An overview of ippai activities

An Overview of IPPAI
Activities
January - December 2015

Copyright © 2016
DISCLAIMER: All these recommendations are put forward on behalf of members and stakeholders present during the meetings
and conference organized by IPPAI. This publication provides general information and information available in public domain
existing at the time of preparation. IPPAI does not take responsibility to the accuracy of the facts, data, conclusion and/or opinions
contained in this report. The survey findings in the publication are based on the responses received from participants.
The publication is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting
as a result of any material contained in this publication will be accepted by IPPAI. It is recommended that professional advice
be taken based on the specific facts and circumstances. This publication does not substitute the need to refer to the original
documents.
This is a compilation in summary of all the salient activities undertaken by IPPAI from
January 2015 and the documents that have emerged out of these deliberations.

An Overview of IPPAI Activities
About IPPAI
“The infinite pursuit of sustainable development using experience, expertise and engagement, for a more cohesive
and better India, through the confluence of ideas and actions steeped in innovation and in conformity with
regulations and within the finite limits of our planet.”
IPPAI was set up as a not-for-profit association shortly after the Government of India opened the power sector to
private industry. Since its inception as an independent body in 1994, IPPAI’s aim has been to provide a neutral platform
for the examination of issues critical to the development of the power sector in India, to discuss energy policy and to
focus on strategic, financial, legal, regulatory and technical issues in the power, oil, gas and allied sectors with a prime
focus on independent power producers.
As we initiate dialogues within the power sector incorporating environmental and socio-ecological concerns in our
deliberations, we look at strategies which are more holistic and do not prescribe economic growth at the cost of the
environment. Moving ahead, we are keen to bring a sustainable approach in our policies.
Examine
As the oldest power producers association, we are able to take up pioneering positions on industry issues as they
emerge and sensitize our members and key stakeholders regarding the same. Through our conferences we take a
first-hand look at the issues that the industry grapples with and seek solutions to these in a collaborative manner.
IPPAI disseminates information on the complex issues of tax, regulatory processes and policy in the power,
infrastructure and petroleum sectors, as they change from time to time. IPPAI keeps track of the latest policies and
regulatory trends to ensure success in this volatile emerging market where policy changes and political uncertainty
impinge on the success or failure of project development on a continuous basis.
Engage
IPPAI’s primary goal is to bring together all the important players to discuss generic issues and resolve problems that
may retard the progress and development of projects in the Indian energy sector. IPPAI provides a cerebral platform
and also an engaging interface between players in the energy sector, policymakers (central and state level), electricity
boards, financial institutions, ministries, power developers, Indian and multinational companies, equipment suppliers,
EPC contractors and consultants.
At the core of IPPAI’s initiatives are its industry-acclaimed conferences that focus on policy, strategic, financial, legal,
regulatory and technical issues in the power, oil, gas and allied sectors. IPPAI’s expertise and focused discussions
ensure consistently relevant programmes with high-profile experts and erudite speakers who address issues of direct
relevance to the energy needs of today.
IPPAI has worked closely with a range of stakeholders in the power sector to examine and resolve the issues that
these players encounter. Some of the entities we have worked with are Tata Power, Suzlon, NTPC, Essar, National
Grid of UK, Cogentrics USA, Westinghouse USA, PSEG Global, E&Y, GMR, Jindal, Jayprakash Associates, BSES, Reliance
Infra, DLF Power, Dabhol, Enron, MPSEB, KEB Engineers Association, CESC, BHP Billiton, Godavri Sugar Mills and
Maersk Shipping.

An independent status, a worldwide reputation and a large network of contacts make IPPAI a highly respected, unique
brand. IPPAI has been an integral part of the key decision-making in the Indian power sector since its inception in the
following ways:
• We have hosted several consultative workshops in India debating over the contents of the Electricity Act 2003.
• IPPAI was closely involved with parliamentary agencies prior to the finalization of the Electricity Act.
• We worked with the CEA in determining the 8th and the 9th Five Year Plans for the power sector.
• We have strategized with various state governments on how to attract fresh investments into the power sector.
• IPPAI was involved in showcasing India with various ministerial missions.
Empower
Due to its unique neutral disposition within the sector, IPPAI is able to interact with regulators from a position of
strength. Such interactions enable IPPAI to provide cutting-edge information on developments in the market and the
emerging situation.
IPPAIinitiativesyieldawealthofinformationonhowtotackleissuespertainingtogenerationinthepowersector.The
recommendations that stem from these initiatives are forwarded to concerned policymakers for their consideration
and necessary action. IPPAI events have proved invaluable to project developers and have contributed substantially
towards their better understanding of this nascent yet rapidly developing market.
IPPAI’s opinions and knowledge are sought by international think-tanks and media and featured on BBC, Reuters,
CNN, Far Eastern Review, Wall Street Journal, The Economist, NDTV and ZEE among others.

INDEX
1. Pre-Budget Consultations and Suggestions for Finance Minister 1
2. Budget 2015-16: Post-Budget Review & Impact Analysis (Power Sector) 3
3. Key Takeaways from Delhi Workshop on Electricity (Amendment) Bill 2014 (20th
February, 2015) 6
4. Key Takeaways from Mumbai Workshop on Electricity (Amendment) Bill 2014 (25th
February, 2015) 7
5. Key Takeaways from Kolkata Workshop on Electricity (Amendment) Bill 2014 (14th
March, 2015) 8
6. Key Takeaways from Bangalore Workshop on Electricity (Amendment) Bill 2014 (18th
March, 2015) 9
7. Suggestions / Recommendations from ‘Powering Vidarbha’ conference held on 21st
Feb 2015 11
8. Suggestions / Recommendations from ‘Powering Andhra’ conference held on April 25th
2015 13
9. Amendments proposed to the National Tariff Policy (2006) 19
10. Glimpse of Media Coverage 29
11. About the conference - ‘Powering Telangana’ 33
12. Recommendations 34
13. About the conference - ‘Powering East and North-East India’ 41
14. Recommendations 42

1
Pre-Budget Consultations and Suggestions for Finance Minister
The challenges for the power sector are the resistances to required tariffs, fuel uncertainties and problems
with funds and their cost. Independent Power Producers Association of India (IPPAI) conducted a workshop to
understand views of members. The workshop was chaired by Prof. S L Rao, First Chairman (CERC). Suggestions
compiled post discussions are below:
GENERAL
1. Minimum Alternate Tax (MAT) for the power sector may be reduced from 18.50% to 8-10%. Units in SEZ and
renewable energy may be exempted.
2. Clean technology projects / super critical technology may be exempted from all taxes for a period of 10 years
from the date of commercialization, extending all benefits for commercialization.
3. Fly ash is the waste product of Power generation. Fly ash bricks are now possible and they save having to dump
the fly ash while conserving the environment by replacing Coal baked bricks. It is counterproductive to charge
excise duty on sale of fly-ash bricks. They should be fully exempted.
4. Naptha import should be given concession in duty on import as this would help in reviving the gas/naptha-
based power plants.
5. Budget should provide for setting up a fully empowered mineral logistics corporation / or convert Directorate
of Rail Movement into an independent commercial entity, involving multi-agency co-operation. Tasks such as
evacuation of minerals, particularly coal have been a challenging issue for Railways and Coal India.
6. Separate institutional framework must be created for fuel evacuation, transportation, with penalties on delay
in coal transportation.
7. Excise duty on coal should be removed. Levy of excise duty on coal raises coal price, which in turn increases
the power cost. Given present shortages of coal, until we are self-sufficient in domestic production, coal import
should be free of duty.
8. Excise duty may be exempted as on other minerals under section 3. Excise duty of 6% is charged from IIP be taxed
at 1% instead of 6% excise duty, as they have no opportunity to avail CENVAT facility like coal trader or producer.
9. Customs Duty (BCD) on imported coal should be revised to Zero.
10. Computation of taxable income under Section 10 of the Income Tax Act may exempt income from sale of
Carbon Credits.
11. Projects that implement clean technologies should be given benefits in taxes. Manufacturers who have already
adopted internationally recognized clean technologies should be incentivized and encouraged by exemption
from levy of any clean energy cess.
12. Exemption must be given on customs duty for equipment for power, at least to match end prices with domestic,
until domestic production matches demand.
13. Utilization of National Clean Energy Fund (NCEF) has been extremely tardy. A list of items on which it can be spent
and an administrative mechanism including power industry to monitor utilization, must be set up. These might:
a. Include Off-grid solar power generation.
b. Funding Discoms who purchase off-grid power in excess of their RPO target.
c. Energy Storage facilities to be developed through NCEF. The variable generation must get converted (through
storage) into 24x7 despatchable power output so that the RE source will always remain tapped.
d. Clean energy fund can be utilized for developing more coal washeries and the machinery purchased for
these washeries should be exempted from taxation.
14. Budget should provide funds for developing the additional tonnage capacity of seaports for coal imports;
existing ports should be strengthened in capacity.

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RENEWABLE ENERGY
15. Renewable energy should also get priority sector lending status under RBI Guidelines. Such a move would
make solar plants bankable and accelerate the project implementation and growth of RE sector.
16. Tax-free Bonds may be issued by specified agencies for renewable energy projects.
17. Infrastructure investment trust benefits of dividend distribution tax of profits distribution may be allowed to
renewable projects.
18. Tax holiday be allowed to be carried forward in case of merger/ demerger.
19. NationalCleanEnergyFund(NCEF)maybeintroducedtosupportREC’stomakethemmoreliquid andbankable.
20. 80% accelerated depreciation (AD) facility may be extended to all roof top solar power plants set up by salaried
individuals. The tax credit so achieved be made tradable.
21. A Generation Based Incentive (GBI) schemes be introduced for all renewable projects
FINANCING POWER SECTOR
22. As in other countries long-term finance for power and renewable energy must come from long-term savings
such as provident funds, pension funds, gratuity funds,insurance and longer duration construction loans. Until
the projects are made viable by faster government clearances, government might stand guarantee.
23. Bring renewable energy including solar project under infrastructure projects to allow tapping of long term, low
cost debt from insurance, pension funds.
24. Concessional loans to State Electricity Boards / DISCOMs on fulfilling Renewable Purchase Obligations (RPO).
DISTRIBUTED POWER
25. Providing capital subsidy for off grid solar and wind power projects in time bound manner. Such off-grid projects
have a huge potential to address the power gap in rural areas that do not have access to the grid and can bridge
the energy divide in the country through distributed power managed locally.
HYDRO ENERGY SECTOR
26. Renewable status be given to Hydro Projects up to 100 MW. Currently, only plants with a capacity of up to
25 mw are considered renewable projects and enjoy easier funding norms and other fiscal incentives. With
renewable tag, all hydro projects would enjoy greater funding leeway, which has emerged as a major roadblock.
27. This will also enable all hydro projects to get RPO/HPO, which in turn will enable hydro projects of large capacity
to be more competitive in selling power.
28. Concession in service tax on construction activities for hydro projects in order to make the project more viable.
R&D
29. Funds be earmarked for R&D projects for energy storage so that large scale RE projects may be made more
reliable and viable.
30. Funds be earmarked for skill development to set up, maintain and operate RE projects and DDG projects.
RAILWAYS
Railways system for trade be rationalized for their distances or the discount be reintroduced. 10% port congestion
charges levied on freight may be reversed, as it increase cost of coal.

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Budget 2015-16: Post-Budget Review & Impact Analysis (Power Sector)
RAILWAY BUDGET
The Railway Budget for 2015-16 proposed raising freight rates for 12 commodities that include a 6.3 per cent
increase for coal.
Likely Impact: Electricity tariffs are expected to rise with increased freight rates, as a direct consequence of increase
in transportation cost for power producers. Likely impact of freight rate hike would be on the landed cost of coal.
An increase in rail freight for coal of 6.3 per cent would likely result in increase in electricity consumer tariff by 3
to 5 paise per unit of power.
UNION BUDGET
Finance Ministers’ speech makes an interesting case of India’s floundering power sector. During its 9 month
regime, NDA government “Brought rapid growth in power sector inspite of uncertainty on the coal front and
launched ambitious programmes for new and renewable energy.” (Excerpts from FM’s Speech)
Five showcase projects, higher pollution tax on coal and a big push to renewable energy sources mark the
government’s formula for powering economic growth.
HIGHLIGHTS FROM THE BUDGET
• Government proposes to set up 5 new Ultra Mega Power Projects, each of 4000 MWs in the plug-and-play
mode. (All clearances and linkages will be in place before the project is awarded by a transparent auction
system. Government hopes it will help unlock investments to the extent of INR 1 Lakh Crore)
Ultra Mega Power Projects (UMPPs) are part of the Union government’s ongoing initiative and do not involve any
budget outlay. At one time 16 UMPPs were identified, of which two have already been commissioned, two are under
implementation for quite some time now, tendering process for two was cancelled recently and the rest are in various
stages.Whilegovernment’sinitiativeofawardingprojectsintheplug-and-playmodeisencouraging,issuesremainwith
awarding projects on design-build-finance-operate-transfer (DBFOT) Model. Several private power developers pulled
out of the bidding process for proposed UMPPs in Odisha and Tamil Nadu. Private players’ withdrawal came after they
had raised several concerns over the bidding norms, particularly the DBFOT model where the lenders’ exposure to a
project is not fully secured, given the need for developers to finally transfer the project to the government. In January,
Suresh Prabhu-led Advisory group on power and coal had proposed that the previous model that allowed developers
to own the project be reintroduced but with unlimited pass-through of fuel costs based on actual escalations.
Likely Impact: The intent to drive new investment in generation through 5 UMPPs is welcome and necessary, but
in order to attract investors it becomes necessary to revive distribution sector and its ability to pay. Doubts remain
whether the power sector has the financial capacity to invest in the five new showcase projects totaling 20GW
approximately. This doubt is natural, given that the financial sector is stressed over 16GW gas-fired generation
capacity idling for want of fuel. It will also be interesting to see if the government introduces new UMPPs on
expected lines, otherwise there would an ultra mega embarrassment on the cards. Moreover with these new
UMPPs the dependence on coal will increase. This would not ameliorate the concerns of environmentalists in India.
• The Ministry of New Renewable Energy has revised its target of renewable energy capacity to 1,75,000 MW
till 2022, comprising 100,000 MW Solar, 60,000 MW Wind, 10,000 MW Biomass and 5000 MW Small Hydro.

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As expected, government wants to give huge fillip to the renewable energy sector, chalking out ambitious plans
to ramp up generation capacity from clean energy sources, particularly in the solar sector. But apart from well-
publicized target of 1.75 lakh MW of renewable energy capacity by 2022, the Budget had absolutely nothing for
the renewable energy sector, at least in the shorter run.
Is it more an aspirational announcement or backed up by a well thought business plan?
While the finance minister mentioned a massive increase in renewable energy, the allocation for the Ministry of
New and Renewable Energy has actually been reduced by about 7 per cent against last year. The budget for the
Ministry of Environment, too, has been cut by 15 per cent from 2014-15 levels.
To reach this ambitious target, government needs to add approximately 19 GW of solar and 6GW of non solar RE
every year, the scale of ambition can be gauged from the fact that we have achieved an average of 1-1.5GW per
year in Renewable energy. There is no clear roadmap to reach this highly ambitious network.
Likely Impact: The budget was an opportunity for the finance minister to address the several issues, by
recognizing Renewable sector as being part of the infrastructure sector to give priority sector lending status
under RBI Guidelines. Such a move would made solar plants bankable and accelerate the project implementation
and growth of RE sector. The current mechanism of accelerated depreciation for solar power projects lacks
clarity and fails to cover residential rooftops. The budget failed to cover these things along with clarity on anti-
dumping plan for the solar sector.
Unlike rail and roads, tax-free bonds have not been specifically proposed for renewable energy. Renewable energy
sector has been left high and dry with government setting ambitious targets without making specific changes to
sector structure, easing of access to capital and taxation. RE developers can only take solace in the fact there are
“indirect benefits” for which the budget leaves some scope. The coal cess, whose proceeds go into the National
Clean Energy Fund, has been doubled to ₹ 200 a tonne of coal mined or imported. The increased fund could help
finance renewable energy projects, but utilization of funds from the increased coal cess are yet to be spelt out.
The only encouraging news from this revised target is that cost of renewable energy, particularly solar energy will
come down with increase in capacity addition, if the journey from current 3 GW to 100 GW accelerates continuously.
• Proposal to increase the Clean Energy Cess from ₹ 100 to ₹ 200 per metric tonne of coal, etc. to “finance
clean environment initiatives”.
“I propose to increase the clean energy cess from ₹ 100 to ₹ 200 per tonne of coal, etc to finance clean energy
initiatives,” finance minister Arun Jaitley announced in his budget speech.
Governments’ intention is clearly highlighted with action plan on promotion of clean energy and simultaneously
tackling climate change.
Increased cess collection forms part of government’s strategy to garner additional resources in the backdrop of higher
devolution to the states through the 14th
finance commission. Being world’s third largest emitter of greenhouse gases,
India is among the few countries to have introduced a carbon tax. There have been no specifications mentioned about
the application of this tax. Since last year, clean energy cess has been raised from ₹ 50 to ₹ 200 per MT. The cess, which
appliestocoalminedinIndiaaswellasimportedcoal,aggregatesto₹6000-7000croreeveryyearatcurrentlevels(₹100/
MT). With mining activity expected to pick up in the country after coal block auctions, annual collection is expected to
substantially increase. The cess was introduced in 2010 and had, till December 2014, gathered ₹16,000 crore.

5
Likely Impact: Though the increased cess would likely result in a tariff increase of 4-6 paise per unit, this may
prove to be a step in the right direction in the longer run. The proceedings from the annual collection from cess
will fund clean energy projects, at a time when India faces a huge test of credibility on international front to
reduce carbon emissions.
• Proposal to establish a National Investment and Infrastructure Fund, which has plans for annual inflows of
₹ 20,000 crore.
Likely Impact: The trust will raise debt; invest as equity in infra projects.
• Two new proposed legislations—the Public Contracts (Resolution of Disputes) Bill and the Regulatory Reform Bill.
Likely Impact: This may be positive step to help resolve long-standing power tariff disputes with high potential
to revive impacted projects.
Other major announcements:
• PPP mode of infrastructure development proposed to be revisited, and revitalised. (Much needed
announcement as PPP projects are need of the hour)
• Investments in infrastructure being increased to ₹ 70000 crore. (Should spur renewed interest in many
projects across the country)
• Additional depreciation at 20% being allowed on new plant and machinery installed by manufacturing units
or a unit engaged in generation and distribution of power.
• Excise duty exemption on round copper wire and tin alloys for manufacture of Solar Photovoltaic ribbon.
• Reduction in basic customs duty to reduce the cost of raw materials for Active Energy Controllers used in
manufacturing renewable power system inverters to 5% (subject to certification by the Ministry of New and
Renewable Energy)
• Allocation of ₹ 5,900 crore for generation of nuclear power and carrying out research in atomic energy (Of
the 5,900 crore, Mumbai-based Bhabha Atomic Energy Commission and Kalpakkam based Indira Gandhi
Centre for Atomic Research (IGCAR) have been allotted ₹ 1,912 alone), while the total money allocated for
the Department of Atomic Energy (DEA) for 2015-16 is ₹ 10,912 crore.
• Second unit of Kudankulam Nuclear Power Project (KKNPP) to be commissioned in 2015-16, raising the
nuclear generation capacity by 1000 MW to 6780 MW.
• Electrification, by 2020, of the remaining 20,000 villages in the country, including by off-grid solar power generation.
• Increase in Basic Customs Duty:
o Metallurgical coke from 2.5% to 5%.
o Tariff rate on iron & steel and articles of iron or steel, falling under Chapters 72 and 73 of the Customs
Tariff, from 10% to 15%. However, there is no change in the existing effective rates of basic customs duty
on these goods.

6
Key Takeaways from Delhi Workshop on Electricity (Amendment) Bill 2014
(20th
February, 2015)
• Lack of clarity on proposed amendments to the Electricity Act, 2003 as bill proposes cosmetic changes to
the 2003 Act.
• Basic fundamental flaws in the original act have not been addressed till date. ‘Open Access’ has remained
more on paper rather than being a seamless operational reality.
• Rules of engagement and sanctity of contracts - a big challenge in an uncertain environment. No clarity on
the same has come through proposed amendments. The new complexities may make the scenario even
more uncertain.
• Falling PLF Levels since 2010 onwards a major concern. Targets set in National Tariff Policy not being met.
• Significant Investment is at risk and major chunk of generation capacity is mothballed, firstly because of fuel
constraints, lacunas in transmission planning and now due to policy paralysis.
• Large sum of money invested in projects which are now stranded, is a loss to the nation’s economy.
• Central Government is creeping back into regulation with proposed amendments; the move should have
been to do away with regulations.
• Load Despatch Centers should be outside Government’s mechanism and monitoring.
• Judicial member in regulatory commission is critical for its functioning. Need to identify changes to keep the
regulators independent of government interventions and influence.
• Separation of Carriage and Content can’t take off effectively unless issues like stranded capacity, evacuation
constraints and regulatory assets are dealt with. Separation of Carriage and content would lead to cherry
picking of high end consumers.
• Section 11 was misused by State Governments to prevent Open Access. No amendments have been
mentioned for this section in the bill.
• Complexities and loopholes exist with respect to implementation of separation of Carriage and Content.
• Migration from Section 63 to Section 62 for redetermination of tariffs is not feasible as it might open
Pandora’s Box and should be considered in aspect of all stakeholders.
• Cross-subsidy is a major challenge and formulae for CSS should be adhered according to the National Tariff
Policy. Currently, several states adopt different mechanism to determine cross subsidy surcharge.
• Cross Subsidy needed to be progressively reduced but the same has not happened in practical scenarios.
There also have been scenarios where it has been increased multifold to curb Open Access. The same has
not been addressed exclusively and more is left for the Tariff Policy.
• Removal of cross-subsidy surcharge on electricity procured from RE Sources is a positive move but no
solution to high wheeling, transmission and operating charges.
• Providing choice to consumers, when nearly one third of the population still doesn’t have access to electricity,
seems somewhat unrealistic. Being an energy starved nation, reducing price of power through competition
is impractical.
• Key stakeholders present during the workshop suggested that Independent Power Producers Association of
India (IPPAI) should submit a comprehensive report to the Standing Committee on Energy, on all aspects of
the proposed changes and giving all stakeholders adequate opportunity to comment on the same.

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Key Takeaways from Mumbai Workshop on Electricity (Amendment) Bill 2014
(25th
February, 2015)
• Proposed amendments are myopic in nature. They have a long term vision but seem to neglect problems
likely to be encountered in the shorter run.
• We are yet to make any significant headway in areas related to consumer tariff, cross subsidy reduction
and open access in particular, which featured prominently in Electricity Act (2003) and National Tariff Policy
(2006).
• CAG audits on PPP projects are casting aspersion on private sector.
• No takers for more than 5 lakh Renewable Energy Certificates (RECs). This is affecting the viability of
renewable energy projects in India.
• Pilot projects should be taken up to promote retail competition; implementation on national level may result
in complete failure.
• In developed countries, Separation of Carriage and Content has been more useful for generators than for
consumers.
• The rationale behind the idea to separate wires from supply is not clear. Just because it was successful in
select countries does not mean it can be replicated in India.
• Concerns still remain that even after competition is opened in the retail sale of electricity, the consumer will
remain connected to the monopoly network service provider or wire company.
• No amendments proposed for section 11 of the Electricity Act (2003), the same has been removed from the
Electricity (Amendment) Bill, 2014.
• To remain competitive in the power market, supply licensees would need to cut on losses and supply at
lower cost.
• SLDCs are not independent in functioning as their members are coming from state transmission utilities.
• Auctioning of PPAs can be one of the options to re-allocate PPAs amongst supply licensees after separation
of carriage from content.
• The term “load factor” in PPA re-allocation should be replaced by “Contract Demand”.
• A scheme like direct benefit transfer of subsidy can be implemented to rationalize cross subsidy structure.
• More discussions are required on the nature and selection of the provider of last resort (POLR).
• One option to deal with Regulatory Assets includes keeping the regulatory assets with the wire company.
• Innovation in metering is important, question remains on who would be responsible for implementing the
new meters. If wires company will take up the task of installing meters, then how would supply licensees
bring innovation in metering?
• Judiciary should be involved in regulatory commission to protect the interest of the consumers ultimately.
• Key stakeholders present during the workshop concluded that government seems to have jumped to the
‘second generation reforms’ even before successfully implementing and consolidating our position against
the first phase of electricity reforms. The opinions also came loud and clear that amendments to the original
act lack clarity and requires detailed deliberations.

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Key Takeaways from Kolkata Workshop on Electricity (Amendment) Bill 2014
(14th
March, 2015)
• Many provisions of the Electricity (Amendment) Bill, 2014 are too vague and not in line with basic structure
of constitution.
• Government should distance itself from regulating the market, government intervention is not required as
it will take us back to the Electricity Supply (1948) Act.
• Concept of separation of carriage and content is a positive move but a pilot project is to be implemented first.
• Success of open access is very important for the success of separation of carriage and content. Hence Open
Access should be implemented completely across India.
• The new amendment asks for the tariff to be determined in a manner that doesn’t lead to a revenue deficit
for the supply licensee. This is an indicative that regulatory assets would not be created after carriage and
content is implemented.
• Proposing one of the supply licensees to be a government owned company will give the company an edge
over private licensees and thus negate competition.
• No clarity on the ownership and treatment of Regulatory assets accumulated before segregation of carriage
and content.
• Heavy commercial risk is inevitable due to absence of reliable metering and billing data.
• Most of the benefits of the Proposed Bill, viz. ‘Open Access’, Smart Metering, transparency and fair
competition, etc. may be enjoyed by the High-end paying consumers.
• Power is a concurrent subject and forcing provisions (state commissions to follow NTP as per amendments)
would result in possible disputes between central and state governments.
• For non-compliance of directions, generators/discoms, there should be provision for show-cause notice and
fair trails before the appropriate commission.
• No clarity on the priority of supply between regulated consumers and open access consumers by provider
of last resort.
• Reducing terms of members of Regulatory Commissions is not a viable option, for effective decision making
process term of members should not be reduced.
• Performance review of Regulatory Commissions by Forum of Regulators (FoR) is a welcome step, but central
government must not intervene as currently proposed. A third party option for performance review of
regulatory commissions may be explored.
• REC should be made a bankable instrument for fund raising purpose and RBI should issue guidelines to the
banks accordingly.
• DDG is a positive move, but at the same time it shouldn’t be considered as a delay to providing grid
connectivity in rural regions.
• The bill asks the thermal power plants to follow the RGO to promote Renewable energy. But mere mentioning
of installed power capacity wouldn’t help in achieving the objective. The focus should be on energy drawn
through RE sources rather than just increasing the installed capacity.
• ‘Municipal solid waste to power’ has not been addressed adequately. It needs more support and incentives.
• Majority of the key stakeholders from the region broadly welcomed the Electricity (Amendment) Bill, 2014,
however they felt that the bill certainly needs modification for it to have a wider impact across complete
gamut of power sector.

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Key Takeaways from Bangalore Workshop on Electricity (Amendment) Bill 2014
(18th
March, 2015)
• Most of the Southern region states have opposed the Electricity (Amendment) Bill, 2014 as several
provisions seem to run contrary of free market pricing and independence in decision making, apart from
going against the federal structure of the constitution through proposed mandatory provision of National
Tariff Policy.
• Proposed amendments related to separation of carriage from content seem to be the most controversial
aspect of the Electricity (Amendment) Bill, 2014.
• Wires and retail separation and intended competition in retail segment are going to be complex in
India, given the level of cross-subsidy that exists between consumer categories. Avoiding cherry picking
of customers will be important for making it a success. As such, internally the jury is still out if retail
competition in electricity is desirable and beneficial for customers.
• The provision to fix the trading margin in the Intra-state trading of electricity seems to run
contrary to the objective of free market pricing and consumer choice and intrudes on the objective
negatively.
• All state electricity regulatory commissions should have a judicial member in the commission, for fair and
just decisions to be delivered in Commission’s proceedings.
• Southern region of India has transmission congestion and exchange prices are high, have to mainstream
the region into the grid.
• USO obligation has to be on incumbent supply licensee (which will be a government owned company),
raises many issues regarding its working.
• Regulatory assets of state electricity distribution companies hold serious implications for all and concerns
remain if consumers will have to bear the burden of past revenue deficits.
• Multi-year tariff (MYT) regime is an unviable option as it takes away the flexibility from regulators.
• Cost of maintaining distribution network should be co-shared between wire company & supply licensee
(private). If the network is not strengthened, nothing else will work.
• The state load dispatch centers should be separated from the state transmission utilities, as there exists a
conflict of interests in their working.
• Cross subsidization across various consumer levels is a major concern and high-end paying consumers
should not bear the burden of it. If state governments wants to subsidize low-end consumers (agriculture,
etc.), it should do it from its own budget.
• Scheduling and settlement of RE power in 15 min. time blocks, deviation settlement is a challenge and
would require special attention. Special provisions have to be made.
• Partial open access, temporary tariffs and high cross subsidy are deterrents to open access.
• Cross-subsidy surcharge proposed to be waived off on power procured from RE sources should not be
loaded on others.
• Cross-subsidy surcharge should also be waived off for power procured from co-generation plants.
• The bill fails to provide clear guidelines on when and how CSS will become zero. Also it needs to lay
guideline and timelines to reduce the minimum load required criterion for open access.

10
• For thermal power plants using coal/lignite, there should be a provision for compensating RGO obligation
through mechanisms like RECs, etc.
• Section 42(2) of the Electricity (Amendment) Bill, 2014 allows open access for use of distribution system
in such phases and subject to such conditions, (including the cross subsides, and other operational
constraints). A bit more clarity is needed on “operational constraints”.
• Section 42(3) of the bill allows Open Access, on payment of a surcharge which shall be in addition to the
wheeling charges and other charges. The bill should clearly state what all are “other charges”.
• Sec. 2 (Clause 57B), defines Renewable Energy Service Company (“RESCO”), which will provide RE power to
consumers. The scope of RESCO should be broadened to other industry and consumer segments.
• Central Electricity Regulatory Commission (CERC) should ask all states to lay down a common format for
their policies and state authorities should clearly mention all such polices on their websites, so as to bring
more transparency.

11
Suggestions / Recommendations from ‘Powering Vidarbha’ conference held on
21st
Feb 2015
Independent Power Producers Association of India (IPPAI) organized a one day conference “Powering Vidarbha”
on February 21st 2015, highlighting major issues plaguing the Vidarbha region of Maharashtra and brought
experts and stakeholders together to seek solutions to kick start stranded power generation capacity in the
region as well as bring out ideas to ensure the industrial development of the region. Vidarbha can be termed as
the ‘Power Hub’ of Maharashtra with numerous power plants located in the region. The abundant availability
of coal and an enormous potential for developing unconventional means of power generation has helped
Vidarbha emerge as an important destination for investments in the energy sector. Proximity of Coal reserves
and connectivity with the rest of the country by all means, makes it a prime location for setting up of power
plants. But for the past few years, the development has not been on expected lines and majority of the projects
developers have been facing challenges to expedite projects.
Following are some of the key areas of concerns highlighted in the conference and the suggestions given thereof:
1. Refinancing the stranded projects: Vidarbha has seen large participation from the private investors, who
have shown interest in setting their power projects in the region. In the present situation, they are either
lying stranded or have incurred huge time & cost overrun. The attendees at the conference suggested
that the option of financial restructuring should be explored for stranded power projects, with a longer
moratorium period and longer duration of loan tenure for such projects. Lowering the rate of interest for
these projects would help in easing the mounting debts on these projects and would help their bankability.
This would avoid these projects from being declared as Non-Performing Assets (NPA).
The 5:25 scheme proposed by Governor, RBI can be effective in distressing stressed assets. The scheme
allows banks to extend long-term loans of 20-25 years to match the cash flow of projects, while refinancing
them every five or seven years. However, such a mechanism can only provide a short term relief to developers
of such stranded projects. In a longer run, the projects need to resume their operation to meet the liabilities
and expenditures.
2. Power Purchase Agreement (PPA) issues: Several developers, who have invested heavily on projects in the
Vidarbha region, will get their return on investment only when their projects resume operation. Some of
the projects in the region couldn’t see the light of the day due to non-availability of buyers for electricity.
Parity should be maintained between the government owned power plants and privately owned power
plants. State-owned discom(MSEDCL) shouldn’t be biased in buying costly electricity from old inefficient
plants, compared to the cheaper power offered from the new projects. It was suggested that projects of
state generating company (MAHAGENCO) should come under the ambit of competitive bidding like seen
with private power generators. It was also suggested that the government should allow the projects to trade
power at power exchanges under open access.
3. Transmission bottlenecks: The impact of transmission congestion on the power exchanges has been
increasing with each passing year impacting both the volumes as well as the prices. The volume lost is slated
to increase further unless adequate measures are adopted to augment transmission capacity in the regions
having congested transmission corridors. Constraints in the regional transmission system in the south further
added to the problem and increased the power deficit there. A transmission corridor for supplying power to
the southern grid has not yet come up completely. This deprives the generators of the opportunity of trading
power in the power starved southern region. It is suggested to facilitate the completion of transmission lines
between the western region and the Southern region to increase the volume of power trade.
4. Fuel Issues: Vidarbha is rich in coal and other mineral resources, but some of the projects are facing the issue
of fuel scarcity. This is due to high transportation cost of coal from distant coal mines. Some of the projects

12
have resorted to imported coal to keep their plants operational, but are facing the issue of compensatory
tariffs not being agreed upon by the state utility. Rational coal linkage should be provided. Mechanism of
coal swapping and coal price pooling should be encouraged to ensure the availability of fuel.
5. Water Issues: Water is just as important as coal for the power plants. Vidarbha is a dry region, where water
allocation is a contentious issue between the farmers and industries. Some possible solutions to the problem
include promotion of sewage water treatment plant to be used by power plants (eg. Koradi thermal power
plant) and promotion of renewable energy sources (eg. Solar power projects) as the region receives good
quantum of solar radiation.
6. OpenAccess:Vidarbhaishomenotjusttothepowerprojectsbutalsototheindustries,whichneedelectricity
to keep their machines running. Electricity in entire Maharashtra is a costly affair. Prices of electricity have
multiplied several times in last few years. Especially for the industries, which generate revenue, jobs in the
state, procuring electricity is laden with high cross subsidy surcharge (CSS), high transmission charges and
electricity duty. It is put forward as a recommendation to reduce the cross subsidy surcharge by following
the formula mentioned in the National Tariff Policy. The state utility should act as a facilitator in providing
open access. One suggestion to promote the industrial development in Vidarbha includes waiving off CSS
for industries coming up in Vidarbha region. Electricity duty is redundant when CSS is also charged to meet
the same objective of cross subsidizing marginal users. Thus Electricity duty should be removed as well. This
would help in avoiding the migration of industries from Vidarbha to nearby regions in Madhya Pradesh and
Chhattisgarh. The Vidarbha Industries Association put forward its request for rebate in night tariff. Long term
vision and validity of night tariff should be provided so that industrialists can plan the operation strategies
accordingly. The qualifying criteria for open access should be reduced from a load connection of 1MW to
100Kw, so that consumer’s choice can be promoted. The contract demand for the consumer shouldn’t be
reduced if he is buying power from open exchanges.
7. Promotion of Renewable Energy: Vidarbha has almost more than 300 sunny days in a year with a solar
radiation ranging between 4 – 7 Kwhr/sq. m/day. This makes it one of the ideal places to set up a solar power
plant. It is thus proposed to promote installation of solar power projects in the region to meet the demand
supply gap, control the level of emissions and overcome the problem of water scarcity. Small scale solar
projects can also help in electrifying rural regions under schemes such as DDUGJY (Deendayal Upadhyay
Grameen Jyoti Yojna). It would be easier for these projects to procure finance under these schemes. Solar
power based DDG projects can also be installed where grid availability is absent.

13
Suggestions / Recommendations from ‘Powering Andhra’ conference held on
April 25th
2015
ABOUT ‘POWERING ANDHRA’
IPPAI (Independent Power Producers Association of India) with the support of Government of Andhra Pradesh
organized a conference ‘Powering Andhra’ on April 25, 2015 with the theme of ‘Reliable and Affordable – 24x7
Power for All’.
Recently, the state has been facing several issues, as nearly 6300 MW generation capacity power is lying stranded
due to non availability of gas, lack of coal supplies in the thermal power plants and transmission congestion in
the southern region.
On such issues, there is a need to prepare a road map and devise short and long term plans to supply the
consumers in the state with reliable and affordable power. This was unanimously agreed in the conference,
which brought all the stakeholders together from the region to discuss various issues and a way forward to
overcome such issues.
The conference provided an interaction between private developers, energy experts and AP government officials.
Separate sessions were held on fuel availability, renewable energy and transmission challenges in which experts
from the power sector addressed the gathering.
IPPAI on behalf of all stakeholders has compiled a series of recommendations for the consideration of the state
government based on the interactions between all stakeholders present during the conference.
The issues that require the attention of the State Government are capacity addition, import of coal, power
procurement,strengtheningtherequiredtransmissionanddistributionnetwork,encouragingrenewables,energy
efficiency measures, undertaking customer centric initiatives, reduction of Aggregate Technical &Commercial
losses, bridging the gap between Average Cost of Supply (ACS) & Annual Revenue Requirement (ARR).
SUGGESTIONS/RECOMMENDATIONS FROM ‘POWERING ANDHRA’ ORGANIZED BY INDEPENDENT POWER
PRODUCERS ASSOCIATION OF INDIA (IPPAI)
Following are some of the key areas of concern highlighted in the conference and the suggestions given thereof:
1. ENSURE ADEQUATE FUEL FOR ROBUST CAPACITY ADDITION:
(i) Coal-based power plants:
The coal supplies from Mahanadi Coal Fields in Odisha to APGENCO power plants was reported to have
been dropped during the last few months(Source: Times of India / February 19, 2015 / http://timesofindia.
indiatimes.com/india/Coal-supply-shortfall-hits-Andhra-Pradeshs-power-plan/articleshow/46294620.cms).
Materialization of coal from MCL is currently around 60%. The coal deficit situation is projected to persist up to
FY 2018-19 as APGENCO stations cannot use imported coal beyond a certain limit due to technical limitations.
Therefore, domestic raw coal has to be provided to enable APGENCO to run its plants up to 90% PLF. If the deficit
in raw coal is not met, APGENCO’s PLF will be limited around 75%, even after importing coal to the maximum
extent possible.
Due to coal shortage, the Krishnapatnam thermal station that was commissioned recently had to be closed
down. This had resulted in a loss of 800 MW of thermal power every day. Due to the same reasons, the other
thermal stations too are generating below their capacity. They include Vijayawada thermal station (1,268 MW

14
as against the 1,760 MW capacity) and Rayalaseema thermal station (712 MW as against 1,050 MW capacity).
To ensure maximum utilization of generation capacity, we recommend the following:
– State Government of Andhra Pradesh must work extensively with Coal India Limited (CIL) & initiate a process
to rationalise coal linkages for various power plants in the state, while also seeking to work out some minor
coal swap arrangements within its fold.
– A way to ease the pressure on supplies from Mahanadi Coalfields Ltd, would be through some swap
arrangements. There is a growing demand for coal from Mahanadi Coalfields, but lack of logistics facilities
hampers supply to power plants. If TSGenco (Telangana’s state utility), which currently gets about 2 million
tonnes of coal from MCL, could source the fuel from Singareni Collieries Company Ltd (a coal miner jointly
owned by the Telangana and Union governments), the coal produced by MCL could be supplied to other
power plants in Andhra Pradesh and other southern states. The state government should approach Coal India
Limited to ensure adequate coal for power stations in the state.
– One of the problems faced by coal miners is that they are unable to push additional coal even after production
as there is limitation in terms of availability of rakes to transport. The state government should work with
Railways in this regard on finding solutions
– Further, the state government should rigorously work with the Central Government for land acquisition and
various clearances to fast-track the development of coal blocks which have been allocated to APGENCO/
APMDC for the proposed 4000 MW capacity APGENCO’s upcoming stations.
(ii) Gas-based power plants:
The gas based power plants in Andhra Pradesh have seen a consistent decline in generation. The total installed
capacity of gas based IPPs having approved PPAs with APDISCOMS in Andhra Pradesh is 2,770 MW. Besides this,
additional capacity of around 4,200 MW is available. However, owing to shortage of gas, only about 500 MW of
this capacity is operational and generating power. This has led to generation losses to the state totaling about
14,000 MU annually.
Gas-based power projects are second only to renewables in generating clean energy. So, ensuring fuel supplies
for such projects will help the generators to avail CDM (clean development mechanism) benefits / credits and
will go a long way in meeting India’s obligations under the climate change commitments and reduce green house
emissions substantially.
We recommend the following:
– Adequate RLNG supply to the independent power producers should be ensured and they should be nominated
as Spinning Reserves.
– The state should expedite the construction of Floating Storage and Re-gasification Unit (FSRU) at Kakinada
and LNG terminal at Gangavaram port.
– A long term RLNG contract with GAIL/Petronet should be explored by the state.
– Competition in supply: Allow multiple agencies/suppliers to source LNG. Lock-in LNG at competitive price
over short to medium term imported through the west coast till the east coast terminal is ready.
– Government intervention for sufficient availability of re-gasification capacity for power plants to operate at
optimum PLFs (~70-75%).

15
– Limit interventions/sacrifices to state/central government though taxes and duties.
– Imposing any interventions/sacrifice by IPPs, pipeline operators, re-gasification terminals will be a dampener
on future investments into the sector.
– The State Government’s intervention should provide long term solutions to boost future investments into
the sector.
2. STRENGTHEN THE TRANSMISSION AND DISTRIBUTION NETWORK TO CATER TO THE EXPECTED GROWTH IN
DEMAND:
The requirement of electricity both energy and peak demand in Andhra Pradesh are expected to increase
significantly from the present level of 43,684 MU & 6,158 MW to 82,392 MU and 13,436 MW respectively by FY
2018-19. To meet this growing demand, a robust & reliable transmission network is required both at Interstate
& Intra state levels. However, an Inter State Transmission System (ISTS) network is required to facilitate import
& drawl of allocated ISGS power.
The transmission corridor connectivity from the Eastern Region to the Southern Region grid has to be completed
timely by the CTU (POWERGRID) to enable power import from ER at much cheaper rates. This will also help
APDISCOMs in narrowing the gap between ARR & ACS.
– The State Government must work extensively with POWERGRID/Implementing agency to ensure the
development of Inter State transmission system progressively by FY 2018-19.
– The State nodal agency must ensure that renewable generation developers apply for connectivity/Long term
access for its integration in the ISTS.
– Based on the capacity addition, it is expected that Andhra Pradesh may have more RE capacity than required
for meeting their Renewable Purchase Obligations (RPO). Further, Andhra Pradesh may not be able to absorb
the entire RE energy locally - particularly during off-peak period - when renewable generation is at its peak. In
addition, the IEGC stipulates the renewable energy plants as “MUST RUN” and not to be subjected to “merit
order dispatch” principles. To address the above aspects and the intermittency nature of renewable energy
generation, development of strong and reliable grid interconnections is important. This shall also facilitate
enlarging balance area and interconnection with flexible generation. There is a need to strengthen Inter-state
transmission which shall facilitate transfer of power outside the RE resource rich states.
– In order to integrate large scale renewable capacity which is intermittent & variable in nature, suitable
balancing infrastructure/ mechanism is required in the form of flexible and quick ramp up & ramp down
generating resources like Pumped storage plants (PSP), large scale battery energy storage etc. To emphasize
this balancing infrastructure,consistent & stable policies and regulatory mechanisms are to be formulated.
– To ensure 24 hrs. supply to the domestic, commercial, industrial and other loads(other than Agriculture loads)
in the villages on par with urban consumers, it is required to segregate agricultural loads or village loads
from mixed load DTRs and install exclusive DTRs to feed the agriculture loads or village loads (whichever is
economical and convenient) and form a separate 11 KV Agriculture feeder and an 11 KV village feeder from
33/11 KV substation.
– Under RGGVY (now DDUGJY) scheme of the Government of India, electricity connections are being provided
for rural households in the habitations with population of more than 100 only. An assessment of the un-

16
electrified /partially electrified Villages /scattered households in the state have to be made which are not
eligible to be covered under DDUGJY (RGGVY). The Government of Andhra Pradesh has to make a plan to
electrify, all the households located in these villages by extending supply from the grid. Wherever possible or
the scattered /remote households where grid supply is either not feasible or not possible, may be electrified
through renewable energy sources under various schemes of MNRE.
3. PROMOTION OF RENEWABLE ENERGY:
Renewable energy is increasingly becoming an important source of the energy mix - meeting thetw in objectives
of meeting energy security and clean energy considerations. Andhra Pradesh has good potential for promotion
of renewable energy projects, particularly solar and wind power projects. The state government has come out
with a new solar and wind policy which will provide the necessary impetus to the promotion of clean energy
in the state. But to realize the estimated potential and targets set by the central government, a lot needs to be
done. We recommend the following:
(a) Tariff:
The prevailing preferential tariff determined by APERC for Wind Power is 4.70 INR/unit for the plant life (25
years) considering a Capacity Utilization Factor (CUF) of 23%. However, for the new sites, the CUF would be
relatively low as the Wind Power density ranges from 200 - 250 W/m2 hence this potential can be realized only
by supporting the developers with a conducive tariff.
– Due to the infirm nature of power generated through RE sources, discoms switch off the bus on RE generators
end to avoid surges and spikes in the system, leaving the generators stranded, without compensating them.
This is also done due to transmission constraints. Therefore, the solution may lie in creating a capacity charge
payable by host discom in case of any non-evacuation of power by the grid.
(b) Evacuation:
– APTRANSCO has to accord evacuation, substation layout, HT line and wind farm layout approvals for proposed
projects within definite time lines.
– Evacuation approvals should be given to projects immediately, where ever there is a possibility to evacuate
the power with little modifications to the existing grid.
– The evacuation schemes suggested should be commercially viable and practical to implement.
– Faster implementation and commissioning of the projects can be done by allowing LILO after considering all
aspects of connectivity, system safety and feasibility.
– The APTRANSCO grid augmentation plan keeping in view the capacity additions in the near future has to be
expedited to ensure uninterrupted connectivity for all the projects to be commissioned.
– Possibility of a JV between APTRANSCO and private developers may be explored for faster implementation
of the grid network.
(c) Land
Though the recent wind power policy has allowed advance possession of land for starting the construction
of wind power projects, there are still field level issues which are holding back the process. Clear guidelines/
instructions should be given to all the District Collectors of wind rich districts to process these proposals on a
priority with clearly defined timelines.

17
(d) Scheduling and Forecasting
Scheduling and settlement of RE power in 15 min. time blocks, deviation settlement is a challenge. Hence,
there is a need to do load balancing and invest in forecasting/scheduling of renewable energy for better
grid integration.
The State Government may consider the possibility of creating an independent agency for forecasting / scheduling
responsibility for RE projects (preferably wind power) or contracting out such responsibilities.
Energy Storage projects are required to be given a special status as they provide a mechanism to convert infirm
power to firm power in 15 minutes time blocks and to ensure scheduling of renewable power in both intra &
inter-state transactions. Unless the variable generation gets converted (through storage) into 24x7 despatchable
power output, the RE source will always remain under tapped.
(f) Others
– The Renewable Power Purchase Obligation should be in line with the RPO visualized by National Action Plan
on Climate Change (NAPCC) according to which 15% of the country’s total energy consumption should be
from renewable sources of energy.
– While the recently announced Wind Power Policy 2015, has accorded Industry status for wind power projects,
there needs to be clarity on the incentives (fiscal/non fiscal) made applicable to wind power projects.
– The Government of Andhra Pradesh will need to define the criteria for wind investment under the categories
defined in the new industrial policy
• Micro and Small
• Medium
• Large
– The Government can consider the 100% reimbursement of stamp duty and transfer duty paid by the wind
power project developer on the purchase or lease of land meant for development of wind power project.
– The Government can consider VAT/CST/reimbursement incentives for a period of 5 years for Wind Power
manufacturing units.
– Since Wind power projects generate “green energy”, the 25% subsidy of total fixed capital investment of the
project with a ceiling 8.02 million USD should be extended.
– For the projects to be developed on forest lands, the Government can have a land bank towards the
compensatory afforestration land to facilitate faster project implementation.
– All the incentives extended by the Government of India on account of state bifurcation to be extended for
wind power projects.
– A separate policy and tariff for Wind Solar hybrid system can also be evolved in order to promote renewable
power generation in the state.

18
4. FACILITATION OF OPEN ACCESS:
Issues -
(i) Intra-State Transactions have become Inter-State Transactions, post state bifurcation:
a. Transactions have become expensive due to addition of PoC losses, PoC charges, two states’ losses and
charges, and other Open Access charges.
b. The scheduling of renewable power is not possible at an inter-state level, which has made current
transactions from AP to Telangana unviable.
c. Availability of transmission capacity can be an issue.
d. Grant of open access will be difficult.
Provisions related to cross-subsidy surcharges and other measures acting as barriers need to be defined in a more
definitive manner so that it is binding on regulators and does not become a hindrance to open access as seen
today. While the Cross subsidy surcharge formulae proposed under the amendments to the National Tariff Policy
(NTP) is a step in the right direction, it is being distorted due to non-uniform methodologies adopted by the State
Electricity Regulatory Commission (SERC’s) and considering bilateral / short term (ST) sources in marginal power
purchase cost. Short term sources would tend to have volatile prices thus preventing a stable cross-subsidy
surcharge regime. Therefore, we suggest that cross subsidy surcharge should be computed excluding ST sources
to reflect true cross subsidy available in the system over a long term of time.
To encourage competition under such circumstances, we recommend the following:
• A stable cross-subsidy surcharge regime that gives predictability for investors. This should be combined with
an equitable balancing and settlement system for handling deviations and providing grid support.
• Well designed guidelines for switching over of consumers from incumbent licensee to new retail supply
licensee.
5. SEPARATE THE PROBLEM OF SUBSIDIZED SECTORS SUCH AS AGRICULTURE SUPPLY FROM THE PROBLEMS OF
THE DISCOMS:
While there are provisions in the Electricity Act to provide discoms with the required subsidy, there are many
problems related to measurement and actual delivery of the subsidy. A system of direct cash transfers, now seen
in other areas,needs to be urgently considered here. Alternatively, the stakeholder for this category should be
the Department of Agriculture or Irrigation and not the discoms. The agriculture department could consider
disbursement to each division based on agricultural consumption at Distribution Transformer (DTR) level. This
approach will help rejuvenate the finances of the discoms and help them to be more commercially sound.

19
Amendments proposed to the National Tariff Policy (2006)
RECOMMENDATIONS FROM INDEPENDENT POWER PRODUCERS ASSOCIATION OF INDIA (IPPAI) TO THE
MINISTRY OF POWER (MoP) ON PROPOSED AMENDMENTS TO THE NATIONAL TARIFF POLICY (NTP 2006)
IPPAI would like to thank its members and eminent people from the power sector for their valuable suggestions
on amendments to the National Tariff Policy.
Note: (Proposed changes in the policy have been highlighted in red colour)
Serial no.
in Draft
Amendments Proposed IPPAI’s suggestions / comments
2.2
Under Legal
position of
the policy
The Act also requires that the Central
Electricity Regulatory Commission (CERC)
and State Electricity Regulatory Commissions
(SERCs) shall necessarily be guided by the tariff
policy in discharging their functions including
framing the regulations under section 61 of
the Act.
The word “….necessarily….” should be
considered for deletion.
Rationale:
The proposed move to make the National
Tariff Policy by the central government
binding on the commission is a step back from
the stated objective of the Electricity Act,
2003 for securing autonomy of the regulatory
commission in determination of tariff and
to distance the government from tariff
determination function. The proposed move
has the effect of subjecting the appropriate
commission to the supremacy of the central
government in issues of determination of
tariff.
The provision violates the federal structure
under the Constitution of India, wherein
power is a concurrent subject and there is
likely to be strong opposition from the states
as it takes away the discretion from the state
commissions to adopt principles peculiar to
the requirements of the state and its utilities.
2.3
Under Legal
position of
the policy
Section 61 of the Act provides that Regulatory
Commissions shall necessarily be guided by
the principles and methodologies specified by
the Central Commission for determination of
tariff applicable to generating companies and
transmission licensees.
4.0
Objectives
of the
policy
The objectives of this tariff policy are to:
(a) Ensure availability of electricity
to consumers at reasonable and
competitive rates;
It may be modified to:
(a) Ensure availability of electricity to
last mile consumers at reasonable
and competitive rates;

20
Rationale: The amendments proposed in
the tariff policy must be in concurrence with
the amendments proposed in the Electricity
Act, 2003, with more focus on introducing
competition at the last mile level.
5.1
General
approach
to tariff
Introducing competition in different segments
of the electricity industry is one of the
key features of the Electricity Act, 2003.
Competition will lead to significant benefits
to consumers through reduction in capital
costs and also efficiency of operations. It will
also facilitate the price to be determined
competitively. The Central Government has
already issued detailed guidelines for tariff
based bidding process for procurement of
electricity by distribution licensees.
All future requirement of power should
be procured competitively by distribution
licensees except in cases of expansion
of existing projects or from its own State
controlled company as an identified developer
and where regulators will need to resort to
tariff determination based on norms provided
that expansion of generating capacity by
private developers for this purpose would be
restricted to one time addition of not more
than 50% of the existing capacity.
Even for the Central Public Sector projects,
tariff of all new generation and transmission
projects should be decided on the basis of
competitive bidding after a period of five
years or when the Regulatory Commission is
satisfied that the situation is ripe to
introduce such competition.
However, the procurement of power from
coal washery rejects based projects shall
be exempted from tariff based competitive
bidding process till the Central Government
decides that the time is ripe to allow for
competitive bidding. Procurement of power
from renewable sources of energy generation
including co-generation shall be governed by
the provisions of para 6.4 of this policy.
1) Nostepshavebeensuggested/prescribed
/ proposed to improve the efficiency of
such state Gencos but instead the policy
suggests that DISCOMs are exempt from
the procurement of power through
competitive bidding from these State
Gencos. Such partial treatment to State
utilities and step treatment to the others
will not lead to fair play. Also, it is going
to delay the notification of the possible
Case I bids. Therefore, the amendment
to the policy should clearly make the
DISCOMs procure entire power through
a Transparent Competitive Bidding or
allow the DISCOMs to procure power
from any plant in either of the Section
62 and Section 63 routes without any
preferential treatment. This is against the
motto of unbundling of the SEBs and also
against the interest of the consumers as
there is potential inefficiency cost being
loaded on to the consumers in the tariff.
2) In some exceptional cases, where states
are finding it very hard to attract bidders
through a competitive bidding route and
the cost expected to be incurred on the
project justifies the benefits accruing
from it. In that case the State might be
allowed to choose a cost plus model.
3) The regulators and government both
have responsibility in market making.
Removing the power trading companies
from participation in the Case I bids is
definitely far from market making but
can only be construed otherwise.

21
Provided that the State Government owned
generation and transmission company can
continue to have projects based on regulated
cost plus regime under section 62 of the Act
for sale or transmission of power within the
State.
Last Proviso to 5.1
“Provided further that the State Transmission
Utilities will endeavour to implement larger
projects on tariff based competitive bidding
basis.”
The last proviso may be modified as follows:
“Provided further that the State Transmission
Utilities shall implement larger transmission
projects of estimated cost INR 500 Crore and
more on tariff based competitive bidding basis.”
Rationale:
The bottom line is that the states will continue
to implement transmission projects on cost
plus route, which is not desirable. The word
larger has no force and it is vague.
It should be specified that all state
transmission projects of estimated cost INR
500 Crore and more shall be implemented
through competitive bidding to provide
benefit of lower market based tariff to the
consumers of the states.
5.3 (c) Notwithstanding above, power from such
plants may be bundled with the power from
renewable energy sources. In such cases, the
Appropriate Commission shall allow tariff pass
through for recovery of the cost incurred.
The Obligated Entities who finally buy such
power shall account the same towards their
renewable purchase obligations.
The included clause is not clear whether the
pass through shall be only for the additional
cost incurred for setting up the renewable
power or it will be for entire plant.
If it is for the entire plant + renewable plant,
then it would mean an amendment of the
existing Power Purchase Agreement (PPA)
including the norms already agreed upon.
The clause should be clear /self explanatory
as it would have far reaching implications for
plants.
5.3 (d)
Cost of Debt
Structuring of debt, including its tenure,
with a view to reducing the tariff should be
encouraged. Savings in costs on account of
subsequent restructuring of debt should
be suitably incentivized by the Regulatory
Commissions keeping in view the interests of
the consumers.
The interest rates change due to:
1) Change in credit rating of the developer.
2) Monetary policy impacting the interest
rate of the bank / Financial Institution.

22
While the developer may be able assess
his credit rating for the tariff, the change in
interest rates due to monetary and other
policy changes impacting the bank credit
rates will not be within the control of the
developer.
Therefore, it is suggested that a particular
project should be automatically able to get
the benefit of restructuring the loans such
that 5 years of construction and 25 years for
repayment should be made the norm.
5.3 (e)
Cost of
Management
of Foreign
Exchange
Risk
Foreign exchange variation risk shall not be
a pass through. Appropriate costs of hedging
and by swapping to take care of foreign
exchange variations should be allowed for debt
obtained in foreign currencies. This provision
would be relevant only for the projects where
tariff has not been determined on the basis of
competitive bids.
Hedging and swapping is allowed, although
transfer of risk due to variation in exchange
rate is not allowed. This needs to be
addressed with caution.
6.1
Procurement
of power
However, some of the competitively Bid Proj-
ects as per the old guidelines dated 19th
Janu-
ary, 2005 have experienced difficulties in get-
ting the required quantity of coal from Coal
India Limited (CIL). In case of reduced quantity
of coal supplied by CIL, vis-a-vis the assured
quantity of 85%, the higher cost of imported/
market based e-auction coal for making up the
shortfall, shall be considered for being made
a pass through by CERC/SERCs, on a case-to
case basis, to the extent of shortfall, as per ad-
visory issued by Ministry of Power in OM no.
FU-12/2011-IPC (Vol-III) dated 31.7.2013.
This is a provision beneficial to the plants that
are having linkage with CIL, but no directions
have been provided for plants which run
completely on imported fuel. They should be
also considered for pass through mechanism.

23
6.2
Tariff
structuring
and
associated
issues
A two-part tariff structure should be adopted
for all long term and medium-term contracts
to facilitate Merit Order dispatch. According to
the National Electricity Policy, the Availability
Based Tariff (ABT) is also to be introduced at the
State level. This framework would be extended
to generating stations (including grid connected
captive plants of capacities as determined by
the SERC). The Appropriate Commission shall
introduce differential rates of fixed charges for
peak and off peak hours for better management
of load within a period of two years.
Power stations are required to be available
and ready to dispatch at all times. In order to
ensure better utilization of non-requisitioned
generating capacity of generating stations,
based on regulated tariff under
Section 62 of the Electricity Act 2003,
notwithstanding any provision contained in
the Power Purchase Agreement (PPA), the
procurer shall communicate, at least two (2)
days in advance, the quantum of generation
not requisitioned by it. The parties contracting
the PPA would be at liberty to mutually
decide the terms of sale, if any, of such un-
requisitioned power to a third party, if not
already provided in the PPA. In case two days’
advance notice is not given, and power is not
requisitioned by the procurer, then deemed
generation benefit would be given to the
generator, for the purpose of incentive.
Will the Peak and off-peak rates be applied
even on the existing PPAs and the PPAs under
Section 63 as well? The inserted language
does not make it clear. More clarification is
needed on this.
The Ministry of Power may confirm /clarify
that the adjacent clause will be made
applicable for Section 62 Projects/ PPAs only.
Clarification is also required on how will such
a clause be applied for deemed generation,
incentive and sale to the other party for
Hydro based PPAs.
6.3
Harnessing
captive
generation
Alternatively, a frequency based real time
mechanism can be used and the captive
generators can be allowed to inject into the
grid under the ABT mechanism.
This needs to be addressed, as Captive
plants would not be able to recover cost of
generation through this generation.
6.4(1)
Renewable
sources
of energy
generation
including
Co-generation
(ii) State Distribution Licensee shall procure
power from all the Waste-to-Energy plants in
the State, depending upon the resources avail-
able, at the tariff determined by the Appropri-
ate Commission on cost plus basis
Similar provisos should be made for Waste
heat to power (WHP), waste to power (from
all available sources), and pressure differen-
tial energy.
Provisions for Hydro Purchase Obligation
(HPO) should have been added in the policy
to promote hydropower.

24
6.4(1)
Renewable-
sources of
energy gen-
eration in-
cluding Co-
generation
(iii)AppropriateCommissionmayalsoprovidefora
suitableregulatoryframeworkforencouragingsuch
other emerging renewable energy technologies by
prescribing separate technology-based REC or ‘REC
multiplier’ (i.e. granting higher or lower number of
RECs to such emerging technologies for the same
level of generation). Similarly, considering the
change in prices of renewable energy technologies
with passage of time, the Appropriate Commission
may prescribe vintage based ‘REC multiplier’
(i.e. granting higher or lower number of RECs for
the same level of generation) based on year of
commissioning of plant.
There is no mention of efficiency certificates
to promote efficiency improvement and
energy conservation.
There should be a mechanism to interchange
REC with E-certs (efficiency certificates).
6.4 (4)
Renewable-
sources of
energy gen-
eration in-
cluding Co-
generation
(4) In order to incentivize the Distribution
Companies to procure power from renewable
sources of energy, the Central Government may
notify, from time to time, an appropriate bid-
based tariff framework for renewable energy,
allowing the tariff to be increased progressively
in a back-loaded manner over the life cycle of
such a generating plant. Correspondingly, the
procurer of such bid-based renewable energy
shall comply with the tariff payment obligations
throughout the said cycle of the generating plant.
The tariff should be also linked to the
financing cost, financing cycle of the project
so that the project owner can repay back the
loan borrowed from the bank.
6.4 (5)
Renewable-
sources of
energy gen-
eration in-
cluding Co-
generation:
In order to promote renewable energy sources,
any generating company proposing to establish
a coal/lignite based thermal generating station
after a specified date shall be required to establish
a renewable energy generating station of at least
10% of the generating capacity of the thermal
generating station. The renewable energy produced
by each generator may be bundled with its thermal
generationforthepurposeoftariffdetermination.In
caseadistributioncompanyprocuresthisrenewable
power, then this would be considered by theSERCs
to meet the RPO of the distribution company.
In case any existing coal and lignite based thermal
power generating station, with the concurrence of
power procurers under the existing Power Purchase
Agreements, chooses forSetting up additional
renewable energy generating capacity, the energy
produced from there shall be allowed to be bundled
and pass through shall be allowed in such cases by
the Appropriate Commission and the Obligated
Entitieswhofinallybuysuchpowershallaccountthe
sametowardstheirrenewablepurchaseobligations.
Who is going to fix the tariff of the bundled
power?
How will the financing for the new renewable
projects be done?
This has to be clearly specified.

25
6.4 (6)
Renewable-
sources of
energy gen-
eration in-
cluding Co-
generation:
In order to further encourage renewable
sources of energy, no inter-State transmis-
sion charges may be levied till such period as
may be notified by the Central Government
on transmission of the electricity generated
from renewable sources of energy through the
inter-state transmission system.
It is good to have this amendment in place,
but renewable energy needs exemption from
15 min. scheduling on a 24 hours basis in en-
ergy terms. Recipient discoms should exempt
RE from wheeling charges and 100% banking
for RE should be provided for sale of electric-
ity at a charge determined by the appropriate
commission.
7.1(2)
Transmis-
sion pricing
The National Electricity Policy mandates that the
national tariff framework implemented should
be sensitive to distance, direction and related
to the quantum of power flow. This has been
developed by CERC taking into consideration
the advice of the CEA. Sharing of transmission
charges shall be done in accordance with such
tariff mechanism as amended from time to time.
While this is a welcome step in the transmis-
sion sector but necessary mechanisms have
to be made to make the transmissions system
provider accountable and an effort trajectory
should be there to reduce the transmission
charges over a period of time at the rate of
5%.
7.1(6)
Transmis-
sion pricing
Investment by transmission developer other
than STUs would be invited through competitive
bids - in accordance with the guidelines issued
by the Central Government from time to time.
However, in the following cases the exemp-
tions from competitive bidding route may be
decided by the Central Government:
(i) First two 1200 kV AC transmis-
sion lines and associated 1200
kV AC substations,
(ii) Up-gradation of existing lines be-
longing to CTU / STU / PGCIL,
(iii) Modification / extension, includ-
ing loop-in-loop-out, of existing /
under construction lines belong-
ing to CTU / STU / PGCIL,
(iv) Augmentation of existing / under
construction sub-stations be-
longing to CTU /STU / PGCIL,
(v) Cross-border lines and associat-
ed terminal sub-stations located
in the Indian territory,
The amendments fail to specify a deadline for
exemption of inter-state transmission projects
(that practically goes to the CTU i.e. Power
Grid Corporation of India) from the tariff-based
competitive bidding (TBCB) route. Although
the 2006 policy had set a cut-off date (2013)
for awarding projects on nomination basis, the
government has continued to award such proj-
ects to PGCIL, undermining competition.
While the previous tariff policy had three cri-
teria for not adopting TBCB route, the govern-
ment has now expanded it to eight instances
where bidding could be avoided. It is a back-
ward step for the transmission sector and in
turn for the entire power sector. The criteria for
awarding projects on cost-plus basis to PGCIL
has stymied the growth of the power sector and
robbed the consumers of the benefit that could
flow from enhanced efficiency that the private
players could bring through competition.
Item wise comments on exemptions under
7.1(6) are given below:

26
(vi) Transmission projects for evacu-
ation of power from Nuclear
Power Projects,
(vii) Works required to be done to
cater to an urgent situation pro-
vided these are implemented
in a specified compressed time
schedule as decided by the Ap-
propriate Government on a case
to case basis,
(viii) The transmission lines / sub-sta-
tions where no bidder comes for-
ward in two successive attempts
of bid process.
Item(ii)
This is discriminatory. If the existing line be-
longs to a private transmission licensee, JV,
or a deemed licensee such as a government
department (e.g. in J&K, Manipur, Pondicher-
ry, Goa there is no STU) then also the same
principle should apply.
Accordingly, it may be modified as follows:
ii) Up-gradation of existing lines belonging to
CTU / STU / PGCIL or any other licensee.
Item(iii)
This is discriminatory. It should apply to all
owners of transmission assets.
(iii) Modification / extension, including loop-
in-loop-out, of existing / under construction
lines belonging to CTU / STU / PGCIL / any
other licensee.
The following proviso may be added under
item (iii):
Provided that when a new substation/ pool-
ing station is being created, all loop in loop
outs (LILOs) would be included in the bid-
ding package.
Item (iv)
This is discriminatory. It should apply to all
transmission licensees.
(iv) Augmentation of existing / under construction
sub-stations belonging to CTU / STU / PGCIL / or
any other transmission licensee.
Item (vi)
There is absolutely no rationale for this.
When private international companies can

27
build mega nuclear power plants, then why
not transmission lines through competitive
bidding. The gestation period for the nuclear
plants is longer. There is no security issue
because the bays in the nuclear station will
not be built by the transmission developer.
The transmission developer will connect his
line to the switchyard gantry. All control and
protections for the lines will be provided and
controlled by the generating station.
Item (vii)
• The time line should be specified
upfront with a clear zero date.
• If the time line is not met due to
reasons other than force majeure,
the IDC should be restricted up
to the scheduled COD and there
should 1% reduction in ROE for ev-
ery six months delay.
• The CTU should be separated
from POWERGRID, so that there
is no perverse incentive to delay a
scheme with the aim of getting it
on nomination basis.
7.4
Ancillary
Services
(1) The Central Commission may introduce
the norms and framework for ancillary service
necessary to support the power system or
grid operation for maintaining power quality,
reliability and security of the grid, including
the method of sharing the charges.
(2) The Central Commission shall also consult
the Central Electricity Authority, CTUs/STUs
and RLDC/SLDCs while specifying the norms
for ancillary services.
(3) The State Commission shall also adopt the
norms and framework for ancillary services as
specified by the Central Commission.
Energy storage is equally important to be
made a part of the policy. With the oncoming
boom of renewable energy, energy storage is
required to provide reliable power.
The framework for ancillary services
should be specified in consultation with
representation from consumers and through
public discussions.
8.2.2
Framework
for revenue
requirements
and costs
The facility of a regulatory asset has been ad-
opted by some Regulatory Commissions in the
past to limit tariff impact in a particular year.
This should be done
If a regulatory commission gets direction
from the state government under section
107/108 from the electricity act 2003 which

28
only as a very rare exception in case of natural
calamity or force majeure conditions excep-
tion, and subject to the following guidelines:
a. Under business as usual conditions,
no creation of Regulatory Assets shall
be allowed.
b. Recovery of outstanding Regulatory
Asset along with carrying cost of Reg-
ulatory Assets should be time bound
and within a period not exceeding sev-
en years. The State Commission may
specify the trajectory for the same.
may result in the creation of regulatory as-
sets, the order should be complied with only
if the appropriate government pays for the
amount as per the section.
8.5
Cross-
subsidy
surcharge
and
additional
surcharge
for open
access
SERCs may calculate the cost of supply of
electricity by the distribution licensee to
consumers of the applicable class as aggregate of
(a) per unit weighted average cost of power
purchase including meeting the Renewable
Purchase Obligation;
(b) transmission and distribution losses
applicable to the relevant voltage level and
commercial losses allowed by the SERC;
(c) transmission, distribution and wheeling
charges up to the relevant voltage level; and
(d) per unit cost of carrying regulatory assets,
if applicable.
The new formula is a welcome step, however
under no circumstances CSS should be
averaged out; it has to be voltage/consumer
category wise.
Also it should be made clear that in under
no condition will the CSS should go up over a
period of time, when calculated on category
wise basis.
8.5.6
Cross-subsidy
surcharge
and
additional
surcharge for
open access
In case of outages of generator supplying
to a consumer on open access, standby
arrangements should be provided by the
licensee on the payment of tariff for temporary
connection to that consumer category as
specified by the Appropriate Commission
In case of outages of a generator supplying
to a consumer on open access, standby
arrangements should be provided by the
licensee for the settlement of the deviation
or the equivalent rate.
9.0
Trading
Margin
The Act provides that the Appropriate
Commission may fix the trading margin, if
considered necessary. Though there is a need
to promote trading in electricity for making
the markets competitive, the Appropriate
Commission should monitor the trading
transactions continuously and ensure that
the electricity traders do not indulge in
profiteering in situation of power shortages.
Fixing of trading margin should be resorted to
for achieving this objective.
Fixation of trading margin should be there
if considered necessary by the appropriate
commission, after a study and public hearing
has been conducted and a reasoned order
may be issued after reaching a conclusion
as to what the appropriate trading margin
should be. The trading margin should be also
applicable to all deemed traders including
Discoms who are constantly trading surplus
power beyond their USO including on the
people who are trading on exchange.

MEDIA COVERAGE
29
Industry sceptical about proposed
5 ultra mega power plants
IANS | New Delhi March 10, 2015 Last Updated at 15:42 IST
At a time when the successful coal auctions bring hope for India’spower sector and the 2015-16 Budget proposes five new ultra megapower projects (UMPPs), the industry itself doubts whether sectorconstraints would allow these projects to make the grid.
Finance Minister Arun Jaitley has in the budget for the next fiscalproposed setting up five new ultra mega power projects (UMPPs),each of 4,000 MWs, in the “plug-and-play mode”, with all clearancesand linkages ready before the project is awarded by auction.
This will unlock investments to the extent of Rs.100,000 crore, Jaitleysaid presenting his first full union budget.
The finance minister also proposed a higher pollution cess on coal anda big thrust to renewable energy-based generation.
For the next fiscal, Jaitley proposed the doubling of the green tax oncoal from Rs.100 per tonne to Rs.200 for funding investment in renew-able sources and clean coal technology for power plants.
Manish Agarwal of international accounting firm KPMG in India doubtswhether the power sector has the financial capacity to invest in the fivenew UMPPs.
“There was mention of five ultra-mega power projects under the’plugand play’ model to get approvals, clearances in place before auction-ing them. However, whether the sector has financial capacity to invest innew capacity of such scale remains a question mark,” Agarwal said in astatement here.
According to the Independent Power Producers Association of India(IPPAI), “It looks unlikely that the government would succeed in imple-menting its proposals given the lacklustre industry response to Odisha andTamil Nadu UMPPs, which forced the government to cancel their bidding.”
“Moreover, the poor financial health of power distribution companies couldalso prove a big put-off to investors,” it added.
The Federation of Indian Chambers of Commerce and Industry (Ficci)saidin its budget analysis that “there has not been any major announcement be-ing made for the power sector except the setting up of UMPPs.”
The target for renewable energy has been set at 175,000 MW capacity by2022, of which solar power will have the largest share at 100,000 MW.
Wind energy will contribute 60,000 MW, followed by 10,000 MW from bio-mass, and 5,000 MW of small hydro projects of up to 25 MW each.
India’s solar power generation capacity currently stands at 3,000 MW, ac-counting for 6.5 percent of the electricity mix.
Commenting on the budget proposals, Ratul Puri, chairman, HindustanPower projects, said that “the doubling of coal cess will provide incrementalRs.10,000 crore a year to help push renewable energy and will bring the costof solar power to grid parity.”
--Indo-Asian News service
Now 24x7 supply in ‘power-
packed’ Andhra Pradesh
TNN | Apr 27, 2015, 05.01AM IST
HYDERABAD: From a shortage last year, Andhra
Pradesh has now emerged as a power surplus state,
announced energy secretary Ajay Jain. Speaking at
a seminar titled ‘Powering Andhra’ organised by the
Independent Power Producers Association of India
(IPPAI) here on Saturday, Jain invited industrialists to
AP and experience 24x7 power supply which he said
would be provided at the cheapest rate in the country.
“AP has become power surplus with the commis-
sioning of Krishnapatnam and we have more power
stations coming into service including Hinduja, Ther-
maltech, Meenakshi and Nagarjuna. Therefore, we will
be offering 24x7 power supply to industries at the low-
est rates as compared to many states in the country,”
said Ajay Jain.
The seminar provided an interaction between private
developers, energy experts and AP government offi-
cials. Separate sessions were held on fuel availabil-
ity, renewable energy and transmission challenges in
which experts from the power sector addressed the
gathering. Representatives from the solar, wind and
new energy sectors demanded reduction in cross sub-
sidy surcharge and provision of open access facility
to private power plants.
Responding to their plea, Ajay Jain told them to repre-
sent their issues to the AP Electricity Regulatory Com-
mission (APERC) as the government does not have
any role in cross subsidy surcharge and open access
issues. Another entrepreneur pointed out that single
window clearances for power projects is only on pa-
per as he has been unsuccessful in securing permis-
sions despite trying for the last 20 months. Ajay Jain
said to overcome this, the state government has de-
cided to offer ‘deemed permission’ to entrepreneurs
as part of the new industrial policy.
Justice C Kodandaram pointed out at lack of support
to bio-mass and ‘bagasse’ (forest waste) power proj-
ects in Andhra Pradesh when states like Tamil Nadu
and Karnataka are making strides in the new energy
sector. He urged the state government to take a clear
view on the energy issues and reduce litigation in the
sector.
IPPAI director general Harry Dhaul complimented the
AP government for taking up the green energy initia-
tive in a big way. Appreciating the introduction of solar
energy for agriculture pump sets, streetlights and LED
bulbs in the domestic sector, he urged the AP govern-
ment to further improve open access to private devel-
opers.

31
Powering Telangana
Recommendations by the
Independent Power Producers
Association of India (IPPAI)
to the
Government of Telangana
Based on proceedings of the ‘Powering Telangana
– Reliable & Affordable Renewable Power for All’
conference held on November 18, 2015
at The Park, Hyderabad

33
About ‘POWERING TELANGANA –
Reliable & Affordable Renewable Power for All’
The Independent Power Producers Association of India (IPPAI) with the support of the Government of Telangana
and the Telangana State Electricity Regulatory Commission (TSERC) organized a conference ‘Powering Telangana’ on
November 18, 2015, on the theme ‘Reliable and Affordable - Renewable Power for All’.
‘Powering Telangana’, a one-day conference focused on the emerging role of renewable power in the state’s energy
mix in coming years and challenges associated with the integration of large amounts of renewables with the grid.
While switching the dependency of Telangana from conventional energy to renewable energy was the focus of
the debate, other ideas that attracted interest include making Telangana an investment hub and a power exporter
by 2018-19, challenges in mainstreaming renewable energy, financing large scale renewable energy projects and
improving project viability, and incentivising alternative energy/energy efficiency/new technologies.
On such issues, there is a need to prepare a road map and devise short- and long-term plans to supply the consumers
in the state with reliable and affordable power. This was unanimously agreed in the conference that brought all
stakeholders from the region together to discuss various issues and the way forward to overcome such issues.
The conference provided an interaction between private developers, energy experts and state government officials.
Separate sessions were held on renewable energy and transmission challenges in which experts from the power
sector addressed the gathering.
IPPAIonbehalfofallstakeholdershascompiledaseriesofrecommendationsforconsiderationbythestategovernment
based on the interactions between all stakeholders present during the conference.
The state government needs to ensure that necessary steps are taken in terms of capacity addition, power
procurement, strengthening the required transmission and distribution network, encouraging renewables, energy
efficiency measures, undertaking customer-centric initiatives, reduction of aggregate technical and commercial losses
and bridging the gap between average cost of supply (ACS) and annual revenue requirement (ARR).

34
Suggestions/Recommendations from
‘Powering Telangana – Reliable and Affordable
Renewable Power for All’ Conference
(November 18, 2015)
Following are some of the key areas of concerns highlighted in the conference and the suggestions given thereof:
1. Strengthen the transmission and distribution network to cater to the expected
growth in demand:
Driven by considerable growth in demand from agriculture, domestic, industrial sectors and metro city of Hyderabad,
the per-capita electricity consumption in the state stands at 985 kilowatt hour (kWh) against the national average of
1010 kilowatt hour (kWh) for FY 14-15. Energy deficit in Telangana for the last three years has ranged between 5%-
12%. Energy requirement in Telangana was assessed to be 47,428 MU in FY 13-14 of which only 44,946 MU could be
met resulting in an energy deficit of 5.23%. Going forward, energy requirement is expected to see an increase of an
average 11% for the next 5 years (FY-15 to FY-19) (Source: http://scclmines.com/scclnew/images/pdfs/Report_on_
Energy.pdf)
To meet this growing demand, a robust and reliable transmission network is required both at inter-state and intra-
state levels. However, Inter State Transmission System (ISTS) network is required to facilitate import and drawl of
allocated ISGS power.
The transmission corridor connectivity from Eastern Region to Southern Region grid has to be completed timely by
the CTU (POWERGRID) to enable power import from ER at much cheaper rates. This will also help TSDISCOMs in
narrowing the gap between ARR and ACS.
– The state government must work extensively with POWERGRID/implementing agency to ensure development of
inter-state transmission system progressively by FY 2018-19.
– The state nodal agency shall ensure that renewable generation developer apply for connectivity/long-term access
for its integration in the ISTS.
– Based on capacity addition, it is expected that Telangana may have more RE capacity than required for meeting
their renewable purchase obligations (RPO) (not specified as yet). Further, Telangana may not be able to absorb
the entire RE energy locally - particularly during off-peak period - when renewable generation is at its peak. In
addition, the IEGC stipulates the renewable energy plants as “MUST-RUN” and not to be subjected to “merit order
dispatch” principles. To address the above aspects and the intermittent nature of renewable energy generation,
development of strong and reliable grid interconnections is important. This shall also facilitate enlarging balance
area and interconnection with flexible generation. There is a need to strengthen inter-state transmission which
shall facilitate transfer of power outside the RE resource rich states.
– In order to integrate large-scale renewable capacity which is intermittent and variable in nature, suitable balancing
infrastructure/mechanism is required in the form of flexible and quick ramp-up and ramp-down generating

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