CHAPTER 1 INDUSTRY PROFILE

CHAPTER 1 INDUSTRY PROFILE

1.1 INTRODUCTION
Energy has been universally recognized as one of the most important inputs for economic growth and human development. There is a strong two-way relationship between economic development and energy consumption. On one hand, growth of an economy, with its global competitiveness, hinges on the availability of cost-effective and environmentally benign energy sources, and on the other hand, the level of economic development has been observed to be reliant on the energy demand. Energy intensity is an indicator to show how efficiently energy is used in the economy. The energy intensity of India is over twice that of the matured economies, which are represented by the OECD (Organization of Economic Co-operation and Development) member countries. Indias energy intensity is also much higher than the emerging economiesthe Asian countries, which include the ASEAN member countries as well as China. However, since 1999, Indias energy intensity has been decreasing and is expected to continue to decrease.

The indicator of energyGDP (gross domestic product) elasticity, that is, the ratio of growth rate of energy to the growth rate GDP, captures both the structure of the economy as well as the efficiency. The energyGDP elasticity during 19532001 has been above unity. However, the elasticity for primary commercial energy consumption for 19912000 was less than unity (Planning Commission 2002). This could be attributed to several factors, some of them being demographic shifts from rural to urban areas, structural economic changes towards lesser energy industry, impressive growth of services, improvement in efficiency of energy use, and inter-fuel substitution. The energy sector in India has been receiving high priority in the planning process. The total outlay on energy in the Tenth Five-year Plan has been projected to be 4.03 trillion rupees at 2001/02 prices, which is 26.7% of the total outlay. An increase of 84.2% is projected over the Ninth Five-year Plan in terms of the total plan outlay on energy sector. The Government of India in the mid-term review of the Tenth Plan recognized the fact that under-performance of the
Page 1

energy sector can be a major constraint in delivering a growth rate of 8% GDP during the plan period. It has, therefore, called for acceleration of the reforms process and adoption of an integrated energy policy. In the recent years, the government has rightly recognized the energy security concerns of the nation and more importance is being placed on energy independence. On the eve of the 59th Independence Day (on 14 August 2005), the President of India emphasized that energy independence has to be the nations first and highest priority, and India must be determined to achieve this within the next 25 years.

1.2 DEMAND AND SUPPLY SCENARIO

In the recent years, Indias energy consumption has been increasing at one of the fastest rates in the world due to population growth and economic development. Primary commercial energy demand grew at the rate of six per cent between 1981 and 2001 (Planning Commission 2002). India ranks fifth in the world in terms of primary energy consumption), accounting for about 3.5% of the world commercial energy demand in the year 2003. Despite the overall increase in energy demand, per capita energy consumption in India is still very low compared to other developing countries. India is well-endowed with both exhaustible and renewable energy resources. Coal, oil, and natural gas are the three primary commercial energy sources. Indias energy policy, till the end of the 1980s, was mainly based on availability of indigenous resources. Coal was by far the largest source of energy. However, Indias primary energy mix has been changing over a period of time. Despite increasing dependency on commercial fuels, a sizeable quantum of energy requirements (40% of total energy requirement), especially in the rural household sector, is met by noncommercial energy sources, which include fuel wood, crop residue, and animal waste, including human and draught animal power. However, other forms of commercial energy of a much higher quality and efficiency are steadily replacing the traditional energy resources being consumed in the rural sector.
Page 2

Resource augmentation and growth in energy supply has not kept pace with increasing demand and, therefore, India continues to face serious energy shortages. This has led to increased reliance on imports to meet the energy demand.

1.2.1 COAL
India now ranks third amongst the coal producing countries in the world. Being the most abundant fossil fuel in India till date, it continues to be one of the most important sources for meeting the domestic energy needs. It accounts for 55% of the countrys total energy supplies. Through sustained increase in investment, production of coal increased from about 70 MT (million tons) (MoC 2005) in early 1970s to 382 MT in 2004/05. Most of the coal production in India comes from open pit mines contributing to over 81% of the total production while underground mining accounts for rest of the national output (MoC 2005). Despite this increase in production, the existing demand exceeds the supply. India currently faces coal shortage of 23.96 MT. This shortage is likely to be met through imports mainly by steel, power, and cement sector (MoC 2005). India exports insignificant quantity of coal to the neighboring countries. The traditional buyers of Indian coal are Bangladesh, Bhutan, and Nepal.

The development of core infrastructure sectors like power, steel, and cement are dependent on coal. About 75% of the coal in the country is consumed in the power sector (MoC 2005).

1.2.2 POWER
Access to affordable and reliable electricity is critical to a countrys growth and prosperity. The country has made significant progress towards the augmentation of its power infrastructure. In absolute terms, the installed power capacity has increased from only 1713 MW (megawatts) as on 31 December 1950 to 118 419 MW as on March 2005 (CEA 2005). The all India gross electricity generation, excluding that from the captive generating plants, was 5107 GWh (gig watt-hours) in 1950 and increased to 565 102 GWh in 2003/04 (CEA 2005). Energy requirement increased from 390 BkWh (billion kilowatt-hours) during 1995/96 to 591 BkWh (energy) by the year 2004/05, and peak demand increased from 61 GW (gigawatts) to 88
Page 3

GW over the same time period. The country experienced energy shortage of 7.3% and peak shortage of 11.7% during 2003/04. Though, the growth in electricity consumption over the past decade has been slower than the GDPs growth, this increase could be due to high growth of the service sector and efficient use of electricity. Per capita electricity consumption rose from merely 15.6 kWh (kilowatt-hours) in 1950 to 592 kWh in 2003/04 (CEA 2005). However, it is a matter of concern that per capita consumption of electricity is among the lowest in the world. Moreover, poor quality of power supply and frequent power cuts and shortages impose a heavy burden on Indias fast-growing trade and industry.

1.2.3 OIL AND NATURAL GAS

The latest estimates indicate that India has around 0.4% of the worlds proven reserves of crude oil. The production of crude oil in the country has increased from 6.82 MT in 1970/71 to 33.38 MT in 2003/04 (MoPNG 2004b). The production of natural gas increased from 1.4 BCM (billion cubic meters) to 31.96 BCM during the same period. The quantity of crude oil imported increased from 11.66 MT during 1970/71 to 81 MT by 2003/04. Besides, imports of other petroleum products increased from 1 MT to 7.3 MT during the same period. The exports of petroleum products went up from around 0.5 MT during 1970/71 to 14 MT by 2003/04. The refining capacity, as on 1 April 2004, was 125.97 MTPA (million tons per annum). The production of petroleum products increased from 5.7 MT during 1970/71 to 110 MT in 2003/04. Indias consumption of natural gas has risen faster than any other fuel in the recent years. Natural gas demand has been growing at the rate of about 6.5% during the last 10 years. Industries such as power generation, fertilizer, and petrochemical production are shifting towards natural gas. Indias natural gas consumption has been met entirely through domestic production in the past. However, in the last 4/5 years, there has been a huge unmet demand of natural gas in the country, mainly required for the core sectors of the economy. To bridge this gap, apart from encouraging domestic production, the import of LNG (liquefied natural gas) is being considered as one of the possible solutions for Indias expected gas shortages. Several LNG terminals have been planned in the country. Two LNG terminals have already been commissioned: (1) Petro net LNG
Page 4

Terminal of 5 MTPA (million tons per annum) at Dahej, and (2) LNG import terminal at Hazira. In addition, an in-principle agreement has been reached with Iran for import of 5 MTPA of LNG.

1.2.4 RENEWABLE ENERGY SOURCES

Renewable energy sources offer viable option to address the energy security concerns of a country. Today, India has one of the highest potentials for the effective use of renewable energy. India is the worlds fifth largest producer of wind power after Denmark, Germany, Spain, and the USA. There is a significant potential in India for generation of power from renewable energy sources, small hydro, biomass, and solar energy. The country has an estimated SHP (smallhydro power) potential of about 15 000 MW. Installed combined electricity generation capacity of hydro and wind has increased from 19 194 MW in 1991/92 to 31 995 MW in 2003/04, with a compound growth rate of 4.35% during this period (MoF 2005). Other renewable energy technologies, including solar photovoltaic, solar thermal, small hydro and biomass power are also spreading. Greater reliance on renewable energy sources offers enormous economic, social, and environmental benefits. The potential for power production from captive and field-based biomass resources, using technologies for distributed power generation, is currently assessed at 19 500 MW including 3500 MW of exportable surplus power from bagasse-based cogeneration in sugar mills (MNES 2005).

1.2.4 FUTURE SCENARIO

Increasing pressure of population and increasing use of energy in different sectors of the economy is an area of concern for India. With a targeted GDP growth rate of 8% during the Tenth Five-year Plan, the energy demand is expected to grow at 5.2%. Driven by the rising population, expanding economy, and a quest for improved quality of life, the total primary energy consumption is expected to about 412 MTOE (million tones oil equivalent) and 554 MTOE in the terminal years of the Tenth and Eleventh Plans, respectively (Planning Commission 1999).

Page 5

The International Energy Outlook 2005 (EIA 2005b) projects Indias gas consumption to grow at an average annual rate of 5.1%, thereby reaching 2.8 trillion cubic feet by 2025 with the share of electric power sector being of 71% by that time. Coal consumption is expected to increase to 315 MT over the forecast period. In India, slightly less than 60% of the projected growth in coal consumption is attributed to the increased demand of coal in the electricity sector while the industrial sector accounts for most of the remaining increase. The use of coal for electricity generation in India is expected to increase by 2.2% per annum during 200225, thus requiring an additional 59 000 MW of coal-fired capacity. Oil demand in India is expected to increase by 3.5% per annum during the same time. It is quite apparent that coal will continue to be the predominant form of energy in future. However, imports of petroleum and gas would continue to increase substantially in absolute terms, involving a large energy import bill. There is, therefore, an urgent need to conserve energy and reduce energy requirements by demand-side management and by adopting more efficient technologies in all sectors.

1.3INDIAN POWER INDUSTRY BEFORE INDEPENDENCE & POST INDEPENDENCE

The British controlled the Indian power industry firmly before Independence. The then legal and policy framework was conducive to private ownership, with not much regulation with regard to operational safety. Immediately after Independence, the country was faced with capacity restraint. India adopted a socialist structure for economic growth and all the major industries were controlled by public sector enterprises. By 1970's India had nationalized most of its energy assets, due to its commitment to social goals. By the late 1980's the Indian economy felt the strain of the socialist agenda followed since independence. Faced with a serious deterioration in public finance and balance of payment crisis, the Union government as part of its policy of economic liberalization allowed greater investment by private sector in the power industry.

Page 6

1.4 OVERVIEW OF INDIAS POWER SECTOR 1.4.1 BACKGROUND

India's power market is the fifth largest in the world. The power sector is high on India's priority as it offers tremendous potential for investing companies based on the sheer size of the market and the returns available on investment capital.

Contribution from different sources of power generation

(Source - Source: Ministry of Power, Government of India)

Almost 55 per cent of this capacity is based on coal, about 10 per cent on gas, 26 per cent on hydro, approximately 5 per cent on renewable sources, about 3 per cent on nuclear and 1 per cent on diesel. In the past five years, there has been a much greater emphasis on transmission and distribution reforms. The government aims to provide "power to all" by 2012. To achieve that promise, it will have to add as much as 1,00,000 MW of generation capacity, cut AT&C losses substantially to below 20 per cent, rationalize tariffs and ensure that average revenue realization is greater than the cost of production. It will have to continue to push the process of reform and restructuring and ensure greater private participation, in every segment. In the past few years, there has been considerable growth in power plants based on renewable sources of energy. The Plant Load Factor (PLF) of generating plants has improved consistently over the last 10 years. The share of thermal power as a proportion of total power generated has decreased from 71 per cent to 66.3 per cent in the last decade. The share of hydro
Page 7

has increased to 26 per cent from 25.7 per cent of the fossil fuel supplies; there is delivery constraint with respect to gas. A number of gas plants today are running at sub-optimal plant load factor (PLF) levels due to shortages. The government has decided not to embark on new projects that rely on gas. It is feared that supply shortages can disturb the capacity addition plans, reduce PLFs, as the rising crude prices have led to firmer naphtha and natural gas prices.Emerging environmental concerns have led to an increasing interest in renewable. Captive power plants (CPPs) also make a major contribution, which is more than one-fifth of the total installed capacity. In the last three years, captive capacity has grown at an average of 1,600 MW per year. The introduction of ABTs (Availability Based Tariffs) has changed the thinking of discoms. They have to pay huge prices as they have to source power from the grid during low frequency periods. During this time the CPP power comes in handy at a much lower tariff. The reform process in the power sector continues. Thirteen states have unbundled SEBs into separate entities for transmission, distribution and generation. Two states have privatized distribution. Regulatory authorities have been set up in 24 states. These authorities are applying commercial principles to tariff setting, monitoring the performance of state utilities and paying attention to areas such as demand side management and grid discipline.

1.4.2 GENERATION
Over the years, the fuel mix has changed. Growing environmental concerns have led to an interest in renewable sources of energy (comprising wind energy, solar photovoltaic energy, biomass power and mini hydro plants). But despite great potential, renewable sources contribute only a little over 6,000 MW at present. The PLF of generating plants has improved consistently over the last few years.

1.4.3 CONTRIBUTION IN INDIAN PRODUCT (GDP)

GROWTH DOMESTIC

With the world population nearly doubling in the past three decades, the present surge in
Page 8

electricity demand, and the projected increase of the global population, the importance of available energy cannot be underestimated. In India, the burning of coal accounts for approximately one half of all electricity generation, nuclear energy approximately one fourth of all electricity generation, and hydro, and gas roughly ten percent of the total electricity generation. Globally, India is presently positioned as the eleventh largest manufacturer of energy, representing roughly 2.4% of the overall energy output per annum. Usually energy, especially electricity, has a major contribution in speeding up the economic development of the country. The existing production of per capita electricity in India is around 600 kWh per annum. Ever since 1990s, Indias gross domestic product (GDP) has been increasing very rapidly and it is estimated that it will maintain the pace in the next couple of decades. As per CEA (Central Electricity Authority) contribution of power sector in GDP is 6.25% to 6.65%. The rise in GDP should be followed by an increase in the expenditure of key energy other than electricity.

1.5 FUTURE PLANS OF CAPACITY ADDITION 1.5.1 PLAN FOR CAPACITY ADDITION DURING XITH FIVE YEAR PLAN (2007-2012)
The power generation capacity added during the last five years is a lowly 21,280 Mw, which is about half the original target of 41,110 MW set for the Tenth Plan. This is also 2000 Mw less than the 23,250 Mw capacity addition projected by the government in last few days of fifth five year plan. (March 2007). An ambitious target of 78,577 Mw has been set by the government for the eleventh plan period (2007 -2012). Of this, the hydropowers share would be 16,553 MW, the thermal power would constitute 58,644 MW and the nuclear powers share would be 3,380 MW. Capacity addition plan from different sources during Sixth five year plan (2007-2012).

Page 9

Plan for capacity addition from various sources during 11th plan

Year wise Capacity addition plan during Sixth five year plan (2007-2012)
Year 2007-08 2008-09 2009-2010 2010 -2011 2011-2012 Total capacity addition Capacity addition (Mw) 16,785 7272 15,198 16,970 22,352 78577

The orders for these capacity additions are likely to be placed by December 2007 so that they can be implemented during the Plan itself.

Page 10

1.5.2 POLICY FOR ADDITIONAL CAPACITY GENERATION

Following is the policy for future power generation under the National Electricity Plan: Inadequacy of generation has characterized power sector operation in India. To provide availability of over 1000 units of per capita electricity by year 2012 it had been estimated that need based capacity addition of more than 1,00,000 MW would be required during the period 2002-12. Government of India has initiated several reform measures to create a favorable environment for addition of new generating capacity in the country. The Electricity Act 2003 has put in place a highly liberal framework for generation. There is no requirement of licensing for generation. The requirement of techno-economic clearance of CEA for thermal generation project is no longer there. For hydroelectric generation also, the limit of capital expenditure, above which concurrence of CEA is required, would be raised suitably from the present level. Captive generation has been freed from all controls. In order to fully meet both energy and peak demand by 2012, there is a need to create adequate reserve capacity margin. In addition to enhancing the overall availability of installed capacity to 85per cent, a spinning reserve of at least 5per cent, at national level, would need to be created to ensure grid security and quality and reliability of power supply.

1.5.2.1 NON-CONVENTIONAL ENERGY GENERATION

The Ministry of Non-conventional Energy Sources is promoting development of small/mini hydro power projects. The potential of generation of power from small and mini hide projects is estimated to be about 10,000 MW in the country. Feasible potential of non-conventional energy resources, mainly small hydro, wind and biomass would also need to be exploited fully to create additional power generation capacity. With a view to increase the overall share of non-conventional energy sources in the electricity mix, efforts will be made to encourage private sector participation through suitable promotional measures.
Page 11

1.5.2.2 HYDRO ELECTRICITY GENERATION

Hydroelectricity is a clean and renewable source of energy. Maximum emphasis would be laid on the full development of the feasible hydro potential in the country. The 50,000 MW hydro initiatives have been already launched and are being vigorously pursued with DPRs for projects of 33,000 MW capacities already under preparation. Harnessing hydro potential speedily will also facilitate economic development of States, particularly North-Eastern States, Sikkim, Uttaranchal, Himachal Pradesh and J&K, since a large proportion of our hydro power potential is located in these States. The States with hydro potential need to focus on the full development of these potentials at the earliest. Hyde projects call for comparatively larger capital investment. Therefore, debt financing of longer tenure would need to be made available for hydro projects. Central Government is committed to policies that ensure financing of viable hydro projects. State Governments need to review procedures for land acquisition, and other

approvals/clearances for speedy implementation of hydroelectric projects. The Central Government will support the State Governments for expeditious development of their hydroelectric projects by offering services of Central Public Sector Undertakings like National Hydroelectric Power Corporation (NHPC). Proper implementation of National Policy on Rehabilitation and Resettlement (R&R) would be essential in this regard so as to ensure that the concerns of project-affected families are addressed adequately. Adequate safeguards for environmental protection with suitable mechanism for monitoring of implementation of Environmental Action Plan and R&R Schemes will be put in place.

1.5.2.3 SMALL HYDROPOWER PLANTS

The Electricity Act 2003 is the catalyzing and facilitating factor for the Power revolution in India. The concern that no households be left out from being electrified, is being aptly
Page 12

addressed by the Union and state Governments. Impetus is being given to Rural Electrification. In order to achieve this objective, synergy is to be evolved where distributed Power Generation supplements (or makes up for the limitation) of electric supply through grid. Besides this mission, initiatives for environmental conservation are propelling utilities to generate more of Green Power. Decentralized Power Generation and Distribution has the power to adequately make up for the limitation of the Electric supply through Grid, and is considered a potential means to provide Power to all by 2012 DPG technologies such as Small Hydro Power help in producing power at the point of consumption. In India, small hydro schemes are further classified by the Central Electric Authority as follows: Type Micro Mini Small Station Capacity Up to 100 KW 101 KW to 2000 KW 2001 KW to 25000 KW Unit rating Up to 100 KW 101 KW to 1000 KW 1001 KW to 5000 KW

1.5.2.4 THERMAL GENERATION

Even with full development of the feasible hydro potential in the country, coal would necessarily continue to remain the primary fuel for meeting future electricity demand. Imported coal based thermal power stations, particularly at coastal locations, would be encouraged based on their economic viability. Use of low ash content coal would also help in reducing the problem of fly ash emissions. Significant Lignite resources in the country are located in Tamil Nadu, Gujarat and Rajasthan and these should be increasingly utilized for power generation. Lignite mining technology needs to be improved to reduce costs. Use of gas as a fuel for power generation would depend upon its availability at reasonable prices. Natural gas is being used in Gas Turbine /Combined Cycle Gas Turbine (GT/CCGT) stations,
Page 13

which currently accounts for about 10 per cent of total capacity. Power sector consumes about 40per cent of the total gas in the country. New power generation capacity could come up based on indigenous gas findings, which can emerge as a major source of power generation if prices are reasonable. A national gas grid covering various parts of the country could facilitate development of such capacities. Imported LNG based power plants are also a potential source of electricity and the pace of their development would depend on their commercial viability. The existing power plants using liquid fuels should shift to use of Natural Gas/LNG at the earliest to reduce the cost of generation. For thermal power, economics of generation and supply of electricity should be the basis for choice of fuel from among the options available. It would be economical for new generating stations to be located either near the fuel sources e.g. pithead locations or load centers. Generating companies may enter into medium to long-term fuel supply agreements especially with respect to imported fuels for commercial viability and security of supply.

1.5.2.5 NUCLEAR POWER

Nuclear power is an established source of energy to meet base load demand. Nuclear power plants are being set up at locations away from coalmines. Share of nuclear power in the overall capacity profile will need to be increased significantly. Economics of generation and resultant tariff will be, among others, important considerations. Public sector investments to create nuclear generation capacity will need to be stepped up. Private sector partnership would also be facilitated to see that not only targets are achieved but exceeded. Nuclear Power Capacity Addition Plan: Nuclear power is seeing a renaissance. Power-starved India, which has the largest number of reactors under construction, is at the forefront of this revival of interest in nuclear power. India is building seven of the 30 reactors under construction around the world. This is likely to increase significantly once the India-US agreement on nuclear cooperation is accepted by the rest of the world. India has been commissioning nuclear reactors in record time of less than five
Page 14

years. The capital cost per megawatt in the case of nuclear plant is Rs 50 million, which is higher than the average cost of the thermal plants (Rs 40 million or less). However, with the fuel cost being much lower than the thermal plants, nuclear power becomes an appealing option.

1.5.2.6 CAPTIVE GENERATION

The liberal provision in the Electricity Act, 2003 with respect to setting up of captive power plant has been made with a view to not only securing reliable, quality and cost effective power but also to facilitate creation of employment opportunities through speedy and efficient growth of industry. The provision relating to captive power plants to be set up by group of consumers is primarily aimed at enabling small and medium industries or other consumers that may not individually be in a position to set up plant of optimal size in a cost effective manner. It needs to be noted that efficient expansion of small and medium industries across the country would lead to creation of enormous employment opportunities. A large number of captive and standby generating stations in India have surplus capacity that could be supplied to the grid continuously or during certain time periods. These plants offer a sizeable and potentially competitive capacity that could be harnessed for meeting demand for power. Under the Act, captive generators have access to licensees and would get access to consumers who are allowed open access. Grid inter-connections for captive generators shall be facilitated as per section 30 of the Act. This should be done on priority basis to enable captive generation to become available as distributed generate ion along the grid. Towards this

end, non- conventional energy sources including co-generation could also play a role. Appropriate commercial arrangements would need to be instituted between licensees and the captive generators for harnessing of spare capacity energy from captive power plants. The appropriate Regulatory Commission shall exercise regulatory oversight on such commercial arrangements between captive generators and licensees and determine tariffs when a licensee is the off-taker of power from captive plant.

Page 15

1.6 PROSPECTS OF RENEWABLE ENERGY 1.6.1 CURRENT SCENARIO

The Progress of renewable energy generation has been encouraging as the country is today one among the top rankers in grid-interactive renewable power installations Adverse local environmental impacts (SOx, NOx, SPM) and global environmental impacts (greenhouse gas emissions mainly due to carbon dioxide) associated with fossil fuel use have resulted in an increased emphasis on renewable.

1.7 REGULATORY ENVIRONMENT 1.7.1 INSTITUTIONAL FRAMEWORK

The Ministry of Power is primarily responsible for the development of the Indian power sector. It is concerned with perspective planning and policy formulation in the sector. The Central Electricity Authority (CEA) is a body constituted under the Electricity Supply Act, which is responsible for developing a sound, adequate, and uniform policy for the control and utilization of national power resources. It is also responsible for the techno-economic appraisal of the project reports for the proposed power plants, including those in the private sector.
Page 16

Subsequent to enactment of the Legislation on establishment of a regulatory authority, an institution called the Central Electricity Regulatory Commission (CERC) has been set up for rationalization of bulk and retail tariff for generation and transmission utilities involved in interstate operations. It also regulates at intra-state level. Each state has set up a State Electricity Regulatory Commission.

1.7.2 THE ELECTRICITY ACT

The Electricity Act 2003 has been enacted by the Parliament in June, 2003. The salient positive features of this legislation are: o Removal of a number of restrictive barriers to the flow of power in a competitive market scenario by opening access to transmission (from the outset) and distribution. o Freeing up of generation and captive power plants from licenses and techno- economic approvals. o The recognition to trading as a distinct activity that would help ushering in a market environment. o The formation of an expert Appellate Tribunal to hear appeals against State and Central Electricity Regulatory Commission orders. o Transferring the full range of regulatory and licensing functions to the Central and State Regulatory Commissions. o Deregulating tariffs in certain situations e.g. in case of agreements between consumers and generating companies. o The distancing of Government from the functioning of the sector after giving broad directions via the National Electricity Policy and the National Tariff Policy. o The conversion of the remaining State Electricity Boards into State Transmission Utilities and deemed licensees with the freedom (but not compulsion) to restructure and progress down the road to corporatization and privatization. o The Energy Conservation Act, 2001 has been enacted and consequently Bureau of Energy Efficiency (BEE) has already been set up.

Page 17

1.7.3 REFORMS SO FAR

o 26 states have signed Memorandum of Understanding (MoU) with the Government of India to undertake reforms. o 20 states have constituted State Electricity Regulatory Commissions and are functional. Tripura and Jharkhand have notified the constitution of SERC. o 18 State Electricity Regulatory Commissions have issued tariff orders. o 11 States have unbundled/corporatized. o State of Orissa and Delhi have privatized distribution of electricity.

1.7.4

MAJOR

POLICIES

NOTIFIED

UNDER

THE

ELECTRICITY ACT DURING 2006 1.7.4.1 TARIFF POLICY

The Tariff Policy has been notified by Government of India on6 January, 2006 under the provisions of section 3 of the Electricity Act, 2003. The objectives of the tariff policy are to: o Ensure availability of electricity to consumers at reasonable and Competitive rates o Ensure financial viability of the sector and attract investments o Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimize perceptions of regulatory risks

1.7.4.2 GUIDELINES FOR PROCUREMENT OF ELECTRICITY

In compliance with section 63 of the Electricity Act, 2003, the Central Government had notified guidelines for procurement of power by Distribution Licensees through competitive bidding. Central Government has also issued the standard bid documents containing RFQ, RFP and
Page 18

model PPA for long term procurement of power from projects having specified site and location.

1.7.4.3 RURAL ELECTRIFICATION POLICY

Rural Electrification Policy, in compliance with section 4 and 5 of the Electricity Act 2003, was notified on 23 August, 2006. Overall approach enunciated in the Policy highlights grid connectivity to be normal way of electrification of villages. For villages / habitations where grid connectivity is not feasible or not cost effective of grid solutions based on stand-alone systems may be taken up. Decentralized distribution generation facilities together with local distribution network may be based on either conventional or non-conventional method of electricity generation. The State Governments should within six months prepare and notify a Rural Electricity Plan to achieve the goal of providing access to all households.

1.7.4.4 NEW HYDRO-POLICY

Section 63 of the Electricity Act provides for development of projects on the basis of competitive bidding for tariff. Sections 61 and 62 allow such projects developed on the basis of tariff to be fixed by the Regulator on the basis of capital cost and norms. In fact, the Electricity Tariff Policy notified in January 2006 also allows a special dispensation for project development by State and Central PSUs on the basis of capital cost and norm-based tariff to be determined by the Regulatory Commission. This dispensation, allowed for PSUs, is now proposed to be made available for the same period of 5 years to promote hydro-power development even through the private sector route. The State would be required to follow a transparent process for selection of the developer. This arrangement would have several advantages. While the initiative for allocation of the project would remain with the State Government (subject to the requirement of transparency in the allocation), the scrutiny of the regulator and the CEA would ensure that the project is being designed and built in the most optimal and economic manner, and that the interest of the consumers is adequately protected. From the point of view of the developer, this
Page 19

procedure would reduce numerous risks associated with the construction and operation and maintenance (O&M) of hydro projects. New Hydel Policy announced with an objective of making investment in hydro projects more attractive. The government has prepared plan for creation of National Grid by 2012 and infrastructure to facilitate inter-regional exchange of 30,000 MW of electricity by 2012.

1.7.4.5 ULTRA-MEGA POWER PROJECTS (UMPPS)

The Ministry of Power, Government of India has launched an initiative for development of coalbased Ultra-Mega Power Projects (UMPPs) in India, each with a capacity of 4,000 MW or above. These projects will be awarded to developers on the basis of tariff-based competitive bidding. To facilitate tie-ups of inputs and clearances, project-specific shell companies have been set up as wholly owned subsidiaries of the Power Finance Corporation (PFC) Ltd. These companies will undertake preliminary studies and obtain necessary clearances including water, land, fuel, power selling tie-up etc. prior to award of the project to the successful bidder. Nine sites have been identified by CEA in nine States for the proposed UMPPs. These include four pithead sites, one each in Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa, and five coastal sites, one each in Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. It is proposed to set up pithead projects as integrated proposals with corresponding captive coal mines. On the request of Ministry of Power, Ministry of Coal has already allocated captive coal mining block for Sasan UMPP in Madhya Pradesh and earmarked captive coal mining block for Orissa UMPP. For the coastal projects, imported coal shall be used. The projects are to be developed with a view to lower the cost of power to the consumers. These projects, adopting supercritical technology to reduce emissions, would be environment-friendly.

Page 20

1.7.4.6 DEVELOPMENT OF MERCHANT POWER PLANTS

To facilitate the development of the electricity market, the Ministry of Power has issued the approach and guidelines on development of merchant power plants (MPPs). Unlike traditional utilities, MPPs compete for customers and absorb the full market risk. There is no guarantee regarding minimum off-take of their output. Typically the risk of a MPP is carried on the balance sheet of the promoter. MPPs can provide the additional generating reserves that India needs now and will need in the future. They are a modern, market-based answer at least in part to the energy challenges faced by the country. MPPs are a product of the restructuring of the electricity industry and they fill different niches in the market; some provide steady supplies to a power grid, while others fire up only when demand is at the highest and meet peak loads. Merchant power plants operating competitively help assure that power is produced with efficiency and supplied to locations where it is needed most. MPPs up to a capacity of 1,000 MW would be provided coal linkage, and captive coal blocks may also be provided to merchant power plants in the range of 5001000 MW. It would be essential that certain normative criteria are laid down for eligibility for coal blocks allotment, particularly to IPPs and merchant plans. These criteria could relate to net worth of the company, their internal resource generation and annual turn-over. The agencies being allotted the coal blocks may also be required to put in place bank guarantee of a reasonable amount which should be liable to be encased if important milestones for development of coal mines are not achieved. The intermediate milestones may also include indicators concerning the development of power projects, such as award of Engineering Procurement and Construction (EPC) contracts, and commencement of construction. Success of this scheme would, to a great extent, depend on availability of reliable data and information for plant sites and other inputs in this capacity range so that developers then can take further appropriate action.

Page 21

1.7.4.7 PRIVATE PARTICIPATION IN TRANSMISSION

Private investment has been allowed in power transmission either through 100per cent equity or joint venture with PGCIL. In case of latter, the PGCIL will hold only 26per cent stake and private party would hold the rest. Private sector participation in transmission has been limited to construction and maintenance of transmission lines on BOOT (build-own-operate-transfer) basis under the control of PGCIL. o Policy initiatives for encouraging competition in development of transmission projects Promote competitive procurement of transmission services o Encourage private investment in transmission lines o Facilitate transparency and fairness in procurement processes o Facilitate reduction of information asymmetries for various bidders. Protect consumer interests by facilitating competitive conditions in procurement of transmission services of electricity. o Enhance standardization and reduce ambiguity and hence time for materialization of projects o Ensure compliance with standards, norms and codes for transmission lines while allowing flexibility in operation to the transmission service providers.

1.8 PROFILE OF MAJOR PLAYERS 1.8.1 TATA POWER

A pioneer in the Indian power sector, Tata Power (TPL) is one of Indias largest energy utilities. Started as the Tata Hydroelectric Power Supply Company in 1911, it is an amalgamation of two entities: Tata Hydroelectric Power Supply Company, Andhra Valley Power Supply Company (1916). TPL provides services in power generation, distribution and transmission; oil and gas; and broadband and communications. The company has big overseas power projects in a number of
Page 22

countries, including the UAE, Malaysia, Saudi Arabia, Kuwait and Algeria. It has also undertaken projects in power plant / utility operations and management in Saudi Arabia, Liberia, Iran, Sierra Leone and Algeria. o Setting up independent power plants (lPPs) and captive power plants (CPPs), and executing power transmission and distribution projects o Operation and maintenance services o Remnant life assessment and performance evaluation services of power plant equ o In overseas projects, erection, testing, commissioning and trial operations. o In power plant / utility operations, management and plant operators training projects.

1.8.2 RELIANCE ENERGY LTD. (REL)

Reliance Energy Ltd is India's leading integrated power utility company in the private sector. It has a significant presence in generation, transmission and distribution of power in Maharashtra, Goa and Andhra Pradesh. Reliance's gas finds in KG-D6 block in Krishna Godavari basin constitutes 60 per cent of India's present total gas production. REL and its affiliate power companies rank among the top 25 listed private sector companies on major financial parameters. REL is part of the Reliance industries-India's private sector company ranked among the world's 175 largest companies in terms of net profit and the 500 largest companies in terms of sales.
o

EPC Division (Engineering., Procurement and Construction Division)

REL has significant presence in the field of execution of the Power projects on EPC basis with a strong track record of the execution and commissioning of projects on time. REL has received wide acclaim for the initiatives in corporate governance. These awards and recognition's greatly motivates and encourage the REL team to set fresh benchmarks in corporate governance, particularly in the Indian Power Sector.

Page 23

1.8.3 NATIONAL THERMAL POWER CORPORATION (NTPC)

NTPC Limited is the largest thermal power generating company of India. A public sector company, it was incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of the Government of India. At present, Government of India holds 89.5per cent of the total equity shares of the company and the balance 10.5per cent is held by FIIs, Domestic Banks, Public and others. Within a span of 31 years, NTPC has emerged as a truly national power company, with power generating facilities in all the major regions of the country

o Business Activities
NTPCs core business is engineering, construction and operation of power generating plants. It also provides consultancy in the area of power plant constructions and power generation to companies in India and abroad. As on date the installed capacity of NTPC is 27,404 MW through its 14 coal based (22,395 MW), 7 gas based (3,955 MW) and 4 Joint Venture Projects (1,054 MW). NTPC acquired 50per cent equity of the SAIL Power Supply Corporation Ltd. (SPSCL). This JV company operates the captive power plants of Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has 28.33per cent stake in Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company between NTPC, GAIL, Indian Financial Institutions and Maharashtra SEB Holding Co. Ltd.

1.8.4

ANDHRA

PRADESH

POWER

GENERATION

CORPORATION LIMITED (APGENCO)

Andhra Pradesh Power Generation Corporation Limited is one of the pivotal organizations of Andhra Pradesh, engaged in the business of Power generation. Apart from operation & Maintenance of the power plants it has undertaken the execution of the on Government of India ng & new power projects scheduled under capacity addition programmed and are taking up renovation & modernization works of the old power stations. APGENCO started operations in
Page 24

1999. This was a sequel to Governments reforms in Power Sector to unbundle the activities relating to Generation, Transmission and Distribution of Power. All the Generating Stations owned by erstwhile Andhra Pradesh State electricity Board (APSEB) were transferred to the control of APGENCO.

1.8.5 NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED (NHPC)

National Hydroelectric Power Corporation Limited, A Govt. of India Enterprise, was incorporated in the year 1975 with an authorized capital of Rs. 2000 million and with an objective to plan, promote and organize an integrated and efficient development of hydroelectric power in all aspects. Later on NHPC expanded its objects to include other

sources of energy like Geothermal, Tidal, and Wind etc. At present, NHPC is a schedule 'A' Enterprise of the Govt. of India with an authorized share capital of Rs. 1,50,000 Million . With an investment base of over Rs. 2.2 Lakh Million approx. and NHPC is among the TOP TEN companies in the country in terms of investment.

1.8.6 SUZLON ENERGY

Established in 1995, Suzlon Energy began its journey to the forefront of the wind energy industry with a small but significant project to supply wind turbine generators for a 3.34 MW wind farm project in Gujarat, India. In little over a decade, Suzlon has grown to rank as one of the world's leading manufacturers, and Indias and Asias leading manufacturer of

wind turbines.

Page 25

CHAPTER 2 COMPANY PROFILE

CHAPTER 2 COMPANY PROFILE

2.1 DAKSHIN GUJARAT VIJ COMPANY LTD. SURAT, GUJARAT 2.1.1 EXECUTIVE SUMMARY
DGVCL is company registered under the Companies Act 1956, with the objectives of distribution of electricity in the southern parts of the State of Gujarat. The Commission is in the process of formulation of revised Multi Year Tariff Regulations for the Control Period from FY 2011-12 to FY 2015-16, and as part of that process has directed DGVCL to submit a Business Plan which would cover the Strategic and Operational Plan for the Company. DGVCL has prepared the Business Plan taking cognizance of the existing internal factors and external business environment affecting the business. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Honble Commission from time to time.

2.1.2 INTRODUCTION
The Business Plan is initiated based on a review of what is on the Companys current operations, operational performance and organization structure. The formulation of strategies is driven by the consideration of the vision, mission and values that the Company holds and cherishes. The existing profile of the Company, its strengths and weaknesses, its policies, and the emerging legal and business environment plays an important role in the formulation of the plan. The approach and methodology adopted for preparation of Business plan of DGVCL is as follows: The business plan is prepared for the projection period FY 2012 to FY 2016.

Page 26

 The assumptions like investment plan, load forecast, loss reduction plan, power procurement plan etc. are maintained as provided in MYT petition for second control period FY 2011-12 to 2015-16

2.1.3 OBJECTIVE OF BUSINESS PLAN

As per the Forum of Regulators recommendation Distribution licensees should submit the business plan and power purchase plan, for approval of the Commission, at least six months prior to submission of MYT petitions. Also as directed by the Hon'ble commission Business Plan for the second Control Period is to be filed along with the MYT filings for the second Control Period. DGVCL has developed a comprehensive business plan for the company for the period FY 2011-12 to FY 2015- 16. The business plan in following sections intends to cover the above issues from the strategic, competitive, financial, commercial and organizational perspectives.

2.1.4 COMPANY PROFILE

Dakshina Gujarat Vij Company Limited (DGVCL) is given the responsibility of distribution of electricity in Southern parts of the State of Gujarat. DGVCL operates through the network spread over 23, 307 Sq. Kms covering seven districts namely Bharuch, Narmada, Surat (except part of Surat City), Tapi, Dangs, Navsari and Valsad. The company has become operational effective from 1st April, 2005.

2.1.5 VISION AND MISSION OF DGVCL

Based on the changing environment, both internal and external, DGVCL has framed its Vision and Mission and tried to align it with its future Business Plan. DGVCL hopes to achieve its goals and take advantage of the opportunities available in the Power sector.

2.1.5.1 VISION
Customer satisfaction through service excellence

Page 27

2.1.5.2 MISSION
1. To provide reliable and quality power at competitive cost 2. To reach global standards in reducing distribution losses

2.1.5.3 THE CORE VALUES

Customer satisfaction Pride of belongingness Excellence Participative work culture Being ethically and socially responsive

2.1.6 CATEGORY WISE CONSUMERS AND SALES

Following Table shows the category wise No of Consumers and Sales for the FY 2009- 10:

Category

No. of

%age-

Sales (Mus) %age- Sales

Consumers Consumers
Residential Commercial Industrial LT PWW Agriculture Street Light 1653882 233697 51756 9733 88625 4300 80.91% 11.43% 2.53% 0.48% 4.36% 0.21% 0.11% 0.0002% 1436 554 2563 97 570 30 3437 272 16.03% 6.18% 28.61% 1.08% 6.36% 0.33% 38.36% 3.04%

Industrial HT 2221 Railway 5

Total

2044219

100.00%

8959

100.00%

(Source: CEA report on Monthly power supply position)

Page 28

DGVCL has a consumer base of 20 lacs; Residential category consists of the largest consumer base followed by Commercial & then Agriculture. The industrial consumption is around 66% which is a source of revenue for DGVCL and 6% is agriculture consumption which is the subsidized category.

2.1.7 INFORMATION TECHNOLOGY INITIATIVES

DGVCL has undertaken many initiatives to become the IT enable power Distribution Company which is the need of the hour at present. The activities which have been implemented are as follows: E- Urja an ERP solution is being implemented as an end to end ERP solution whereby several processes will be computerized. E-Gram Panchayats, (E-GPs) whereby 2391 E-GPs under 7 districts have been assigned as the agency for collection of energy bills. There is also E-Payment facility from anywhere across the world. Deployment of Automatic Meter Reading (AMR) System to HT consumers In June, 2009 Rs 23.38 Crores have been sanctioned for DGVCL for implementation of RAPDRP Part-A for 11 towns covering 33 Sub Divisions and Approximately 7 Lacs Consumers within the span of two years. Under this project, various IT based applications will be implemented like Consumer Indexing, GIS Mapping, SCADA-DMS system, Centralized Consumer Care Centre.

2.1.8 HUMAN RESOURCE DEPARTMENT

DGVCLs HR Management System in association with GETRI has organized many need based training & development programs. Further DGVCL also provides training at its GEKC (Gujarat Energy Knowledge Centre), Surat. The total number of employees in DGVCL as on 31st Mar, 2010 was 4495.

Page 29

2.1.9 ENERGY CONSERVATION MEASURES

Creating awareness among the consumers by distributing pamphlets Regular and periodical maintenance of line and equipments, technical loss reduction activities & equipments in use to save energy In the entire Below Poverty Line (BPL) category Consumers, it is planned to provide CFL lamp instead of conventional incandescent lamp. Scheme for providing energy-efficient motors and pump sets to farmers in the Companys is under active consideration.

2.1.10 CONSUMER SERVICE

The basic objective of the Company is to serve the consumers and provide the quality power supply. To achieve the objective, DGVCL has undertaken many consumer service related activities which includes 1. 24x7 customer care call center for better consumer service. 2. Any Time Payment (ATP) machine which is a touch screen multimedia based system has been installed to facilitate consumers to pay their energy bills at any time. 3. Mobile Van has been started in some tribal years to collect energy bill from consumers door step. 4. The company has launched the E-payment facility so as to enable the consumers to make payment through internet 5. Complaints Redressed Committees (CRC) formed for redressing consumer grievance. 6. Providing Quality services to the consumers.

Page 30

2.1.11 OTHER ACTIVITIES

Other Activities carried out by DGVCL are: HVDS, Anti-theft drive, Various schemes- Primitive tribe, Micro irrigation scheme, Petapara non-tribal scheme, Tribal area sub plan wells, special project for agriculture, Kutir jyoti, Zupadpatti, Sagar khedu yojana.

2.1.12 MAJOR ACHIEVEMENT

DGVCL has been adjudged as the winner of the Best Public Sector Utility for adoption of best performance: Consumer friendly practices, Reforms & E-Governance Award- T&D of the Prestigious National Awards ENERTIA AWARDS 2008- Indias Awards for sustainable Energy & Power for reducing distribution losses to 15.45% in the F.Y. 2007-08 and transmission losses to 3.85% in the F.Y. 2007-08.

2.1.13 OPERATIONAL PERFORMANCE ANALYSIS

A comparative analysis of the operational performance of past years in relation to Sales, T&D Loss, Reliability indices, DTR failure rate, etc. is discussed here. In spite of the fact that DGVCL is inherited with an old distribution infrastructure from the erstwhile GEB, DGVCL is making all out efforts to improve / sustain the performance as well as to supply quality power to the consumers. The Demand-Supply for electricity in DGVCL has increased manifold; despite significant overall progress in the power sector, there had been a significant gap between demand and supply. Various practices regarding distribution loss reduction adopted by the utility has made it possible to achieve a low distribution loss level of around 15.2% in FY 2009-10 from distribution loss level of 19.9% in 2005-06. In FY 2009-10 the losses increased due to poor monsoons which lead to higher supply to the agricultural category.

Page 31

Past 5 Years Distribution Loss

(Source: CEA report on Monthly power supply position) Power Purchase cost: The Power Purchase cost has been showing an increasing trend in last five years, however there was a decrease in the power purchase cost per unit in FY 09-10 due to reduction in gas prices which were too high in FY 08- 09. Past 5 Years Power purchase cost of Power Purchase Cost/ Unit

(Source: CEA report on Monthly power supply position)

Page 32

 The total amount of agricultural subsidy released each year by GoG is capped at Rs 1100 Cr. It is allocated to each Discom in proportion to its respective percentage share in agricultural consumption to compensate for the revenue loss due to subsidized category of consumers as well as for unmetered consumption. The reliability of the distribution system on the basis of number and duration of sustained interruptions in a year, using the indices such as SAIFI, SAIDI & MAIFI indicates that system reliability has improved a lot in the past 3 years. Reliability Indices SAIFI SAIDI MAIFI FY 2007-08 20.31 33.07 17.61 FY 2008-09 7.87 7.19 18.35 FY 2009-10 7.80 7.12 17.34

(Source: CEA report on Monthly power supply position) There is a reduction in the distribution transformer failure rate over the last 5 years and it has reduced to 12.90% for the year 2009-10. This is mainly due to vigorous transformer maintenance. Past 5 years DTR Failure Rate

(Source: CEA report on Monthly power supply position)

Page 33

 Employee expense is around 3.8% of the total revenue earned and is Rs 0.19/unit sold; which is quiet under control & rational. Revenue realized from sale of power is slowly coming closer to the average cost of supply. For FY 2009-10, revenue realized from sale of power has increased to 97% of the average cost of supply from 92% in FY 2005-06.

(Source: CEA report on Monthly power supply position) Under Demand Side Management (DSM) measures DGVCL has taken tremendous and remarkable steps to reduce energy consumption by increasing end use efficiency. Load forecasting along with load management is done by the DSM cell, generation control and load control measures are also in place.

Page 34

2.1.14 FINANCIAL PERFORMANCE ANALYSIS

After analysis of the revenue statement and the Balance Sheet of DGVCL, it can be analyzed that the dependence on the government subsidy as well as the income from other sources has been decreasing and revenue from tariff is increasing at a 5 year CAGR of 12%. Though there is a major increase in Employee expenses due to sixth pay commission & also an increase in other debits, there has been a profit due to power purchase cost under control due to steps undertaken by GUVNL & DGVCL including measures relating to reduction in T&D losses. The fixed Assets and CWIP has been increasing by 14% and 34% respectively due to frequent augmentation and expansion of distribution system to cater the load growth in the area. The CAPEX plan undertaken includes re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving the targeted reduction in system losses, undertake automation and other Improvement works to enhance customer service. Also, the debt: Equity ratio of 0.51 is considered to be in favorable position due to low gearing ratio and therefore is having a sound financial position to get additional fund to carry out their additional CAPEX. However, the Current Asset Ratio is lower than 2:1 which is considered to be efficient industry standard ratio as such. This is due to increase in current liabilities compare to current assets. Also the summary of the CAPEX planned by the Company for FY 2009-10 is as outlined below: Sr. No. A B C D E Schemes Distribution Schemes Rural Electrification Schemes Energy Conservation Non Plan Schemes Other New Schemes Capital Expenditure Total FY 2009-10 (Approved) 78 103 2 54 61 298 FY 2009-10 (Actual) 114 63 3 10 190 Deviation 36 40 2 51 51 108

(Source: CEA report on Monthly power supply position)

Page 35

2.1.15 FINANCIAL PERFORMANCE ANALYSIS

The Indian economy has been witnessing more than 9% growth rate in last three years resulting in major dependent on power to carry out the activities related to production and service affecting the economy. The developing economy has resulted into increase in demand of power whereas the capacity available within the country is not suffice enough to meet such demand resulting into peak and energy deficit. The growth in demand of electricity and National plan to have a per capita consumption of 1000 units, Indian government has set ambitious goals in the 11th plan to add around 100,000 MW capacities. However, the Western region accounts for ~32% of the total generation in the country and also has the highest deficit in the country. The Western region is facing a shortage of nearly 18% in FY 2009-10. The region wise demand supply scenario is shown below: Regions North West South East N. East All India Energy Requirement (MU) 254231 258528 220576 87927 9332 830596 % deficit 12% 14% 6% 4% 11% 10% Peak Demand (MW) 37159 39609 32178 13220 1760 123916 % deficit 15% 18% 10% 6% 18% 13%

(Source: CEA report on Monthly power supply position)

In the past, there has been a consistent gap in the peak demand and peak met as well as in energy terms in the State. Considering the performance in past few years, Gujarat Power Sector has improved a lot with no energy deficit within the State and having a per capital consumption of more than 1000 units which is the target of Indian Government to achieve it by 2012 for India as a whole. The following table shows the actual power supply situation in the state for the past few years.

Page 36

Period Peak Peak Peak Demand Met Deficit/ Surplus (MW) (MW) (MW) 2002-03 8641 7336 -1305 2003-04 9820 7204 -2616 2004-05 10162 7578 -2584 2005-06 9783 7610 -2173 2006-07 11619 8110 -3509 2007-08 12119 8885 -3234 2008-09 11841 8960 -2881 2009-10 10406 9515 -891

Peak Deficit/ Surplus (%) -15.1 -26.6 -25.4 -22.2 -30.2 -26.7 -24.3 -8.6

Energy Energy Peak Requirement Availability Deficit/ Surplus (MU) (MU) (MU) 60175 53316 -6859 57171 50292 -6879 59681 52724 -6957 57137 52436 -4701 62464 54083 -8381 68747 57614 -11133 67516 60885 -6631 70412 67263 -3149

Peak Deficit/ Surplus (%) -11.4 -12 -11.7 -8.2 -13.4 -16.2 -9.8 -4.5

(Source: CEA report on Monthly power supply position) The negligible deficit in the State will be eliminated within the immediate future by contracting the additional capacity for the Company by GUVNL.

2.1.16 REGULATORY FRAMEWORK 2.1.16.1 National Level

The implementation of the Electricity Act, 2003 (EA 2003) has effected considerable changes the electricity market. The major changes relevant to working of a distribution company are as under: DE licensing of generation; Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc. Provision for license free generation and distribution in the rural areas; Introduction of open access in transmission and distribution; Introduction of parallel license exclusivity of distribution license removed; SERC is a mandatory requirement ; Provision for payment of subsidy through budget by State Government; Issues concerning theft and losses in the system;
Page 37

The provisions of the EA2003 mentioned above, have far reaching implications for the power sector. It is evident from the above provisions that the EA2003 intends to create a competitive power sector in the long term and has left no choice for the state utilities but to improve their performance to face the competition from other players entering into the market. Also, in line with Electricity Act 2003, the National Electricity Policy outlines a plan for rural electrification, increased generation capacity, generation mix to be adopted for clean environment, improvement in grid for better transmission and distribution of power. India also seeks to create a more competitive energy sector to increase private sector participation. Finally, the Policy emphasizes the need for conservation and demand-side management including a national awareness campaign. In line with the above policy, the distribution company has to undertake activities to be more competitive as well as to abide by the policy guidelines. The policy aims at improving efficiency, financial availability of the sector, availability of power and protection of customer interest. Also, the National Tariff Policy deals with various parameters with respect to the fixation of tariffs, like providing adequate return on investment to the power generator and supplier and ensuring reasonable user charges for the consumers. It provides uniform guidelines to the SERC for the fixation of tariffs for their respective entities. The policy states that the distribution licensee should, in future, procure power solely through competitive bidding which as per the recent guidelines from Ministry of Power will be in effect from 5th January 2011. At the National level, many initiatives have been considered by MoP, GoI and CERC with a view to develop the power sector. The initiatives described in the report are as follows: Rural Electrification Policy, 2006 R-APDRP (Restructured Accelerated Power Development & Reform Program) Renewable Purchase obligation with Renewable Energy Certificate Mechanism National Action Plan for Climate Change (NAPCC) National Solar Mission National Mission for Enhanced Energy Efficiency
Page 38

2.1.16.2 State Level

The regulatory framework in the State of Gujarat is well established. The Gujarat Electricity Regulatory Commission (GERC) has already defined most of the regulations and is monitoring performance with a positive approach of improving efficiency and overall development of the sector. Multi-year tariff principles have already been implemented in the State. Benchmarkbased performance monitoring has become the practice. Current Regulations relevant to DGVCL are as follows: Terms and Conditions of Tariff Regulations, 2005 Standards of Performance of Distribution Licensee Regulations, 2005 Procurement of Energy from Renewable sources Regulation Power System Management Standards, 2005 Distribution Intra-State ABT implementation Provisions of Intra State Open access regulations Licensees Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges (First Amendment) Regulations, 2010 Different Orders on determination of tariff for renewable sources of energy Designating State Nodal Agency for REC Regulations

2.1.17 REGULATORY FRAMEWORK

The power distribution business environment would throw up a number of market related issues and challenges which needs to be evaluated by DGVCL. Some of these issues and challenges are as follows: 1. Open Access Regulation mandated to provide non-discriminatory open access which may result in loss of subsidizing consumers;

Page 39

2. Parallel License As per the Act, a parallel licensee is possible to be operated whereby two licensees are supplying power in the same specified area. Currently, due to recent clarification from MoP and Ministry of Commerce, SEZ became the Distribution Licensee for the SEZ area whereby Discom is supplying power. Also, other companies may get an approval of being a distribution licensee to supply power in the specified area of DGVCL which is more prevalent in urban areas due to low losses and are marked by the nonexistence of agriculture consumers. 3. ABT implementation UI at intra-state level due to deviation in schedule and actual will make each DISCOM accountable. A proper planning and scheduling of power along with implementation of SCADA is required to have efficient distribution system; 4. Regulatory provisions Being into a regulated environment, have to follow the regulatory framework and directions by the appropriate commission. 5. Industry Risk and Competition A competition from the other private sector player due to opening of power sector will result into a risk of losing of subsiding consumers. 6. Renewable Power Purchase Obligation SERC mandates the distribution licensee to purchase of electricity from renewable sources, a percentage of the total consumption of electricity in the area of a distribution licensee. This step is considered to promote the generation from such renewable sources and can have a minimum impact on the environment. 7. Impact of DSM measures - Demand Side Management (DSM) is described as the planning, implementation and monitoring of utilities activities designed to encourage customers to amend their electricity consumption patterns, both with respect to timing and level of electricity demand so as to help the customers to use electricity more efficiently. Every Distribution Licensee has to implement the DSM measures as an integral part of their day-today operations. Many SERCs and Discoms have already introduced some DSM programs. Experience suggests that the skills of discom staff, and the priority accorded to it by discom management, are important for its success. DSM incentives need to be carefully designed and targeted so that the appropriate load curve changes are realized.

Page 40

8. Universal Service Obligation DGVCL is obliged to supply power to each consumer under USO. New connections to remote areas are expensive and maintaining reliable supply levels are difficult. These features tend to increase technical losses and the costs of O&M. 9. Power Purchase Responsibility To meet RPO and get a low cost power, DGVCL may go for direct procurement of power from the generator. 10. Market Penetration and Service Area - The widespread distribution network and the retail reach of such infrastructure would be key discriminators of a licensees market position. 11. Cost to Serve against realization The tariff of the consumers needs to progressively move towards the cost of supply of electricity and reduces the cross subsidies within the category of consumers. This has to be achieved by all the Distribution Utilities in India which is considered to be a major challenge for SERC and Utilities. 12. Rationalization of Tariffs to retain HT and Large consumers Currently, the Tariff is calculated based on cost of the supply at consumer end, the capacity of the consumer to pay and the socio economic policy of the government. The rationalization of tariffs is required simplify the structure and introducing cost reflective tariff by way of retaining the high end customers. Understanding these core issues & risks of the power sector help in identifying the opportunities that lie ahead

Page 41

2.1.18 SWOT ANALYSIS

Before outlining the Business Plan for any company, it is very important for the organization to introspect to identify its strength and weaknesses and assess the external environment to outline opportunities and threats. Accordingly, it is very important to evaluate the environment both internal and external while charting out its growth path and the same has been outlined below.

Page 42

2.1.19 RISK ANALYSIS

It is necessary to understand that how the risks are perceived by the business. Virtually all organizations strive to survive. They strive to create value for their stakeholders including State Government, SERC, Consumers, Financial institutions, etc. The risk can be identified as a financial risk, regulatory risk, operating risk, technology risk, etc. Improve Efficiency: In order to be competitive on the distribution segment, DGVCL has to improve operational efficiency. The efficiency can be achieved through reduction of losses, quality power supply and up gradation of network. Improvement in Consumer Services: Due to inclusion of Open Access and Parallel License under the amended Electricity Act 2003, a consumer of DGVCL will always have a choice to avail supply of electricity from any other Distribution licenses other than DGVCL in case of proper service, continuous power supply or cheap power. Therefore, a constant improvement in Consumer service will be required to avoid chances of losing the consumers. Project Management and Execution: A key element of the implementation of infrastructure plan is to execute project on a timely manner and is managed in a judicious way. To meet the investment objectives & improving the existing infrastructure of Distribution System, DGVCL needs to review the timely implementation and completion of Infrastructure plan. Recovery of Arrears: Even though DGVCL has a collection efficiency of 100%, still there are some arrears which need to be targeted and collected. Regulatory awareness: Regulatory risks will have to proactively deal with to minimize the impact on Company as well as Consumer Interest and therefore a capacity building is required to provide training to the employees for creating awareness related to regulatory provisions. Anti-theft measures: for reducing commercial losses it is quite necessary to go for anti-theft measures.

Page 43

2.1.20 FUTURE BUSINESS OPPORTUNITIES

While the SWOT analysis has revealed a number of opportunities, DGVCL may be targeting some of the opportunities in the near future. The key opportunities which could be targeted are: 1. Joint Ventures / Public Private Partnership 2. Non-Conventional Energy 3. Providing Ancillary Services to other power sector players 4. Distribution Franchisee route 5. Technical Consultancy To avail opportunities for the future, DGVCL has to rapidly ramp up its existing technical staff to meet the objectives and gain advantage from the business opportunities. The Discom is making arrangements for Training of the existing staff to undertake future responsibilities as well. Organization Development & Institutional Strengthening hence has to be the key focus areas. Apart from Human Resources Development, DGVCL has to focus on the Environment related aspects to adhere to pollution control norms. However, the key aspect would be being operationally efficient to be able to match the efficiencies of private sector players. Commercial efficiency would be the focus. Thus, the short term outlook for DGVCL would be primarily to focus on improvement of its operational performance and have an efficient consumer. With the additional generation capacity being planned in the system, DGVCL can look at fulfilling the ever growing demand for the State. Also, while DGVCL has started looking at diversification by considering renewable energy, ancillary services, etc., this could be looked at contributing in a significant manner in the future business of the Discom. DGVCL has prepared the Business / Operational Plan taking cognizance of the existing internal factors and external business environment affecting the business. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Honble Commission from time to time.
Page 44

2.1.21 OPERATIONAL PLAN

The operational plan includes the estimate of each cost of DGVCL for the second control period (from FY 2011-12 to FY 2015-16) and is in line with the MYT petition. The costs are estimated based on certain assumptions, past trend and extrapolated for future period.

2.1.21.1 Sales Projections: It has been observed from past experience that the
historical trend method has proved to be a reasonably accurate and well accepted method for estimating the load, number of consumers and energy consumption. In light of the above, DGVCL has estimated the above for various customer categories primarily based on the CAGR trends during past years. Following table shows the 5 year as well as 3 year CAGR for the category wise sales: CAGR of Sales Sales (MU) Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL 5 years CAGR FY 10 over 06 9.83% 11.69% 6.72% 9.29% 2.22% 6.87% 7.49% 4.26% 4.97% 4.31% 6.12% 3 years CAGR FY 10 over 08 7.66% 10.96% 5.27% 7.46% 3.70% 5.41% 6.34% 5.57% 3.89% 5.44% 5.96% FY 10 over FY 09 6.7% 13.8% 12.4% 9.0% 6.9% 3.4% 10.2% 4.8% 4.6% 4.7% 7.9%

(Source: CEA report on Monthly power supply position)

Page 45

Considering the above growth rates annually the category wise sales have been projected as shown on the following table: Sales Projection FY 2011-12 to 2015-16 Sales (MU) FY 1112 Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL FY 1213 Projection FY 13FY 1414 15 FY 1516

1881 683 2880 115 774 34 6367

2088 758 3024 126 834 36 6864

2317 841 3175 137 893 38 7401

2572 934 3334 149 903 4 7932

2855 1036 3500 136 903 43 8501

3789 294 4083 10450

3979 306 4285 11149

4178 318 4496 11897

4387 331 4718 12650

4606 344 4950 13451

(Source: CEA report on Monthly power supply position)

2.1.21.2 Distribution Losses:

The company has achieved a significant reduction in distribution losses, during recent years. However, loss reduction is a slow process and becomes increasingly difficult as the loss levels come down. Projection of distribution losses for second control period FY 2011-12 to 2015-16 are as shown below: Distribution Loss Level FY 2011-12 to 2015-16 Particular Distribution Loss FY 11-12 13.20% FY 12-13 12.95% FY 13-14 12.70% FY 14-15 12.45% FY 15-16 12.20%

Page 46

2.1.21.3 Distribution Losses:

The energy requirement for DGVCL will be met by supply from GUVNL. Based on the sales and distribution provided above, Energy Balance of DGVCL for the second control period FY12-FY16 is as shown below: Energy Balance FY 2011-12 to 2015-16 S. No 1 2 3 4 5 Particular Energy Sales Distribution Losses Energy Requirement Transmission Losses Total Energy to be input to Transmission System Pooled Losses in PGCIL System Total Energy Requirement Unit FY 1112 MUs 10450 MUs 1589 13.20% % MUs 12039 MUs 561 4.45% % MUs 12600 MUs 149 MUs 12747 FY 1213 11149 1659 12.95% 12808 589 4.40% 13397 FY 1314 11897 1731 12.70% 13628 620 4.35% 14248 FY 1415 12650 1799 12.45% 1449 649 4.30% 15098 FY 1516 13451 1869 12.20% 15320 688 4.30% 16008

275

281

325

372

13672

14529

15423

16380

(Source: CEA report on Monthly power supply position)

Page 47

2.1.21.4 Total Power Purchase Cost

A bulk supply tariff has been envisaged for the state. The total power purchase cost for GUVNL for the second control period FY 2011-12 to 2015- 16 comes to the power purchase cost through merit order, transmission charges, GUVNL charges and SLDC Fees & charges, as shown below: Power Purchase Cost FY 2011-12 to 2015-16 S. No Discom Discom Total Fixed Variable Power Cost Cost Purchase Cost 11348 19473 8125 Trading Trading Profit Fixed Variable & Cost Cost trading Margin 798 1115 600 Total Net Trading Cost Revenue 2513 18075

FY 1112 FY 1213 FY 1314 FY 1415 FY 1516

11126

11793

22919

1203

1275

700

3177

21016

12473

13233

25705

1451

1540

800

3791

23454

13902

13850

27752

1713

1706

900

4319

25139

18356

13702

21059

2358

1760

100

5119

28700

(Source: CEA report on Monthly power supply position)

Page 48

2.2 2.2 TORRENT POWER LTD. 2.2.1 INTRDUCTION

Torrent Power Ltd is one of the leading brands in the Indian power sector. The company is engaged in generation, transmission and distribution of power. The company has a generation capacity of 1647.5 MW and distributes power to more than 3 million customers annually in Ahmedabad, Gandhinagar, Surat, Bhiwandi and Agra. The company's subsidiaries include Torrent Power Grid Ltd, Torrent Energy Ltd, Torrent Pipavav Generation Ltd and Torrent Power Bhiwandi Ltd. Torrent Power Ltd was incorporated on April 29, 2004 as a private limited company with the name Torrent Power Trading Pvt. Ltd. In January 25, 2006, the name of the company was changed to Torrent Power Private Ltd. In February 8, 2006, the company was converted into public limited company and the name was changed to Torrent Power Ltd. In the year 2006, as per the scheme of amalgamation, Torrent Power AEC Ltd, Torrent Power SEC Ltd and Torrent Power Generation Ltd were amalgamated with the company with effect from April 1, 2005. In July 28, 2006, the company divested their stake partially in AEC Cements & Constructions Ltd, a non-material and non-listed subsidiary and hence AEC Cements & Constructions Ltd ceased to be a subsidiary company. In October 19, 2006, Torrent Power Grid Ltd (erstwhile Torrent Power Transmission PVT Ltd), a joint venture company with Power Grid Corporation of India Ltd became a subsidiary of the company. In December 20, 2006, the company signed a distribution franchise agreement with Maharashtra State Electricity Distribution Company Ltd for the Bhiwandi circle in Maharashtra for a period of ten years. In January 26, 2007, the company commenced Distribution Franchise for Bhiwandi circle of Maharashtra State Electricity Distribution Company Ltd catering to 1.4 lakh customers with an unrestricted demand of about 700 MW. In May 2007, the company signed a memorandum of understanding (MoU) with Gujarat Power Corporation for setting up over 1000-MW coal based power project at Pipavav, Amreli Dist. in Gujarat. During the year 2007-08, the company added 321 Distribution Transformers of 11 kV at Ahmedabad, Gandhinagar and Surat. They also commissioned the first phase of 220 kV Transmission Lines project at Surat. In September 25, 2007, the company formed a subsidiary company, namely Torrent Pipavav Generation Ltd for the development of coal based thermal project. During the year 2008-09, the company added 352
Page 49

Distribution Transformers of 11 km at Ahmedabad, Gandhinagar and Surat. The company's subsidiary, Torrent Power Grid Ltd, a joint venture with PGCIL, commissioned the first phase of evacuation arrangement by construction of 26 km Jhanor-Vapi LILO line. The company also installed and commissioned transmission lines to connect SUGEN plant with 220 km Kim substation of GETCO. During the year, the company was awarded the Distribution Franchise to Agra and Kanpur Distribution Circles for a period of 20 years. In September 2008, the company formed Torrent Power Bhiwandi Ltd (formerly known as Torrent Power Distribution Services Ltd) as a subsidiary company for providing infrastructural and manpower support for Bhiwandi operations of the company. In October 2008, the company entered into a Power Purchase Agreement with Gujarat Paguthan Energy Corporation PVT Ltd for supply of 49.6 MW wind power. Simultaneously, the company is also evaluating the establishment of their own wind and solar power generation. In March 2009, Torrent Energy Ltd became a subsidiary of the company, which is formed for setting up a 1500 MW gas based combined cycle power plant in Dahej SEZ. The company signed Fuel Supply Agreement (FSA) with South Eastern Coalfields Ltd; a subsidiary of Coal India Ltd, for meeting requirements of their coal based generating station at Sabarmati. The FSA is effective for a period of 5 years from April 1, 2009. In May 2009, the Uttar Pradesh Power Corporation Ltd (UPPCL) has entered into an agreement with the company for power distribution in Kanpur and Agra. During the year 2009-10, the company signed the shareholders' agreement with Gujarat Power Corporation Ltd for implementation of the 1000+ MW Coal-Based Power Project at Pipavav, Dist. Amreli, and Gujarat. Torrent Power Grid Ltd, a subsidiary company commissioned the second phase of power transmission line (80 km. double circuit 400 kV transmission lines) i.e. Gandhar-Dehgam Loop in Loop out (LILO) at SUGEN to facilitate power supply from SUGEN to Ahmedabad. In August 15, 2009, the company fully commissioned their ambitious SUGEN Mega Power Project. In September 30, 2009, the company commissioned 1147.5 MW SUGEN Mega Power Project and was dedicated to the nation. The company was awarded the distribution franchise for Agra and Kanpur distribution circles for a period of 20 years. They commenced distribution operations at Agra from April 1, 2010.Torrent Energy Limited (TEL) became the Distribution Licensee for Dahej SEZ and in April 4, 2010, they commenced the distribution of power. The company is in the process of setting up a 400 KV transmission system for evacuating power generated at their SUGEN plant
Page 50

to the various off take centers. The project being implemented in a phased manner is nearing completion and is expected to be fully functional during the financial year 2010-11. The company is currently implementing a 1200 MW gas based power project at Dahej in South Gujarat. The project, called the DGEN Power Project, is being implemented in a phased manner starting with a 400 MW first phase. They are also considering addition of one more unit of 382.5 MW at SUGEN. The EPC contract is on the verge of being finalized.

2.2.2 HISTORY
Torrent Power Limited was originally incorporated on April 29, 2004 under the Companies Act, 1956 as Torrent Power Trading Private Limited. The name of the Company was, thereafter, changed to Torrent Power Private Limited on January 25, 2006. The Company was converted into Public Limited Company on February 08, 2006 and the name of the Company was thus changed to its present name Torrent Power Limited. Pursuant to the Composite Scheme of Arrangement including Amalgamation sanctioned by the order of the Honble High Court of Gujarat at Ahmedabad dated July 12, 2006, the undertakings of Torrent Power AEC Limited, Torrent Power SEC Limited and Torrent Power Generation Limited as a going concern are transferred to and vested in TPL on and from the Appointed Date, i.e., April 1, 2005. Thus, TPL shall undertake the consolidated operations of the transferor companies of the Torrent Group in the power sector. The main object for which the Company has been established is set out in its Memorandum of Association as hereunder: To generate, transmit, distribute, purchase, procure, sell, trade, import, export or accumulate or otherwise deal in all forms of electrical power in all aspects, to own, promote, set up, establish, develop, maintain, run, operate, manage and acquire generating company, generating station or stations of every kind and description, and to own, promote, set up, establish, develop, maintain, run, operate and manage transmission and distribution networks or systems and to acquire, in any manner, these networks or systems and to act as agent or representative of any person engaged in the planning, development, generation, transmission, distribution, supply, trading or financing of
Page 51

power and to investigate, research, design and prepare feasibility, appraisal or project reports and to build and execute projects for generation, transmission, distribution, supply, purchase, sale, trading, import, export, storage and accumulation of all forms of electrical power and to engage in all activities incidental thereto.

2.2.3 OPERATION 2.2.3.1 Generation

Torrent Power has an aggregate generating capacity of 1647.5MW comprising: 1147.5 MW SUGEN gas based megs combined cycle power plant near Surat 400 MW coal based thermal power station at Sabarmati, Ahmedabad 100 MW gas based combined cycle power plant at Vatva, Ahmedabad It is in the process of adding a standalone unit of 382.5 MW named UNOSUGEN at the existing SUGEN site and setting up a 1200 Mw Greenfield DGEN Mega power project based on gas at Dahej SEZ, near Bharuch.

2.2.3.2 Transmission
Torrent Power is in the process of setting up a 400 KV transmission system for evacuating power generated at its SUGEN plant to the various off take centers. The project being implemented in a phased manner is nearing completion and is expected to be fully functional during FY 2010-11.

Page 52

2.2.3.3 Distribution
Torrent Power transmits and distributes more than 12 billion units of power to around 2.2 million customers in the cities of Ahmedabad, Gandhinagar, Surat and Bhiwandi spanning an area of 408 Sq. Km. and franchise area of 721 sq. km. These cities are major industrial and commercial hubs. The T&D losses in Gujarat at 7.6% are amongst the lowest in the country. A testimony of Torrent Powers operational efficiency is the drastic reduction in T&D losses in Bhiwandi from 48% in January 2007 to the present 19.33%.

2.2.4 SUBSIDIARY COMPANIES 2.2.4.1 Torrent Private Limited

Torrent Private Limited is the apex company of the Rs. 82 billion Torrent Group. Synergizing the group activities, it spearheads the groups investments in different investee companies, which are managed by their respective Board of Directors and professional CEOs. Besides monitoring and managing the groups investments, Torrent Private Limited is also involved in promoting the corporate image of Torrent and provides specialized services to the group. The company acts as a catalyst and developer of new ventures by providing strategic, financial, corporate and managerial inputs to enhance the groups predominant position in healthcare and power. The latest initiative in this direction is the 1147.5 MW mega power plants near Surat.

2.2.4.2 Torrent Pharmaceuticals Limited

Torrent Pharmaceuticals Limited, the flagship company of the Torrent Group, was conceived to rapidly make and market new formulations in niche therapeutic areas at affordable prices. Torrent Pharmaceuticals Limited is a dominant player in the therapeutic areas of cardiovascular (CVS) and central nervous system (CNS) and has achieved significant presence in GastroIntestinal, Dialectology, Anti-infective and Pain management segments.
Page 53

In terms of prescription share, Torrent Pharmaceuticals Ltd. is the sixth largest company in the Indian pharmaceuticals arena and growing 3 times faster than the prescription share market. With 1000 product registrations and exports to more than 50 countries, Torrent is already in the big league of global branded generic products business.

2.2.4.3 Torrent Cables Limited (TCL)

The ISO 9002 accredited Torrent Cables Limited (TCL) is on a winning streak. Against the sales of Rs. 71.98 crore in 2002-03, TCL clocked sales figures of Rs. 116.91 crore in 2003-04. Net profit also jumped from Rs. 7.48 crore in 2002-03 to Rs. 11.78 crore in 2003-04. The company which was referred to the Board for Industrial & Financial Reconstruction (BIFR) and declared a sick unit in 1999 has improved its performance continuously and got out of the purview of BIFR in March 2004. In fact, TCL today is among the very few profit making power cable companies in India and an established market leader in HT Power Cable segment. TCLs revival and turning around can be attributed to the QII (Quantum Initiative Improvement) drive and the reengineering initiatives. And above all, to the team work of its people who have displayed unmatched levels of perseverance and commitment.

2.2.5 FUTURE PROSPECT

The Electricity Act 03 has ushered in a new era of long overdue reforms in the Indian power sector. The enactment of this Act can be said to be a step towards initiation of various measures to change Indias status of suffering from a chronic power deficit to a power surplus state. The Act seeks to bring about a qualitative transformation of the electricity sector through a new paradigm; it seeks to create a liberal framework of development of the power sector by distancing government from regulation. The Electricity Act 2003 will lead the power sector from a single buyer model to multiple buyers, multi seller market structure. The Act will bring about deregulation in a phased manner in generation, transmission and distribution in the country The provisions of the Act present new opportunities for growth for the group such as
Page 54

 Possibility of taking up new distribution areas Undertaking franchisee from existing SEBs/ New Discoms The group may also venture as second licensee in urban areas Explore alternative source of procuring reliable and cheap power from other generating companies

2.2.6 MILESTONES
1) 1989-90 Mahendra Electricals taken over and renamed as Torrent Cables Ltd.' - Torrents initial foray into power

2) 1996-97 Foundation stone for GTEC laid and Zero date announced Torrent acquires management control of Surat Electricity Company

3) 1998-99 Torrent acquires management control of The Ahmedabad Electricity Company Combined Cycle operations of GTEC commissioned in mid-December 1998

4) 1999-00 Sale of equity stake in GTEC to Powergen India Pvt. Ltd. (Indias largest M & A transaction of the 20th century) The Ahmedabad Electricity Companys customer base crosses 1 million mark

5) 2001-02 The Ahmedabad Electricity Company's turnover crosses the Rs. 10 billion mark
Page 55

6) 2002-03 Work on 1147.5 MW combined cycle mega power project near Surat commenced

7) 2004-05 Torrent brings together three of its group companies Torrent Power AEC unified brand Torrent Power Torrent Power Generation Limited achieves financial closure Limited,

Torrent Power SEC Limited and Torrent Power Generation Limited under a single,

8) 2005-06 Torrent Power Generation Ltd. awards EPC contract for its upcoming SUGEN 1147.5 MW CCPP to a consortium of Siemens AG and Siemens Ltd. India; commences construction of its first power block Torrent Power Generation Ltd. and Siemens creates a 50:50 JV to provide O&M services to its SUGEN 1147.5 MW CCPP

9) 2006-07 Torrent Power bags MoPs Gold Shield award for two years for outstanding performance in power distribution Torrent Power commences distribution operations in Bhiwandi, Maharashtra

10) 2007-08 Torrent Power Grid Ltd. obtains license from CERC to setup the 400kV transmission line Torrent Power signs MOU with GPCL for setting up the 1000+ MW coal based power project at Pipavav in Gujarat

11) 2008-09
Page 56

 Phase I of Torrent Power Grid Ltd.s transmission system commissioned i.e. LILO of Vapi-Jhanor

12) 2009-10 All three units of SUGEN Power Plant commissioned; commences commercial production Phase II of Torrent Power Grid Ltd.s transmission system commissioned i.e. LILO of Dehgam-Jhanor Torrent Power signs distribution franchise agreement with UPPCL for Agra and Kanpur Torrent Power signs SHA with GPCL for setting up 1000+ MW coal based plant at Pipavav, district Amreli, Gujarat

13) 2010-11 Phase III of Torrent Power Grid Ltd.s transmission system commissioned i.e. 141 km line connecting phase II with the Pirana substation of PGCIL Torrent Power commences distribution operations in Agra, Uttar Pradesh effective from 1st April, 2010 Torrent Power and its subsidiary, Torrent Energy Ltd., awards EPC contract to Siemens for implementing UNOSUGEN (stand-alone 382.5 MW generation plant at its existing SUGEN plant location) and DGEN (1200 MW generation plant at Dahej SEZ) projects Torrent Energy Ltd., subsidiary of Torrent Power Ltd., commenced distribution operations in Dahej SEZ effective from 4th April, 2010.

Page 57

2.2.6 SWOT ANALYSIS 2.2.6.1 Strengths

The integrated player in India across the entire value chain generation, transmission and distribution The only successful player in the private distribution franchisee business The only power utility company with positive FCFF in FY10 Zero reliance on Chinese equipment Stellar operational efficiency (FY10 average PLF was 90%+ and T&D losses were sub-10% compared to the national average of 78% and 25%+ respectively) One of the strongest balance sheets in the sector with FY10net debt: equity of 0.6 as compared with ~1.5x for peers Strong Board of Directors with a high profile of independent directors such as Keki Mistry and Kiran Karnik

2.2.6.2 Weakness
Lack of disclosure in the annual report on key items. For example, there is no break up of revenues between generation, transmission and distribution The Kanpur franchisee has still not started functioning as the local state electricity board is creating issues in the light of Torrent having won the distribution contract Fuel ties up and financial closure for the near-term pipeline (1.5GW or ~96% of current installed capacity) is yet to take place

Page 58

2.2.6.3 Opportunities
There is a huge opportunity for private sector power utilities in India (particularly for those utilities that have Torrents battle hardened execution capabilities) Private distribution franchisees is a big (and relatively untapped) opportunity in India given the poor financial position of the state electricity boards Given Torrents presence in the T&D segment, the growing scope for private sector participation in this space offers a huge opportunity particularly as the Governments focus switches from power generation to power T&D

2.2.6.4 Threats
The 5x increase in private sector generation capacity by FY13 could result in merchant power rates getting compressed. Difficult to replicate the success of Bhiwandi in other private distribution franchisees as opposition from the local SEBs (who do not want to see private sector distributors in their area) is very strong Given that the KG Basin gas does not seem to be ramping up and infrastructure bottlenecks in the transportation of imported LNG (and the resultant crunch in the supply of gas) can be a negative for Torrent as 75% of its incremental capacity is gas based, which does not have fuel tie-up. Any delays in the construction of the Dahej SEZ will also delay the upcoming 1.2GW project in Dahej (will account for 37% of Torrents total capacity)

Page 59

CHAPTER 3 CONCEPTUAL FRAMWORK

CHAPTER 3 CONCEPTUAL FRAMWORK

3.1 WHAT IS COMPARATIVE RESEARCH? 3.1.1 DEFINITION
Comparative research is a research methodology in the social sciences that aims to make comparisons across different countries or cultures. A major problem in comparative research is that the data sets in different countries may not use the same categories, or define categories differently (for example by using different definitions of poverty).

3.1.2 DEVELOPMENT OF THE TRADITION

When the practice of comparative research began is a matter of debate. Karl Deutsch has suggested we have been using this form of investigation for over 2,000 years. Comparing things is essential to basic scientific and philosophic inquiry, which has been done for a long time. Most authors are more conservative in their estimate of how long comparative research has been with us. It is largely an empty debate over the definition of the tradition with those questioning whether comparing things counts as comparative research.

Textbooks on this form of study were beginning to appear by the 1880s, but its rise to extreme popularity began after World War II. There are numerous reasons that comparative research has come to take a place of honors in the toolbox of the social scientist. Globalization has been a major factor, increasing the desire and possibility for educational exchanges and intellectual curiosity about other cultures. Information technology has enabled greater production of quantitative data for comparison, and international communications technology has facilitated this information to be easily spread.

Page 60

3.1.3 COMPARATIVE RESEARCH DEFINEDOBJECTIVE

Comparative research, simply put, is the act of comparing two or more things with a view to discovering something about one or all of the things being compared. This technique often utilizes multiple disciplines in one study. When it comes to method, the majority agreement is that there is no methodology peculiar to comparative research. The multidisciplinary approach is good for the flexibility it offers, yet comparative programs do have a case to answer against the call that their research lacks a "seamless whole". There are certainly methods far more common than others in comparative studies, however. Quantitative analysis is much more frequently pursued than qualitative, and this is seen in the majority of comparative studies which use quantitative data. The general method of comparing things is the same for comparative research as it is in our everyday practice of comparison. Like cases are treated alike, and different cases are treated differently; the extent of difference determines how differently cases are to be treated. If one is able to sufficiently distinguish two cases, comparative research conclusions will not be very helpful. Secondary analysis of quantitative data is relatively widespread in comparative research, undoubtedly in part because of the cost of obtaining primary data for such large things as a country's policy environment. This study is generally aggregate data analysis. Comparing large quantities of data (especially government sourced) is prevalent. A typical method of comparing welfare states is to take balance of their levels of spending on social welfare. In line with how a lot of theorizing has gone in the last century, comparative research does not tend to investigate 'grand theories', such as Marxism. It instead occupies itself with middle-range theories that do not purport to describe our social system in its entirety, but a subset of it. A good example of this is the common research program that looks for differences between two or more social systems, then looks at these differences in relation to some other variable coexisting in those societies to see if it is related. The classic case of this is Esping-Andersen's research on social welfare systems. He noticed there was a difference in types of social welfare systems, and compared them based on their level of de commodification of social welfare goods. He found that he was able to class welfare states into three types, based on their level of de commodification. He further theorized from this that de commodification was based on a
Page 61

combination of class coalitions and mobilization, and regime legacy. Here, Esping-Andersen is using comparative research: he takes many western countries and compares their level of de commodification, then develops a theory of the divergence based on his findings. Comparative research can take many forms. Two key factors are space and time. Spatially, crossnational comparisons are by far the most common, although comparisons within countries, contrasting different areas, cultures or governments also subsist and are very constructive, especially in a country like New Zealand, where policy often changes depending on which race it pertains to. Recurrent interregional studies include comparing similar or different countries or sets of countries, comparing one's own country to others or to the whole world. The historical comparative research involves comparing different time-frames. The two main choices within this model are comparing two stages in time (either snapshots or time-series), or just comparing the same thing over time, to see if a policy's effects differ over a stretch of time.[7] When it comes to subject matter of comparative inquiries, many contend there is none unique to it. This may indeed be true, but a brief perusal of comparative endeavors reveals there are some topics more recurrent than others. Determining whether socioeconomic or political factors are more important in explaining government action is a familiar theme. In general, however, the only thing that is certain in comparative research issues is the existence of differences to be analyzed.

Page 62

3.2 WHAT IS CUSTOMERS SATISFACTION LEVEL? 3.2.1 WHAT IS CUSTOMER?

DEFINITION A person, company, or other entity which buys goods and services produced by another person, company, or other entity. In general terms, a customer is a person or organization that a marketer believes will benefit from the goods and services offered by the marketers organization. As this definition suggests, a customer is not necessarily someone who is currently purchasing from the marketer. In fact, customers may fall into one of three customer groups: 1) Existing Customers Consists of customers who have purchased or otherwise used an organizations goods or services, typically within a designated period of time. For some organizations the time frame may be short, for instance, a coffee shop may only consider someone to be an Existing Customer if they have purchased within the last three months. Other organizations may view someone as an Existing Customer even though they have not purchased in the last few years (e.g., television manufacturer). Existing Customers are by far the most important of the three customer groups since they have a current relationship with a company and, consequently, they give a company a reason to remain in contact with them. Additionally, Existing Customers also represent the best market for future sales, especially if they are satisfied with the relationship they presently have with the marketer. Getting these Existing Customers to purchase more is significantly less expensive and time consuming than finding new customers mainly because they know and hopefully trust the marketer and, if managed correctly, are easy to reach with promotional appeals (i.e., emailing a special discount for new product). 2) Former Customers This group consists of those who have formerly had relations with the marketing organization typically through a previous purchase. However, the marketer no longer feels the customer is an Existing Customer either because they have not purchased from the marketer within a certain time frame or through other indications (e.g., a Former Customer just purchased a similar product from the marketers competitor). The value of this
Page 63

group to a marketer will depend on whether the customers previous relationship was considered satisfactory to the customer or the marketer. For instance, a Former Customer who felt they were not treated well by the marketer will be more difficult to persuade to buy again compared to a Former Customer who liked the marketer but decided to buy from someone else who had a similar product that was priced lower. 3) Potential Customers The third category of customers includes those who have yet to purchase but possess what the marketer believes are the requirements to eventually become Existing Customers. As we will see in the Targeting Markets Tutorial, the requirements to become a customer include such issues as having a need for a product, possessing the financial means to buy, and having the authority to make a buying decision. Locating Potential Customers is an ongoing process for two reasons. First, Existing Customers may become Former Customers (e.g., decide to buy from a competitor) and, thus, must be replaced by new customers. Second, while we noted above that Existing Customers are the best source for future sales, it is new customers that are needed in order for a business to significantly expand. For example, a company that sells only in its own country may see less room for sales growth if a high percentage of people in the country are already Existing Customers. In order to realize stronger growth the company may seek to sell their products in other countries where Potential Customers may be quite high.

3.2.1 CUSTOMER SATISFACTION LEVEL

Customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals." In a survey of nearly 200 senior marketing managers, 71 percent responded that they found a customer satisfaction metric very useful in managing and monitoring their businesses. It is seen as a key performance indicator within business and is often part of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer
Page 64

satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. "Within organizations, customer satisfaction ratings can have powerful effects. They focus employees on the importance of fulfilling customers expectations. Furthermore, when these ratings dip, they warn of problems that can affect sales and profitability. . . . These metrics quantify an important dynamic. When a brand has loyal customers, it gains positive word-ofmouth marketing, which is both free and highly effective." Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able do this, firms need reliable and representative measures of satisfaction. "In researching satisfaction, firms generally ask customers whether their product or service has met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When customers have high expectations and the reality falls short, they will be disappointed and will likely rate their experience as less than satisfying. For this reason, a luxury resort, for example, might receive a lower satisfaction rating than a budget moteleven though its facilities and service would be deemed superior in 'absolute' terms." The importance of customer satisfaction diminishes when a firm has increased bargaining power. For example, cell phone plan providers, such as AT&T and Verizon, participate in an industry that is an oligopoly, where only a few suppliers of a certain product or service exist. As such, many cell phone plan contracts have a lot of fine print with provisions that they would never get away if there were, say, a hundred cell phone plan providers, because customer satisfaction would be way too low, and customers would easily have the option of leaving for a better contract offer. There is a substantial body of empirical literature that establishes the benefits of customer satisfaction for firms.

Page 65

3.2.1.1 PURPOSE
Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty." "Customer satisfaction data are among the most frequently collected indicators of market perceptions. Their principal use is twofold:" "Within organizations, the collection, analysis and dissemination of these data send a message about the importance of tending to customers and ensuring that they have a positive experience with the companys goods and services." "Although sales or market share can indicate how well a firm is performing currently, satisfaction is perhaps the best indicator of how likely it is that the firms customers will make further purchases in the future. Much research has focused on the relationship between customer satisfaction and retention. Studies indicate that the ramifications of satisfaction are most strongly realized at the extremes." On a five-point scale, "individuals who rate their satisfaction level as '5' are likely to become return customers and might even evangelize for the firm. (A second important metric related to satisfaction is willingness to recommend. This metric is defined as "The percentage of surveyed customers who indicate that they would recommend a brand to friends." When a customer is satisfied with a product, he or she might recommend it to friends, relatives and colleagues. This can be a powerful marketing advantage.) "Individuals who rate their satisfaction level as '1,' by contrast, are unlikely to return. Further, they can hurt the firm by making negative comments about it to prospective customers. Willingness to recommend is a key metric relating to customer satisfaction."

3.2.1.2 CONSTRUCTION
Organizations need to retain existing customers while targeting non-customers. Measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. "Customer satisfaction is measured at the individual level, but it is almost always reported at an aggregate level. It can be, and often is, measured along various dimensions. A hotel, for example, might ask customers to rate their experience with its front desk and check-in service,
Page 66

with the room, with the amenities in the room, with the restaurants, and so on. Additionally, in a holistic sense, the hotel might ask about overall satisfaction 'with your stay.'" As research on consumption experiences grows, evidence suggests that consumers purchase goods and services for a combination of two types of benefits: hedonic and utilitarian. Hedonic benefits are associated with the sensory and experiential attributes of the product. Utilitarian benefits of a product are associated with the more instrumental and functional attributes of the product (Batra and Athola 1990). Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization's products. Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance. This provides the measurer with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according to expectation. The usual measures of customer satisfaction involve a survey with a set of statements using a Likert Technique or scale. The customer is asked to evaluate each statement and in term of their perception and expectation of performance of the organization being measured. Their satisfaction is generally measured on a five-point scale.

Page 67

"Customer satisfaction data can also be collected on a 10-point scale." "Regardless of the scale used, the objective is to measure customers perceived satisfaction with their experience of a firms offerings." It is essential for firms to effectively manage customer satisfaction. To be able do this, we need accurate measurement of satisfaction. Good quality measures need to have high satisfaction loadings, good reliability, and low error variances. In an empirical study comparing commonly used satisfaction measures it was found that two multi-item semantic differential scales performed best across both hedonic and utilitarian service consumption contexts. According to studies by Wirtz & Lee (2003), they identified a six-item 7-point semantic differential scale (e.g., Oliver and Swan 1983), which is a six-item 7-point bipolar scale, that consistently performed best across both hedonic and utilitarian services. It loaded most highly on satisfaction, had the highest item reliability, and had by far the lowest error variance across both studies. In the study, the six items asked respondents evaluation of their most recent experience with ATM services and ice cream restaurant, along seven points within these six items: please me to displeased me, contented with to disgusted with, very satisfied with to very dissatisfied with, did a good job for me to did a poor job for me, wise choice to poor choice and happy with to unhappy with. A semantic differential (4 items) scale (e.g., Eroglu and Machleit 1990), which is a four-item 7point bipolar scale, was the second best performing measure, which was again consistent across both contexts. In the study, respondents were asked to evaluate their experience with both products, along seven points within these four items: satisfied to dissatisfied, favorable to unfavorable, pleasant to unpleasant and I like it very much to I didnt like it at all The third best scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g., Westbrook 1980). Again, the respondents were asked to evaluate their experience on both ATM services and ice cream restaurants, along seven points within delighted to terrible. It seems that dependent on a trade-off between length of the questionnaire and quality of satisfaction measure, these scales seem to be good options for measuring customer satisfaction in academic and applied studies research alike. All other measures tested consistently performed worse than the top three measures, and/or their performance varied significantly across the two

Page 68

service contexts in their study. These results suggest that more careful pretesting would be prudent should these measures be used. Finally, all measures captured both affective and cognitive aspects of satisfaction, independent of their scale anchors. Affective measures capture a consumers attitude (liking/disliking) towards a product, which can result from any product information or experience. On the other hand, cognitive element is defined as an appraisal or conclusion on how the products performance compared against expectations (or exceeded or fell short of expectations), was useful (or not useful), fit the situation (or did not fit), exceeded the requirements of the situation (or did not exceed).

3.2.1.3 METHODOLOGIES
American Customer Satisfaction Index (ACSI) is a scientific standard of customer satisfaction. Academic research has shown that the national ACSI score is a strong predictor of Gross Domestic Product (GDP) growth, and an even stronger predictor of Personal Consumption Expenditure (PCE) growth. On the microeconomic level, academic studies have shown that ACSI data is related to a firm's financial performance in terms of return on investment (ROI), sales, long-term firm value (Tobin's q), cash flow, cash flow volatility, human capital performance, portfolio returns, debt financing, risk, and consumer spending. Increasing ACSI scores has been shown to predict loyalty, word-of-mouth recommendations, and purchase behavior. The ACSI measures customer satisfaction annually for more than 200 companies in 43 industries and 10 economic sectors. In addition to quarterly reports, the ACSI methodology can be applied to private sector companies and government agencies in order to improve loyalty and purchase intent. Two companies have been licensed to apply the methodology of the ACSI for both the private and public sector: CFI Group, Inc. and Foresee Results apply the ACSI to websites and other online initiatives. ASCI scores have also been calculated by independent researchers, for example, for the mobile phones sector, higher education, and electronic mail. The Kano model is a theory of product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano that classifies customer preferences into five categories:
Page 69

Attractive, One-Dimensional, Must-Be, Indifferent, Reverse. The Kano model offers some insight into the product attributes which are perceived to be important to customers. SERVQUAL or RATER is a service-quality framework that has been incorporated into customer-satisfaction surveys (e.g., the revised Norwegian Customer Satisfaction Barometer) to indicate the gap between customer expectations and experience. J.D. Power and Associates provides another measure of customer satisfaction, known for its topbox approach and automotive industry rankings. J.D. Power and Associates' marketing research consists primarily of consumer surveys and is publicly known for the value of its product awards. Other research and consulting firms have customer satisfaction solutions as well. These include A.T. Kearney's Customer Satisfaction Audit process, which incorporates the Stages of Excellence framework and which helps define a companys status against eight critically identified dimensions. For Business to Business (B2B) surveys there is the InfoQuest box. This has been used internationally since 1989 on more than 110,000 surveys (Nov '09) with an average response rate of 72.74%. The box is targeted at "the most important" customers and avoids the need for a blanket survey. In the European Union member states, many methods for measuring impact and satisfaction of egovernment services are in use, which the eGovMoNet project sought to compare and harmonize. These customer satisfaction methodologies have not been independently audited by the Marketing Accountability Standards Board (MASB) according to MMAP (Marketing Metric Audit Protocol).

Page 70

CHAPTER 4 RESEARCH METHODOLOGY

CHAPTER 4 RESEARCH METHODOLOGY

4.1 OBJECTIVE OF THE RESEARCH
To know the residential & industrial areas in which DGVCL and Torrent power Ltd. are serving. To study the different charges of electricity in DGVCL and Torrent power Ltd. To study the billing facility and payment system of DGVCL and Torrent power Ltd. To study the issues related to service and power cuts in DGVCL and Torrent power Ltd. To know the satisfaction level of the customers towards their power supplier either DGVCL or Torrent power Ltd.

4.2 THE RESEARCH PROCESS

Following are the research process which can be useful to determine the project and project title also. There are mainly eight steps of the following charts:FORMULATING THE RESEARCH PROBLEM CHOICE OF RESEARCH DESIGN DETERMINING SOURCES OF DATA DESIGNING DATA COLLECTION FORMS DETERMINING SAMPLING DESIGN AND SAMPLING SIZE ORGANIZING AND CONDUCTING THE FIELD SURVEY PREPARING THE RESEARCH REPORT
Page 70

4.2.1 Formulating the Research Problem

It is very first and most important step in the applied research process because, poorly defined problem will not yield useful results. It is rightly said A problem well defined is half solved. Poorly defined problem cause confusion and do not allow to develop a good research design. In this study researcher set problem of Comparative study between DGVCL (Dakshin Gujarat Vij Company Limited) and Torrent power Ltd..

4.2.1.1 Sampling Unit

The individuals or objects whose characteristics are to be measures are called sampling unit. The sampling units always identify the objects to be studies. It is necessary that the universe is well defined. The researcher want to study on Comparison between Dakshin Gujarat Vij Company Limited and Torrent power Ltd., so the researcher may consider all population of Surat city, as sampling unit.

4.2.1.2 Time and Space Boundaries

As regard time and boundaries, we find that the two universes are again different. In the first instance, a precise date, viz. 30th January, 1990 is given while in the second instance the entire month of January is given. Similarly, two universes are different in terms of space-the buyer universe specifies stores located in Delhi while the shoppers universe specifies the Delhi metropolitan area which should be a larger territory than the former. The researcher set time and space boundaries as Comparative study between DGVCL (Dakshin Gujarat Vij Company Limited) and Torrent power Ltd. with respect to Surat city in NovemberDecember 2011.

Page 71

4.2.2 Choice of Research Design

The research design is the blue print of the study. A research design is a logical and systematical planning and it helps directing a piece of research. Types of research design are following:

Research Design

Exploratorystu dy

Descriptive Study

Causal Study

Litrature Search

Experince Survey

Focus Group

Analysis of Selected Cases

Longitudinal

Cross Section

Natural Ex.

Controlled Ex.

True Panel

Omnibus Panel

Sample Surver

Time Series

Cross Sectional Designs

Combination of These Two Design

Descriptive research - Cross Sectional research design was taken by the researcher for The Study on Retailer Attitude towards CFL of the Ajanta Quartz With Reference To Surat City Because this, research design is focused on accurate descriptive of the variable present in the problem. A descriptive study is undertaken when the researcher wants to know the characteristics of certain groups such as age, sex, education level, income, occupations, etc.

4.2.3 Determining Sources of Data

After research design has been selected, the other important step is to collect the required data. There are two types of data: 1) Primary Data, 2) Secondary Data.

Page 72

For the purpose of the study, primary data is collected by directly personal interview of the respondents to collect their view about DGVCL and Torrent power Ltd... This was flat necessary because people in gravel have a tendency in answering question. There are some secondary data collected from Internet, websites, magazine to collect the proper information and the industry details about DGVCL and Torrent power Ltd. And also power sector of India.

4.2.4 Designing Data Collection Forms

Once the decision in favor of collection or sources of data, one has to decide the mode of collection. The two methods are available: 1) Observation Method o This method suggests that data are collect through ones observation. If the researcher is a keen observer, with integrity he would be in a position to observe and record data faithfully and accurately. While the observational method may be suitable in the case of some studies, several things of interest such as attitudes, opinions, motivations and other intangible states of mind cannot be observed. 2) Survey Method o In marketing research, field surveys are commonly used to collect primary data from the respondents. Surveys can be 1) Personal, 2) Telephonic, 3) Mail, 4) Diary. The researcher decided to collect data through primary data collection; the researcher was selecting the survey method for collection of primary data. In the survey method, the researcher selects personal survey for data collection. For the collection of required primary data, the researcher prepared the questionnaire, which is enclosed at the end of the topic. The questionnaire includes two types of question that is single choice, multi-choice and rank question.

Page 73

4.2.5 Determining Sampling Design and Sampling Size

When the researcher had decided to carry out a filed survey, he had to decide whether it is to be a census survey or sample survey. The researcher was select a sample survey for his research as it has an overwhelming advantages over a senses survey and it is not possible for researcher to meet every and each retailer of Surat city as it has population something around 9 Lakh. Sampling method: The researcher was selected Surat city of Gujarat state as his sample site and area sampling, convenience sampling and snow-ball sampling as sampling method. Sample size: In sample size the researcher have taken 128 samples as a sample size which include 128 as a personal interview.

4.2.6 Organizing and conducting The Field Survey

After selection of sample size and sample method, the researcher was went for a field survey. The researcher was collected required data by filing up the questionnaire from various respondents.

4.2.7 Processing and Analyzing the Collected Data

When the researcher was complete his field survey, the researcher processed the collected data and analyze it in a systematic manner so as the researcher derived results from it. In order to derive meaningful outcomes from the data, the researcher formed the data in tables and then uses various statistical tools and interprets the data as it shown in the chapter of findings and analysis of data.

4.2.8 Preparing the Research Report

After data had been tabulated, interpreted and analyzed, the researcher prepared his report embodying the findings of his research study and his recommendations

Page 74

CHAPTER 5 DATA ANALYSIS & INTERPRETATION

CHAPTER 5 DATA ANALYSIS & INTERPRETATION

1) Which power connection do you have? Option DGVCL Torrent Total Responses 33 95 128

26%

DGVCL Torrent

74%

Interpretation: - 26% have DGVCL and 74% Torrent Power Ltd...

Page 75

2) What is your type of area? Option Industrial Residential Total Responses 60 68 128

47% 53%

Industrial Residential

Interpretation: - 47% from industrial area and 53 % from residential area.

Page 76

3) What is your average amount of electricity bill per month? Option <1000 1000 - 5000 5000 - 10000 10000 - 25000 >25000 Total Responses 29 39 11 7 42 128

23% 33% <1000 1000 - 5000 5000 - 10000 10000 - 25000 5% 9% >25000 30%

Interpretation: - 23% get < 1000 ; 30% 1000 to 5000 ; 9% 5000 to 10000 ; 5%
10000 to 25000 ; 33% > 25000 .

Page 77

4) What is the rate of power cuts of electricity in a week? Option No Cut 1 - 2 Times 2 - 4 Times >4 Times Total Responses 93 19 12 4 128

3% 9%

15%

No Cut 1 - 2 Times 2 - 4 Times >4 Times 73%

Interpretation: - 73% people dont have power cut.

Page 78

5) If there is a power cut then, how much is the time period of power cut in a day? Option < 1 Hour 1 - 2 Hours 2 - 3 Hours >3 Hour Total Responses 10 13 11 2 36

5% 28% 31% < 1 Hour 1 - 2 Hours 2 - 3 Hours >3 Hour

36%

Interpretation: - 28% people have power cut for < 1 hour; 36% for 1- 2 hours; 31% for 2
hours; 5% for > 3 ours.

Page 79

6) Rate the following features of your power connection meter. 6.1) High rate Response (Fi) 36 62 16 8 6 Total = 128 WAM Wi 5 4 3 2 1 Fi Wi 180 248 48 16 6 498

60.00% 50.00% 40.00% 30.00% 48.44% 20.00% 28.13% 10.00% 12.50% 0.00% Excellent Good Average 6.25% Poor 4.69% Very Poor

Interpretation: - 28% people are rate excellent; 48.44% to good; 12.50% to average; 6.25% to
poor; 4.96 to very poor.

Page 80

6.2)

Failures Response (Fi) 15 32 25 29 27 Total = 128 WAM Wi 5 4 3 2 1 Fi Wi 75 128 75 58 27 363

30.00% 25.00% 20.00% 15.00% 25.00% 10.00% 5.00% 0.00% Excellent Good Average Poor Very Poor 11.72% 19.53% 22.66% 21.09%

Interpretation: - 11.72% people are rate excellent; 25.00% to good; 19.53% to average;
22.66% to poor; 21.09% to very poor.

Page 81

6.3)

High maintenance required Response (Fi) 12 23 33 38 22 Total = 128 WAM Wi 5 4 3 2 1 Fi Wi 60 92 99 76 22 349

35.00% 30.00% 25.00% 20.00% 15.00% 25.78% 10.00% 5.00% 0.00% Excellent Good Average Poor Very Poor 9.38% 17.97% 17.19% 29.69%

Interpretation: - 9.38% people are rate excellent; 17.97% to good; 25.78% to average; 29.69%
to poor; 17.19% to very poor.

Page 82

6.4)

Quality of meter Response (Fi) 31 44 35 13 5 Total = 128 WAM Wi 5 4 3 2 1 Fi Wi 155 176 105 26 5 467

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average Poor 24.22% 34.38% 27.34%

10.16% 3.91% Very Poor

Interpretation: - 24.22% people are rate excellent; 34.38% to good; 27.34% to average;
10.16% to poor; 3.91% to very poor.

Page 83

6.5)

Incorrect reading of the meter Response (Fi) 5 24 23 47 29 Total = 128 WAM Wi 5 4 3 2 1 Fi Wi 25 96 69 94 29 313

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 3.91% Excellent Good Average Poor Very Poor 18.75% 22.66% 17.97% 36.72%

Interpretation: - 3.91% people are rate excellent; 18.75% to good; 17.97% to average; 36.72%
to poor; 22.66% to very poor.

Page 84

6.6) Weighted Average Mean High rate Failures High maintenance required Quality of meter Incorrect reading of the meter 3.89 2.84 2.73 3.65 2.45

4.05 3.85 3.65 3.45 3.25 3.05 2.85 2.65 2.45 2.25 High rate Failures High maintenance required Quality of meter 2.84 2.73 2.45 Incorrect reading of the meter 3.89 3.65

Interpretation: - High rate and quality of meter are most affective features.

Page 85

7) Rate the following statements about your power supplier. 7.1) The charges of electricity are very high. Response (Fi) 55 55 13 0 5 Total = 128 Wi 5 4 3 2 1 Fi Wi 275 220 39 0 5 539

WAM

50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average 10.16% 0.00% Poor 3.91% Very Poor 42.97% 42.97%

Interpretation: - 42.97% people are rate excellent; 42.97% to good; 10.16% to average; 3.91%
to very poor.

Page 86

7.2) The taxes imposed by government are very high Response (Fi) 53 54 15 2 4 Total = 128 Wi 5 4 3 2 1 Fi Wi 265 216 45 4 4 534

WAM

45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average 11.72% 1.56% Poor 3.13% Very Poor 41.41% 42.19%

Interpretation: - 41.41% people are rate excellent; 42.19% to good; 11.72% to average; 3.13%
to very poor.

Page 87

7.3) The bill paying facility is not proper. Response (Fi) 15 15 44 32 22 Total = 128 Wi 5 4 3 2 1 Fi Wi 75 60 132 64 22 353

WAM

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average Poor Very Poor 11.72% 11.72% 34.38% 25.00% 17.19%

Interpretation: - 11.72% people are rate excellent; 11.72% to good; 34.38% to average;
25.00% to poor: 17.19% to very poor.

Page 88

7.4) The complaints are not taken care. Response (Fi) 13 22 19 46 28 Total = 128 Wi 5 4 3 2 1 Fi Wi 65 88 57 92 28 330

WAM

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average Poor Very Poor 10.16% 21.88% 17.19% 14.84% 35.94%

Interpretation: - 10.16% people are rate excellent; 17.19% to good; 14.84% to average;
35.94% to poor: 21.88% to very poor.

Page 89

7.5) After due date billing charges are very high. Response (Fi) 15 21 21 38 33 Total = 128 Wi 5 4 3 2 1 Fi Wi 75 84 63 76 33 331

WAM

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Excellent Good Average Poor Very Poor 11.72% 29.69% 25.78% 16.41% 16.41%

Interpretation: - 11.72% people are rate excellent; 16.41% to good; 16.41% to average;
29.69% to poor: 25.78% to very poor.

Page 90

7.6) Weighted Average Mean The charges of electricity are very high. 4.21

The taxes imposed by government are very high 4.17 The bill paying facility is not proper. The complaints are not taken care. After due date billing charges are very high. 2.76 2.58 2.59

4.40 4.20 4.00 3.80 3.60 3.40 3.20 3.00 2.80 2.60 2.40

4.21

4.17

2.76

2.58

2.59

The charges of The taxes The bill paying The complaints After due date electricity are imposed by facility is not are not taken billing charges very high. government proper. care. are very high. are very high

Interpretation: - The charges of electricity and the taxes imposed by government are most
affective features.

Page 91

8) Are you satisfied with the paper quality of your electricity bill? Option Yes No Total Responses 96 32 128

25%

Yes No

75%

Interpretation: - 75% are satisfied with paper quality of bill.

Page 92

9) Have you ever called to DGVCL or Torrent power? Option Yes No Total Responses 31 97 128

24%

Yes No

76%

Interpretation: -Only 24% are called to visit office.

Page 93

10) Is it safe to use your power connection? Option Yes No Total Responses 118 10 128

8%

Yes No

92%

Interpretation: - 92% are saying that use of electric power connection is safe.

Page 94

CHAPTER 6 FINDING & CONCLUSION

CHAPTER 6 FINDING & CONCLUSION

6.1 FINDING
26% have connection of DGVCL and 74% have connection of Torrent Power Ltd... 47% respondent from industrial area and 53 % from residential area 23% respondent get < 1000 ; 30% 1000 to 5000 ; 9% 5000 to 10000 ; 5% 10000 to 25000 ; 33% > 25000 . 73% respondent doesnt have power cut. 28% respondent have power cut for < 1 hour; 36% for 1- 2 hours; 31% for 2 hours; 5% for > 3 ours. High rate and quality of meter are most affective features; because their mean are 3.89 and 3.65 respectively. The charges of electricity and the taxes imposed by government are most affective features.; because their mean are 4.21 and 4.17 respectively. 75% respondents are satisfied with paper quality of bill. Only 24% respondents are called to visit office. 92% respondents are saying that use of electric power connection is safe.

Page 95

6.2 CONCLUSION

Page 96

CHAPTER 7 SUGGESTION

CHAPTER 7 SUGGESTION

Page 97

BIBLIOGRAPHY
o Books:
Name Marketing Research: Research Design Business Research Method Statistical Methods Author G.C. Beri Donald R. Cooper & Pamela S. Schindler S P Gupta Publication Tata McGraw-Hill

Tata McGraw-Hill Sultan Chand & Sons Publishers

o Websites:
www.en.wikipedia.org http://www.dgvcl.com/ www.torrentpower.com http://www.torrentlimited.com/milestones_power.htm www.sebi.gov.in

Page 98

QUESTIONNAIRE
I, Alpesh Maniya, student of SPB College of Management (BBA), Surat, is conducting a survey Comparative study between DGVCL (Dakshin Gujarat Vij Company Limited) and Torrent power Ltd. with reference to Surat City. I will be thankful, if you give proper response to the questions. The information you share with me is only used for academic purpose. Your personal details will be kept secret.
Thank you for spending your valuable time. Alpesh Maniya

1) Which power connection do you have? DGVCL 2) What is your type of area? Industrial Residential Torrent power Ltd.

3) What is your average amount of electricity bill per month? Less than 1000 5000 to 10,000 More than 25,000 4) What is the rate of power cuts of electricity in a week? No Power cut 3 to 4 Times 1 to 2 Times More than 4 Times 1000 to 5000 10,000 to 25,000

5) If there is a power cut then, how much is the time period of power cut in a day? Less than an hour 2 to 3 hours 1 to 2 hours More than 3 hours
Page 99

6) Rate the following features of your power connection meter. Excellent High Rate Failures High Maintenance Required Quality of Meter Incorrect reading of the meter Good Average Poor Very Poor

7) Rate the following statements about your power supplier. Strongly Agree The charges of electricity are very high. The taxes imposed by government are very high. The bill paying facility is not proper. The complaints are not taken care. After due date billing charges are very high. Agree Neutral Disagree Strongly Disagree

8) Are you satisfied with the paper quality of your electricity bill? Yes No

9) Have you ever called to DGVCL or Torrent power? Yes No

10) If yes, then why do you call to DGVCL or Torrent power? ________________________________________________________________

Page 100

11) Is it safe to use your power connection? Yes 12) If no then please specify why? ________________________________________________________________ ________________________________________________________________ 13) Give your suggestions. ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ No

Personal Details Name:Age: Phone No:Address:E-mail ID:______________________________________________ ___ ___________________________ ______________________________________________________ ___________________________
Employed Self employed

Occupation:
Student Household

__________THANK YOU_________
Page 101