Traditionally, the vertically integrated State Electricity Boards (SEBs) and Central Utilities monopolized the Power Sector. Gradually the Power sector started to open up for private participation - this move was prompted by the poor operational performance of the SEBs and its deteriorating financial health. In 1991, the Electricity Act was amended to allow private sector participation in power projects and by the year 2000 the FDI cap for investments in power sector was completely removed. With this, the stage was set for full-scale private sector participation in power sector. However, the real boost to incentivize private sector's sluggish participation in the sector was provided by the Electricity Act, 2003 (EA 2003).

The Act marked a dynamic shift in the power sector in the country, which was once characterized by monopolistic entities, heavy subsidies, delayed Techno Economic Clearances (TEC) & other project approvals / clearances and poorly performing power plants. With the enactment of the EA 2003, a robust legal and regulatory framework was put in place enhancing investor confidence and increased private sector investments.

The power projects till date have been implemented on two formats - (1) MoU based projects, awarded through bilateral agreements / arrangements between the host state government and the developer and (2) Independent Power Producers (IPPs) selected through tariff based competitive bidding process. Although several IPPs awarded under bilateral MoUs are successfully operating in India, the National Tariff Policy (NTP) announced on January 6, 2006 stipulates that Distribution utilities are required to undertake all future power procurement only through tariff-based competitive bidding route. The NTP has however exempted power sale on short-term basis (less than one year) from the regulatory cost determination framework and mandates that the same be driven by the prevalent demand supply scenario.

The NTP has clearly put the Generation sector in a fast track mode with impetus on generation of competitive power by Independent Power Producers (IPPs), Captive Power Plants (CPPs) and Merchant Power Plants (MPPs) for short-term supply and setting of Power exchanges.

Overview of Power Sector in India
India is currently ranked fifth in the world in terms of total energy consumption and has invested over INR 1,000Billion since independence on development of the Power sector. The installed power generation capacity as on February 01, 2007 is around 128,581 MW. The annual per capita consumption of the country, at about 606 kWh is among the lowest in the world. Moreover the country is facing a continuous deficit of 8-10 % in energy terms.

The 17th Electric Power Survey Report, published in May 2007, projected electrical energy demand of 969 Tera Watt Hours for 2011-12 and peak electric demand of 153 Giga Watts entailing capacity addition of 78,000 MW by 2011-12. The electrical energy demand for 2021-22 has been estimated as 1915 Tera Watt Hours and peak electric demand of 298 Giga Watts. GoI had set an ambitious target to achieve capacity addition of 41,110 MW in 10th Plan period (2002-07) and 60,000 MW in 11th Plan period (2007-2012). However, actual capacity addition during the 10th Plan period has fallen substantially short of the target.

Demand Supply Scenario in DMIC States
The Project Influence Area (PIA) spans 1483 Km along the length of the DMIC with a 150km reach on either side of the DFC. The development of the DMIC will provide many benefits to the states falling under the PIA such as facilitating closer economic integration, improve transit transport efficiency, enhance economic competitiveness, promote regional trade and investment, and promote and strengthen partnerships. To aid the industrial development in the DMIC, it is essential to have necessary enabling infrastructure in DMIC States. Infrastructure such as Road/Rail connectivity, Ports, Irrigation network and Telecommunication network though is essential; but the most critical and governing factor for achieving the proposed growth and industrialization in the DMIC area would be availability of power. The big industrial hubs proposed to be set up in the PIA will have enormous power requirement and a critical assessment of the power demand-supply position in the concerned DMIC states shall have to be undertaken prior to making an investment decision.

The power shortage scenario has worsened over the past few years. Energy requirement and peak demand are projected to rise over the coming years with economic growth and increase in per capita consumption. The anticipated power demand in the DMIC states and proposed capacity additions for the XI Plan period based on 16th EPS projections DMIC states have identified suitable locations for setting up power generation plants under XI Five Year Plan and envisage to commission by 2011-12. Major initiatives in the DMIC influence area include power plants at Hissar (1200MW Coal based plant in Haryana), Kota (195MW Coal based plant in Rajasthan) and Surat (Lignite based plant in Gujarat).

GoI has envisaged capacity addition of 100,000 MW by 2012 to meet its mission of 'Power to All'. To meet this objective, huge capacity addition need to be made during the 11th plan period. Setting up of Ultra Mega Power Projects (UMPPs) are steps in that direction. These power projects would have an installed capacity of around 4000 MW each with Ministry of Power, CEA and Power Finance Corporation working in tandem for development of these projects under a tariff based competitive bidding framework. As of now, seven UMPPs have been identified for development.

The size of these projects being large, they will meet the power needs of a number of states through transmission of power on regional and national grids. DMIC states have been allotted share from these UMPPs, however till date only two projects have been bid out namely; Mundra in Gujarat and Sasan in Madhya Pradesh. Commissioning of these projects is expected to involve longer gestation periods considering the size of power generation capacity of UMPP Projects. Thus, DMIC states require suitable measures to avoid power supply deficits in 2011-12 and beyond.

Power Sector - Investment Potential in DMIC States
Development of DMIC includes power intensive industries as SEZs, manufacturing plants and IT parks that requires large quantum of reliable power on continuous basis. To ensure power supply security and a balanced regional growth in DMIC area, it would be appropriate to enhance power generation capacities in these states. It becomes imperative that all development efforts should be holistic in nature and should ensure that enabling infrastructure should be given adequate importance in the entire process. In view of the above, it is envisaged that development of DMIC will involve capacity addition by additional 10,000MW. It is envisaged that these power generation capacity additions would be primarily located along the West Coast of Gujarat and Maharashtra.

It is also important to note that DMIC Region also offers opportunities for setting up natural gas based combined cycle power in the vicinity of existing / proposed Gas Authority of India (GAIL) pipeline especially in Gujarat, Rajasthan & Uttar Pradesh depending on the availability of gas. However, exact locations for power plants would be identified during the detailed feasibility stage based on availability of land, domestic / imported fuel and other enabling raw materials and infrastructure. During the detailed feasibility stage for the DMIC Project, it is envisaged that developing transmission network from the nearby power plants, as short listed by the respective DMIC states, to the proposed industrial development nodes need to be explored.

Fuel Supply for DMIC Power Projects
The fuel source for development of additional power generation capacity in DMIC States could be imported coal, domestic coal or lignite. A brief review of fuel options is as follows:

Lignite The state of Rajasthan is endowed with large lignite deposits in the country after Tamilnadu & Gujarat. In the three districts of the state viz. Bikaner, Nagaur and Barmer, geological reserves of more than 1 billion tonnes have been confirmed so far by exploratory drilling.

Rajasthan State Mines & Minerals Ltd. (RSMML), Govt. of Rajasthan enterprise, started the commercial production of Lignite from these mines. Lignite of these mines has added advantage of low sulphur and ash contents.

District Nagaur falls in the influence area. Presently, RRSMML is operating the Matasukh-Kasnau Lignite mine in Nagaur. The commercial production of Lignite from these mines, was commenced from November 2003 with envisaged capacity of 12,00,000 MT per year. This area can be further explored for the feasibility of setting up Lignite based pithead power plants.

Domestic Coal
A study conducted by GSI, CMPDI & MECL in January 2006, has estimated a cumulative total of 253.30 Billion Tonnes of Geological Reserves of Coal in India. Pench - Kanhan Coalfield in Madhya Pradesh and few blocks in Wardha Coal Field in Maharashtra have sufficient coal reserves and can be further evaluated for the fuel linkage. On the Eastern part West Bengal, Orissa and Jharkhand are estimated to have coal resource of 11,383 MT, 16,911 MT and 9,750 MT respectively, however feasibility of transportation needs to be evaluated in terms of cost which would ultimately impact the cost of generation.

Imported Coal Presently, the coal handling capacity in Indian Ports accounts for 65 Million Tonnes. In view of the Generation capacity proposed during the XI Plan and the shortfall expected in domestic coal supply, the existing ports are being strengthened to handle an additional 77.87 Mn Tonnes. National Maritime Policy on Port and Shipping Sector has projected this enhancement in capacity by the year 2013-14.

Power Projects identified in Gujarat and Maharashtra lie along the west coast. Imported coal would be the most apt choice for these plants. The project locations identified in Gujarat and Maharashtra lie along the west coast, where a captive jetty or port may be planned for receiving the imported fuel. Also, depending on the feasibility the DFC can be used for transporting imported coal from Jawaharlal Nehru Port or any other port (as feasible) to the projects identified in Haryana and Rajasthan.

Gas Based Power Projects
There is a potential to develop gas based power plants in DMIC Region, especially in the state Gujarat. Government of Gujarat, through Gujarat State Petronet Limited (GSPL), has well laid-out plans for developing 2200km long 'Gas Grid Network' across the state. About 360km pipeline between Hazira- Vadodara-Ahmedabad-Kalol is already in operation, transporting 9MMSCMD of gas at present including 3MMSCMD of LNG.

In addition, presence of gas networks of Gas Authority of India Limited (GAIL), the leading PSU offering gas supply and distribution solutions for domestic/industrial usage and energy security for the country, as well as other private sector agencies (viz. M/s Reliance, M/s Adani etc) in the state of Gujarat and in DMIC Region offers opportunities for developing Gas based power plants to cater to respective investment nodes (i.e investment regions/industrial areas) in DMIC Region.