Industry Analysis

Indian Power Sector

Arjun Yadav
IIM Indore, Mumbai

Key Success Factors

Market Position: The company with strong operating
performance and favorable terms of services can position itself
better in the industry.

Regulation: Since the industry is highly regulated, companies

must be able to comply with the regulations and be flexible to
changes.

Cost and Operation Management: Managing costs is an

important concern as selling prices are not flexible and fuel prices
are irregular. Downstream efficiencies for better transmission and
distribution. Operational success will lead to efficiency.

Diversification: Companies need to diversify its market

segments, type of generation plants and location, in order to keep
their business sustainable.

PESTEL and Industry

analysis
Political / Government policies Analysis:
The low allocation of budget in power sector hampered
the rural & urban electrification, and power generation
capacity.
The different pricing regimes and distribution policies of
state governments further aggravated the power
situation.
As the state government paid these subsidies irregularly,
the SEBs did not plan any long term project
implementation i.e. capacity expansion, network
extension, regular maintenance and system
improvement. This also affected the T&D losses of SEBs.

PESTEL and Industry

analysis
Economic Analysis:
Multiple drivers (industrial expansion, growing percapita incomes) leading to growth in power demand
- this is set to continue in the future.
During FY1015, GDP growth is likely to average
8.08.5 %
India set to become a global manufacturing hub
with investments across the value chain
Power consumption estimated to increase from
821.2 TWh in 2013 to 1,433.2 TWh by 2022
Indias power demand expected to rise up to 1,915
TWh by FY22

PESTEL and Industry

analysis
Technological Analysis:
Indiatofacesignificantchallengesinachievinghig
h
CO2reductioninpowergeneration,whilealsome
etingthe predictedgrowth indemandandsupply.
Acceleratedexploitation of naturalresources
andmoretransmission and distribution (T&D)
capacity
areessentialtoovercomethecurrentproblems.
Increasedcompetition,additionalequipmentsuppl
ycapacityandotheractionstoinvolvetheprivate

PESTEL and Industry

analysis
Environmental Analysis:

Openness towards renewable

Effect on flora and fauna
Air and Water pollution
Waste Management
Environment Laws
Poor health level

energy

Social Analysis:

Poor health level

Food insecurity
Homelessness
Loss of assets
Landlessness
Joblessness

PESTEL and Industry

analysis
Legal & Regulatory Analysis:
If government doesnt own sufficient resources to develop
power projects, it has option to issue the license to others
for these projects.
There is legal frame work for laying down wires and other
works but there was no regulation regarding the tariff,
power generation, and infrastructure development.
There are some provisions to maintain the relationship
between licensee and consumer but there was no
regulation for efficiency of power plant, tariff,
environmental issues, and infrastructure development.

The value chain of the

industry
Prior to 2003, the market was vertically
integrated with state owned boards, causing
monopoly and price regulation.

The value chain starts from the producers.

Forwarded to generation facilities where they are
converted to power.
Generators pass it on to the distributors.
Supplied to the consumers over the network.

Market Leader
NTPC has a significant
presence in the value
chain of power
generation business.
Current generating
capacity of 30,144 MW plans to become a 75,000
MW company by 2017.

NTPC has 18.79% of the total national capacity it

contributes 28.60% of total power generation due
to its focus on high efficiency.
NTPC thus became a listed company in November
2004 with the government holding 89.5% of the
equity share capital.

Second Largest Player

Presence in all the segments of the power sector Generation (thermal, hydro, solar and wind),
Transmission, Distribution and Trading. It is one of
the largest renewable energy players in India.
Its international presence includes strategic
investments and collaborations in other countries.
With its track record of technology leadership,
project execution excellence, world class safety
processes, customer care and driving green
initiatives, Tata Power is poised for a multi-fold
growth.