as per leading market research firm rncos

8/8/2019 As Per Leading Market Research Firm RNCOS

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As per leading market research firm RNCOS (2008) report on ³Indian Power

Sector Analysis´ more than 64% of India¶s total installed capacity is contributed

by thermal power. Significant jump in unit size and steam parameters will result inhigher efficiencies and better economics for the Indian power sector.

Western region accounts for largest share (30.09%) of the installed power in India

followed by Southern region with 27.76%.

Unbalanced growth remains the cause of concern for the Indian power sector. Onlyabout 56% of households have access to electricity, with the rural access being

44% and urban access about 82%.

Southern region remains the dominant region in renewable energy source

accounting for more than 57% of the total renewable energy installed capacity.

SIZE

Generation capacity of 141 GW; 663 billion units produced (1 unit = 1kwh)-

January 2008.

STRUCTURE

Majority of Generation, Transmission and Distribution capacities are with either

public sector companies or with State Electricity Boards (SEBs)

Private sector participation is increasing especially in Generation and Distribution

Distribution licences for several cities are already with the private sector

Three large ultra-mega power projects of 4000MW each have been recently

awarded to the private sector on the basis of global tenders.

MAIN PLAYERS



Major players in the Power sector can be broadly divided into public, private and

international private sectors.

G - Generation T - Transmission D - Distribution

Source: Ministry of Power, Capitaline

BLUEPRINT OF MINISTRY

The Ministry of Power has set a goal - Mission 2012: Power for All.

A comprehensive Blueprint for Power Sector development has been prepared

encompassing an integrated strategy for the sector development with following

objectives:-

Sufficient power to achieve GDP growth rate of 8%

Reliable of power

Quality power

Optimum power cost

Commercial viability of power industry

Power for all

Strategies To Achieve The Objectives:

Power Generation Strategy with focus on low cost generation, optimization of

capacity utilization, controlling the input cost, optimisation of fuel mix,

Technology upgradation and utilization of Non Conventional energy sources

Transmission Strategy with focus on development of National Grid including

Interstate connections, Technology upgradation & optimization of transmission

cost.



Distribution strategy to achieve Distribution Reforms with focus on System

upgradation, loss reduction, theft control, consumer service orientation, quality

power supply commercialization, Decentralized distributed generation and supplyfor rural areas

Regulation Strategy aimed at protecting Consumer interests and making the sector

commercially viable

Financing Strategy to generate resources for required growth of the power

sectorConservation Strategy to optimise the utilization of .electricity with focus on

Demand Side management, Load management and Technology upgradation to provide energy efficient equipment / gadgets.

Communication Strategy for political consensus with media support to enhance the

genera; public awareness.

General Performance Review

The fiscal year 2008-09 began amidst financial slowdown,which decelerated theeconomic growth of India to 6.7%.This depicted a decline of 2.1% from the average growthrate of 8.8% recorded in the previous five years. While theGDP growth in the first two quarters was above 7.5%, it fellsharply in the third and fourth quarter to 5.8% as comparedto GDP growth rate of 9.3% and 8.6% recorded in Q3 and

Q4 of 2007-08.The moderation in growth for 2008-09 is mainly attributed

to steep slowdown in growth in industry to 3.9 per cent from8.1 per cent in 2007-08. Within industry, the manufacturing,electricity, gas and water supply and construction activitiesdeclined sharply, while growth in mining and quarryingsector showed a marginal growth. Growth in agriculture,



forestry and fi sheries declined from 4.9% in 2007-08 to 1.6%in 2008-09. The growth slowdown in services sector wasmoderate. It was estimated at 9.7% in 2008-09 as comparedto 10.9% in 2007-08.While the market witnessed slowdown in new investments,the rise in inflation, high interest rates and liquidity crunchalso led to cancellation, renegotiation and delay of many

planned projects in India. To counter this negative falloutof the global economic slowdown, the Indian Governmentimplemented fi scal stimulus packages to boost demandand increased expenditure on public projects. The RBI took a number of monetary easing and liquidity enhancingmeasures to facilitate fl ow of funds to meet the needs of infrastructure sectors.

As a result, in the second quarter (July-September 2009),the economic indicators were looking up. After growing by6.1% in the fi rst quarter, the GDP is estimated to have grown

by 6.8% in the second quarter. The growth was led by anestimated 7% growth in the industrial sector, as comparedto 5% in the fi rst quarter. While, the industry as well as

services sector were on recovery track, the performance of the agriculture sector remained a cause of concern.Considering the overall market conditions during the lastfi scal of the company (October ± September 2009), Siemenscontinued to achieve stable performance.Further reviews on each of Siemens¶ sector businesses aregiven separately in the following paragraphs:

Industry Sector

The Industry sector was impacted the most as a result of the global economic slowdown, with growth rates decliningfrom 8.1% in FY08 to 3.9% in FY09. With an acute liquiditycrunch, most investments were deferred and projects werescaled down or deferred in sectors such as Automotive,

Textiles, Paper, FMCG, F&B, Cement, Metal Technologiesand other infrastructure projects. This decline in demandled to severe price pressures in the market with companiesanxious to fi ll up idle capacities. The heartening fact was thatthe Railway sector had a marginal impact of the economiccrisis. The freight and passenger loading did not decline inabsolute terms and registered a growth over previous years.



Considering the overall market pressures, Siemens IndustrySector, which is a mix of short and long cycle businesses

performed on expected lines during the last fi scal. It secureda good order intake and increased its revenue by 12% withstrong order backlog. Its profi t margin remained good at 5%.A major contributor to the Industry Sector performance wasthe Mobility division, which grew by 48% over the previous

fi scal. Siemens Mobility division is a key player in Rail basedtransport solutions. With the addition of InfrastructureLogistics and Traffi c Solutions business, the division grew toa full spectrum of Mobility solutions provider. It continuedto gain market share due to its state-of-the-art technologyand in-depth local infrastructure including manufactureof propulsion equipment at Nashik and Kalwa Works,

progressive localization of baggage handling solutions, a vastnetwork of service infrastructure and dedicated personnel.The order intake of Industry Solutions (IS) division, whichhandles project business, was affected due to postponementof investment decisions in the respective market segments.With some large order back log, the turnover of IS

division remained steady. Industry Automation and DriveTechnologies (IA&DT), the product and solution division wasalso moderately affected and its order intake was a refl ectionof prevailing market trends.With its edge in providing innovative and customized products& solutions, Siemens IA&DT division won several noteworthyorders amidst stiff competition and price pressures. Thedivision also signed important alliances with Steel Authorityof India Ltd., Indian Machine Tools Manufacturers Association(IMTMA) and with the Indo Danish Tools Room (IDTR)Jamshedpur to impart technical training to their employeesand end customers. IA&DT further expanded their training

Siemens Power Group in India

Provides in

Power Generation ««. solutions, systems , products and services for:

y Gas Turbine & Steam Turbine based Power plants



and services produced. In economics, "economic growth" or "economic growth

theory" typically refers to growth of potential output, i.e., production at "full

employment," which is caused by growth in aggregate demand or observed

output.As economic growth is measured as the annual percent change of National

Income it has all the advantages and drawbacks of that level variable. But peopletend to attach a particular value to the annual percentage change, perhaps since it

tells them what happens to their pay check.

The real GDP per capita of an economy is often used as an indicator of the average

standard of living of individuals in that country, and economic growth is therefore

often seen as indicating an increase in the average standard of living.However,

there are some problems in using growth in GDP per capita to measure general

well being.GDP per capita does not provide any information relevant to thedistribution of income in a country. GDP per capita does not take into account

negative externalities from pollution consequent to economic growth. Thus, the

amount of growth may be overstated once we take pollution into account. GDP per

capita does not take into account positive externalities that may result from

services such as education and health. GDP per capita excludes the value of all the

activities that take place outside of the market place (such as cost-free leisure

activities like hiking).

Economists are well aware of these deficiencies in GDP, thus, it should always be

viewed merely as an indicator and not an absolute scale. Economists have

developed mathematical tools to measure inequality, such as the Gini Coefficient.

There are also alternate ways of measurement that consider the negative

externalities that may result from pollution and resource depletion (see Green

Gross Domestic Product.)The flaws of GDP may be important when studying

public policy, however, for the purposes of economic growth in the long run it

tends to be a very good indicator. There is no other indicator in economics which is

as universal or as widely accepted as the GDP.Economic growth is exponential,

where the exponent is determined by the PPP annual GDP growth rate. Thus, the

differences in the annual growth from country A to country B will multiply up over

the years. For example, a growth rate of 5% seems similar to 3%, but over two

decades, the first economy would have grown by 165%, the second only by 80%

(source: wikipedia).



India¶s Second Quarter GDP Rises To 8.8%Published: 9/5/2010 1:59:44 PM By: TradingEconomics.com, MarketWatch

India's economy expanded 8.8% in thesecond quarter from a year earlier, comparedto an 8.6% on-year expansion in the first,lifted by robust activity in manufacturing.

Agricultural output along with strong

development in the Industrial and Miningsector has helped to boost the Indianeconomy. Agricultural output rose 2.8 per

cent y-o-y thanks to improved harvests.Industrial production increased by 12% andin the mining sector by 9%.

However, in spite of strong supply data, private consumption slumped to 0.3% y-o-yin Q2 from 2.6% in Q1, fixed investment hasdropped to 3.7% from 17.7%, governmentconsumption growth was negative and bothexport and import growth contracted.

The Reserve Bank Of India has stated that ithad seen an annual growth of 8.5% steadily.The main priority of the Reserve Bank is tocurb the ongoing inflation, which peaked at11% last month. Interest rates have beenincreased by the banks to contain theinflation, but it could slow down the growthof the Indian economy in the coming months.

But even thought there has been a rise in theinterest rates there hasn¶t been much changein the distribution of loans, the Indiancustomer is hardly affected with the hiked

interest rates.

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Global Economics

The Indian economy had grown by 5.4 per cent in 2001-02, which included a

growth rate of 3.3 percent in the India Industry Sector. While the Indian Industry

Sector grew by 3.3 per cent, the various segments in the industry like construction

showed a lower growth in 2000-01, whereas, there was a marked improvement in

the growth rates of manufacturing (from 4.2 per cent in 1999-2000 to 6.7 per cent

in 2000-01) and mining and quarrying (from 2 per cent to 3.3 per cent during the

same period). The growth rate of electricity, gas and water supply remained almost

unchanged at around 6.2 per cent for both 1999-2000 and 2000-01.

In the India Industry Sector the most striking force has been the IT Industry sector.

The Indian software industry has grown at a massive rate from a mere US $ 150

million in 1991-92 to a staggering US $ 5.7 billion (including over $4 billion worth

of software exports) in 1999-2000. No other Industry in India has performed this

well against the global competition. The IT sector has helped the India Industry

Sector to move ahead in leaps and bounds. The BPO industry has also been a pillar

of success for the India Industry Sector. As more and more industries come up the

future holds good prospects for the India Industry Sector.

India Industry Sector

The India Industry Sector and agricultural sector now comprises of more than half

of India's GDP which amounted to 51.16 per cent in 1998-99. The number of

Industries in India have multiplied by a large amount in the last few years. The



various Sectors in Indian Industry are gaining more and more importance. As India

is a developing country the Iron & Steel Industry in India, IT Industry in India,

Indian Travel & Tourism Industry, Food and Beverage Industry in India and

various other types of industries are coming to the forefront and taking the center

stage.

FDI Inflows to Power

The Power Sector in India-

The government of India aims at reaching 2, 00,000 MW by the year 2012. The

regional transmission network along with inter-regional capacity to transmit power

will be expanded to ensure this growth. The total power generation in India has

increased from 264.3 Billion Units (BUs) during 1990-91 to 551.7 Billion Units

during 2006-07(up to Jan.'07). The investments required in the execution of this

task will be generated from public-private partnerships in the sector.

Power projects involving generation and distribution tasks are allowed in all types

and sizes

As per the Electricity Act 2003, trading in power is activated

A duration of 30 years will given as a renewable license period

Thermal power plants will get a return of 16 percent on equity and will get 68.5

percent PLF

The import of equipments will be entitled to 20 percent of import duty



100% FDI is allowed in the power sector under the automatic route in India with

the exception of Atomic Energy. Important aspects of FDI in the power sector of

India are -

100 percent Foreign Direct Investment is allowed under automatic route in almost

all the power sectors in India except the Atomic Energy

as per leading market research firm rncos

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