVIEW– EQUIPMENT INDUSTRY
Investments in the Energy Equipment Industry
Growth in India‟s energy sector has drawn investments into the electrical equipment industry too. This
investment has come from the existing players and through FDI into capacity expansion and green field
projects.
Over the last 10 years, the energy equipment and related industries have received foreign direct
investment of US$ 2,955.5 million. Major investments have been made in electrical equipment industry
followed by miscellaneous mechanical and engineering industries, boilers and steam generating plants and
prime movers (other than electrical generators), as shown in the following table.
Table 20: FDI in Energy Equipment and Related Industries
(US$ million)
Industry April 2000 – March 2010
Electrical equipment 2,146.5
Miscellaneous mechanical and engineering industries 795.9
Boilers and steam generating plants 9.4
Prime mover (other than electrical generators) 3.7
Total 2,955.5
Source: Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
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INDUSTRY OVERVIEW– EQUIPMENT INDUSTRY
Overall economic recovery in India as well as in some of the major export destinations has encouraged the
industry players to take up expansion and green field projects. Investments have been mainly made in
capacities for generators, transformers, switchgears, wires and cables, boilers and turbines (including steam,
hydro, gas and wind energy turbines). The table below provides a snapshot of the investments made in
electrical equipment industry as of March 2010.
Table 21: Investments as of March 2010
(No., US$ million)
^ Steam, hydro, gas and wind energy
Source: CMIE
Industry
Outstanding investments Projects under implementation
No. of
projectsInvestment No. of projects Investment
Generators, transformers,
switchgears5 218.6 3 168.6
Wires and cables 11 350.3 8 240.7
Boilers and turbine^ 23 5,738.9 12 2,678.1
Total 39 6,307.8 23 3,087.5
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INDUSTRY OVERVIEW– EQUIPMENT INDUSTRY
Some of the major projects which are expected to be completed in 2010-11 are listed in the following table:
Table 22: Major Projects
(US$ million)
^AAC: All Aluminium Conductors, ACSR: Aluminium Conductors Steel Reinforced
Source: CMIE
Industry Company Investment Brief description
Switchgears Reyrolle 21.4The plant for manufacturing solid insulated switchgear is
expected to commission in September 2010.
Wires and cables Kei Industries 9.6The plant is expected to start producing 220 kV extra high
voltage cables from September 2010.
Wires and cablesCords Cable
Industries12.2
Commercial production of high tension rubber wires and cable
is expected to be commissioned in August 2010.
Wires and cables Polycab Wires 74.9The green field plant will manufacture 110 kV, 132 kV and 220
kV wires, AAC and ACSR^.
Wind turbine generators Regen Powertech 59.9The plant with capacity of 300 units is expected to start
production in August 2010.
Wind turbine generators R R B Energy 107.0The plant with capacity of 700 MW is expected to start
production in September 2010.
Boilers, turbines, generatorsReliance
Infrastructure2,568.8
The boiler, turbine and generator project is expected to be
complete by December 2010.
Turbines Siemens 58.9The project will be completed in December 2010 and will add
100 MW to Siemens‟ plant at Vadodara, Gujarat.
Transformers Polycab Industries 145.6 -
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INDUSTRY OVERVIEW– EQUIPMENT INDUSTRY
L&T-MHI (joint venture between Larsen and Toubro Limited and Mitsubishi Heavy Industries) has recently
invested US$ 404 million in a 4,000 MW manufacturing facility for supercritical boilers and turbines at
Hazira in Gujarat. The turbine and generator manufacturing facility was commissioned in April 2010 and the
boiler facility was commissioned in June 2010.
Budget Provisions in Energy Equipment Sector
India‟s electrical equipment sector is highly sensitive to government policies given its dependence on the
power sector, which is not only regulated by the government but also the investments in the sector are
mostly controlled by government schemes.
The central, state and private sectors together have projects to add about 62,000 MW of generation
capacity during the Eleventh Five-Year Plan period. States are also undertaking projects for upgrading their
power transmission and distribution systems. Rural electrification and grid-connected renewable energy
projects are also underway to augment capacity and increase the power supply coverage area. All these
projects are expected to have a positive impact on electrical equipment industry.
In the Union Budget 2008-09, the government reduced custom duty on project imports by 5 per cent.
However, a special countervailing duty of 4 per cent was imposed on a few specific power sector projects.
The Budget also emphasised on increasing the pace of power generation capacity addition and continuing
the reform process in power distribution. The initiatives in this respect include developing eight ultra mega
power (UMPP) projects, each with a capacity of 4,000 MW, and allocated on the basis of competitive
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INDUSTRY OVERVIEW– EQUIPMENT INDUSTRY
bidding as well as augmenting capacities in generation, transmission and distribution systems. In addition, US$
186 million was provided for R-APDRP projects of 2008-09. These initiatives and provisions are expected to
boost demand for transformers and switchgears – two major equipments used in transmission and
distribution of power. Moreover, the Budget proposed the creation of a national fund for transmission and
distribution reform.
In the Union Budget 2009-10, the allocation under R-APDRP was increased by 139 per cent to US$ 445
million over the previous budget estimate. It was also proposed that customs duty on permanent magnets
for synchronous generators above 500 KW used in wind-operated electricity generators be reduced from
7.5 per cent to 5 per cent. However, excise rate was doubled on items that previously attracted 4 per cent
duty, albeit with the exception of certain items such as power driven pumps for handling water, vacuum and
gas filled bulbs of retail sale price not exceeding US 42 cents per bulb, compact fluorescent lamps and
medical equipment.
The plan allocation for power sector, excluding the RGGVY, was more than doubled in the Union Budget
2010-11 to US$ 1,098 million from US$ 484 million in 2009-10. The plan outlay for the Ministry of New and
Renewable Energy (MNRE) was increased by 60 per cent, to US$ 214 million from US$ 134 million in 2009-
10. The budget also laid out the plan for setting up solar, small hydro and micro power projects at a cost of
about US$ 107 million in the Ladakh region of Jammu & Kashmir. Further, the budget exempted specified
inputs required for the manufacture of rotor blades for wind energy generators from central excise duty.
Excise on light emitting diodes (LED) lights was reduced from 8 per cent to 4 per cent and put at par with
compact fluorescent lamps (CFL).
80
Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
81
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India: Energy Sector September 2010
BOILERS
A boiler is a closed vessel which can sustain high pressure and is used to heat and vaporise water for use in
heating and power generation and industrial processes. Apart from power generation industry, which uses
boilers to produce steam at high pressure for operating turbines, industries such as fertiliser, petrochemical,
refinery, steel and paper require boilers for heating and other process requirements.
The Boiler Industry
Major boiler manufacturers in India include Bharat Heavy Electricals Limited (BHEL), Thermax, L&T-MHI,
Alstom India, CetharVessels and GB Engineering. These companies manage large turnkey projects which
include design, detailed engineering, procurement, manufacturing, supply, erection, and commissioning of
boilers (including repair and maintenance).
The main types of boilers manufactured in India include the following:
Utility boilers: Utility boilers are used for power generation applications. Utility boilers are classified
mainly on the basis of the fuel used, the mode of firing, the number of boiler drums and circulation of
water.
Industrial boilers: Industrial boilers are used by a number of industries for captive power generation and
process steam generation. These boilers are usually capable of handling a range of fuels such as coal, oil, gas
and black liquor. Industrial boilers manufactured by Indian manufacturers cater to specific requirements
such as dual pressure, multi-fuel firing, CO gas firing, import steam heating, drum coil heating and stand-by
heating. In addition, Indian boiler makers manufacture circulating fluidised bed combustion boilers and heat
recovery steam generators.
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BOILERS
Various types of utility and industrial boilers are given in the following table:
Table 23: Types of Utility and Industrial Boilers
Utility Boilers Industrial Boilers
• Coal or oil or gas fired.
• Tangential or wall firing, direct or indirect firing.
• Two-pass or single-pass.
• Front or rear or side mill layout.
• Single drum or bi-drum.
• Natural or controlled circulation ort once-through.
• Constant or sliding pressure operation.
• Base load or cyclic or two-shift operation.
• Cold primary air or hot primary air systems.
• Vertical package (oil or gas fired).
• Vertical units (oil, gas or coal fired).
• Fluidised-bed combustion (coal and other
solid fuels).
• Chemical recovery.
• Waste heat recovery.
• Stoker fired.
Source: IMaCS analysis
Supercritical boilers: Supercritical boilers are a new technology trend in the power generation industry,
as fuel efficiency has become a major priority. Such boilers were originally developed in the 1950s in the US
and over time they have undergone significant development.
Supercritical conditions occur when the boiler pressure increases above the critical pressure of 3,208 psi
/221.2 bars, above which the two phase mixtures of water and steam cease to exist. This eliminates the need
for separation of water and steam in drums during operation and allows a simpler separator to be employed
during start-up. The major advantage of supercritical boiler technology is that it requires less fuel per unit of
power generated compared to conventional subcritical steam generators. Thus, it is also less harmful to
environment and requires comparative lesser start-up time.
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BOILERS
Of late, the Indian power sector has started adopting this technology primarily because of the CEA
mandating stricter energy efficiency benchmarks for the power sector. CEA has also issued guidelines for
supercritical equipment to ensure reliability and good performance of power plants. Companies such as
BHEL, L&T-MHI and Thermax are developing supercritical boilers manufacturing capabilities.
Capacity and Production
The total production of boilers in India in 2009-10 was valued at about US$ 2,723.9 million. The industry
has been growing at an average rate of 37.7 per cent for the last six years.
Table 24: Production of Boilers
(US$ million)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR
Production 550.5 890.2 1296.2 2045.5 2208.3 2723.9 37.7%
Source: CMIE, IMaCS analysis
The value of total production of boilers in India increased four-fold, from US$ 550.5 million in 2004-05 to
US$ 2,208.3 million in 2008-09. During the same period, domestic demand for boilers increased at a faster
pace and was supported by imports. Until 2006-07, India was a net exporter of boilers. Since 2007-08, it
has become a net importer. Most of India‟s imports of boilers are from China.
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BOILERS
Table 25: Production, Import, Export and Consumption of Boilers
(US$ million)
Source: CMIE, IMaCS analysis
Growth of boiler manufacturing industry is closely linked with the development of the power and process
industries. The boiler manufacturers in India, including those with supercritical technology, are expected
to benefit immensely from the large generation capacity addition plans for the Eleventh and Twelfth Five-
Year Plan periods. Further, ageing of power plants in India and overseas is expected to increase
opportunities for R&M boilers. In this regard, Alstom has partnered with National Thermal Power
Corporation (NTPC), India‟s largest power generator, to undertake renovation, modernisation, retrofit and
refurbishment of aging power plants. The revival of industrial activity – as indicated by the significant
increase of 10.4 per cent in the IIP in 2009-10 – is expected to benefit the industrial boiler manufacturers.
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Production 550.5 890.2 1,296.2 2,045.5 2,208.3 41.5%
Imports 24.7 55.6 30.1 346.8 492.1 111.3%
Total Supply 575.2 945.8 1,326.4 2,392.3 2,700.5 47.2%
Exports 59.1 68.8 111.3 182.0 207.7 36.9%
Consumption 516.1 877.0 1,215.1 2,210.2 2,492.8 48.2%
Industry Growth Drivers and New Technology Development
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BOILERS
A shift towards supercritical technology is one of the major new developments in India‟s boiler industry.
Indian boiler manufacturers are collaborating with foreign technology partners for inducting supercritical
technology. Table 26: Technological Partnership for Supercritical Technology
Indian Manufacturer Foreign Partner
Bharat Heavy Electricals Limited
(BHEL) Alstom, France
ThermaxBabcock and Wilcox Power Generation Groups,
The USA
Larsen and Toubro (L&T) Mitsubishi Heavy Industries, Japan
Source: CMIE, IMaCS Research
BHEL is also in the process of developing its own supercritical technology, which is expected to be
inducted by 2013. The company has recently established a research facility to conduct heat transfer studies
at supercritical pressure conditions (over 221 bars). This facility is also capable of analysing parameters for
ultra supercritical boilers, which are being considered for economical power generation. L&T has also
prioritised technology analysis of supercritical boilers and thermo-hydraulic design of once-through steam
generator.
86
Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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India: Energy Sector September 2010
CONDUCTORS, WIRES AND CABLES
Wires are metallic conductors formed by drawing metals and are used to carry electricity and
telecommunication signals. Conducting metals commonly used to manufacture wires and cables are copper,
aluminium, steel and steel-reinforced aluminium, and galvanised steel.
Cables and wires are mainly used in high-voltage transmission and distribution of electric energy, industrial
and household electrical wiring, transmission of telecommunication signals, and electrical and electronic
equipment.
Major manufacturers of wires and cables in India include Havells India, SterliteTechnologies, Finolex
Cables, Diamond Power Infrastructure, KEI Wires and Cables, Precision Wires India, Nicco Corporation,
Universal Cables, Torrent Cables, Cords Cable Industries, Polycab Wires and Hindustan Vidyut Products.
Cables manufactured in India cover a wide range in terms of insulation (PVC1, XLPE2 and sioplus), voltage
(low, medium and high voltage up to 33 kV), conductors (copper wire, aluminium) and armouring. Cable
manufactures often undertake EPC projects for laying underground and submarine cables as well as
transmission and distribution cabling.
The Conductors, Wires and Cables Industry
1Poly Vinyl Chloride 2Cross-linked poly-ethylene
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CONDUCTORS, WIRES AND CABLES
Production of cables and wires in India has increased over last few years because of the growth of power
sector and industrial activity. The total production of aluminium-based conductors increased from 27,625
tonnes in 2004-05 to 34,605 tonnes in 2009-10. During the same period, production of winding wires
increased from 20,959 tonnes to 31,621 tonnes. Production of telecommunication cable has fallen for the
last three years because of declining demand for wired telephones.
Capacity and Production
Table 27: Production of Various Types of Cables and Wires
Unit 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR
ACSR/AAC Tonnes 27,625 28,057 26,848 16,187 17,407 34,605 4.6%
Winding wires Tonnes 20,959 24,413 25,384 28,849 30,104 31,621 8.6%
Insulated cables/wires Billion Km 7,408 8,960 8,169 25,797 57,028 96,509 67.1%
Telecommunication
cables
Million
metres16,488 14,027 7,119 8,013 7,073 5,579 -19.5%
Note: AAC: All Aluminium Conductors, ACSR: Aluminium Conductors Steel Reinforced
Source: CMIE, IMaCS analysis
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India: Energy Sector September 2010
CONDUCTORS, WIRES AND CABLES
In 2008-09, India‟s cables imports were valued at US$ 857.4 million. Cable imports have grown at 28.8 per
cent over the last five years. India imports cables and wires mainly from China, South Korea, the US and
Southeast Asia. Although India is a net importer of cables and wires, exports have increased five-fold, from
US$ 95.3 million in 2004-05 to US$ 516.8 million in 2008-09. Major exports destinations are the Middle
East, the US, the UK and Japan.
Table 28: Export and Import of Cables and Wires
(US$ million)
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Export 95.3 163.7 324.8 430.7 516.8 52.6%
Import 311.4 350.4 488.0 917.8 857.4 28.8%
Source: CMIE, IMaCS analysis
Major growth drivers of the wire and cable industry are power transmission and distribution sectors, real
estate development and general industrial activity.
The Government of India has prioritised building of a strong national grid. About 22,100 MW of inter-
regional transmission capacity is expected to be added during the Eleventh Five-Year Plan period. Further,
in order to achieve the government‟s mission to provide electric power to every Indian and to
Industry Growth Drivers
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India: Energy Sector September 2010
CONDUCTORS, WIRES AND CABLES
reduce transmission and distribution losses, greater emphasis is being laid on technology-driven
distribution of power. In addition, the RGGVY targets electrification of 125,000 un-electrified villages by
building village electrification infrastructure and rural electricity distribution network. As such, these
projects are the largest drivers of demand for cables and wires.
91
Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Transformers … (1/5)
India: Energy Sector September 2010
TRANSFORMERS
A transformer is a device that transfers electrical energy from one circuit to another through mutual
induction. By appropriate selection of the ratio of turns in the circuits, a transformer allows an alternating
current (AC) voltage to be „stepped up‟ or „stepped down‟.
Transformers are indispensable to electricity generation, transmission and distribution. By stepping up
voltage before transmitting electrical energy over long distances through wires and then stepping down
voltage as required in the power distribution process, transformers help reduce resistive loss and ensure
economic transmission of power over long distances. They are also used in electronic products in order
to step-down the supply voltage to a level suitable for the circuits of electronic instruments. The other
uses of transformers are in railway locomotives and traction equipment.
The industry manufactures a wide range of transformers, such as generation transformers, distribution
transformers, traction and locomotive transformers, and ultra-high-voltage instrument transformers (1,200
kV). Energy efficient transformers with low loss and low noise levels that meet international standards are
also produced.
Major manufacturers of transformers in India include EMCO, Bharat Bijlee, Crompton Greaves,
Transformers and Rectifiers India Limited (TRIL), Kirloskar Electric, Voltamp Transformers and Indian
subsidiaries of multinational companies such as ABB, Siemens, and Areva T&D.
The Transformer Industry
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India: Energy Sector September 2010
TRANSFORMERS
Indian manufacturers are fast aligning themselves with the changing power generation, transmission and
distribution scenario. While generation capacity is being augmented, smart-grid technologies are
increasingly being deployed to reduce transmission and distribution losses. Going ahead, greater use of
765 kV extra high voltage (EHV) transmission highways and High Voltage Direct Current (HVDC) links are
expected to open up new opportunities for the industry. As the government has initiated bulk tendering
of supercritical power plants, Power Grid Corporation of India Limited (PGCIL) has moved towards
implementation of 800kV HVDC transmission lines and will adopt 1,200 kV AC lines next.
India has over 500 transformer manufacturers. In 2009-10, total production of power and distribution
transformers in India was estimated at 176,427 MVA. The production has grown at a rate of about 17 per
cent during the period 2004-2010. Of the total transformers produced, power transformers contributed
140,048 MVA while distribution transformers accounted for 36,379 MVA.
Capacity and Production
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Transformers … (3/5)
India: Energy Sector September 2010
TRANSFORMERS
The power transformers market has grown at a rate of 18.2 per cent during the period 2004-2010, faster
than the distribution transformer market, which registered a growth of 13.4 per cent. Further, the demand
for small-size distribution transformers of 16 KVA to 100 KVA has grown significantly. Transformers
ranging from 250 KVA to 630 KVA have also registered growth.
Besides meeting the domestic requirement, India is exporting transformers to more than 50 countries,
including the US, South Africa, Cyprus, Syria, Iraq and the countries in Europe, the Middle East and Far East.
Exports of transformers grew over five-fold, from US$ 91.5 million in 2004-05 to US$ 466.2 million in
2008-09. During this period, imports grew from US$ 71.5 million to US$ 324.6 million. While transformers
imported from China and South Korea pose pricing challenge to Indian manufactures, Indian products are
of better quality and help recover good margins.
Table 29: Production of Transformers
(MVA)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR
Power transformers 60,787 62,577 77,674 94,390 119,101 140,048 18.2%
Distribution transformers 19,369 27,181 35,188 40,412 34,272 36,379 13.4%
Total 80,156 89,758 112,862 134,802 153,373 176,427 17.1%
Source: CMIE, IMaCS analysis
95
Transformers … (4/5)
India: Energy Sector September 2010
TRANSFORMERS
The growth of power generation capacity and, transmission and distribution network is expected to boost
demand for power and distribution transformers in India. Replacement of transformers installed during
the Sixth Plan (1980-85) and Seventh Plan (1985-89) periods is also expected to add to demand.
EMCO, a leading transformer manufacturer, puts strong emphasis on enhancing product portfolio through
continuous and collaborative research and developmental activity. The company‟s sustained R&D efforts
have resulted in development of „Smart Transformer‟. The company is also in the process of developing a
„High Temperature Super Conducting Transformer‟. Further, it has developed an eco-friendly dielectric fluid
for transformer in association with Electrical Research and Development Association (ERDA), Vadodara.
Table 30: Imports and Exports of Transformers
(US$ million)
Source: CMIE, IMaCS analysis
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Export 91.5 130.6 206.0 318.0 466.2 50.3%
Import 71.5 78.7 119.3 182.0 324.6 46.0%
Industry Growth Drivers and New Technology Development
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India: Energy Sector September 2010
TRANSFORMERS
The „Smart Transformer‟ is an intelligent, value added, and compact transformer with a monitoring and
energy management system designed to provide comprehensive diagnostics and real-time performance
information of transformers to utilities and large power consumers. It ensures shorter network down
time and better load planning. The product is available at up to 630 kVA rating, 25 kV class and for single-
and three-phase.
Under the National Perspective Plan, EMCO has collaborated with Central Power Research Institute, a
public sector institute to develop energy-efficient 'High Temperature Super Conducting Transformer'. The
project, which is jointly funded by Ministry of Power and EMCO, aims to develop 630 kVA, high
temperature superconductor (HTS) distribution transformer using super-conducting elements.
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Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Turbines … (1/4)
India: Energy Sector September 2010
TURBINES
Turbines are the most critical equipment in the electric power generation process. A turbine is a rotary
engine that extracts energy from the source (steam, water, gas and wind) and converts it to useful work
(rotating engine for generation of electric power).
Turbines are primarily classified on the basis of speed, power output, input conditions (pressure and
temperature at entry and exit of turbine) and input fluid – steam, water, gas and wind. Turbines are mostly
used in power generation. However, in industrial processes, turbines may work as a source of mechanical
energy to drive pumps and compressors.
Major turbine manufacturers in India are BHEL, L&T-MHI, Alstom India, Triveni Engineering and Industries,
Siemens and Kirloskar Brothers.
The Turbine Industry
As of March 2009, the Indian turbine market was valued at about US$ 1,136 million. It grew at a rate of
44.1 per cent between 2004-05 and 2008-09. The growth was by power generation capacity addition. The
demand for turbines is primarily met by domestic production, which was valued at US$ 912 million for
2008-09.
Capacity and Production
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TURBINES
Both imports and exports of turbines have grown at over 35 per cent over the last few years. However,
total imports of turbines largely outpace exports. In recent years, turbine imports from China and Korea
have increased.
Table 31: Production, Trade and Consumption of Turbines
(US$ million)
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Production 198 261 505 874 912 46.5%
Imports 84 167 186 252 293 36.5%
Total Supply 283 428 690 1,126 1,205 43.7%
Exports 19 30 58 52 69 37.6%
Consumption 263 398 633 1,074 1,136 44.1%
Source: CMIE, IMaCS analysis
Growth of turbine industry is driven by augmentation of power generation capacity across fuel-segments.
The table below summarises the power generation scenario in India.
Industry Growth Drivers and New Technology Development
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Turbines … (3/4)
India: Energy Sector September 2010
TURBINES
Table 32: Snapshot of Power Generation Scenario
(MW)
MoP: Ministry of Power, Government of India, LOA: Letter of Approval
Source: CEA
Particulars Capacity
Capacity at the end of 10th Plan (March-2007) 132,329
Add: Likely 11th Plan capacity-addition (CEA / MoP estimate) 62,374
Add: Slippage from the 11th Plan (original target: 78,700 MW) 16,326
Add: Capacity under construction in the 12th Plan (LOA allotted) 46,500
Aggregate capacity at the end of 12th Plan (March 2017)) 257,529
Add: Renewable capacity addition in the 11th Plan (7,154 MW commissioned by
September 2009)14,000
Total by the end of 12th Plan, including renewable capacity 271,529
Expected capacity addition in the 12th Plan 100,000
Capacity in the 12th Plan, for which orders not yet placed 53,500
Capacity by the end of 12th Plan (assuming 100 per cent ordering
and execution of remaining orders)324,029
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India: Energy Sector September 2010
TURBINES
Indian manufacturers have well-qualified engineers and technicians who are capable of using advanced
engineering design tools, finite elements method (FEM), computational fluid dynamics (CFD) and 3-D
modelling. BHEL has developed a new single-cylinder reheat turbine in 120-150 MW range to meet
customers' demand for improved part-load efficiency and compact design. The main features of the newly-
designed steam turbine include combined high pressure, intermediate pressure and low pressure turbines
in a single casing with horizontally-split outer and inner casings, nozzle control with regulating stage and
reaction blading, central admission, provision of extractions for regenerative feed heating cycle and high-
pressure electro-hydraulic actuators.
BHEL‟s compact design of split-stay ring for hydro turbines permits use of compact guide apparatus, which
in-turn brings the generator closer to the turbine and facilitates adoption of semi-umbrella bearing
arrangement. This design helps reduce weight for medium and high-head stay rings, and more importantly,
permits accommodation of the semi-umbrella bearing arrangement in limited spaces of underground
caverns.
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Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Switchgears … (1/4)
India: Energy Sector September 2010
SWITCHGEARS
A switchgear is used both to de-energize equipment to allow work to be done and to clear faults
downstream. A circuit breaker enclosed within switchgear is the key component that interrupts fault
currents. Switchgears are primarily classified on the basis of voltage: low voltage switchgear (up to 1,100
V), medium voltage switchgear (up to 36KV) and high voltage switchgear (above 36 kV).
Oil-filled circuit breakers have largely been replaced by air-blast, vacuum, or gas-insulated equipment,
facilitating safer control of high currents and power levels by automatic equipments with digital controls,
protection, metering and communications. There has been a higher demand for gas-insulated switchgear
(GIS) because of space constraint in urban areas. Switchgears are required not only for transmission and
distribution of electricity but also to access and control electricity.
Major manufacturers of switchgears in India are L&T, Legrand India, Schneider Electric India, ABB India,
Crompton Greaves, Havells India, Siemens India and Reyrolle. India‟s switchgear industry is well developed
and it is capable of manufacturing products in the entire voltage range from 240 V to 800 kV.
The Switchgears Industry
Switchgears are a combination of electrical disconnects and fuse and/or circuit breakers and are used to
isolate electrical equipment within an electric power system or grid.
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India: Energy Sector September 2010
SWITCHGEARS
India‟s switchgear market is estimated at US$ 2.1 billion. While power contractors, low-tension circuit
breakers (LTCB) and miniature circuit breakers (MCB) have grown at a rate of 18-22 per cent during the
period 2004-2010, high-tension circuit breakers (HTCB) have grown at a rate of 9.9 per cent. Switch fuse
and fuse switch units and HRC fuses have grown at a moderate rate of 5.7 per cent.
The high growth of LTCB segment is primarily due to sustained demand from the housing sector, IT
industry, services and infrastructure sectors. In the low-voltage switchgear segment, MCBs are fast
replacing re-wireable switch fuses. High-voltage transmission projects have been the key driver for growth
of HTCBs.
Capacity and Production
Table 33: Production of Switchgears and Circuit Breakers
(Thousands)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR
Power contactors 2,407 2,958 3,489 4,475 3,667 6,533 22.1%
Low -tension circuit breakers 608 623 809 1,615 1,178 1,506 19.9%
High-tension circuit breakers 35 44 52 59 59 55 9.9%
Miniature circuit breakers 35,191 38,373 49,664 59,563 62,979 81,450 18.3%
Switch fuse and fuse switch units 647 815 934 942 834 853 5.7%
Source: CMIE, IMaCS analysis
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Switchgears … (3/4)
India: Energy Sector September 2010
SWITCHGEARS
Over the last five years, both exports and imports of switchgears have increased. However, imports have
outpaced exports. Exports of switchgears, primarily MCBs, have increased from US$ 169 million in 2004-
05 to US$ 418 million in 2008-09. Switchgears manufactured in India are exported to over 40 countries
including the UK, China, and Singapore and the countries in Southeast Asia, Middle East and Africa. During
the same period, imports of switchgears have increased from US$ 286 million to US$ 918 million.
Table 34: Exports and Imports of Switchgears
(US$ million)
Source: CMIE, IMaCS analysis
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Exports 169 250 323 401 418 25.4%
Imports 286 383 513 653 918 33.9%
Growth in production of switchgears is driven by increased demand from power utilities, infrastructure
projects, and industrial and residential consumers. Steady growth of use of the low-tension circuit
breakers and miniature circuit breakers is expected to continue with the improvement in the real estate
and services sectors. Strengthening of transmission and distribution network is expected to benefit
medium and high voltage segments.
Industry Growth Drivers and New Technology Development
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India: Energy Sector September 2010
SWITCHGEARS
In-house R&D units of manufacturers have been using advanced computer-aided engineering tools such as
electromagnetic and electrostatic analysis, structural and fatigue analysis, thermal analysis, coupled field
analysis for design, and development of switchgears. The R&D effort in this industry is entirely consumer
driven and involves new product development and enhancement of features of existing products.
Crompton Greaves has developed customised software – „Virtual Laboratory Program for Switchgears‟ –
which enables the company to optimise design and reduce cycle time. The technology cell of the company
has published a number of technical papers on design and development of switchgears in journals of
repute.
Havells India has developed some new circuit breakers, such as a two-pole version of mini MCB, Type S'
RCCB and Type A' RCCB, and ACBs in the range of 3,200 A to 4,000 A. In developing existing products,
the company has been successful in:
• Introducing glue (resin) in 63A MCBs for improved consistency in thermal tripping of circuit breaker.
• Introducing parallel circuit in 63A breaker to reduce temperature rise of the breaker.
• Upgrading RCCB from electromechanical design to PCB based electronic design.
• Upgrading MCCBs with reverse feed applications.
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Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Transmission Towers … (1/4)
India: Energy Sector September 2010
TRANSMISSION TOWERS
India‟s transmission tower industry has matured over the last two decades and is presently moving
towards high-voltage transmission.
The larger tower manufacturers in India, such as KEC International, Jyoti Structures, Kalpataru Power
Transmission, Sujana Towers, and EMCO, provide turnkey solutions for designing, manufacturing, load
testing and installation of a wide range of transmission lines.
Indian tower industry produces structures that can carry transmission lines of up to 765 kV. Now,
following the recent initiatives by Power Grid Corporation of India to introduce 1,200 kV transmission
lines, India‟s tower industry is moving towards an era of extra high-voltage transmission. Outside India,
these companies supply towers and structural components to power utilities and EPC contractors. Their
overseas customers include ABB (Germany), AREVA T&D (France), Balfour Beatty Power Network(the
UK), Cegelec (France), Cobra (Spain), Downer PTR (Australia), Enelpower S.p.a ( Italy), GYM (Peru), Pivot
(Nigeria), Sumitomo Electric (Japan) and SAG (Germany).
The Transmission Tower Industry
Transmission towers support transmission lines carrying high-voltage electricity from power generating
units to substations for further distribution. They are fabricated by welding steel components and,
galvanized and tested for design load before commissioning.
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Transmission Towers … (2/4)
India: Energy Sector September 2010
TRANSMISSION TOWERS
The global economic slowdown has impacted the transmission tower and lines business moderately. This
impact was evident in lower capacity utilisations during 2008-09. However, most of the key players
expanded capacities during this period. In 2008-09, total capacity of the top three players3 was 369,000
tonne, up from 273,000 a year ago. Total production in the industry in 2008-09 was 537,000 tonnes. The
production increased at a rate of 17.4 per cent since 2004-05.
Capacity and Production
Table 35: Domestic Production of Transmission Towers
(Thousand tonnes)
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Transmission tower production 283 390 398 498 537 17.4%
Source: CMIE, IMaCS analysis
Exports of transmission towers increased from US$ 50.5 million in 2004-05 to US$ 212.8 million in 2008-
09. Indian companies have secured contracts in North America, Africa, Middle East and Southeast Asia.
Indian companies are cost competitive and have the capability to tackle different types of challenging
terrains, having done projects in the extreme terrains of India.
3KEC International, Jyoti Structures and Kalpataru Power Transmission
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India: Energy Sector September 2010
TRANSMISSION TOWERS
Table 36: Exports of Transmission Towers
(US$ million)
^April-December 2009, #CAGR between 2004-05 and 2008-09
Source: CMIE, IMaCS analysis
The growth in transmission tower industry is driven by expansion of transmission network, introduction
of higher voltage transmission and new technologies for bulk power transmission.
It is estimated that in the Eleventh Plan period, 22,100 MW of transmission capacity will be added. CEA
has estimated a fund requirement of over US$ 30 billion for implementation of transmission schemes in
this period. In the international market, growth is expected in the Middle East where many large power
generation projects are being planned to address power shortage. Further, there are plans to set up inter-
country and regional lines, which will offer growth opportunities to integrated EPC players. Indian
companies which have a presence in the African power transmission space are expected to benefit
because of renewed funding by donor countries and multilateral agencies. These developments in
domestic and international markets offer tremendous growth opportunities to India‟s transmission towers
and lines industry.
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR#
Exports 50.5 70.6 126.0 210.0 212.8 156.5 43.3%
Industry Growth Drivers and New Technology Development
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Transmission Towers … (4/4)
India: Energy Sector September 2010
TRANSMISSION TOWERS
Technology advancement and absorption by Indian transmission tower manufacturers primarily involves
manufacturing process improvements. The production process of large players is suitably automated with
use of CNC machines for drilling, cutting and punching operations. In order to enhance quality of products
and reduce downtime, manufacturers continuously upgrade their facilities by employing imported
advanced machines.
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Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Wind turbine generators … (1/4)
India: Energy Sector September 2010
WIND TURBINE GENERATORS
Wind power generation is one of the fastest growing sources of renewable energy in the world. In India
too, the share of renewable energy in the total installed capacity has been increasing rapidly. As of
December 2009, the installed wind power capacity was 10,925 MW, which was about 6.3 per cent of the
installed wind energy capacity in the world.
Government policies have played a significant role in the rapid deployment of wind power systems. The
Ministry of New and Renewable Energy (MNRE) is responsible for policy formulation at the Centre, while
state governments have policies that follow the general directives of MNRE. The existing financial
incentives for wind power developers include 80 per cent accelerated depreciation, customs duty
exemption on specific critical components, excise duty and sales tax exemptions, income tax exemption
on profits from power generation and preferential tariffs.
WTG manufacturers in India include Suzlon, Vestas Wind technology India, Enercon (India), Siemens GE
India, Pioneer Wincon, RRB Energy and Regen Powertech. They manufacture a wide range of wind turbine
generators with capacity ranging from 250 kW to 2,100 kW. Besides manufacturing, Indian companies
The WTG Industry
A wind turbine is a rotating machine that converts wind energy into kinetic energy, which is used for
production of electric power. Wind turbines are installed at locations with strong winds. These are
designed employing advanced aerodynamic modelling to determine the optimum tower height, control
systems, number of blades and blade shape.
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India: Energy Sector September 2010
WIND TURBINE GENERATORS
also provide project solutions including land sourcing, wind resource assessment, infrastructure
development, and installation and commissioning of generators.
Capacity and Trade
The annual production capacity of wind turbine generators in India is estimated at 3,000 MW. Wind power
generation has grown at a rate of almost 30 per cent since 2004-05.
Table 37: Installed Wind Power Capacity
(MW)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR#
Installed capacity 3,593.5 5,341.7 7,114.4 8,697.9 10,246.2 10,925.0 29.9%
^ As of December 2009, #CAGR between 2004-05 and 2008-09
Source: MNRE, IMaCS Research
Wind turbine generators and components, such as nacelle and hub and bolt box assembly, are exported
to several countries, including the US, Australia, Nicaragua, Bulgaria and Brazil.
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WIND TURBINE GENERATORS
Industry Growth Drivers and New Technology Development
Government policy support is important for growth of wind energy generation. Volatile fossil fuel prices,
heightened concern about energy security and growing preference for clean and green energy are positive
factors for the industry. The export-oriented Indian wind generator manufacturers can potentially tap both
the domestic and global markets. According to BTM Consultant ApS, wind power is a fast growing renewable
energy resource: in 2009, 38 GW of wind power stations were installed worldwide and in 2014 fresh
installations could nearly double to 72 GW. Most of the new installations will take place in the USA, China,
India, and Southeast Asia.
In the domestic market, there is a huge opportunity in states where installed wind power capacity is much
less than their estimated potential. The states with high wind power generation potential are Gujarat (9,675
MW), Andhra Pradesh (8,275 MW), Karnataka (6,620 MW), Maharashtra (3,650 MW), Rajasthan (5,400 MW)
and Orissa (1,700 MW). Their current installed capacities are far short of the potential. As of December
2009, the installed wind power capacity in Gujarat was only 1,711.8 MW, in Andhra Pradesh 122.5 MW, in
Karnataka 1,390.6 MW, in Maharashtra 2,004.4 MW, in Rajasthan 855.4 MW and in Orissa less than 3 MW.
Table 38: Export and Import of Wind Turbine Generators
(US$ million)
Source: CMIE, IMaCS analysis
2004-05 2005-06 2006-07 2007-08 2008-09 CAGR
Export 1.2 23.8 296.7 363.9 692.8 391.8%
Import 2.2 7.6 2.4 1.1 2.4 2.1%
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India: Energy Sector September 2010
WIND TURBINE GENERATORS
The thrust areas identified by MNRE for research and development are: design, development and
manufacture of MW-scale wind electric generators (WEGs) up to 25 kW and WEGs for low-wind
operations; development of materials used in MW scale WEGs; high efficiency electronics for protecting,
controlling and optimizing performance, power management and conversion; and establishing connectivity
with grid to export and/or import power.
Large Indian manufacturers have dedicated R&D centres. For example, Vestas‟ has set up a R&D centre at
Chennai, which is its largest R&D unit outside its home-country, Denmark. This centre does cutting-edge
developmental work into all aspects of wind turbine engineering and design. Conversely, India-based
Suzlon Energy has based its global R&D in Germany, Netherlands and Denmark, besides India. Suzlon‟s
R&D activities are focused on increasing energy yield, reliability, ease of operation and cost reduction
through weight decrease.
117
Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Diesel engines … (1/3)
India: Energy Sector September 2010
DIESEL ENGINES
In India, diesel engines are used by a variety of industries and services, including telecom, construction,
IT/ITES, real estate, hospitality, textiles, auto and auto ancillaries, food processing, pharmaceutical, oil and
gas and manufacturing.
Major diesel-engine manufacturers include Cummins India, Greaves Cotton, Kirloskar Industries, Birla
Power Solutions, Swaraj Engines, Powerica and Wartsila India. These companies produce a wide range of
engines in the 10-3,500 horse power (HP) range for mobile and stationary equipments. In the 10 HP and
lower segment, engines are, mainly, manufactured for portable power generation sets and agricultural
implements such as power sprayers, pump-sets and power reapers.
The Diesel Engines Industry
A diesel engine is an internal combustion machine which compresses air to a sufficiently high temperature
to ignite the diesel injected into its cylinder. The combustion expands the air in the cylinder and that
actuates the piston. Thus, it converts the chemical energy stored in the fuel into mechanical energy, which
can be used to generate electric energy. Diesel engines are mainly used for power generation, vehicle
mobility and operating industrial equipment.
In 2009-10, the total production of diesel engines in India was estimated at 3.39 million units. Production
has grown at a rate of 2.6 per cent during the period, 2004-2010. Although about 90 per cent of the
domestic demand for engines is met from indigenous production, imports have grown in the last four
Capacity and Production
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India: Energy Sector September 2010
DIESEL ENGINES
years because of cheaper supply from China and South Korea, and the growing popularity of diesel cars.
Table 39: Production, Trade and Consumption of Diesel Engines
(Thousand units)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR
Production 2,975 3,021 3,171 3,232 3,338 3,390 2.6%
Imports 133 194 307 401 366 415 25.6%
Total supply 3,107 3,215 3,479 3,634 3,704 3,805 4.1%
Exports 295 149 192 145 179 179 -9.6%
Consumption 2,812 3,066 3,287 3,488 3,525 3,626 5.2%
^ Estimate
Source: CMIE, IMaCS analysis
Poor power supply in rural areas and frequent load shedding in industrial areas are the key drivers of
demand for industrial diesel engines in India. The peak deficit of 13.0 per cent and normal deficit of 10.1
per cent create the need for auxiliary power supply. Although the government plans to reduce peak
deficit and normal deficit to 6.5 per cent and 2 per cent, respectively, by 2012, power shortages are
expected to continue because of slippage in installations of planned capacities, industrial growth, increasing
urbanisation and rural electrification. The demand for diesel engines as substitute source of electricity is
expected to remain strong in the foreseeable future.
Industry Growth Drivers and New Technology Development
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India: Energy Sector September 2010
DIESEL ENGINES
The R&D effort in the diesel engine industry primarily focuses on introduction of new products and
improvement of the existing products. The upgrades are mainly aimed at meeting the changing emission
norms and improving fuel efficiency.
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Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
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Capacitors … (1/3)
India: Energy Sector September 2010
CAPACITORS
Capacitors are made with a variety of materials for different applications. The raw materials used include
paper, plastic film, ceramic, mica, aluminium electrolyte and tantalum. Though capacitors are mostly used in
appliances such as television and flash bulb of camera, they have a critical role in power factor correction
in electricity networks.
Major capacitor manufacturers include Havells India, ABB India, Schneider Electric India, BHEL, Universal
Cable and Tibrewala Electronics.
A wide range of capacitors are manufactured in India. They include high-voltage and low-voltage capacitors,
single and three-phase capacitors, harmonic filters (high and low-voltage), surge protection capacitors,
automatic power-factor correction (APFC) panels and motor-run capacitors. The manufacturers also
provide a comprehensive range of technical services, including system study, energy audit, harmonic
analysis, testing and commissioning of HT/LT capacitor banks and their associated equipment.
The Capacitor Industry
Capacitors are passive electronic components that store energy. They consist of two conducting plates
separated by an insulator, called the dielectric. A capacitor is identified by the type of dielectric or plate
material used. Capacitors are used in electric and electronic equipment.
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India: Energy Sector September 2010
CAPACITORS
In 2008-09, the total production of capacitors in India was 19,413 MVAr. Since 2005-06, production
increased by over 24 per cent.
Capacity and Production
Table 40: Production of Capacitors
(MVAr)
2005-06 2006-07 2007-08 2008-09
Capacitors 15,556 15,020 16,388 19,413
Source: CMIE, IMaCS analysis
Capacitors manufactured in India are exported to the US, Spain, Qatar, Turkey and the UAE. Imports are
primarily from China, the US, Singapore, Germany, Taiwan and Japan.
Apart from the growing electronics market, capacitor demand is derived from the need for grid
stabilisation and cutting out reverse flow of energy. Hence, grid expansions at the inter-state and intra-
state levels are significant demand generators for capacitors.
Indian manufacturers are engaged in developing new products to meet changing customer requirements.
For example, the R&D unit of Universal Cables has developed a number of products including the
following:
Industry Growth Drivers and New Technology Development
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Capacitors … (3/3)
India: Energy Sector September 2010
CAPACITORS
• High-stress low-voltage capacitors.
• Mixed Dielectric power capacitors with nontoxic impregnant.
• High-voltage all polypropylene film power capacitors.
• Water cooled high-frequency capacitors for electric furnace.
125
Contents
Boilers
Conductors, wires and cables
Transformers
Turbines
Switchgears
Transmission towers
Wind turbine generators
Diesel engines
Capacitors
Energy meters
INDIA: ENERGY SECTOR September 2010
126
Energy meters … (1/4)
India: Energy Sector September 2010
ENERGY METERS
Nowadays, meters are not limited to simple data logging; instead, they are seamlessly connected to
telecommunication infrastructure and IT systems for continuous monitoring and data analysis. Therefore,
meter manufacturers are transforming from product manufacturers into comprehensive solution
providers.
Indian companies in the energy metering industry undertake design, installation and commissioning of
automatic meter reading solutions. These solutions involve networking of meters, collecting data from
them and transporting the data over suitable cost-effective media to a central station for display, analysis
and report generation. The major energy metering-system manufacturers are EMCO, Analog Devices,
Crompton Greaves, L&T and Kaytee Switchgear.
These companies produce a wide range of energy metering products that meet the national and
international standards. The typical features of energy meters include monitoring of active, reactive and
apparent energy, voltage, current, frequency and time-of-day use. There are meters that help in load survey,
fraud monitoring, magnetic immunity at wide range of operating temperatures. They also make
The Energy Meter Industry
An electric meter or energy meter is a device that measures the amount of electrical energy consumed.
The most common unit of measurement on the electricity meter is the kWh. Power utilities, industrial
units, commercial establishments, agricultural and domestic consumers constitute the market for energy
meters.
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Energy meters … (2/4)
India: Energy Sector September 2010
ENERGY METERS
The total production of energy meters in India in 2009-10 was 16,145 units. It has grown at a rate of 19
per cent during the period, 2004-2010. Energy meters manufactured in India are also exported to
countries in Europe, Southeast Asia, the Middle East and Africa.
Capacity and Production
single-phase and three-phase meters for residential, commercial and industrial connections.
Table 41: Production of Energy Meters
(Thousands)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR
Energy meters 6,774 9,417 12,480 11,064 9,713(E) 16,145 19.0%
Source: CMIE, IMaCS analysis
E-estimated
Industrial growth, urbanisation, rural electrification and replacement of old meters will drive the growth of
India‟s energy meter industry. Agriculture is potentially a large market as only 40 per cent of the electricity
consumed by this segment is currently metered. In terms of geographies, states such as Bihar, Jharkhand
and Orissa are severely under-metered. A favourable policy environment exists for the growth of metering
industry. Central schemes such as R-APDRP encourages metering at various network levels.
Industry Growth Drivers and New Technology Development
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India: Energy Sector September 2010
ENERGY METERS
For example, EMCO has developed a software-interface for configuring meter functions such as
programming and reading, report generation and, program development and maintenance. This software,
called EDMS, has a flexible modular configuration. Its key features are as follows:
• Client administrator module: This module provides controlled access with clear definition of groups
and roles.
• Inventory and help desk: This module helps track all meter details and also facilitates access to
metered data on a computer using remote access.
• Data analysis: This module is used for analysing meter data and generating reports.
• Data exchange: This module is used to define data exchange formats and rules between the
application and any third-party software, such as a billing system.
The meter manufactures have set up state-of-the-art R&D facilities to develop solutions for detection of
tampering, load management, revenue protection, energy accounting and communication.
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India: Energy Sector September 2010
ENERGY METERS
• Energy audit: This module facilitates energy audit at several levels of distribution network.
• Billing: This module helps in calculating and generating bills based on meter data.
• Web access: This module allows online analysis of performance, consumption and billing pattern of a
connection.
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Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
131
Control panels
India: Energy Sector September 2010
CONTROL PANELS
BHEL, L&T and ABB India are the major control panel manufacturers in the country. There are many
medium and small manufacturers who often act as contract manufacturers for the larger players. The
companies manufacture a comprehensive range of control and relay panels as well as control desks for
control, protection, alarm, indication, metering and synchronising functions for power stations, sub-stations
and industrial plants.
This industry‟s growth is assured with the expansion of power generation and increasing investment in
other user segments. Control panels are used extensively in power plants and sub-stations. The process
industries, such as fertilisers and cement, are also large consumers of control panels as they need to
monitor and control plant operations remotely. The electronics industry also consumes a large volume of
control panels, albeit, of smaller sizes.
The Control Panels Industry
Control and relay panels facilitate centralised control of equipment in power stations, switching stations
and industrial plants. The design of control and relay panels is based on the concept of unit assembly from
standard parts. The panels are bolted together to form a board. This approach provides ease of
replacement, extension, rearrangement and addition. The panels are usually of standard dimensions –
height of 2,200 mm to 2,300 mm, width of 600 mm to 1,000 mm (in stages of 600, 750, 900 and 1,000
mm) and depth of 600 mm or 800 mm. The panel enclosure is usually made of sheet-steel and is equipped
with interior lamps, anti-condensation heater and ventilation facilities. The metering panel usually
incorporates measurements for voltage, current, energy, frequency or power factor.
132
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
133
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India: Energy Sector September 2010
OIL EXPLORATION AND DRILLING EQUIPMENT
Apart from sampling and extracting oil and gas, rigs can also be used to install sub-surface fabrications
such as underground utilities, instrumentation, tunnels or wells. Rigs are categorised as onshore and
offshore depending on their location of use.
Light-duty drilling rigs are often like a mobile crane mounted on a vehicle and are usually used to drill
water wells. Oil rigs tend to be large, permanent structures. Initially, oil rigs used to be semi-permanent, as
derricks were built on-site and dismantled after the completion of the well. These days, oil drilling rigs are
usually heavy, complex and stationary.
The major components of oil rigs are mud tank and pump, motors, various types of hoses (such as
vibrating and Kelly hose), goose neck, flow lines (which facilitate movement of mud and drilling fluid),
rotary tables, derrick and other hoisting equipment, drill bits to crush rocks , and valves such as blowout
preventer which facilitate sealing and flow control.
Building and maintaining rigs is rather expensive and therefore, oil exploration companies hire them at
hefty daily rentals. Globally, about 10 major yards manufacture offshore oil-rigs. Singapore‟s Keppel FELS
Limited has the largest capacity for making offshore rigs.
The Oil Exploration and Drilling Equipment Industry
Drilling rigs are complex equipment used for creating boreholes in the earth‟s crust. Typically, rigs are used
to sample or produce sub-surface reserve of oil or gas. Drilling rigs vary in size and applications. Some rigs
are mounted on trucks or trailers for mobility while others are permanently installed on land or in sea.
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India: Energy Sector September 2010
OIL EXPLORATION AND DRILLING EQUIPMENT
In India, offshore oil rigs are rented from global suppliers. Among the domestic rig makers, BHEL has the
largest facilities and it manufactures mobile as well as stationary deep-drilling rigs. While its mobile rigs
can drill to depths of 5,000 ft to 7,000 ft its deep drilling rigs can drill to depths of 3,600 m to 9,000 m.
With demand of offshore drilling rigs increasing in India, BHEL is also in the process of collaborating with
a US-based company for technical knowhow. Some of India‟s ship building companies such as Bharati
Shipyard are also venturing into oil-rigs manufacturing. Besides manufacturing, the industry also undertakes
refurbishment of offshore drilling rigs.
The New Exploration Licensing Policy has boosted oil and gas exploration and production in India. Private
sector participation and competition have resulted in new oil and gas discoveries and additional output.
However, a combination of high rentals and non-availability of drilling rigs has adversely affected
exploration. Only about 10 per cent of the 880 wells proposed for drilling in the first six rounds of the
policy, have been drilled so far. However, India has the potential to become a manufacturing base for oil
rigs, given its manufacturing base and availability of engineering skills.
135
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
136
Storage batteries … (1/4)
India: Energy Sector September 2010
STORAGE BATTERIES
The storage battery market is classified on the basis of usage – industrial and automotive. Automotive
battery business is further classified into original equipment manufacturing (OEM) and replacement
segments. Battery users in the industrial category include telecom, infrastructure, uninterrupted power
supply (UPS) back-up, railways and power utilities. Storage batteries are also used in submarines and
household inverters.
India‟s storage battery market is estimated at about US$ 1.9 billion, in which the automotive battery
segment accounts for about 55 per cent while the industrial battery segment accounts for the remaining.
The organised sector market is estimated at US$ 1.37 billion at current Lead prices, which is almost
equally shared by industrial batteries (US$ 675 million) and automotive batteries (US$ 696 million). Exide
Industries, Amara Raja Batteries, HBL Power Systems and High Energy Batteries (India) are the major
storage battery manufacturers in India.
The Storage Battery Industry
A storage battery comprises one or more electrochemical cells, known as secondary cells, which are
capable of deriving electrical energy from reversible chemical reaction. Different combination of chemicals
are used in storage batteries, such as lead-acid, nickel-cadmium (NiCd), Nickel-metal-hybrid (NiMH),
lithium-ion (Li-ion) and lithium-ion-polymer (Li-ion polymer). Storage batteries are widely used in
electronic equipment, automobiles and manufacturing.
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STORAGE BATTERIES
In 2009-10, total production of storage batteries was 50.9 million units, compared to 43.1 million units a
year ago. Production of storage batteries in India has grown at a rate of 5.8 per cent over the period
2004-2010. However, the demand is growing at a faster rate and is increasingly being met by imports,
primarily from China.
Capacity and Production
Table 42: Production andTrade of Storage Batteries
(Million units)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR
Production 38.3 35.7 40.1 41.0 43.1 50.9 5.8%
Export 0.8 1.0 0.9 1.3 2.8 2.2 21.2%
Import 8.6 21.2 24.8 31.6 41.2 49.7 41.8%
Demand 46.1 55.9 64.0 71.3 81.4 98.4 16.3%
^ Estimates
Sources: CMIE, IMaCS analysis
In 2008-09, total import of storage batteries in India stood at 41.2 million units with over 87 per cent of
those coming from China. The remaining imports were mainly from Hong Kong, Vietnam and South Korea.
The spike in imports from China is attributed to a change in market focus by Chinese producers whose
traditional markets were sluggish because of economic downturn. At 2.8 million units, India‟s exports of
storage batteries in 2008-09 were modest in comparison to imports. The UAE, Singapore, the USA and
Spain are key export markets for India‟s storage batteries.
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STORAGE BATTERIES
The storage battery industry is expected to benefit from the growth in automobile manufacturing. It is
expected to grow at 10-15 per cent per annum over the next five years. Increasing incomes and easy
consumer credit are driving demand for automobiles and consumer appliances. Increasing demand for
household and commercial inverters is another important source of growth for storage batteries. Exports
could be a major source of growth given the availability of skilled manpower and cost-competitiveness.
In the industrial segment, growth of storage batteries is linked to the industrial production. After dipping
to a 2.7 per cent in 2008-09, India‟s industrial production grew by 10.4 per cent in 2009-10. According to
Centre for Monitoring Indian Economy (CMIE), the growth has been broad based, and in 2010-11,
industrial production will grow more than 9 per cent.
Overall economic recovery, industrial growth and large investment proposed in infrastructure sector are
expected to boost the industrial segment demand for storage batteries. Major growth opportunities are
expected in large-scale power projects, telecom, mechanised farming and rural electrification.
Industry Growth Drivers
New Technology Development
Continuous technical improvement to meet the changing requirements of the user industries is the driving
force of technology development in the storage battery industry. For development of new products and
enhancing features of the existing products, Indian storage battery manufacturers often take collaborative
approach, which includes partnering foreign manufacturers for technology induction and automobile
OEMs for developing customised products.
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India: Energy Sector September 2010
STORAGE BATTERIES
Exide has entered an agreement with Furukawa Battery Company, Japan, for lead-acid storage batteries
for vehicles, including hybrid batteries, „maintenance free batteries‟ , VRLA batteries, and Idling Stop
System (ISS) batteries. Exide is collaborating with Changxing Noble Power Sourcing Company, China, in
development of the „deep cycling E-bike‟ batteries. Exide is evaluating possibilities of development of
lithium-ion batteries for the emerging electric vehicle segments. The major R&D focus for Exide is
development of state-of-the-art batteries for ISS vehicles (micro-hybrids), mild hybrid and electric vehicles.
Other key R&D areas for company include:
• Enhancement of re-chargeability and deep cycling capability in the new range of batteries
• Development of materials and processes
• Enhancement of shelf life of battery.
Amara Raja Batteries has designed and developed a micro hybrid program for Tata Motors. The company
has also entered into a development agreement with Honda, Japan, for VRLA batteries for motorcycles.
140
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
141
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India: Energy Sector September 2010
INDUSTRY OVERVIEW – OIL AND GAS
India is among the top ten importers of fuel in the world. Domestically produced oil and gas are able to
meet less than one-third of the country‟s requirement of these energy sources. In 2009-10, the country
imported about 85 per cent of its total crude oil requirement. Resources developed so far, have been able
to meet just about 29-32 per cent of total oil and natural gas demand. India‟s growing economy requires
rapid augmentation of energy resources, particularly to meet its increasing need for power, transportation
and manufacturing.
Rising income levels have led to higher energy consumption. Consequently, increasing dependence on
imported oil and gas has become a major concern for India‟s energy security. Volatility in the international
oil and gas market has added to this concern. Traditionally, fulfilling energy needs of the poor, particularly,
for fuel and lighting purposes, has been a major reason for continuing subsidies. However, this has meant
subsidising the non-poor as well, for want of comprehensive information on energy use patterns. In recent
years, this has resulted in unsustainable financial burden for the oil and gas industry. To address this
concern, the Government of India has introduced pricing reforms for oil and gas products. The
government is also trying to make the allocation of subsidies more transparent and justifiable.
Importantly, the Government has recognised the need for addressing rapid consumption growth through
the development of domestic supplies. In 1999, the Ministry of Petroleum & Natural Gas (MoPNG)
formulated the New Exploration licensing Policy (NELP) to increase investment in oil and gas exploration
and production. Under the policy, exploration blocks are awarded through a transparent global
competitive bidding process. So far, seven bidding rounds have been held and 203 exploration blocks have
been awarded.
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INDUSTRY OVERVIEW – OIL AND GAS
The eighth round of bidding (NELP-VIII) was launched in April 2010, along with fourth round for coal bed
methane blocks (CBM-IV). In this round, Government of India has offered 70-oil and gas exploration
blocks covering an area of about 163,535 sq km. Simultaneously it has offered 10 coal bed methane blocks
under CBM-IV, covering an area of about 5,000 sq. km and spread across seven states of the country.
The oil and gas sector has consistently contributed 2.7-2.9 per cent of the GDP from 2004-05 to 2008-09.
The GDP from petroleum and natural gas has grown at an average rate of 9 per cent. The share of
petroleum products has been increasing in the total sector GDP, indicating a growing refinery and
marketing industry. The GDP from petroleum products increased at an average rate of 18.8 per cent in
the three-year period 2006-2009.The sector is also a significant contributor to central and state taxes.
The sector accounts for 27.5 per cent of the total excise and customs collections of the Central
Government.
Oil refining industry has been continuously adding capacity and upgrading technology. Today, it is a net
exporter. Its price realisations and gross refining margins are at par with international standards,
sometimes even better. This industry is heavily dominated by government-owned entities. However, the
private sector‟s presence in this area is increasing now.
It is estimated that over the next two decades, India‟s oil and gas sector would require an investment of
about Rs 10,500 billion (about US$ 233 billion). More than three-quarters of the investments in oil would
be absorbed by the refining units. In the case of gas, over 90 per cent of the investment would be spread
across exploration, transport and distribution.
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India: Energy Sector September 2010
INDUSTRY OVERVIEW – OIL AND GAS
In a scenario of high oil prices and a dearth of new oil production fields in the country, it is imperative to
increase production from the existing oil fields using enhanced oil recovery techniques. Currently, such
techniques are being applied in 26 oil fields. Most of these are larger fields with probable reserves of more
than 50 million barrels. Use of enhancement techniques in small fields has viability concerns.
Although the demand for oil and gas products is growing, future demand for these resources could be
impacted by the sustained emphasis on energy efficiency, development of alternative fuels and growth of
mass rapid transport systems. Subsidy reforms would also have considerable effect on demand as removal
of market distortions will align demand with the true economic prices of petroleum products.
Importance to Economy
India has over 17 per cent of the global population and accounts for about 7 per cent of the world‟s GDP.
However, according to the International Energy Agency (IEA), India‟s energy production accounts for just
about 4 per cent of the global energy production. In terms of absolute consumption, India accounts for
about 5 per cent of the global energy consumption. An average Indian consumes 0.53 tonnes of oil
equivalent (TOE) of energy as compared to 1.82 TOE used by an average global consumer.
Though coal is still the predominant source of energy, the use of hydrocarbons in the total primary
commercial energy supply has been increasing. During the three year period, from 2006-07 to 2008-09,
the average growth in gross energy generated in the petroleum products, coal and electricity segments
was 8.0 per cent, 6.6 per cent and 6.5 per cent, respectively.
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INDUSTRY OVERVIEW – OIL AND GAS
Table 43: Gross Energy Generated
Unit 2004-05 2005-06 2006-07 2007-08 2008-09(P)
Coal Million tonne 382.61 407.04 430.83 457.08 493.28
Lignite Million tonne 30.34 30.06 31.29 33.98 -
Natural Gas Billion cubic metre 31.76 32.20 31.75 32.42 32.85
Crude Oil Million tonne 33.98 32.19 33.99 34.12 33.51
Petroleum Products Million tonne 129.36 131.08 148.27 158.74 164.59
Electricity Billion kWh 665.80 697.40 752.50 813.10 842.40
Source: Ministry of Petroleum and Natural Gas
P-Provisional
At current prices, the petroleum sector consisting of petroleum and natural gas production as well as
petroleum products, has consistently contributed between 2.7 per cent and2.9 per cent of the GDP from
2004-05 to 2008-09. Over this period, refining and marketing have shown greater growth. In 2004-05, the
contribution of oil and natural gas to the sector was 57 per cent and that of petroleum products was 43 per
cent. By 2008-09, the share of petroleum products had increased to 54 per cent. While the GDP from oil
and natural gas grew at an average rate of 9 per cent between 2006-07 and 2008-09, the GDP from refined
products grew at about 18.8 per cent.
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INDUSTRY OVERVIEW – OIL AND GAS
Table 44: GDP from Petroleum Sector
(US$ billion)
Sources: Central Statistical Organisation, Ministry of Petroleum and Natural Gas
*Estimated at 81per cent of GDP from rubber and petroleum products
The sector is also a key contributor to the government‟s revenue through excise duties, customs duties,
petroleum cess and dividends from the public sector companies.
GDPPetroleum &
Natural Gas
Petroleum
products*
Petroleum
sector
Sector as %
of GDP
2004-05 656.55 10.44 7.82 18.26 2.78
2005-06 756.07 11.23 10.21 21.44 2.84
2006-07 938.54 13.46 13.98 27.44 2.92
2007-08 1,129.60 15.10 17.05 32.15 2.85
2008-09 1,136.36 14.24 16.67 30.91 2.72
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INDUSTRY OVERVIEW – OIL AND GAS
Table 45: Realisation of Excise and Customs Duties
(US$ billion)
2004-05 2005-06 2006-07 2007-08 2008-09(P)
Excise duties 9.55 11.50 13.78 14.98 12.91
Motor spirit 3.05 3.90 4.36 5.00 4.58
Kerosene oil 0.28 0.05 0.06 0.06 0.06
Diesel oil 3.47 4.95 5.97 6.01 4.74
Furnace oil 0.22 0.39 0.45 0.49 0.46
POL products 0.82 1.03 1.17 1.57 1.49
Petroleum gases 0.54 0.07 0.11 0.14 0.13
Cess on crude oil 1.16 1.11 1.67 1.71 1.44
Customs duties 2.93 2.53 3.34 4.51 2.43
Crude petroleum 2.16 1.59 1.81 2.26 0.60
Petroleum products 0.77 0.94 1.53 2.25 1.83
Other non-tax revenue 0.94 1.38 1.51 1.61 2.05 (RE)
Total petroleum revenue 13.41 15.41 18.63 21.10 17.39
Source: Ministry of Petroleum and Natural Gas
P-provisional
RE-revised estimate
About 138,000 persons are employed in the public and the private enterprises of the sector, contributing
around 0.5 per cent of the total workforce. Between 2005 and 2009, the employment in the sector
increased by 4.2 per cent.
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India: Energy Sector September 2010
INDUSTRY OVERVIEW – OIL AND GAS
Table 46: Employment in Petroleum Sector
(No. of persons)
Source: Ministry of Petroleum and Natural Gas
In terms of foreign direct investment (FDI), the sector contributed about 1.6 per cent of the total FDI in
2009-10 and 2.2 per cent in 2008-09. Most of the investments have come in the oil refinery segment.
2005 2006 2007 2008 2009
Exploration and Production 41,415 39,694 38,948 33,935 33,612
Refining 26,859 30,262 28,151 30,128 32,745
Marketing 40,628 43,317 42,970 44,995 42,183
Pipelines 7,318 7,816 7,510 8,933 4,598
R&D 2,096 2,071 2,029 1,964 2,076
Other 15,055 15,151 15,707 19,868 23,759
Total 133,371 138,311 135,315 139,823 138,973
Table 47: FDI Inflows to Petroleum Sector
(US$ million)
Total FDI Petroleum & Natural Gas Sector as % of total FDI
2006-07 12,547 95 0.76%
2007-08 16,874 1,364 8.08%
2008-09 20,950 460 2.19%
2009-10 19,586 316 1.61%
Source: Department of Industrial Policy and Promotion
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INDUSTRY OVERVIEW – OIL AND GAS
While most of the investments have come via Mauritius and Singapore, other countries with over US$
0.02 billion FDI in the sector include the USA, the UK, Netherlands and Cyprus. Acquisition of shares in
oil exploration projects contributed about 8.8 per cent to the sector‟s FDI.
Domestic Resources and Demand Gap
According to the Planning Commission of India, the country‟s demand for various forms of energy
including coal, lignite, natural gas and hydroelectric energy was predominantly met from domestic sources
until the 1980s. This situation has reversed following the economic and energy reforms of the 1980s and
1990s, which resulted in higher economic growth and energy consumption. In fact, the energy demand and
supply projections by the Planning Commission indicate a continuing unmet demand for many years to
come.
India's proven and indicated reserves of crude oil amounted to 5.7 billion barrels at the end of 2009, equal
to 0.5 per cent of global reserves. Table 48: Proven and Indicated Crude Oil Reserves
(Million metric tonnes)
2005 2006 2007 2008 2009
Onshore 376 387 357 403 405
Offshore 410 369 368 366 369
Total 786 756 725 769 775
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INDUSTRY OVERVIEW – OIL AND GAS
The sedimentary basins of India, on-land and offshore (up to the 200m isobaths), have an area of about
1.79 million sq. km. So far, 26 basins have been identified for exploration and they have been divided into
four categories based on their degree of prospectivity. Over the last 12 years, the unexplored area has
come down to 15 per cent.Table 49: Basin-wise Hydrocarbon Area
(Sq km)
Basin Offshore On-land Total
Proven commercial productivity
Assam-Arakan 116,000 - 116,000
Cambay 51,000 2,500 53,500
Cauvery 25,000 30,000 55,000
Krishna-Godavari Offshore 28,000 24,000 52,000
Mumbai Offshore - 116,000 116,000
Rajasthan 126,000 116,000 242,000
Identified prospectivity
Kutch 35,000 13,000 48,000
Mahanadi-NEC 55,000 14,000 69,000
Andaman-Nicobar 6,000 41,000 47,000
Prospective basins
Bengal 57,000 32,000 89,000
Ganga Valley 186,000 186,000
Himalayan Foreland 30,000 30,000
Kerala-Konkan Lakshadweep 94,000 94,000
Saurashtra 52,000 28,000 80,000
VIndhya 162,000 162,000
Purnea
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INDUSTRY OVERVIEW – OIL AND GAS
Basin Offshore On-land Total
Potentially prospective
Bastar 5,000 5,000
Bhima Kaladgi 8,500 8,500
Chhattisgarh 32,000 32,000
Kuddapah 39,000 39,000
Deccan Syneclise 273,000 273,000
Karewa 3,700 3,700
Narmada 17,000 17,000
Pranhita Godavari 15,000 15,000
Satpura-S. Rewa-Damodar 46,000 46,000
Spiti Zanskar 22,000 22,000
Deepwater area within Eez 1,350,000
Total 1,390,200 394,500 3,134,700
Source: Directorate General of Hydrocarbons
Of the 26 sedimentary basins, ONGC has tested 19 basins for their hydrocarbon potential through
seismic survey and drilling. Seven basins have been upgraded to producing or Category I, basins. These are
Cambay, Upper Assam, and Assam Arakan Fold belt, Mumbai offshore, Krishna-Godavari, Cauvery and
Jaisalmer. Extensive exploration activities have started in these basins. Exploration activities are continuing
in seven other basins – Mahanadi, Kutch, Andaman add Nicobar, Kerala-Konkan-Lakshadweep, Saurashtra
and Bengal.
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INDUSTRY OVERVIEW – OIL AND GAS
About 80 per cent of current production is from fields which have passed their peak production. India has
discovered a few significant gas reserves of late. These fields are expected to peak between 2020 and
2030, falling to 50 bcm by the end of the projection period.
Energy security
In recent years, new threats to energy security have emerged in the form of the increased global
competition for energy resources due to the rapid pace of industrialisation in countries such as India and
China. The key exporters of crude oil to India are the Middle-East, North and West African countries. To
diversify energy risk, India is trying to boost its domestic oil and gas production, buy oil equity in
international oil fields and enter into long-term supply contracts with several partner countries.
To boost domestic production, Indian government has opened up the upstream sector to private Indian
companies and multinationals. Seven rounds of bidding have occurred over the past decade and significant
discoveries have been made in the North-western state of Rajasthan and the East coast regions of
Krishna-Godavari and Mahanadi. Since December 2006, private investors have been allowed to develop
their own infrastructure. Consequently, several Indian and foreign private companies have become active
in the upstream oil sector.
152
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
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India: Energy Sector September 2010
INTERNATIONAL INTEREST
The NELP was introduced in January 1999 to auction oil and gas blocks to global bidders for exploration
and production. Earlier, the government had offered exploration blocks to private companies in nine
rounds of bidding. The NELP took lessons from these nine rounds and incorporated several changes in the
new policy.
These changes were aimed at creating a level playing field for private bidders, Indian and foreign, and the
established state corporations. Some of the highlights of the new policy were:
• Removal of the compulsion to have government as a partner
• Same competitive bidding standards for the public and private sector
• Open availability of exploration acreages
• Freedom to market produced crude oil and gas in the domestic market
• Pricing at par with international prices
• Abolition of cess levied on crude oil production
International interest in New Exploration Licensing Policy
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INTERNATIONAL INTEREST
• Import duty exemption on goods required for petroleum production
• Seven-year tax holiday following commencement of commercial operations
• Pre-tax sharing of profit oil
In the first six rounds of NELP, 162 product sharing contracts (PSC) were signed. In response to an initial
lack of interest from major oil and gas companies, the government allowed 100 per cent FDI in all
upstream activities. In addition, deepwater projects were made attractive by pegging royalty at only 5 per
cent for the first seven years of commercial production against 10 per cent royalty for other offshore
projects and 12.5 per cent royalty for the onshore projects.
In the last completed round of bidding, NELP-VII, 57 blocks were offered for exploration. The features of
this round included the following:
• Model production sharing contract (MPSC)
• Option of seismic study only in the first phase of the exploration period
• Up to 100 per cent participation by foreign companies
• No signature, discovery or production bonus
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INTERNATIONAL INTEREST
• No mandatory state participation
• No carried interest by national oil companies
• Income tax holiday for seven years from the start of commercial production
• No custom duty on imports required for operations
• Biddable cost recovery limit up to 100 per cent
• Option to amortise exploration and drilling expenditures over a period of 10 years from the start of
commercial production
• Sharing of profit petroleum with the government based on pre-tax investment multiple achieved by the
contractor
• Royalty for on-land areas payable at a rate of 12.5 per cent for crude oil and 10 per cent for natural
gas
• For shallow water offshore areas, royalty payable at a rate of 10 per cent for both crude oil and
natural gas
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INTERNATIONAL INTEREST
Table 50: NELP and CBM Achievements
NELP-I to VII and CBM-I to III
Hydrocarbon reserves accretion of over 600 MMTOE.
68 oil and gas discoveries have already been made in 19 exploration blocks.
India has become oil and gas producer from deepwater area also.
Private sector interest in deepwater exploration and production has come from Indian and foreign companies (Reliance,
NIKO, GSPC).
New discoveries in CBM as alternative fuel have brought India on the select list of CBM producing countries.
Contracts signed for 23 CBM exploration blocks.
More than 6 trillion cu. ft (TCF) reserves have already been established in four CBM blocks.
India‟s first commercial production of CBM commenced in July 2007 at the rate of about 72,000 cu. m per day.
• For deepwater offshore areas (beyond 400 m isobaths) royalty payable for both crude oil and natural
gas at a rate of 5 per cent for the first seven years of commercial production and 10 per cent thereafter.
Prior to the NELP, only 11 per cent of Indian sedimentary basin area was under exploration. At the
conclusion of the seventh round, the area under exploration has increased to about 50 per cent. During
the Eleventh Plan period, the target is to increase the coverage to 80 per cent.
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India: Energy Sector September 2010
INTERNATIONAL INTEREST
In the NELP-VIII, 70 exploration blocks (the highest number of exploration blocks offered at one go, so
far) are available for bidding. Of these blocks, 24 are in deep water (more than 400 bathymetry depth), 28
in shallow water (400-bathymetry or less), eight onshore (200 sq km or more) and 10 are Type-S (less
than 200 sq km). Also, for the first time, a new area has been proposed to be brought under exploration in
West Andaman Sea. These blocks cover a sedimentary area of about 164,000 sq. km., which is 5.2 per cent
of Indian sedimentary basin area. The 18 on-land blocks are in Assam (2), Gujarat (8), Haryana (1), Madhya
Pradesh (3), Manipur (2) and West Bengal (2).
During the process of formulating NELP-VIII, the government consulted various stakeholders, including the
potential bidders, and factored in their views in the final terms and conditions of the auction. CBM-IV
auction offers 10 CBM blocks covering an area of about 5,000 sq. km. These CBM blocks are in Assam (1),
part Chhattisgarh and part Madhya Pradesh (1), Jharkhand (1), Madhya Pradesh (2), Maharashtra (2), Orissa
(2) and Tamil Nadu (1).
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INTERNATIONAL INTEREST
Table 51: The Krishna-Godavari Basin
The NELP showcase
India is expected to dominate the Asian region in terms of fields coming on stream over the next five-year period. Most of the new
fields will be from the Krishna-Godavari basin. The success of Reliance in the KG-D6 block is presented as one of the foremost
accomplishments of India‟s fledging deepwater industry and highlights what is possible when governments, private enterprise, and
global engineering expertise integrate effectively. Using the experience of key contractors and deepwater engineering specialists
from Asia, the US, Europe, and the Middle-East, the KG-D6 project took only six years from discovery to production compared to
the industry average of nine years for similar deepwater facilities.
With the success of D6, Reliance is looking to further develop the area. It already has a total of 36 discoveries in the KG-D6 block.
The D-1 and D-3 discoveries are targeting eventual production of 80 mmcm/d (2.8 TCF/d), twice the current national gas
production.
NELP rounds over the previous decade have brought over US$ 10 billion in investment commitments. A
total of 115 discoveries have been made so far and development plans for their exploitation are under
progress. In addition, 26 blocks have been awarded for exploitation of CBM and 6 TCF (trillion cubic
feet) of gas reserves have been identified so far. A number of Improved Oil Recovery (IOR) and
Enhanced Oil Recovery (EOR) schemes have been implemented to enhance the indigenous production
of crude oil.
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INTERNATIONAL INTEREST
India has entered into dialogues with over 50 countries to develop relations in the field of oil and gas
exploration, technology absorption, acquisition of energy assets and development of alternative fuel
markets. Some of the key cooperation initiatives with other countries are as the following:
United Kingdom: Bharat Petro Resources Limited, a 100 per cent subsidiary of Bharat Petroleum
International Energy Relations
Table 52: Recent Discoveries
Company No. Of Discoveries Investor type
British Gas 1 Foreign
Cairn Energy 27 Foreign
Essar Oil 3 Indian private
Focus Energy 3 Indian private
GSPC 19 State owned
Hardy Exploration 1 Foreign
HOEC 2 Indian private
Jubilant Oil & Gas 4 Indian private
Niko Resource 2 Foreign
ONGC 12 Central government
RIL 41 Indian private
Total 115 -
Source: Directorate General of Hydrocarbons
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INTERNATIONAL INTEREST
Corporation Limited, has a 25 per cent participating interest in the UK North Sea blocks 48/2c and 1/d.
Encore Petroleum is the operator of the blocks. These blocks are at the exploration stage.
United States: ONGC supported Keshava Deva Malviya Institute of Petroleum Exploration (KDMIPE),
Dehradun, has entered into Shale Gas Research Consortium Agreement with EGI, University of Utah,
USA. KDMIPE has also sponsored shale gas research in ISM University, Dhanbad. ONGC has also taken
up a pilot project with the help of Schlumberger through its acquired company Tera Tek, which is into
geo-mechanical studies. KDMIPE is the nodal agency for monitoring and execution of the shale gas pilot
project.
Algeria: Engineers India Limited, a state-owned Indian company has been providing consultancy services
in the hydrocarbon sector of Algeria for nearly two decades. OVL, ONGC‟s arm for investment in
overseas E&P projects, signed a memorandum of understanding (MoU) with Sonatrach in Nov 2000 for,
identification of suitable exploration and production projects in Algeria, India, Russia and other
countries.
Brazil: ONGC and Petrobras signed a MoU for strategic cooperation in key technology areas related
to deepwater exploration and production of oil and gas in Brazil, India and other countries. It also
involves cooperation in existing oil and gas exploration and production projects of both companies.
China: In April 2005, China and India signed a joint statement to cooperate in the field of petroleum
and natural gas, including cooperation in the areas of survey and exploration of petroleum and natural
gas resources in third countries.
161
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
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DEMAND SUPPLY PROJECTIONS
Considering the continuing gap between the demand and indigenous production of crude oil and natural
gas and low crude oil reserves, national oil companies and private companies are being encouraged to
venture abroad. The various strategic options in this regard include focus on ventures with producing fields
for the short term, equity participation as a part of reserves portfolio management, emphasis on
exploration acreages for the short to medium term and promoting upstream sector services for the long
term.
Mandate for the Eleventh-Five Year Plan
Table 53: Planned Petroleum and Natural Gas Demand-Supply
Ninth Five-Year
Plan (Actual)
Tenth Five-Year
Plan (Actual)
Eleventh Five-
Year Plan (P)
Terminal year demand of petroleum products (Million tonnes) 100.43 119.85 141.79
Reserve accretion (MTOE) 795.13 1,652.92 2,129.44
Crude oil production (Million tonnes) 162.99 166.56 206.76
Natural gas production (bcm) 140.92 158.86 287.31
Net Imports – Terminal Year
Crude oil - 111.50
Petroleum products - -15.77
Refining capacity (Million tonnes) 118.37 148.97 240.96
Source: Planning Commission; P-Projected
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At the beginning of the Eleventh Five-Year Plan period (2007-2012), the Planning Commission had
projected a demand for gas of 279.43 million metric standard cubic meters per day (mmscmd) in the
terminal year of the period, compared to 179.17 mmscmd in the first year of the Plan. The corresponding
projection for increase in gas production was 63.23 bcm compared to 33.78 bcm.
Table 54: Gas Production – Eleventh Five-Year Plan Projection
(bcm)
Source: Planning Commission
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
ONGC - 22.10 22.53 22.77 22.99 22.00
OIL - 3.13 3.21 3.25 3.28 3.56
Private/JV - 8.55 22.55 29.41 28.77 37.61
Total 31.55 33.78 48.29 55.43 55.03 63.23
The projected demand for natural gas is the highest for the power sector, followed by the fertiliser,
petrochemicals, city gas distribution and sponge iron and steel units. Any surplus gas after allocation to
these industries would be available for sale to other units.
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DEMAND SUPPLY PROJECTIONS
Table 55: Projected Natural Gas Demand – Eleventh Plan Period
(mmscmd)
Source: Report of the Working Group on Petroleum & Natural Gas Sector for the Eleventh Plan
*Sponge iron and steel
Since the demand-supply projections for gas leave a significant unmet demand of 38.22 bcm, it is evident
that gas imports would increase. According to Planning Commission estimates, by the end of 2011-12,
India would import about 23.75 million tonnes of LNG. That could still leave an unmet demand of about
10-11 bcm.
2007-08 2008-09 2009-10 2010-11 2011-12
Power generation 79.70 91.20 102.70 114.20 126.57
Fertiliser 41.02 42.89 55.90 76.26 76.26
City gas 12.08 12.93 13.83 14.80 15.83
Industrial 15.00 16.05 17.17 18.38 19.66
Petrochemicals 25.37 27.15 29.05 31.08 33.25
Others* 6.00 6.42 6.87 7.35 7.86
Total 179.17 196.64 225.52 262.07 279.43
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DEMAND SUPPLY PROJECTIONS
Table 56: LNG Supply – Eleventh Five-Year Plan Projection
(Million tonnes per annum)
Source: Planning Commission
While the demand for crude oil has been projected by the Planning Commission to be around 207 million
tonnes in 2011-12, the projected domestic oil production in that year is only 39-40 million tonnes. Going
by the current trends in demand for oil and domestic production, the unmet demand could be higher than
projected.
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Dahej 5.00 5.00 5.00 7.50 10.00 10.00
Hazira 2.50 2.50 2.50 2.50 2.50 2.50
Dabhol - 1.20 2.10 5.00 5.00 5.00
Kochi - - - - 2.50 5.00
Mangalore - - - - - 1.25
Total 7.50 8.70 9.60 15.00 20.00 23.75
Table 57: Crude Oil Production – Eleventh Five-Year Plan Projections
(Million tonnes)
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
ONGC - 27.16 28.00 29.00 28.53 27.37
OIL - 3.50 3.55 3.73 3.91 4.30
Private/JV - 10.57 10.78 9.76 8.75 7.85
Total 33.98 41.23 42.33 42.49 41.19 39.51
Source: Planning Commission
166
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
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DEMAND SUPPLY SCENARIO
India imports about 85 per cent of its crude oil requirement. By volume, oil imports increased at an
average rate of 10.9 per cent over the five-year period between 2004-05 and 2009-10. In terms of value,
the increase was over 26 per cent.
Oil imports and refined products exports
Table 58: Crude Oil Imports
P: provisional
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P)
By volume (Million tonnes) 95.86 99.41 111.5 121.6 128.16 159.26
By value (Rs billion) 1,170.03 1,717.02 2,190.29 2,726.99 3,418.87 3,753.78
By value (US$ billion) 25.89 38.16 52.15 67.84 76.95 79.55
India may import over 80 per cent of its crude oil requirement, but it is a net exporter of petroleum
products. In terms of quantity, exports of petroleum products have increased from 9.83 million tonnes in
2004-05 to 18.12 million tonnes in 2008-09 and 36.30 million tonnes in 2009-10.
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Table 59: Net Exports of Petroleum Products
P: provisional
Along with the increase in domestic production of 19.6 per cent in 2009-10, export of petroleum
products also increased 38 per cent. While crude oil imports increased 24.3 per cent during this period,
net imports increased only 12 per cent.
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P)
By volume (Million tonnes) 9.38 10.02 15.77 18.32 18.65 36.31
By value (Rs billion) 15.04 22.00 40.51 49.79 56.56 110.28
By value (US$ billion) 3.38 4.93 8.92 12.43 13.76 23.45
Table 60: Import and Export of Crude Oil and Petroleum Products
(Quantity: thousand metric tonnes)
FY 2009 2010(P) Change (%)
Qty Rs. billionUS$
millionQty Rs. billion
US$
millionQty Rs. billion
US$
million
Imports 146,440 4,027.81 90,419 173,921 4,091.32 86,630 18.8% 1.6% -4.2%
Crude oil 128155 3,418.87 76,957 159259 3,753.78 79,552 24.3% 9.8% 3.4%
Products
LPG 2,347 78.32 1,705 2,718 83.29 1,767 15.8% 6.3% 3.6%
Naphtha 4,988 173.49 3,802 1,734 49.42 1,029 -65.2% -71.5% -72.9%
Petrol 397 15.30 352 385 12.64 266 -3.0% -17.4% -24.4%
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DEMAND SUPPLY SCENARIO
FY 2009 2010(P) Change (%)
Qty Rs. billionUS$
millionQty Rs. billion
US$
millionQty Rs. billion
US$
million
SKO 1,449 64.59 1,470 985 29.09 614 -32.0% -55.0% -58.2%
HSD 2,734 96.56 2,214 2,531 63.90 1,332 -7.4% -33.8% -39.8%
Lubes 1,145 47.21 995 1,418 35.18 733 23.8% -25.5% -26.3%
FO/LSHS 2,602 78.92 1,746 896 19.35 406 -65.6% -75.5% -76.7%
Bitumen 59 1.05 43 69 1.38 29 16.9% 31.4% -32.6%
Others 2,564 5,3.50 1,136 3,925 43.28 902 53.1% -19.1% -20.6%
Exports 18,285 608.93 13,462 14,662 337.53 7,078 38.0% 22.6% 12.1%
LPG 109 4.55 92 131 4.91 104 20.2% 7.9% 13.0%
Naphtha 7284 240.28 5,611 9911 298.47 6,318 36.1% 24.2% 12.6%
MS/Petrol 5330 175.00 4,000 9762 311.70 6,643 83.2% 78.1% 66.1%
ATF 3490 130.12 2,998 4588 133.31 2,824 31.5% 2.5% -5.8%
SKO 77 3.62 79 46 1.54 32 -40.3% -57.5% -59.5%
HSD 13769 475.20 11,008 18419 508.33 10,728 33.8% 7.0% -2.5%
LDO 0.4 .013 0.3 41.0 0.87 18.2 - - -
Lubes 93 4.78 148 24 1.08 19 -74.2% -77.4% -87.2%
FO/LSHS 5932 117.95 2,738 5173 105.01 2,243 -12.8% -11.0% -18.1%
Bitumen 40 0.67 17 39 0.75 16 -2.5% 11.9% -7.0%
Others 807 22.39 534 2839 74.39 1,580 251.8% 232.2% 195.9%
Net
Imports 109,510 2,853.23 63,194 122,948 2,650.95 56,104 12.3% -7.1% -11.2%
Source: Petroleum Planning and Analysis Cell
P: provisional
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DEMAND SUPPLY SCENARIO
Gross export realisations for petrol, naphtha, ATF, HSD and FO were lower than their respective import
costs in 2009-10. However, export realisations were higher for LPG, propane, SKO and lubes. SKO
realisations were 150 times higher than import costs. Regional trade movements of the BP Statistical Study
indicate that in 2009, India exported mainly to Singapore and other Asia-Pacific countries. Europe and
Central America were the other two large importers from India. The country imported mainly from the
Middle East.
Consumption of petroleum products has steadily increased in India, from 107.75 million tonnes in 2003-04
to 138.19 million tonnes in 2009-10. At the end of March 2010, the five-year average growth of total
petroleum products consumption was 4.5 per cent.
Demand Growth Segments
Table 61: Consumption of Petroleum Products
(Thousand metric tonnes)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) 5-year average growth (%)
LPG 9,305 10,245 10,456 10,849 12,165 12,344 13,121 5.14
MS 7,897 8,251 8,647 9,286 10,332 11,258 12,818 9.25
NAPHTHA/NGL 11,868 13,993 12,194 13,886 13,294 13,911 10,239 -5.00
ATF 2,484 2,813 3,299 3,983 4,543 4,423 4,627 10.81
SKO 10,230 9,395 9,541 9,505 9,635 9,303 9,304 -0.18
HSD 37,074 39,650 40,191 42,897 47,669 51,710 56,320 7.32
LDO 1,619 1,477 883 720 668 552 457 -20.09
LUBES 1,427 1,336 2,081 1,900 2,290 2,000 2,657 17.56
FO/LSHS 12,945 13,540 12,829 12,618 12,717 12,588 11,589 -3.01
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DEMAND SUPPLY SCENARIO
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) 5-year average growth (%)
Bitumen 3,373 3,339 3,508 3,833 4,506 4,747 4,919 8.17
Pet. coke - - - - 5,950 6,166 6,750 6.55
Others 9,529 7,596 9,586 11,274 5,449 4,597 5,397 -1.22
Total 107,751 111,634 113,215 109,239 120,751 133,599 138,196 4.50
Source: Ministry of Petroleum and Natural Gas; P-provisional
Projections indicate that transport energy demand is expected to grow at 6.1 per cent per annum over
the next two decades. The demand is expected to reach 162 MTOE by 2030. Also, the share of transport
in final energy demand is expected to double over the next two decades. India currently accounts for only
2 per cent of global transport energy demand. However, in the long term – improved fuel efficiency of
vehicles, higher fuel prices, switch to compressed natural gas (CNG) for public transport in major cities
and greater use of public transport – are expected to impact the demand growth for transport energy.
The number of vehicles on the road is the principal determinant of fuel demand for transport. The total
vehicle stock in India increased from 19 million in 1990 to 68 million in 2004. It is projected to reach 295
million by 2030. Annual sales of new light-duty vehicles (LDV), which reached 1.2 million in 2005, are
projected to increase to 13.3 million in 2030. Vehicle population growth will continue through the next
two decades at 5.7 per cent per annum, faster than the 5.1 per cent growth rate of per-capita GDP.
Demand Sectors
Transport
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DEMAND SUPPLY SCENARIO
The fleet of LDVs is expected to increase faster than any other category of transport vehicles, from 11
million in 2005 to 115 million by 2030, marking an average growth rate of almost 10 per cent. Excluding
two and three wheelers, there are currently 13 vehicles per 1,000 people in India. This ratio is expected to
grow to 93:1000 by 2030. Despite this seven-fold increase, vehicle ownership in 2030 would still be only
15 per cent of what Japan has today, which is 600 vehicles per 1,000 people.
Two-wheelers make up over 80 per cent of India‟s current vehicle stock, yet they consume only 15 per
cent of road-transport fuels. The recent shift from two-stroke to four stroke engines for these vehicles has
greatly increased their fuel-efficiency and reduced air pollution. Towards the end of the projection period,
ownership of two-wheelers will begin to plateau, as more people are likely to purchase passenger cars.
Two-wheelers would still account for over 50 per cent of the total vehicle stock in 2030.
Experience around the world shows that vehicle ownership takes off when per-capita GDP, expressed in
purchasing power parity terms, reaches a level of between US$ 3,000 and US$ 10,000, which allows a
large portion of the population afford a personal vehicle. India has passed the US$ 3,000 tipping point and
has had a corresponding increase in vehicle ownership rates.
As the vehicle stock is expanding rapidly, small changes in the projected rate of growth have a large impact
on transport oil demand by the end of the projection period. While the growth in the vehicle stock
excluding two-wheelers is projected to increase by 9.4 per cent per year over the next two decades, only
a slight increase in this rate of growth would significantly push up road fuel consumption. However,
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even if GDP and household incomes were to grow faster, infrastructure bottlenecks might constrain
vehicle ownership growth and consequently the demand for transport fuel. Also, public spending on
highways and measures to tackle traffic congestion will also have an impact on demand for transport fuel.
Air transport has been growing rapidly in recent years. India is one of the world‟s more vibrant civil
aviation markets. The economic growth has increased the propensity to fly. Moreover, the emergence of
low-cost carriers has brought the cost of domestic air travel closer to the cost of train travel.
Energy consumption in the residential sector grew at an average rate of 1.6 per cent during the period,
1990-2005. It is projected to maintain this growth rate from 2005 to 2030. Its share of total energy
consumption is expected to decrease from 44 per cent in 2005 to 29 per cent in 2030. Also, the share of
biomass in residential energy will drop from 79 per cent to 59 per cent in 2030, as cooking gas and
electricity will become accessible to more people.
According to the National Sample Survey Organisation (NSSO), rural households depend on biomass for
almost 85 per cent of their cooking needs while LPG meets 56 per cent of this need in urban households.
It is projected that in 2030, there will be more rural households relying on LPG as their primary fuel for
cooking than today. However, biomass would still be used as a secondary fuel. Demand for biomass in
urban areas is projected to fall by 15 per cent over the next two decades, and its share in urban
household energy use will be a mere 12 per cent in 2030.
Domestic Fuel
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Residential consumption of natural gas is still small in India and is limited to major cities. It is projected to
grow by an average rate of 9.1 per cent per year during the period, 2005-2030. Several cities are setting up
pipeline networks to supply gas to apartment complexes. But, natural gas consumption would still account
for only 2 per cent of total residential energy use in 2030 and all of it would be in urban areas.
In 2030, kerosene and LPG are expected to meet 80 per cent of the urban households‟ energy
requirement for cooking. They will cater to cooking needs of about 32 per cent of the rural households.
The share of urban households in total LPG consumption for cooking is expected to grow from 56 per
cent today to about 80 per cent by 2030.
Power generation accounts for about 29 per cent of total gas consumption in the country and 48 per cent
of all the gas consumed for energy purposes. In 2008-09, gas consumption by the power sector was
estimated at 12,603 million cubic metres (mcm) compared to 12,037 mcm in 2007-08.
According to CEA, as of March 2008, the central, state and private utilities operated 150 gas-based units
with a total capacity of 10,018.9 MW. In addition, there are 15 independent gas-based power plants with a
total capacity of 3,903 MW. Some of the large gas turbine plants include Ratnagiri CCGT (2,220 MW),
Uran CCGT (912 MW), Dadri CCGT (817 MW), Kawas CCGT (644 MW) and Gandhar CCGT (648
MW).
Power Generation and Industrial Fuel
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DEMAND SUPPLY SCENARIO
Power industry is constrained by shortage of gas supply. That has resulted in not only loss of generation at
the existing power plants but also in discouraging further investment in gas-based power plants. The loss
of generation due to shortage of gas increased to 31.17 billion units in 2007-08 from 21.69 billion units in
2003-04. While the private sector plants achieved about 94.6 per cent of its target utilisation in 2007-08,
the state sector achieved 85.7 per cent. Even the commitments of gas allocations made to power stations
are not being fulfilled.
In 2008-09, fertiliser industry consumed 21 per cent of the total gas sold in the country and 54 per cent
of the total gas consumed by the non-energy sector. The share of transportation and petrochemicals
industries were 2.6 per cent and 6.5 per cent, respectively. According to the Planning Commission, the
demand for gas from the fertiliser industry is expected to increase by 35.22 mmscmd to 76.26 mmscmd in
2011-12 from the 2006-07 level. Likewise, the demand for gas from the petrochemicals and refining
industry is expected to increase by 4.66 mmscmd to 19.66 mmscmd over this period.
Gas is a cheaper feed stock for fertiliser industry compared to naphtha. With capacity expansions in the
industry, the demand for natural gas is expected to increase. The fertiliser industry is likely to add 35 per
cent more capacity in the coming three years in addition to converting old naphtha and fuel oil based
plants to use gas as the feedstock. The industry may need additional 24 mcm gas a day to feed the new
plants and the converted ones. While ONGC supplies about 15 mcm gas per day from its fields, the
remaining has to be imported. The Government has asked the private gas producer, Reliance, to sell gas
Fertiliser and Petrochemicals
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DEMAND SUPPLY SCENARIO
to fertiliser companies and power producers on priority at US$ 4.2 per million British thermal units
(BTUs). Reliance has signed agreements with 12 fertiliser companies for supplies from its KG-D6 field.
Buying from domestic sources ensures stable prices for gas users.
Table 62: Natural Gas Demand Sectors
(Million cubic meter)
2004-05 2005-06 2006-07 2007-08 2008-09(P)
Energy 21,328 22,052 20,855 22,436 26,012
Power generation 12,099 11,878 11,963 12,037 12,603
Industrial fuel 3,569 3,780 3,205 3,324 5,912
Tea plantations 142 151 170 160 154
Domestic fuel 343 75 443 39 102
Captive use/LPG shrinkage 4,944 5,048 5,034 5,618 5,706
Others* 231 1,120 40 1,258 1,535
Non-energy 9,447 8,973 10,513 11,892 18,043
Fertiliser 8,173 7,762 8,497 9,822 9,082
Petrochemicals 1,236 1,175 1,377 1,432 1,105
Transport-CNG(mscm) - - - - 1,095
Others** 38 36 639 638 6,761
Energy & non-energy 30,775 31,025 31,368 34,328 44,055
Source: Ministry of Petroleum & Natural Gas
P-Provisional
*Mainly, City Gas distribution, **Mainly, Sponge iron units
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According to the World Trade Organization (WTO), the share of fuel imports (crude oil, mineral fuels
and feedstock, lubricants and related materials) in India‟ s total imports increased to 40.1 per cent in 2008
up from 34.7 per cent in 2000 and 29 per cent in 1990. This share was among the highest in the world.
Share in Global Market
Table 63: Share of Fuel Imports in Total Merchandise Imports
Value share (%)
Country 2000 2008
Russia 3.7 1.6
Hong Kong 2.1 3.7
Argentina 3.7 7.2
Iran 2.2 8.4
Mexico 3.0 9.5
Bangladesh 6.2 9.9
Malaysia 4.8 10.8
China 9.2 14.9
European Union 8.5 15.2
Viet Nam 13.5 15.5
Australia 8.3 15.7
Brazil 14.8 19.8
Thailand 12.2 20.8
Philippines 11.1 21.2
Sri Lanka 7.7 22.4
USA 11.1 23.1
Indonesia 13.9 24.3
Singapore 12.1 27.3
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Value share (%)
Country 2000 2008
Korea 23.7 32.7
Pakistan 33.1 33.2
Japan 20.4 35.0
India 34.7 40.1
Bahrain 45.5 51.9
Source: World Trade Organisation, 2008
According to the BP Statistical Review of World Energy, June 2010, global oil refining capacity in 2009 grew
by 2.2 per cent, or 2 million barrels per day (b/d), the largest increase since 1999. Non-OECD capacity
surpassed OECD capacity for the first time. The Asia-Pacific region accounted for more than 80 per cent
of the global growth, largely, due to increases in capacity in India (19.5 per cent, or 580,000b/d) and China
(10.5 per cent, or 820,000b/d).
Table 64: India‟s Share in World Oil and Gas Market (%)
Oil Gas
Consumption 3.8 1.8
Production 0.9 1.3
Proved reserves 0.4 0.6
Source: BP Statistical Review of World Energy, June 2010
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DEMAND SUPPLY SCENARIO
India‟s demand for oil has always exceeded domestic supply. Moreover, since the 1970s, there has been an
increasing shortage of other energy sources. Domestic coal, natural gas and hydroelectric power have
fallen short of total requirement. The main reason for this shortage lies in slow and erratic development
of domestic energy resources.
Energy Demand Met from Domestic Sources
Table 65: Percentage Demand Met from Domestic Sources (%)
Indicators 1960-61 1970-71 1980-81 1990-91 2000-01 2011-12(P)
Coal 100.00 100.00 99.70 97.80 96.10 93.02
Lignite 100.00 100.00 100.00 100.00 100.00 100.00
Oil 5.40 35.60 32.60 42.80 30.30 27.59
Natural Gas/LNG - 100.00 100.00 100.00 100.00 69.30
Hydro Power 100.00 100.00 100.00 99.93 99.96 95.94
Source: Planning Commission; P-Projected
Also in recent years, India has been increasingly exposed to the vagaries of global oil supply. The country
has become a significant participant in the global oil market, but it is not big enough to influence prices. In
fact, after the unwinding of administered pricing in 2002 and floating the rupee, the country‟s balance of
payments has been influenced by increasing share of oil imports.
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DEMAND SUPPLY SCENARIO
The refining capacity has increased from 177.9 million metric tonnes per annum (mmtpa) in 2008-09 to
184.4 mtpa in 2009-10. The capacity addition has come from public sector companies. However, in 2009-
10, the refining output of public sector oil marketing companies remained constant but it increased by
almost 11.5 per cent for the two private sector companies – Reliance and Essar. In fact, the private
refineries‟ production increased the overall capacity utilisation from 88.3 per cent in 2008-09 to 101.2 per
cent in 2009-10.
There are 22 refineries in the country: 19 in the public sector and three in the private sector. The public
sector refineries have a capacity of 105 mmtpa and the balance 72.9 mmtpa is contributed by the private
sector. The 19 public sector refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi,
Panipat, Visakhapatnam, Chennai, Nagapattinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka,
Narimanam and two refineries at Mumbai. The three private sector refineries are Reliance's Jamnagar and
Jamnagar SEZ refineries and Essar'sVadinar refinery. Reliance's Jamnagar refinery is the largest single crude
oil refinery in India with a capacity of 33 mmtpa. IOCL dominates the multiple location refining capacity
with a share of nearly 33.8 per cent.
Growth of Refining Capacity
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DEMAND SUPPLY SCENARIO
Table 66: Refinery Capacity
(Thousand metric tonnes)
Installed Capacity Crude Processed Capacity utilisation (%)
FY 2009 2010 2009 2010 2009 2010
Public Sector
IOC, Digboi 650 650 623 600 95.8 92.3
IOC, Guwahati 1,000 1,000 1,076 1,078 107.6 107.8
IOC, Koyali 13,700 13,700 13,852 13,206 101.1 96.4
IOC, Barauni 6,000 6,000 5,940 6,184 99.0 103.1
IOC, Haldia 6,000 7,500 6,042 5,686 100.7 75.8
IOC, Mathura 8,000 8,000 8,601 8,107 107.5 101.3
IOC, Panipat 12,000 12,000 13,070 13,615 108.9 113.5
IOC, Bongaigaon 2,350 2,350 2,163 2,220 92.0 94.5
IOC, Sub Total 49,700 51,200 51,367 50,696 103.4 99.0
HPC, Mumbai 5,500 5,500 6,652 6,965 120.9 126.6
HPC, Visakh 7,500 8,300 9,158 8,830 122.1 106.4
HPC, Sub Total 13,000 13,800 15,809 15,795 121.6 114.5
BPC, Mumbai 12,000 12,000 12,221 12,501 101.8 104.2
BPC, Kochi 7,500 9,500 7,738 7,875 103.2 82.9
BPC, Sub Total 19,500 21,500 19,959 20,376 102.4 94.8
KRL, Kochi 0 0 0 0 0 0
CPCL, Chennai 9,500 9,500 9,707 9,571 102.2 100.7
CPCL, Narimanam 1,000 1,000 418 517 41.8 51.7
CPCL, Sub Total 10,500 10,500 10,125 10,088 96.4 96.1
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DEMAND SUPPLY SCENARIO
Installed Capacity Crude Processed Capacity utilisation (%)
FY 2009 2010 2009 2010 2009 2010
Public Sector
BRPL, Bongaigaon 0 0 0 0 0 0
NRL, Numaligarh 3,000 3,000 2,251 2,619 75.0 87.3
ONGC, Tatipaka 78 78 83 55 106.4 70.5
MRPL, Mangalore 9,690 11,820 12,576 12,498 129.8 105.7
TOTAL PSU 105,470 111,900 92,211 91,751 87.4 82.0
JVC/PVT
RIL, Jamnagar 33,000 33,000 31,971 31,379 96.9 95.1
RPL (SEZ), Jamnagar 29,000 29,000 31,971 29,555 110.2 101.9
EOL, Jamnagar 10,500 10,500 12,916 13,502 123.0 128.6
JVC/PVT Sub Total 72,500 72,500 76,858 74,436 106.0 102.7
GRAND TOTAL 177,970 184,400 169,069 166,187 88.3 101.2
Source: Ministry of Petroleum and Natural Gas
P-provisional
Indian refineries mainly produce liquid petroleum gas (LPG), Naphtha, motor spirit (MS), aviation turbine
fuel (ATF), kerosene oil (SKO), high speed diesel (HSD), light diesel oil (LDO), lubricants, furnace oil (FO),
low sulphur heavy stock (LSHS), and bitumen. Domestic production of petroleum products increased 19.6
per cent in 2009-10 over the previous year to 185 million tonnes.
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DEMAND SUPPLY SCENARIO
Table 67: Domestic Production of Petroleum Products
(Thousand metric tonnes)
FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010(P) 5-Year CAGR (%)
LPG 7,651 7,817 7,717 8,454 8,868 9,170 10,345 5.9%
NAPHTHA 12,641 15,796 16,016 18,176 17,978 16,453 18,782 3.9%
MS 11,211 11,058 10,508 12,536 14,174 16,021 22,554 16.2%
ATF 4,302 5,197 6,219 7,850 9,120 8,092 9,304 13.2%
SKO 10,148 9,207 9,026 8,621 8,025 8,461 8,833 -0.7%
HSD 43,129 46,081 47,730 53,676 58,482 63,031 73,249 9.8%
LDO 1,628 1,385 944 803 713 609 472 -19.0%
LUBES 666 646 676 967 882 870 950 9.3%
FO 9,102 10,580 10,314 12,259 12,642 14,714 15,257 7.9%
LSHS 4,608 4,235 3,804 3,266 3,315 3,046 2,627 -8.9%
BITUMEN 3,379 3,347 3,575 3,838 4,450 4,620 4,873 7.9%
Others 9,176 7,400 7,551 9,624 11,245 9,569 17,755 23.4%
Total 117,641 122,749 124,080 140,070 149,893 154,654 185,000 8.8%
Source: Petroleum Planning and Analysis Cell
P: provisional
Key Efficiency Achievements
The refining industry has been expanding capacity and upgrading technology and refinery complexity at
regular intervals. As a result, some of the new units, such as those of Reliance and Essar, have improved
their gross refining margins significantly.
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India: Energy Sector September 2010
DEMAND SUPPLY SCENARIO
Table 68: Gross Refining Margins for Domestic Refineries
(US$/bbl)
Source: Company reports
FY 2004 2005 2006 2007 2008 2009
IOC 5.30 6.20 4.60 4.19 9.02 6.28
HPCL-Mumbai 4.30 5.60 3.22 4.786.54
3.97
HPCL-Vizag 4.60 5.10 2.56 3.51 -
BPCL-Mumbai 4.64 4.56 1.64 3.64 4.60 4.48
BPCL-Kochi 4.00 5.90 3.17 3.46 7.18 6.27
CPCL 4.39 5.36 4.37 5.00 8.47 -
MRPL 3.90 5.68 - 4.60 7.00 5.32
RIL 8.80 10.30 11.70 15.00 12.20
The Nelson Complexity Index (NCI) measures the level of secondary processing facilities of a refinery in
relation to its crude distillation capacity. Indian refineries have a relatively lower refinery complexity (less
than five) as compared to a global average of six. However, the refineries are upgrading their capacities to
treat more types of crude. Also, with stringent environment regulations being implemented, Indian
refineries have been forced to upgrade their units.
185
Demand supply scenario … (19/24)
India: Energy Sector September 2010
DEMAND SUPPLY SCENARIO
Table 69: NCI of Domestic Refineries
Company NCI
IOCL 4.1
HPCL 3.6
BPCL 4.0
CRL 5.0
MRL 6.0
RPL 11.3
New Refineries
HPCL, Bhatinda 9.6
RPL, Jamnagar 14.0
Production of Crude Oil
India‟s crude oil production in 2008-09 amounted to 33.51 million tonnes. Its gas production was 33.84
bcm. About three-quarters of total production came from nine offshore fields. The 85 onshore fields
supplied the rest. A few major fields discovered in the 1970s and 1980s account for the bulk of India's oil
output. The top five producing fields contribute half of all output. Most of the producing fields are now in
decline, including the nine offshore fields. It is estimated that 80 per cent of current production comes
from fields which have passed their peak.
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DEMAND SUPPLY SCENARIO
Reforms undertaken under the NELP have had a positive impact on domestic production. Private
investors have developed new oil and gas fields. India‟s oil output is projected to increase to 39.51 mmt in
2011-12. A number of new projects, including Mangala, Bhagyam, D6-MA-1, Aishwariya, GS-29-1 and Vijaya
are expected to compensate for the decline of existing mature fields.
Table 70: Crude Oil Production
(Million tonnes)
2004-05 2005-06 2006-07 2007-08 2008-09(P)
Onshore 11.59 11.43 11.33 11.21 11.27
OIL 3.19 3.23 3.11 3.10 3.47
ONGC 8.32 8.10 8.06 7.92 7.56
Private/JVC 0.07 0.10 0.16 0.19 0.24
Offshore 22.39 20.76 22.66 22.91 22.23
ONGC (Bombay High) 18.17 16.31 17.99 18.02 17.80
Private/JVC 4.23 4.45 4.67 4.89 4.43
Total 33.98 32.19 33.99 34.12 33.51
JVC: Joint Venture Company; P-provisional
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DEMAND SUPPLY SCENARIO
Typically, the gestation period between discovery and the start of production is eight to ten years. The
highest number of new field starts in India in a single year was 28, in 1999. It is estimated that an average
of 25 fields would be brought into production every year between 2007 and 2013. But the increase in
demand for drilling rigs would drive up costs. Only about 10 per cent of the 880 wells proposed to be
drilled in the first six rounds of the NELP have been drilled so far, partly because of a poor availability of
drilling rigs. Delays in drilling would result in a smaller contribution of those fields before 2015.
Domestic Gas Production and LNG Imports
India‟s natural gas production is projected to reach 63.23 bcm in 2012. The production from mature fields
is projected to decrease from 24.78 bcm in 2006 to 3.53 bcm in 2030. Still, the domestic gas production
has the potential to reach more than 50 bcm in 2020 because of major discoveries over the last seven
years in the Krishna-Godavari basin. However, production is expected to peak between 2020 and 2030
and then to drop to 50 bcm at the end of 2030.
The outlook for gas production also faces uncertainties. About 100 fields are already being appraised or
developed, and they will undoubtedly boost output in the next decade. However, 150 more fields
discovered in the last thirty years are still awaiting appraisal.
Still, NELP has helped speed up fields‟ development. For example, some of the 20 fields discovered in the
Krishna-Godavari basin since 2002 have started production in 2010.
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Demand supply scenario … (22/24)
India: Energy Sector September 2010
DEMAND SUPPLY SCENARIO
As production shifts from the mature producing fields in the Mumbai basin on the West coast to the
relatively under-developed offshore Krishna-Godavari basin on the East coast, substantial investment is
required for oil and gas transmission and distribution infrastructure, especially in the Southeast region of
the country. Demand is currently concentrated in the Central and the Northern regions.
Table 71: Natural Gas Production
(MCM)
2004-05 2005-06 2006-07 2007-08 2008-09(P)
Onshore 9,094 9,578 9,272 9,099 8,763
OIL 2,010 2,270 2,265 2,340 2,268
ONGC 5,658 5,751 5,876 5,877 5,753
Private/JVC 1,426 1,557 1,131 882 742
Offshore 22,669 22,624 22,475 23,318 24,086
ONGC (Bombay High) 17,313 16,823 16,567 16,457 16,738
Private/JVC 5,356 5,801 5,908 6,861 7,348
Total 31,763 32,202 31,747 32,417 32,849
Source: Ministry of Petroleum and Natural Gas; P-provisional
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India: Energy Sector September 2010
DEMAND SUPPLY SCENARIO
Gas imports are projected to double between 2005 and 2010, reaching about 15 million tonnes per
annum (MTPA). Imports are projected to stabilise for a decade thereafter and then quadruple between
2020 and 2030 to 61 bcm as demand continues to grow and domestic production peaks. LNG import
capacity at the two existing LNG terminals at Hazira and Dahej currently amounts to 8.7 MTPA. If the
two more planned LNG terminals become operational by 2011-12, they will increase LNG import
capacity to 24 MTPA. This implies that there could be excess capacity of about 10 MTPA over the next
decade. Major new capacity additions might be needed after 2025. However, these projections depend on
the availability of supplies from LNG-exporting countries and the competitiveness of gas against other
fuels in the market.
Protracted negotiations over LNG imports have led to delays in finalising a number of planned gas-based
projects. Price has been the main stumbling block, as increasingly expensive LNG struggles to compete
against cheap coal and domestic gas. However, it is the most competitive way of filling the gap between
the rising demand for gas and the indigenous production. It is extremely unlikely that the plans for piping
gas from producing countries will materialise soon. Several international pipeline projects have been
mooted, including those from Iran, Myanmar, Turkmenistan and Oman. The Iran-Pakistan-India pipeline,
which would be more than 2,660 km-long and have a capacity of 60 mcm per day, has been under
discussion since 1994. Geopolitical factors, transit charges and pricing have complicated the negotiations.
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India: Energy Sector September 2010
DEMAND SUPPLY SCENARIO
Table 72: LNG Imports
2004-05 2005-06 2006-07 2007-08 2008-09(P)
By volume (Million tonnes) 2.50 5.06 6.81 8.32 8.06
By value (Rs billion) 16.96 33.66 56.5 71.97 95.48
By value (US$ billion) 0.38 0.75 1.35 1.79 2.08
Source: Ministry of Petroleum and Natural Gas
191
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
192
Government organisations … (1/5)
India: Energy Sector September 2010
GOVERNMENT ORGANISATIONS
The Ministry of Petroleum and Natural Gas (MoPNG) formulates policies for the oil and gas sector and
also regulates it. The MoPNG is entrusted with the responsibility of exploration and production of oil and
natural gas and their refining, distribution and marketing. It also manages import, export and, conservation
of petroleum products and LNG. There are several departments and organisations under the ministry.
These are:
• Centre for High Technology (CHT): CHT, established in 1987, is an advisory body to implement
scientific and technological programmes for the oil sector. It acts as a forum for sharing of technical
information amongst the refineries.
• Directorate General of Hydrocarbons (DGH): DGH was established in 1993 under the
administrative control of MoPNG. DGH‟s mandate is to promote sound management of the oil and
natural gas resources, particularly ensuring adherence to appropriate technological, economic and
environmental benchmarks.
• Oil Industry Development Board (OIDB): The OIDB was set up in January 1975 under the Oil
Industry (Development) Act, 1974 to provide financial assistance for the development of oil industry.
193
Government organisations … (2/5)
India: Energy Sector September 2010
GOVERNMENT ORGANISATIONS
• Oil Industry Safety Directorate (OISD): OISD is a technical directorate under the MoPNG that
formulates self-regulatory measures to enhance safety in the oil and gas industry and coordinates their
implementation.
• Petroleum Conservation Research Association (PCRA): The Government established the
Petroleum Conservation Action Group in 1976 which was reconstituted as PCRA in 1978. PCRA
promotes research, development and deployment efforts aimed at petroleum conservation and
environment protection.
• Petroleum Planning and Analysis Cell (PPAC): PPAC was created in 2002 to assist MoPNG with
pricing and coordination issues following the dismantling of Administered Pricing Mechanism (APM) and
the consequent dissolution of the Oil Coordination Committee.
• Petroleum Federation of India (PFI): PFI was set up in 2002 to promote the interest of the
petroleum industry and function as a facilitator for the Indian oil industry.
• Petroleum India International (PII): PII is a consortium of public sector companies in the
petroleum, petrochemicals and engineering sectors. PII was established in 1986 with the objective of
mobilizing individual capabilities of its member companies in technical and managerial domains for
international projects.
194
Government organisations … (3/5)
India: Energy Sector September 2010
GOVERNMENT ORGANISATIONS
Energy sector reforms started in the early 1990s. The first phase of oil sector reform involved allowing
private and foreign firms to participate in onshore exploration and production through production-sharing
contracts. Between 1996 and 2002, in the second phase of reforms, private participation was allowed in
oil and gas production, refining and marketing. In 1997, the government announced a New Exploration
Licensing Policy (NELP) to provide a more attractive framework for private and foreign investment in oil
exploration. In 2002, the government allowed private-public joint ventures in building oil product pipelines
and in 2006, it allowed private investors to develop their own gas pipeline infrastructure.
FDI in the gas sector is allowed in oil and gas exploration and production, and in LNG terminals. In 1998,
GAIL, ONGC, IOCL and Bharat Petroleum Corporation Limited (BPCL) formed a joint venture, Petronet
LNG, to build and operate LNG import terminals. Petronet LNG commissioned its first terminal at Dahej
in 2004. Shell commissioned its LNG terminal in 2005 at Hazira.
The government expects increased supply and greater competition to eventually remove the need for
price fixing and subsidies. A government appointed expert group‟s report, “A viable and sustainable system
of pricing of petroleum products”, released in February 2010, has recommended measures to achieve a
sustainable pricing policy for the four controlled petroleum products - petrol, diesel, kerosene and LPG -
which together constituted 63 per cent of total petroleum products consumption in 2008-09.
The Integrated Energy Policy, 2006, delineates the policies of all energy sectors in the country and seeks
Reforms and Policies
195
Government organisations … (4/5)
India: Energy Sector September 2010
GOVERNMENT ORGANISATIONS
to promote competition. In fact, new entrants have been allowed to market transportation fuels - petrol,
diesel, and aviation turbine fuel - since March 2002. The government has issued retail licenses to Reliance
Industries, Essar Oil, Shell, ONGC, MRPL and the Numaligarh Refinery.
With the recent discoveries in the Krishna-Godavari basin, domestic natural gas is expected to become
the second most used source of commercial energy in India. Efforts are being made to raise imports of
natural gas in the form of LNG and through transnational gas pipelines.
Pricing Reforms
In February 2010, the experts group, headed by former Planning Commission member Kirit Parikh,
submitted its report on pricing policy for four major oil products. The committee has recommended that
prices of petrol and diesel should be market-determined, both at the refinery gate and at retail stations
whereas the prices of kerosene and domestic LPG could be partially raised by US$ 0.13 per litre and US$
2.22 per cylinder, respectively. For kerosene and LPG, the committee has recommended linking fuel prices
with per capita income and selective allocations to poorer families through smart cards issued by Unique
Identification Authority.
The committee has accepted the subsidy formula proposed by ONGC aimed at reducing subsidy burden of
oil companies. The formula suggests an incremental rate of taxes on higher crude oil price realization from
the nomination blocks of ONGC and OIL. Acting on the recommendation, the Government has effected
retail price changes recently.
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Government organisations … (5/5)
India: Energy Sector September 2010
GOVERNMENT ORGANISATIONS
Figure 6: Price Revisions in Delhi
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HSD (Rs./litre) PDS Kerosene (Rs./litre)
MS (Rs./litre) LPG (Rs./Cylinder-RHS)
Standard LPG cylinder weight: 14.2 kg
197
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
198
Trends and opportunities … (1/4)
India: Energy Sector September 2010
TRENDS AND OPPORTUNITIES
As part of its energy security strategy, India has forged new ties with Russia, Iran and China and built
partnerships with Burma and Venezuela. The country has also carefully entered into cooperative
relationships with several oil producing countries in Africa and in the Middle East. India has also allowed
public sector companies such as ONGC and OIL to secure ownership of oil and gas fields and companies
overseas. ONGC has acquired equity stakes in the oil fields in Iran, Iraq, Sudan, Libya, Angola, Burma,
Russia, Vietnam and Syria.
India is looking at Kazakhstan as an important emerging exporter of oil and gas. Kazakhstan is among the
top ten countries in the world in terms of explored oil and gas reserves. The country depends significantly
on overseas funding to develop these resources, which offers investment opportunities to India.
Investing in Overseas Oil Assets
Emerging alternative fuel sources include liquid coal, hydrogen fuel cell, coal bed methane and uranium. The
developing carbon market, following the Kyoto Protocol, 1997, has also invigorated investment in alternative
energy.
Several diesel hydro desulphurization projects have been implemented in India‟s oil refineries. Stringent
emission norms have been set for vehicular emissions in the form of Bharat Stage II, Bharat Stage III and
Bharat Stage IV standards. The Bharat Stage IV (equivalent to Euro IV) norms were launched in Delhi in April
2010. Use of bio-diesel and ethanol blended petrol is also being encouraged through favourable pricing.
Alternative Fuels
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India: Energy Sector September 2010
TRENDS AND OPPORTUNITIES
The concept of building a few months‟ strategic oil reserves was first conceived by the US in 1975 after
the oil shock. It now has reserves of 727 million barrels in the Gulf of Mexico that can last 37 days.
Subsequently, Japan built government-owned reserve of 320 million barrels to last 92 days and a private
reserve of 129 million barrels to last 77 days. China and India started constructing their strategic reserves
in 2004 and 2007, respectively. The initial Indian reserves are aimed at providing buffer stocks for two
weeks.
Strategic Oil Reserves
The reference scenario of 6.3 per cent GDP growth rate over the next two decades implies a need for
investment of about US$ 228 billion in oil and gas sector. More than three-quarters of the US$ 165 billion
oil-linked investments would be absorbed by the refining sector, which would be significantly export
oriented. More than 90 per cent of the US$ 91 billion investments in gas will go into exploration,
production, transportation and distribution. The upstream investments could be impacted by availability
and cost of drilling equipment and skilled manpower. Investments in LNG re-gasification plants would be
smaller, US$ 5.9 billion.
In the high growth scenario, an average growth of 7.8 per cent in GDP during the period, 2005-2030,
means a five time increase in per capita GDP by 2030. In this scenario, the primary energy demand is
projected to expand by 4.2 per cent per year, compared to 3.6 per cent in the reference scenario. Coal
and oil demand would account for most of the increase. Oil demand is expected to rise to 8.3 mbd in
Investment and Infrastructure Development
200
Trends and opportunities … (3/4)
India: Energy Sector September 2010
TRENDS AND OPPORTUNITIES
2030, 1.8 mbd more than in the reference scenario, driven by a dramatic increase in the vehicle stock.
Dependence on biomass would decrease further, as higher incomes would lead to greater use of cleaner,
more efficient fuels. Per capital electricity generation would rise to 2,400 kWh in 2030.
However, higher economic growth itself would require a substantial acceleration and deepening of
structural, institutional and price reforms and more rapid infrastructure development. In the high growth
scenario, cumulative investment in energy infrastructure would rise to about US$ 1.7 trillion during 2006-
2030 compared to US$ 1.2 trillion in the reference scenario. More than 70 per cent of the increase would
be in power generation. Investments in oil would be about US$ 88 billion higher because of the
deployment of enhanced recovery techniques. In contrast, investments in gas would increase by only 17
per cent to US$ 71 billion. The investments in coal would be US$ 11 billion more.
The total investment under the first seven rounds of NELP stands at US$ 13.8 billion. Under NELP-VIII, oil
companies have committed an investment of US$ 1.1 billion. India will sign contracts for 31 exploration
blocks awarded to 23 companies, including BHP Billiton Petroleum International, BG Exploration and
Production, and Cairn India. India plans to launch NELP-IX in the third quarter of 2010.
In the refining segment, over 92 mmtpa of additional capacity is being planned by 2012. Natural gas
demand is expected to increase by more than 100 mmscmd over the next four years. Recent gas finds and
increased use of gas for power generation, petrochemicals, fertilisers and city gas distribution will raise the
share of gas in the energy mix of the country.
201
Trends and opportunities … (4/4)
India: Energy Sector September 2010
TRENDS AND OPPORTUNITIES
There are many areas of the sector that remain severely under-developed, such as city gas distribution,
LNG import and re-gassification infrastructure, and pipeline networks. However, the growing demand-
supply mismatch provides opportunities for investment in the entire value chain of petroleum and natural
gas sector.
Rising energy demand puts enormous strain on existing energy transport infrastructure. Ports, railways,
roads are an important part of the supply chain of petroleum products. Public funds are insufficient to
cover all required investments in roads, railways and ports. The government has turned to public-private
partnerships as a way of bridging the funding gap. Gas transportation is also attracting significant
investment. Government-owned GAIL is a major investor in gas transmission pipelines from well heads to
bulk consumers.
202
Contents
Control panels
Oil exploration and drilling equipment
Storage batteries
Industry overview – oil and gas
International interest
Demand supply projections
Demand supply scenario
Government organisations
Trends and opportunities
Companies
INDIA: ENERGY SECTOR September 2010
203
Companies … (1/3)
India: Energy Sector September 2010
COMPANIES
Table 74: Major Equipment Players
Company name Sector Key products
Bharat Heavy Electricals
Limited (BHEL)Power equipment
Boilers, turbines, transformers, other power and oil
exploration equipment
Larsen & Toubro Limited (L&T) Power and other equipment
Supercritical boilers, switchgears, electrical control system,
metering solutions and relays, medical equipment, control
and automation
ABB India Power and automation technology
Cable and cable accessories, control systems, HV-products
and systems, insulation components, MV-products and
systems, power protection and automation products, turbo-
charging and transformers.
Siemens IndiaAutomation and control, energy,
healthcare and lighting
Transformers, switchgears, turbines, motors, generators,
switch and control boards.
Havells India LimitedElectrical and power distribution
equipment
switchgear, cables and wires, capacitors, building circuit
protection, energy meters and fans.
EMCO Limited Power equipmentTransformers, energy meeting systems, power quality
equipment, substations and transmission line and towers.
KEC International Limited Transmission tower
Turnkey projects in power transmission lines up to 1,200
kV, power distribution networks, substations, telecom,
railways, cabling and engineering services.
Suzlon Limited Wind turbines Wind turbines and related EPC contracts.
Cummins India Limited Diesel EnginesDiesel engines in the 205 HP-2,365 HP range and dual-fuel
engines.
Exide Industries Limited Storage batteriesStorage batteries for the automotive, industrial, and
submarine sectors.
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Companies … (2/3)
India: Energy Sector September 2010
COMPANIES
Table 75: Major Energy Sector Players
Company name Sector Description
National Thermal Power
Corporation (NTPC)Power generation
Largest power generating company. Government-
owned. Mainly, thermal power generator, entering
hydropower also.
NHPC Limited Power generationGovernment-owned, hydropower company. Installed
capacity of 4,622 MW. Several new projects ongoing.
NHDC Limited Power generationJoint venture between NHPC and Govt. of Madhya
Pradesh.
THDC Limited Power generation
Joint venture between Government of India and
Uttar Pradesh. Operates the Tehri Hydropower
Complex.
Power Grid Corporation of
India Limited (PGCIL)Power transmission
Central Government-owned intra-regional power
transmission company. National transmission utility.
Also responsible for national load dispatch function.
Reliance Power Transmission
Limited (RTPL)Power transmission
Private sector company. Implementing 300 km
transmission line for Parbati-Koldam project at
Himachal Pradesh.
Tata Power LimitedPower generation, transmission and
distribution.
Private sector company operating primarily in
Mumbai and Delhi. Also implementing UMPP.
Reliance Power LimitedPower generation, transmission and
distribution.
Private sector company operating primarily in
Mumbai and Delhi. Also implementing UMPP.
GMR Energy Power projects developer Independent power producer company.
GVK Power & Infrastructure Power projects developer Independent power producer company.
Jaiprakash Power Ventures
LimitedHydropower project developer Independent power producer company.
Noida Power Company Limited Power distribution Private power distribution company.
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Companies … (3/3)
India: Energy Sector September 2010
COMPANIES
Company name Sector Description
Torrent Power LimitedPower generation, transmission and
distribution.
Private sector company operating primarily in
Ahmedabad and parts of Maharashtra as franchisee.
Malana Power Limited Hydropower project developer Independent power producer.
Essar Power Limited Power generationIndependent power producer. Has license for
distribution and transmission.
Oil and Natural Gas
Corporation Limited (ONGC)Oil and gas exploration and refining
Government-owned, largest oil producer in the
country. Active in oil and gas exploration and activity.
Cairn India Limited Oil and gas exploration and productionLarge private sector oil producer in the country.
Recent discoveries in Rajasthan.
Gujarat State Petroleum
Corporation Limited (GSPC)
Oil and gas exploration and production, gas
transmission and distribution.
Among the largest gas trading companies in India.
Recent discoveries in KG-basin.
Oil India Limited (OIL) Oil and gas exploration and production
Government-owned. Operates in exploration,
development and production of crude oil and natural
gas, transportation of crude oil and production of
LPG.
ONGC Videsh Limited (OVL) Overseas oil and gas exploration and equityProduces hydrocarbons from its nine assets in Russia,
Syria, Vietnam, Sudan, Venezuela and Brazil.
GAIL India Limited (GAIL)Natural gas transmission and distribution
company
Largest gas pipeline company in India. Also strong
CNG and city gas player.
Petronet LNG LNG imports LNG terminal owner.
Gujarat Gas Company Limited
(GGCL)Natural gas transmission and distribution Largest private sector player. Operates in Gujarat.
Jindal Drilling and Industries
Limited (JDIL)Offshore drilling services
Offshore drilling for oil and gas, horizontal and
directional drilling and mud-logging services.
Aban Offshore Limited (AOL) Offshore drilling servicesLargest offshore drilling contractor in the private
sector.
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INDIA: ENERGY SECTOR September 2010
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