it is a very good project report.

1. Chronicle Order of the Project Report
1
Front Page
2
Certificate
3 Acknowledgement
4 Index- Page Numbering is essential
5 Objectives of the study
6 Introduction to the company/ topic
7 Hypothesis, if any
7 Literature Review
8 Research Methodology
9 Data Analysis
10 Findings & Conclusion
11 Recommendations
12 References/ Bibliography
13 Annexure- to include questionnaire if any
Summer Training Project Report
ON
NTPC LTD. 1

2. Title Of the Project
Submitted in Partial fulfillment of requirement of award of MBA degree of
GGSIPU, New Delhi
Submitted By
Name
Enrolment No
Semester/Batch
Northern India Engineering College
(Affiliated to GGSIPU)
FC-26, Shastri Park, Delhi-110053
NTPC LTD. 2

3. TABLE OF CONTENTS
1.1 EXECUTIVE SUMMARY
1.2 GENERAL INTRODUCTION
1.3 INDUSTRY PROFILE
1.4 GENESIS
CHAPTER 2:RESEARCH METHODOLOGY
2.1 OBJECTIVES
2.2 RESEARCH DESIGN
2.3 SOURCES OF DATA COLLECTION
2.4 PRIMARY & SECONDARY SOURCE
2.5 LIMITATIONS
CHAPTER 3: BUINESS PORTFOLIO
CHAPTER 4:DATA ANALYSIS AND INTERPRETATION
CHAPTER 5: FINDINGS & RECOMMENDATIONS
4.1MAJOR FINDINGS
4.2RECOMMENDATIONS
4.3CONCLUSION
BIBLIOGRAPHY
NTPC LTD. 3

4. EXECUTIVE SUMMARY
Power is a concurrent subject under the Constitution. Due to paucity of resources with
the Central/State PSUs and SEBs and in order to bridge the gap between demand and
availability of power, a policy to encourage private sector participation was initiated in
1991. The study was to make for the trends in tariff structure in power sector and to have
a detailed look on the reforms in and restructuring of the power sector in last decade. A
special focus has been given to the Availability Based Tariff regime and its impact on
NTPC. A comparative analysis between the previous tariff structure and the existing
tariff structure is attempted in this study.
NTPC LTD. 4

5. INTRODUCTION
In this chapter the purpose of the study has been elaborated in the background demand
factor of electricity with special focuses on recent power sector reforms. Need of Tariff
policies initialed by the government and the impact on the development of power sector
has been discussed.
Overview of Indian Power Sector
In general, the history of development Indian power sector has been discussed. This
chapter has given focus on the structure, key players and growth of them in the vicinity of
different policies adopted.
Tariff Structure Policy And Norms
Deals with the evolution of tariff policy and discusses the basic concepts of tariff. It also
explains the need for establishing a comprehensive tariff policy in power sector. Various
important provisions, which govern the tariff determination, are discussed under this part.
Tariff structure is based on the cost plus method of pricing. The methodology of tariff
structure is explained in detail. At the end of the chapter the features of a good tariff are
explained.
Trends In Tariff Structure
Refers to the historical methods of tariff structure. This chapter explains that initially
tariffs were structured on single part, and then a committee was constituted to make the
tariff in Two-parts, which consists of fixed charges And Variable charges. K. P. Rao
committee constituted the Two-part tariff. It was evolved to formulate principles for
generation tariff. After going through the historical methods of tariff structure we discuss
the current tariff structure.
Availability Based Tariff Structure
Deals with the current tariff structure, which is based on CERC notification. This is the
electricity tariff based on the plant availability and frequency. Therefore it is called
Availability Based Tariff. The components of Availability Based Tariff are explained in
NTPC LTD. 5

6. detail; it is three-part tariffs, which consists of capacity charges, energy charges and
unscheduled interchange charges. After discussing the current tariff structure comparative
analysis of different methods of tariff structure has been attempted in the next chapter.
Than this report covers definition of tariff.Tariff is the price charged for the sale of
electricity from the state electricity boards by Central public centre units engaged in
power generation.There are two types of tariffs cost plus and market determined. In India
Electricity sector is operating in Cost Plus Regulated Tariff regime.Than three kinds of
tariff structure are covered which are- Single-part-tariff,Two-part-tariff and Availability
Based Tariff(ABT). ABT is currently used by NTPC for tariff Determination.In ABT
system if the average availability actually achieved over the year is higher than the
specified norm for plant availability, the generating company gets a higher payment. In
case the average availability achieved is lower payment is also lower. Hence it is called
availability-based tariff.Than its various components are discussed in detail.
After that various reforms occurred in power sector are discussed and certain
recommendations for improvement of Tariff structure are suggested.
NTPC LTD. 6

7. National Thermal Power Corporation
COMPANY PROFILE
Our Vision
"A world class integrated power major, powering India’s growth,
with increasing global presence
Our Mission
"Develop and provide reliable power, related products and
services at competitive prices, integrating multiple energy sources
with innovative and eco – friendly technologies and contribute to
society"
Our Core Values (BCOMIT)
• Business Ethics
• Customer Focus
• Organizational & professional Pride
• Mutual Respect and Trust
• Innovation and Speed
• Total Quality for Excellence
OBJECTIVE
NTPC LTD. 7

8. .
To realise the vision and mission, eight key corporate objectives have been identified.
These objectives would provide the link between the defined mission and the functional
strategies.
 Business portfolio growth
o To further consolidate NTPC’s position as the leading thermal power generation
company in India and establish a presence in hydro power segment
o To broad base the generation mix by evaluating conventional and non-
conventional sources of energy to ensure long run competitiveness and mitigate
fuel risks
o To diversify across the power value chain in India by considering backward and
forward integration into areas such as power trading, transmission, distribution,
coal mining, coal beneficiation, etc
o To develop a portfolio of generation assets in international markets
o To establish a strong services brand in the domestic and international markets
 Customer Focus
o To foster a collaborative style of working with customers, growing to be a
preferred brand for supply of quality power
o To expand the relationship with existing customers by offering a bouquet of
services in addition to supply of power – e.g. trading, energy consulting,
distribution consulting, management practices
NTPC LTD. 8

9. o To expand the future customer portfolio through profitable diversification into
downstream businesses, inter alia retail distribution and direct supply
o To ensure rapid commercial decision making, using customer specific
information, with adequate concern for the interests of the customer
 Agile corporation
o To ensure effectiveness in business decisions and responsiveness to changes
in the business environment by
 Adopting a portfolio approach to new business development
 Continuous and co-coordinated assessment of the business environment to
identify and respond to opportunities and threats
o To develop a learning organization having knowledge-based competitive edge
in current and future businesses
o To effectively leverage Information Technology to ensure speedy decision
making across the organization
 Performance Leadership
o To continuously improve on project execution time and cost in order to sustain
long run competitiveness in generation
o To operate & maintain NTPC stations at par with the best-run utilities in the
world with respect to availability, reliability, efficiency, productivity and costs
o To effectively leverage Information Technology to drive process efficiencies
o To aim for performance excellence in the diversification businesses
o To embed quality in all systems and processes.
NTPC LTD. 9

10.  Human Resource Development
o To enhance organizational performance by institutionalising an objective and
open performance management system
o To align individual and organizational needs and develop business leaders by
implementing a career development system
o To enhance commitment of employees by recognizing and rewarding high
performance
o To build and sustain a learning organization of competent world-class
professionals
o To institutionalize core values and create a culture of team-building,
empowerment, equity, innovation and openness which would motivate employees
and enable achievement of strategic objectives.
 Financial Soundness
o To maintain and improve the financial soundness of NTPC by prudent
management of the financial resources
o To continuously strive to reduce the cost of capital through prudent management
of deployed funds, leveraging opportunities in domestic and international
financial markets
o To develop appropriate commercial policies and processes which would ensure
remunerative tariffs and minimize receivables
o To continuously strive for reduction in cost of power generation by improving
operating practices
NTPC LTD. 10

11.  Sustainable Power Development
o To contribute to sustainable power development by discharging corporate social
responsibilities
o To lead the sector in the areas of resettlement and rehabilitation and environment
protection including effective ash-utilization, peripheral development and energy
conservation practices
o To lead developmental efforts in the Indian power sector through efforts at policy
advocacy, assisting customers in reform, disseminating best practices in the
operations and management of power plants etc
 Research and Development
o To pioneer the adoption of reliable, efficient and cost-effective technologies by
carrying out fundamental and applied research in alternate fuels and technologies
o To carry out research and development of breakthrough techniques in power plant
construction and operation that can lead to more efficient, reliable and
environment friendly operation of power plants in the country
NTPC LTD. 11

12. 1. GENESIS
Till early Seventies, the power generation capacity addition, in India, was mainly
done by State Electricity Boards. The gap between the demand and supply of power
had been on increase and the same was affecting the economic growth of the
country. With a view to supplement the efforts of SEBs in the matter of integrated
development of power; it was decided to set-up generating companies in Central
Sector also. To pursue this objective,
After incorporation in November 1975, NTPC has grown to become not only the largest
utility National Thermal Power Corporation Limited was formed in November 1975 as a
generating company in the Central Sector. National Thermal Power Corporation is the
largest power generation company in India. The Forbes Global 2000 ranking for 2005
ranks it as the 5th leading company in India and the 486th leading company in the world. It
is a public listed (Bombay Stock Exchange) Indian public sector company, with majority
shares owned by the Government of India. At present, Government of India holds 89.5%
of the total equity shares of the company and the balance 10.5% is held by FIIs, Domestic
Banks, Public and others. NTPC ranks amongst the top five companies, in terms of
market capitalisation.
NTPC’s core business is engineering, construction and operation of power generating
plants and also providing consultancy to power utilities in India and abroad. As on date
the installed capacity of NTPC is 26, 404 MW through its 14 coal based (21,395 MW), 7
gas based (3,955 MW) and 4 Joint Venture Projects (1,054 MW).
NTPC’s share on 31 Mar 2006 in the total installed capacity of the country was 19.51%
and it contributed 27.68% of the total power generation of the country during 2005-06.
Thus, every fourth home in India is enlightened by NTPC. A total of 170.88 Bus of
NTPC LTD. 12

13. electricity was produced across all the stations of the company in the financial year
2005-2006. The Net Profit after Tax on March 31, 2006 was INR 58, 202 million. Net
Profit after Tax for the quarter ended June 30, 2006 was INR 2004-2005) where the profit
was INR 13087 million.
Pursuant to special resolution passed by the Shareholders at the Company’s Annual
General Meeting held on September 23, 2005 and the approval of the Central
Government under section 21 of the Companies Act, 1956, the name of the Company
“National Thermal Power Corporation Limited” has been changed to “NTPC Limited”
with effect from October 28, 2005.
The company, which has completed its thirty years of existence on November 7,
2005, has made its foray into hydro-power and is planning to go into nuclear too).
2. GROWTH of the country but also a leading power utility of international acclaim.
The installed capacity of NTPC as on March 31, 2004 is 21749 MW through its 13 coal
based (17480 MW), 7 gas/liquid fuel based (3955 MW) and 3 Joint Venture (coal based)
Projects (314 MW). NTPC has generated 151357 million units (MUs)
of electricity in 2003-04 including 2187 million units generated by JV Companies.
NTPC LTD. 13

14. From the above graph it’s been clear that NTPC is creating that leading benchmark in all
over the country, like above graph is dictating that the intensive and remarkable growth
covered by NTPC was started in year 1986-87 from 3000MW with 20000BU and goes to
inconsistent growth in year 2006-07 by 30000MW with 200000BU. This shows the
effective installed capacity is leading a terrific generation of power.NTPC’s 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
27,904 MW through its 15 coal based (22,895 MW), 7 gas based (3,955 MW) and 4 Joint
Venture Projects (1,054 MW). NTPC acquired 50% 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 28.33%
stake in Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company
between NTPC, GAIL, Indian Financial Institutions and Maharashtra SEB Holding Co.
Ltd. The present capacity of RGPPL is 740 MW.
NTPC’s share on 31 Mar 2007 in the total installed capacity of the country was 20.18%
and it contributed 28.50% of the total power generation of the country during 2006-07.
NTPC has set new benchmarks for the power industry both in the area of power plant
construction and operations. It is providing power at the cheapest average tariff in the
country. With its experience and expertise in the power sector, NTPC is extending
consultancy services to various organizations in the power business.
NTPC LTD. 14

15. NTPC is committed to the environment, generating power at minimal environmental cost
and preserving the ecology in the vicinity of the plants. NTPC has undertaken massive a
forestation in the vicinity of its plants. Plantations have increased forest area and reduced
barren land. The massive a forestation by NTPC in and around its Ramagundam Power
station (2600 MW) have contributed reducing the temperature in the areas by about 3°c.
NTPC has also taken proactive steps for ash utilizations. In 1991, it set up Ash Utilisation
Division to manage efficient use of the ash produced at its coal stations. This quality of
ash produced is ideal for use in cement, concrete, cellular concrete, building material.
A "Center for Power Efficiency and Environment Protection (CENPEEP)" has been
established in NTPC with the assistance of United States Agency for International
Development. (USAID). Cenpeep is efficiency oriented, eco-friendly and eco-nurturing
initiative - a symbol of NTPC's concern towards environmental protection and continued
commitment to sustainable power development in India.
As a responsible corporate citizen, NTPC is making constant efforts to improve the socio-
economic status of the people affected by the projects. Through its Rehabilitation and
Resettlement programmes, the company endeavors to improve the overall socio-
economic status of Project Affected Persons.
NTPC was among the first Public Sector Enterprises to enter into a Memorandum of
Understanding (MOU) with the Government in 1987-88. NTPC has been Placed under
the 'Excellent category' (the best category) every year since the MOU system became
operative.
Recognising its excellent performance and vast potential, Government of the India has
identified NTPC as one of the jewels of Public Sector ‘Navratnas’- a potential global
giant. Inspired by its glorious past and vibrant present, NTPC is well on its way to realise
its vision of being “A world class integrated power major, powering India’s growth, with
increasing global presence”.
NTPC LTD. 15

16. SPREAD ACROSS THE COUNTRY
NTPC projects/power stations are spread all over the country. The location map of
NTPC approved projects as shown below exhibits the wide presence of NTPC throughout
the length and breadth of the country.
The map below shows the locations of our existing power stations, as well as those
currently under construction, together with their respective capacities.
KOLDAM (800 MW)
LOHARINAG-PALA TAPOVAN VISHNUGADH (520 MW)
(600 MW)
DADRI (817 MW) LATA-TAPOVAN (108 MW)
NCPP (840 MW)
TANDA (440 MW)
BADARPUR (705
FARIDABAD
MW) (705 MW) **
(430 MW) UNCHAHAR
AURAIYA (840 MW + 210 MW)
(652 MW) KAHALGAON
ANTA (840 MW+ 1500 MW))
FARAKKA (1600 MW)
(413 MW)
VINDHYACHAL
(2260 MW + 1000 MW) RIHAND
KAWAS
(1000 MW + 1000 MW)
(645 MW)
SIPAT (2980 MW) KORBA TALCHER TPS SINGRAULI
(2100 MW) (460 MW)) (2000 MW)
JHANOR-GANDHAR
(648 MW)
TALCHER
(2500 MW
+ 500MW)
RAMAGUNDAM
SIMHADRI
(2100 MW + 500
(1000 MW)
MW)
COAL POWER STATION
GAS POWER STATIONS
HYDRO PROJECT
(in italics) : Projects in progress
KAYAMKULAM ** : Plants managed and operated by NTPC
(350 MW)
NTPC LTD. 16

17. NTPC has mostly built Regional power stations supplying power to the various
states in the Region as per power allocation formula approved by Govt. of India.
The list of completed projects, projects under construction and projects managed by
NTPC is given below:
COMPLETED PROJECTS
S.No Name of the Project Capacity Location Primary Cost
(MW) (State) Fuel (Rs. Million)
1. Korba 2100 Chhattisgarh Coal 16252.50
2. Ramagundam 2100 Andhra Coal 20592.20
Pradesh
3. Singrauli 2000 Uttar Pradesh Coal 11906.90
4. Farakka 1600 West Bengal Coal 31842.20
5. Vindhyachal 1260 M.P Coal 14603.70
6. Rihand 1000 Uttar Pradesh Coal 23874.00
7. Talcher -I 1000 Orissa Coal 25921.80
8. Kahalgaon 840 Bihar Coal 17158.90
9. NCTPP, Dadri 840 Uttar Pradesh Coal 16692.10
10. Talcher (taken Over) 460 Orissa Coal 3560.00
11. Unchahar–I (Taken Over 420 Uttar Pradesh Coal 9250.00
12. Dadri Gas 817 Uttar Pradesh Gas 9603.50
13. Auraiya 652 Uttar Pradesh Gas 6787.70
14. Jhanor-Gandhar 648 Gujarat Gas 25000.00
15. Kawas 645 Gujarat Gas 15995.70
16. Anta 413 Rajasthan Gas 4189.70
17. Kayamkulam 350 Kerala Naphth 13105.80
a
18. Tanda (taken over) 440 Uttar Pradesh Coal 10000.00
19. Vindhyachal- II 1000 Madhya Pradesh Coal 27533.80
20. Unchahar – II 420 Uttar Pradesh Coal 14120.90
21. Faridabad 430 Haryana Gas 11636.00
TOTAL 19435 329627.40
APPROVED / ON-GOING PROJECTS
S. Capacity Location Primary Estimated Cost Completion
No. Project (MW) (State) Fuel (Rs. Million) Schedule
22. Simhadri 1000 A.P. Coal 38834.50 Dec 2002
23. Talcher –II 2000 Orissa Coal 66488.30 Feb.2006
24. Rihand-II 1000 U.P. Coal 42162.40 May 2006
25. Ramagundam-III 500 A.P. Coal 22130.30 Aug.2005
TOTAL 4500 169615.50
NTPC LTD. 17

18. 4 NTPC’S SHARE IN INDIAN POWER SECTOR
As at the end of March 2006 NTPC’s installed capacity is about 19.1% of the total
installed capacity of the country and it has contributed about 26.7% of the total power
generation of the country during 2003-07
NTPC IN INDIAN POWER SECTOR AS ON 31-03-2011
ALL INDIA: 112058 MW ALL INDIA: 558 BUs
NTPC 21438 MW
19.1% NTPC 149.2 BUs
26.7%
5.FUNDING PATTERN OF NTPC:-
NTPC is a Government of India Company. 89.50% of its equity is held by the
Government of India and the balance 10.5% is held by FIIs, Domestic Banks, Public and
others. The company was formed with an authorized capital of Rs. 1250 million which as
on 31st March, 2005 stands at Rs. 100000 million. The paid equity capital as on
31.03.2005 was Rs 82455 million which includes 73796.3 million contributed by
Government of India and Rs 8658.4 million held by public, employees and Qualified
Institutional Buyers (QIB). The growth of share capital, reserve and surplus is given
below:
NTPC LTD. 18

19. “India’s growth, with increasing global presence”.
6.FINANCIALS:-
TURNOVER AND PROFIT
NTPC recorded a turnover of Rs.255,460.00 million during 2004-05 as against Rs.
259,642.00 million during 2003-04. Net profit after tax is Rs.58,070.00 million as
compared to Rs. 52,608.00 million during the previous year.
CAPITAL STRUCTURE
As on 31st March, 05 the authorized share capital of NTPC is Rs.100,000 million and the
paid up share capital Rs. 82,455 million.
SELECTED FINANCIAL INFORMATION(Rs. in Million)
NTPC LTD. 19

20. 2005-06 2004-05 2003-04 2002-03 2001-02
A) Operating Income
Earned from
Sale of Energy 260701 225069 188178 190019 177697
Consultancy & Other Income 26806 24110 61816 4492 7076
Total 287507 249179 249994 194511 184773
Paid & Provided for
Fuel 163947 137235 122150 110312 103991
Employees Remuneration & Benefits 9684 8823 8835 8268 8036
Generation, Administration &
other expenses 12721 12062 9813 10814 11531
Provision (Net) 334 (6160) (3813) 1567 1730
Prior Period/Extra Ordinary Items 2488 (102) 183 803 (500)
Profit before depreciation, Interest &
Finance Charges and Tax 98333 97321 112826 62747 59985
Depreciation 20477 19584 20232 15291 13784
Profit before Interest &
Finance Charges and Tax 77856 77737 92594 47456 46201
Interest & Finance Co 17632 16955 33697 9916 8680
Profit before tax 60224 60782 58897 37540 37521
Tax (Net) 2022 2712 6289 1465 2125
Profit after tax 58202 58070 52608 36075 35396
Dividend 23087 19790 10823 7080 7079
Dividend tax 3238 2680 1387 395 -
Retained Profit 31877 35600 40398 28600 28317
B) What is Owned
Gross Fixed Assets 460396 431062 400281 366106 328912
Less : Depreciation 229501 207914 187736 167456 152131
Net block 230895 223148 212545 198650 176781
Capital Work-in-progress,
Construction Stores
& Advances 136340 99285 74953 63863 65550
Investments 192891 207977 173380 36674 40281
Current Assets, Loans & Advances 157245 129073 135468 194132 167799
Total Net Assets 717371 659483 596346 493319 450411
C) What is Owed
Long Term Loans 201195 166719 149415 127090 113161
Working Capital Loans 778 4159 5113 5067 2651
Current Liabilities & Provisions 61402 67467 80941 45850 48146
Total Liabilities 263375 238345 235469 178007 163958
D) Others
Deferred Revenue
- Advance against deprectiaion 4408 3374 1591 271 -
Development surcharge fund - - 3784 - -
Total 4408 3374 5375 271 -
E) Net Worth
Share Capital 82455 82455 78125 78125 78125
Reserves & Surplus 367132 335308 277376 237002 208400
Miscellaneous Expenditure
(To the extent not written off or adjusd) - - - (87) (72)
Net Worth 449587 417763 355501 315040 286453
F) Capital Employed 523572 500540 458267 386343 356526
NTPC LTD. 20

21. G) Value Added 97482 88415 66749 88084 80889
H) No. of Shares 8245464400 8245464400 7812549400 7812549400 78125494
I) No. of Employees* 21870 21420 20971 21408 21383
J) Ratios
Return on Capital Employed (%) 12.46 12.77 12.93 10.88 11.93
Return on Net Worth (%) 14.16 14.33 14.94 12.13 12.98
Book Value per Share (Rs.) 54.53 50.67 45.50 40.32 3666.58
Current Ratio 2.56 1.91 1.67 4.23 3.49
Debt to Equity 0.45 0.41 0.43 0.42 0.40
Value Added/Employee (Rs. Million) 4.46 4.13 3.18 4.11 3.78
* Excluding JVs, Subsidiaries, BTPS (owned by NTPC w.e.f. 1st June, 2006) & BALCO
STATION-WISE GENERATION 2005-06
STATIONS Capacity(MW) Gen. (MU)Gross
Northern Region 5280 36465
Singrauli 2000 15503
Rihand 2000 10591
Unchahar 840 7041
Tanda 440 3330
National Capital Region 3152 22206
Dadri ( Coal ) 840 6768
Anta ( Gas ) 413 2809
Auraiya ( Gas ) 652 4282
Dadri ( Gas ) 817 5394
Faridabad ( Gas ) 430 2953
Western Region 5653 41668
Korba 2100 16001
Vindhyachal 2260 18305
Kawas ( Gas ) 645 2884
Jhanor Gandhar ( Gas ) 648 4478
Eastern Region 5900 42751
Farakka 1600 11464
Kahalgaon 840 6572
Talcher - Kaniha 3000 21185
Talcher -Thermal 460 3530
Southern Region 3950 27791
NTPC LTD. 21

22. Ramagundam 2600 19691
Simhadri 1000 7742
Rajiv Gandhi CCP ( Liquid Fuel ) 350 358
Total 23935 170880
Badarpur
(Owned by NTPC w.e.f. 1st June, 2006) 705 5380
Performance highlights
2006 2005
Commercial Generation Million Units 169789 158271
Sale of Energy Rs Million 260701 225069
Profit before tax “ 60224 60782
Profit after tax “ 58202 58070
Dividend “ 23087* 19790
Dividend tax “ 3238 2680
Retained Earnings “ 31877 35600
Net Fixed Assets “ 230895 223148
Net Worth “ 449587 417763
Loan Funds “ 201973 170878
Capital Employed “ 523572
500540
Net Cash From Operations “ 62064 50998
Value Added “ 97482 88415
No. of Employees # “ 21870 21420
Value added per employee Rs Million 4.46 4.13
Debt to Equity Ratio 0.45 0.41
Return on Capital Employed % 12.46 12.77
Face Value per share Rs. 10.00 10.00
Dividend Per share “ 2.80* 2.40
Book Value per Share “ 54.53 50.67
# excluding JVs, Subsidiaries and BTPS (owned by NTPC w.e.f. 1st June, 2006)
* including final dividend recommended by the Board
NTPC LTD. 22

23. 7. TURNAROUND CAPABILITY
NTPC has also demonstrated its ability in turning around sub-optimally performing
stations. The phenomenal improvement in the performance of Badarpur, Unchahar and
Talcher by NTPC stand testimony to this.
Badarpur (705 MW)
The expertise in R&M and performance
turnaround was developed and built up by
NTPC with the operational turnaround of
Badarpur TPS through scientifically
engineered R&M initiatives. .
Unchahar (420 MW)
The Feroze Gandhi Unchahar Power Station
was taken over by NTPC as part of a win-win
deal with the Uttar Pradesh Government
whereby the dues of UPSEB were adjusted
was used to and the expertise of NTPC
turnaround the languishing station.
The remarkable speed and the extent of the
turnaround achieved can be seen in the Table.
NTPC LTD. 23

24. Talcher (460 MW)
An even more challenging turnaround story
was being scripted at the OSEB's old power
plant at Talcher, taken over in June 1995. The
table indicates the dramatic gains in the
performance of the power plant after take
over.
While NTPC bettered the PPA commitments,
from the viewpoint of capital requirements, turning around such old units is a low cost,
high and quick return option. These successes helped NTPC, the concerned SEBs and the
entire nation in terms of economy and power availability.
Tanda
Tanda Thermal Power station was taken over by
NTPC on the 15 Jan 2000.The PLF of the power
station improved from 14.9% at the time of the
takeover to 91.14% for the year 2006-07
8. OPERATIONAL PERFORMANCE
Since its inception NTPC has a record of
sustained high level of performance of all its
plants, which have facilitated All India PLF (Thermal) to rise from 55.3% in 1991-92 to
84.4% in 2003-04. NTPC plants achieved a PLF of 70.59% in 1991-92, which has
increased to 84.4% in 2003-04.
NTPC LTD. 24

25. The following table presents the average PLF of our coal-fired plants compared to the
average PLF for all coal-fired plants in India (including our plants) for the periods
indicated:
NTPC LTD. 25

26. The operating performance of NTPC has been
considerably above the national average. The
availability factor for coal stations has increased
from 85.03 % in 1997-98 to 90.09 % in 2006-07,
which compares favourably with international
standards. The PLF has increased from 75.2% in
1997-98 to 89.4% during the year 2006-07 which is
the highest since the inception of NTPC.
It may be seen from the table below that while the installed capacity has increased by 56.40% in
the last nine years, the employee strength went up by only 3.34%
NTPC LTD. 26

27. Regulatory and Policy Environment
One key element of the regulatory reforms in the power sector is the establishment of a
transparent and fair pricing mechanism for power with a thrust on efficiency in
operations. A central regulator has been constituted that governs the pricing of bulk
power sold by central generators to state utilities. In addition, state regulatory agencies
have also been formed/notified that are responsible for regulating operations of state
utilities including rationalization in tariffs for different categories of consumers. Central
power utilities need to adapt to the twin challenge of working with multiple regulatory
agencies and a tariff regime with downward pressure on bulk supply tariffs.
Further, regulatory reforms might pave the way for significant changes in the Indian
Power sector, including trading of electricity, direct supply to HT customers, creation of
power exchanges and “open access” to transmission infrastructure. As a leading player in
the power sector, NTPC would need to track these changes and also proactively assist the
regulators in framing policies that enable development of the sector
BUSINESS PORTFOLIO
NTPC LTD. 27

28. Introduction
Over the last two decades, NTPC has spearheaded the development of thermal generation
capacity in the Indian power sector. In this process, it has built a strong portfolio of coal
and gas/liquid fuel based generation capacities. Recently, the company has also made
initial forays in the area of hydropower. NTPC is also offering technical services through
its Consultancy Wing and has entered into joint ventures for offering some of the
services. However, till date thermal generation has been the single largest revenue
generator for NTPC.
The Indian power sector has witnessed and can anticipate several changes in the business
and regulatory environment as outlined in the previous chapter of this plan. Players such
as NTPC face significant uncertainties in the availability and economic viability of
thermal fuels. The challenged health of state utilities presents a threat to the cash flow of
generators. However, ongoing changes in the customer environment also provide
opportunities for improving the customer mix. The policy framework has changed
substantially with the recent clearance of the Electricity Bill by both houses of
parliament. The Indian power sector is on the road to becoming a viable investment
destination with the recent thrust of the participants on speedy reform. This has also
increased the threat of competition. Thus the power sector offers a mixed bag of
opportunities and threats to players and NTPC needs to review its business strategy and
portfolio in light of these changes.
NTPC with its history of excellence in all aspects of its business is uniquely positioned
for growth. Continued growth in generation is relatively easy on account of NTPC’s
significant learning curve benefits. However to capitalise on the changing face of the
power sector NTPC needs to consider a bolder target of becoming India’s leading
integrated power utility. In addition, NTPC needs to target being the brand ambassador
for the Indian power sector in overseas markets. This would call for controlled, urgent
and successful entry into other businesses in the power value chain and targeting markets
outside India. Therefore, NTPC’s business portfolio strategy would target three key
dimensions:
NTPC LTD. 28

29. o Capacity addition program (including changes in fuel mix, technology, etc)
o Diversification along the power value chain
o Dominance in the services business in the domestic and international markets
Growth of the Generation Business
Developing and operating world-class power stations is NTPC’s distinctive competence.
Its scale, financial strength and significant learning curve benefits would also serve to
provide an advantage over competitors. Hence sustaining leadership in generation is
critical to the target of being the largest integrated power utility. Thus NTPC would
continue to focus on making available reliable and quality power at competitive prices.
To meet this objective, NTPC would continue to speedily implement projects and
introduce state-of-art technologies.
Projected portfolio in 2017
Total capacity portfolio
India’s generation capacity can be expected to grow from the current levels of about 104
GW to about 225-250 GW by 2017. NTPC currently accounts for about 19% of the
current installed capacity. Going forward, in its target to remain the largest generating
utility of India, NTPC would endeavour to maintain or improve its share of India’s
generating capacity. Towards this end, NTPC would target to build an overall capacity
portfolio of over 56,000 MW by the end of the 12th plan period. Of this, NTPC would
target commissioning 9,370 MW in the 10th plan, 11,210 MW in the 11th plan period and
15,540 MW in the 12th plan period. While NTPC is fully equipped to provide the
requisite managerial resources such as engineering capability, ability to manage multiple
projects, etc the ability to arrange sufficient and timely funds would govern success in
achieving the targets.
NTPC LTD. 29

30. Energy mix for capacity addition
Currently, coal has a dominant share in the generation capacities in India and this is also
reflected in the high share of coal-based capacities in NTPC’s current portfolio. However,
going forward, NTPC would have to review the share of coal-based projects on account
of potential demand supply gap for domestic coal and the likely availability and
competitiveness of alternate fuels such as gas. Efforts to reduce the variable cost of
power would be critical to ensure dispatch of power plants under a merit order system.
NTPC can also avail of opportunities to add hydropower to its portfolio subject to
competitive tariffs and minimal R&R issues. A first step in this direction has already
been taken with the investment in Koldam. As a leader in power generation, NTPC could
also consider other energy sources such as biomass, cogeneration, nuclear power, fuel
cells, etc for future development thereby reducing the dependence on thermal fuels.
While a decision on the fuel/energy mix for NTPC in the future would be largely
governed by their relative tariff-competitiveness, by 2017 the mix would be significantly
different from the existing portfolio.
Thermal Power
To revise NTPC’s thermal fuel strategy a study of the expected trends in availability and
prices of domestic coal, imported coal and natural gas was carried out. The study also
compared the long run competitiveness of landed power using these alternatives in each
of the three plan periods. This has helped in developing the long-term strategy for
thermal fuels as detailed in this section.
Goal
• To own/manage/control a portfolio of about 42,000 MW of thermal power by 2017,
retaining its position as India’s largest thermal power utility
• To minimise the landed cost of power from new plants by selecting appropriate fuels
to retain its long-run competitiveness in power generation, while keeping in mind
NTPC LTD. 30

31. technical constraints such as evacuation of power, load balancing and other system
constraints
Strategies
Domestic coal based projects: NTPC would continue its strategy of major portion of
capacity addition through pithead based coal plants during the 10th and 11th plan periods.
However, going forward, NTPC would consider alternate fuel options to domestic coal
(including regassified LNG and imported coal) with a view to broadbase its fuel portfolio
and minimise its cost of power generation.
Gas based projects: NTPC would seek to develop gas-based combined cycle power
projects subject to the assured availability of gas at a competitive price. Analysis
indicates that gas could potentially be competitive to domestic coal in some parts of the
country especially in states near to the coast. NTPC is already exploring various sources
including regassified liquefied natural gas and is evaluating their competitiveness prior to
making a decision in this regard.
Imported coal based projects: During the 10th plan period, most of NTPC’s
proposed plants are expected to be more competitive than projects based on imported
coal. However, going forward, imported coal based projects might be a more competitive
option to domestic coal based projects at some coastal locations. In view of this, NTPC
would evaluate imported coal based projects (at the port) in the Southern/Western Region
for the 11th and 12th plan periods.
Other fuel options: The option of developing lignite-based capacities was also
evaluated and compared with domestic coal based plants. The analysis revealed that in
the present scenario, domestic coal based capacities are more suitable for NTPC. Going
forward, NTPC would continue to evaluate lignite as a fuel and would consider setting up
lignite based capacities, if found competitive. In addition, NTPC would track
developments in alternate fuel options such as Orimulsion, Di-Methyl Ether (DME), Coal
NTPC LTD. 31

32. Bed Methane (CBM) and heavy refinery residues. Capacities based on these fuels would
be developed in the event they are competitive with other fuel options. In addition,
considering the potential for development of cogeneration plants in India, NTPC would
explore opportunities for the same.
Maintaining a comprehensive database for review of mix: The thermal fuel
options detailed above would need to be constantly evaluated and further fine-tuned in
line with the emergent fuel prices and availabilities and other system constraints. In
addition, decisions on plant and fuel selection would need to be considered on a case-to-
case basis. To facilitate this, a comprehensive database of fuels, their availabilities,
pricing trends and impacting forces would need to be maintained. The responsibility for
designing and maintaining the database and deriving implications for NTPC, would
reside with the Fuel Management Group.
Co-ordination with NTPC’s overall business plan: The information from the
database on fuel availability and price forecasts would also be a critical input in
developing the overall business plans for NTPC. To facilitate review and fine-tuning of
the capacity addition program based on fuel scenarios, the Fuel Management Group
would work closely with the Corporate Planning group in the business plan revision
exercise.
MULTI-PRONGED GROWTH APPROACH:
Over the last three decades, NTPC has spearheaded
development of thermal power generation in the Indian
power sector. In this process, it has built a strong portfolio of
coal and gas/liquid fuel based generation capacities. The
company has made initial forays in the area of hydropower
development and plans to have a significant share of hydropower in its future generation
portfolio. Although NTPC is also offering technical services, both in domestic and
NTPC LTD. 32

33. international markets, through its Consultancy Wing, the generation business would
continue to be the single largest revenue generator for NTPC.
The Indian power sector is witnessing several changes in the business and regulatory
environment. The legal and policy framework has changed substantially with the
enactment of the Electricity Act 2003. In the foreseeable future, India faces formidable
challenges in meeting its energy needs. Recently, a draft integrated energy policy has
been issued, which addresses all aspects including energy security, access, availability,
affordability, pricing, efficiency and environment. To meet the twin objectives of
ensuring availability of electricity to consumers at competitive rates, as well as attract
large private investments in the sector, a new Tariff policy has also been issued. The
power sector thus offers a mixed bag of challenges and opportunities to players and
NTPC would continue to review its business strategy and portfolio in light of these
changes.
NTPC is adopting a Multi-pronged growth strategy for capacity addition through
Greenfield Projects, Expansion of existing stations, Acquisitio ns and takeovers and joint
ventures / subsidiaries, to accomplish its growth plans.
NTPC LTD. 33

34. JOINT VENTURE PARTNERS
The following joint venture companies have been formed so far:
NTPC -ALSTOM POWER SERVICES PVT. LTD. (NASL)
(Incorporated in 1999 and formerly known as NTPC-ABB ALSTOM POWER
SERVICES PVT. LTD)
OBJECTIVE: Undrtake Renovation & Modernisation of power stations in India
and other SAARC countries
PROMOTERS' NTPC: 50%
EQUITY: ALSTOM Power Generation AG : 50%
UTILITY POWER TECH LTD
(Incorporated in 1996)
This JV has been promoted with Reliance Energy Limited (formerly BSES Limited)
a private sector Indian power company.
OBJECTIVE: To undertake project construction, erection and supervision in
NTPC LTD. 34

35. power sector and other sectors in India and abroad
PROMOTERS' NTPC: 50%
EQUITY: REL: 50%
PTC(India) Ltd
(Incorporated in 1998)
This JV has been promoted with Power Grid Corporation of India Ltd (PGCIL), a
Government owned transmission major in India. Power Finance Corporation (PFC),
a power sector finance company owned by the Government of India and National
Hydro Electric Power Corporation Ltd. (NHPC), a Government owned hydro power
utility.
OBJECTIVE: To trade, import, export and purchase power from identified power
projects and sell it to identified SEBs/others
PROMOTERS' NTPC: 8% Tata Power: 10%
EQUITY: PGCIL: 8% DV: 10%
PFC: 8% FII: 18.5%
NHPC: 8%
NTPC-SAIL POWER COMPANY (PVT) LTD (NSPCL)
NSPCL, the Joint Venture Company of NTPC and SAILwith 50:50 equity
participation,stood merged with BESCL(Bhilai Electric Supply Co. Pvt Ltd, another
JV Co. of NTPC and SAIL with 50:50 equity participation.) w.e.f 2nd August
2006,as per the scheme of Amalgamation approved by High Court of Delhi. As a
result of aforesaid merger of BESCL in NSPCL, all properties, licenses, permissions,
debt, liabilities etc. with respect to BESCL now stand vested in NSPCL.
OBJECTIVE: To supply power to the Bhilai, Durgapur and Rourkela Steel Plant
of Steel Authority of India Limited (SAIL) from its Coal based
power stations at Bhilai (Chhattisgarh), 2x30MW+1X14MW,
Durgapur (West Bengal) 2x60MW and Rourkela (Orissa) 2x60
MW.
For the purpose of its business development, NSPCL is carrying out
the expansion of its installed capacity at Bhilai, by implementation
of 500MW (2x250MW) power plant.
PROMOTERS' NTPC: 50%
EQUITY: SAIL : 50%
NTPC TAMIL NADU ENERGY COMPANY LIMITED
This JV was incorporated on 23rd May, 2003 with Tamil Nadu Electricity Board, a
State run Electricity Board in the State of Tamil Nadu engaged in generation,
NTPC LTD. 35

36. transmission and distribution of electricity.
OBJECTIVE: To set up a 1000 MW coal based power station at Ennore in Tamil
Nadu utilising the existing infrastructure facility at Ennore and
supply power mainly to Tamil Nadu and the states of Kerala,
Karnataka and Pondicherry.
PROMOTERS' NTPC: 50%
EQUITY: TNEB : 50%
Vaishali Power Generating Company Limited
This JV was incorporated on with Bihar State Electricity Board, a State run
Electricity Board in the State of Bihar, engaged in generation, transmission and
distribution of electricity.
OBJECTIVE: To take over Muzaffarpur Thermal Power Station (2x110MW), a
coal based power station at Kanti, for carrying out restoration,
R&M and supplying power mainly to the state of Bihar.
PROMOTERS' NTPC: 51-74%
EQUITY: BSEB : 26-49%
ARAVALI POWER COMPANY PRIVATE LTD
(Joint Venture Agreement was signed on 14.12.2006 among NTPC Ltd,Indrapastha
Power Generatuion Company Ltd.(IPGCL) and Haryana Power Generation
Company Ltd.(HPGCL).The Company was Incorporated on 21.12.2006.
OBJECTIVE: To set up a coal-based power station of 1500MW capacity in Distt.
Jhajjar, Haryana, in joint venture with IPGCL and HPGCL.
PROMOTERS' NTPC-50%, IPGCL-25%, HPGCL-25%
EQUITY:
PROPOSED JOINT VENTURES
1.0 INDIAN RAILWAYS
MOU signed on 18th February 2002. Indian Railways are the largest rail network in
Asia and the world's second largest under one management.
OBJECTIVE: To set up power stations to meet traction and non-traction
power requirement of Indian Railways.
LIKELY EQUITY Yet to be finalised
CONTRIBUTION
FROM PROMOTERS
NTPC LTD. 36

37. 2.0 SINGARENI COLLIERIES COMPANY LTD(SCCL)
MOU was signed between NTPC and SCCL on 23.08.2006
OBJECTIVE: To promote one or more Joint Venture Companies for
undertaking acquisition of coal/lignite mine blocks
including exploration, development, mining, beneficiation,
processing, operation & maintenance, development,
operation & maintenance and selling electricity generation
thereof, besides providing consultancy services.
LIKELY EQUITY 50% by each Company in the individual Joint Venture
CONTRIBUTION Company
FROM PROMOTERS
RESEARCH METHODOLOGY
RESEARCH OBJECTIVE
To study the reforms that are brought in by CERC with special reference to the
comparison of traditional and modern tariff policies..
RESEACH DESIGN
NTPC LTD. 37

38. The study undertaken is exploratory, descriptive and analytical. The report also includes
numerical, statiscal data and it is qualitative and quantitative in nature.
RESEARCH METHODOLOGY
To meet the above-mentioned objective, personal interviews were held with the Senior
Executives & an extensive research study was carried out in NCR (HQ), Noida.
Information has been collected from various sources that have been detailed in the
bibliography.
DATA COLLECTION TECHNIQUES
Information for the study has been collected from different Primary & Secondary
sources.
PRIMARY DATA
Primary Data is collected from the survey & for this survey Direct Personal Interviews
were organized with the Senior Executives of NTPC. While interacting the following
questions were posed to the interviewees either implicitly or explicitely.
• What is the significance of Power sector in any Economy?
• How is the Power Sector been evolving for the last few years?
• What has been the role of NTPC in Power Sector?
• What have been the most important changes in the Power Sector in recent years?
• What are the features of new Tariff Structure & how are these different from the
existing Tariff Structure? What are its advantages
• What are the most significant impacts of the power sector reforms on the industry
as a whole
• Are reforms giving the right impact as they are indented to give?
• Which level of the power industry do you think needs more reform initiative?
• How the New Tariff Structure would affect the Power Sector of your company?
NTPC LTD. 38

39. • Have any action plans been made to recover the old dues from SEBs?
• Any comments & suggestions?
SECONDARY DATA
Secondary Data has been collected from the following sources: -
CERC Notifications
Expert’s Reports
Report of M.S.Ahluwalia Committee
Annual Accounts
NTPC magazines like Damini & Horizons
Misc. Journals, newspaper, leaflets
Sources of data are given in the bibliography and the end of the project report
LIMITATIONS
No study is free from limitations, which are caused by constraints of time, money,
knowledge base and similar factors. An attempt was made to broad base the study as far
as possible, however it is but naturals that this study also suffers from some limitations
which are broadly mentioned below:
 The regions are far away, thus the study has been confined to National Capital
Region. Due to cost constraint visiting other regions, projects, SEBs etc. was not
possible as it would involve huge expenditure.
NTPC LTD. 39

40.  It was practically impossible to cover all the regions, projects, SEBs in a short
span of two months. Hence time constraint was one of the limitations.
 Knowledge gained pertains to NTPC. Non availability of knowledge of working
of SEBs, other regions also acted as a constraint.
 The availability of data was limited to National Capital Region. Moreover we had
no access to confidential files etc.
 The conservative attitude of some of the employees was a limiting factor in
gaining information.
NTPC LTD. 40

41. BUSINESS PORTFOLIO
Introduction
Over the last two decades, NTPC has spearheaded the development of thermal generation
capacity in the Indian power sector. In this process, it has built a strong portfolio of coal
and gas/liquid fuel based generation capacities. Recently, the company has also made
initial forays in the area of hydropower. NTPC is also offering technical services through
its Consultancy Wing and has entered into joint ventures for offering some of the
services. However, till date thermal generation has been thesingle largest revenue
generator for NTPC.
The Indian power sector has witnessed and can anticipate several changes in the business
and regulatory environment as outlined in the previous chapter of this plan. Players such
as NTPC face significant uncertainties in the availability and economic viability of
thermal fuels. The challenged health of state utilities presents a threat to the cash flow of
generators. However, ongoing changes in the customer environment also provide
opportunities for improving the customer mix. The policy framework has changed
substantially with the recent clearance of the Electricity Bill by both houses of
parliament. The Indian power sector is on the road to becoming a viable investment
destination with the recent thrust of the participants on speedy reform. This has also
increased the threat of competition. Thus the power sector offers a mixed bag of
opportunities and threats to players and NTPC needs to review its business strategy and
portfolio in light of these changes.
NTPC with its history of excellence in all aspects of its business is uniquely positioned
for growth. Continued growth in generation is relatively easy on account of NTPC’s
significant learning curve benefits. However to capitalise on the changing face of the
power sector NTPC needs to consider a bolder target of becoming India’s leading
integrated power utility. In addition, NTPC needs to target being the brand ambassador
for the Indian power sector in overseas markets. This would call for controlled, urgent
and successful entry into other businesses in the power value chain and targeting markets
NTPC LTD. 41

42. outside India. Therefore, NTPC’s business portfolio strategy would target three key
dimensions:
o Capacity addition program (including changes in fuel mix, technology, etc)
o Diversification along the power value chain
o Dominance in the services business in the domestic and international markets
Growth of the Generation Business
Developing and operating world-class power stations is NTPC’s distinctive competence.
Its scale, financial strength and significant learning curve benefits would also serve to
provide an advantage over competitors. Hence sustaining leadership in generation is
critical to the target of being the largest integrated power utility. Thus NTPC would
continue to focus on making available reliable and quality power at competitive prices.
To meet this objective, NTPC would continue to speedily implement projects and
introduce state-of-art technologies.
Projected portfolio in 2017
Total capacity portfolio
India’s generation capacity can be expected to grow from the current levels of about 104
GW to about 225-250 GW by 2017. NTPC currently accounts for about 19% of the
current installed capacity. Going forward, in its target to remain the largest generating
utility of India, NTPC would endeavour to maintain or improve its share of India’s
generating capacity. Towards this end, NTPC would target to build an overall capacity
portfolio of over 56,000 MW by the end of the 12th plan period. Of this, NTPC would
target commissioning 9,370 MW in the 10th plan, 11,210 MW in the 11th plan period and
15,540 MW in the 12th plan period. While NTPC is fully equipped to provide the
requisite managerial resources such as engineering capability, ability to manage multiple
projects, etc the ability to arrange sufficient and timely funds would govern success in
achieving the targets.
NTPC LTD. 42

43. Energy mix for capacity addition
Currently, coal has a dominant share in the generation capacities in India and this is also
reflected in the high share of coal-based capacities in NTPC’s current portfolio. However,
going forward, NTPC would have to review the share of coal-based projects on account
of potential demand supply gap for domestic coal and the likely availability and
competitiveness of alternate fuels such as gas. Efforts to reduce the variable cost of
power would be critical to ensure dispatch of power plants under a merit order system.
NTPC can also avail of opportunities to add hydropower to its portfolio subject to
competitive tariffs and minimal R&R issues. A first step in this direction has already
been taken with the investment in Koldam. As a leader in power generation, NTPC could
also consider other energy sources such as biomass, cogeneration, nuclear power, fuel
cells, etc for future development thereby reducing the dependence on thermal fuels.
While a decision on the fuel/energy mix for NTPC in the future would be largely
governed by their relative tariff-competitiveness, by 2017 the mix would be significantly
different from the existing portfolio.
Thermal Power
To revise NTPC’s thermal fuel strategy a study of the expected trends in availability and
prices of domestic coal, imported coal and natural gas was carried out. The study also
compared the long run competitiveness of landed power using these alternatives in each
of the three plan periods. This has helped in developing the long-term strategy for
thermal fuels as detailed in this section.
Goal
• To own/manage/control a portfolio of about 42,000 MW of thermal power by
2017, retaining its position as India’s largest thermal power utility
• To minimise the landed cost of power from new plants by selecting appropriate fuels
to retain its long-run competitiveness in power generation, while keeping in mind
technical constraints such as evacuation of power, load balancing and other system
constraints
NTPC LTD. 43

44. Strategies
Domestic coal based projects: NTPC would continue its strategy of major portion of
capacity addition through pithead based coal plants during the 10th and 11th plan periods.
However, going forward, NTPC would consider alternate fuel options to domestic coal
(including regassified LNG and imported coal) with a view to broadbase its fuel portfolio
and minimise its cost of power generation.
Gas based projects: NTPC would seek to develop gas-based combined cycle power
projects subject to the assured availability of gas at a competitive price. Analysis
indicates that gas could potentially be competitive to domestic coal in some parts of the
country especially in states near to the coast. NTPC is already exploring various sources
including regassified liquefied natural gas and is evaluating their competitiveness prior to
making a decision in this regard.
Imported coal based projects: During the 10th plan period, most of NTPC’s
proposed plants are expected to be more competitive than projects based on imported
coal. However, going forward, imported coal based projects might be a more competitive
option to domestic coal based projects at some coastal locations. In view of this, NTPC
would evaluate imported coal based projects (at the port) in the Southern/Western Region
for the 11th and 12th plan periods.
Other fuel options: The option of developing lignite-based capacities was also
evaluated and compared with domestic coal based plants. The analysis revealed that in
the present scenario, domestic coal based capacities are more suitable for NTPC. Going
forward, NTPC would continue to evaluate lignite as a fuel and would consider setting up
lignite based capacities, if found competitive. In addition, NTPC would track
developments in alternate fuel options such as Orimulsion, Di-Methyl Ether (DME), Coal
Bed Methane (CBM) and heavy refinery residues. Capacities based on these fuels would
be developed in the event they are competitive with other fuel options. In addition,
NTPC LTD. 44

45. considering the potential for development of cogeneration plants in India, NTPC would
explore opportunities for the same.
Maintaining a comprehensive database for review of mix: The thermal fuel
options detailed above would need to be constantly evaluated and further fine-tuned in
line with the emergent fuel prices and availabilities and other system constraints. In
addition, decisions on plant and fuel selection would need to be considered on a case-to-
case basis. To facilitate this, a comprehensive database of fuels, their availabilities,
pricing trends and impacting forces would need to be maintained. The responsibility for
designing and maintaining the database and deriving implications for NTPC, would
reside with the Fuel Management Group.
Co-ordination with NTPC’s overall business plan: The information from the
database on fuel availability and price forecasts would also be a critical input in
developing the overall business plans for NTPC. To facilitate review and fine-tuning of
the capacity addition program based on fuel scenarios, the Fuel Management Group
would work closely with the Corporate Planning group in the business plan revision
exercise.
Hydel Power
India has a vast, untapped potential for hydropower development. Apart from being an
environmentally clean source of power, hydropower would also provide a peaking power
option for the country. While in the current scenario NTPC has plant specific pricing and
power purchase agreements, in the future, portfolio presence of hydropower could help
NTPC in bundled pricing and peak demand management. Executing hydro projects
would have the added benefit of price stability in the long term on account of the low
share of variable costs in the tariff. Global utilities have recognised the advantages of
hydropower in the generating portfolio and many of the top utilities own and operate
significant hydropower capacities. Amongst the top ten global thermal generating
NTPC LTD. 45

46. companies, NTPC is the only one without any hydro capacities in its portfolio. However,
NTPC has already initiated action and is already building capabilities in hydropower by
executing an 800 MW hydroelectric station at Koldam. Going forward, NTPC would
seek to expand the share of hydropower in its generating portfolio. Towards this end
NTPC may also consider replacing any proposed coal based capacity addition with
hydropower capacity subject to tariff-competitiveness and minimal Resettlement and
Rehabilitation issues.
Goals
• To build a hydropower portfolio comprising 20% of the overall generation portfolio
by 2017, adding about 11,000 MW during the 10th, 11th and 12th plan periods. Out
of this, NTPC would target adding about 4,500 MW by the end of the 11th plan
period
• To reduce the dependence on thermal fuels, and build peaking power capacities,
thereby generating competitive advantage for the future
• To develop and leverage organizational capabilities in the area of erecting,
commissioning and operating hydropower plants
Strategies
Gradual build-up of a large hydro portfolio: NTPC would seek to gradually increase its
hydro capacity portfolio. It has already commenced work on the Koldam project. In the
immediate term, projects would be added gradually in order to leverage experience
gained and to mitigate risks in hydropower development. After developing required skills
in the initial years, the pace of hydropower addition would be ramped up, if necessary
replacing proposed thermal capacity additions (subject to being competitive). In all,
NTPC would target building a portfolio of 4,500 MW of hydropower by the end of the
11th plan. During the 12th plan period, hydropower additions would comprise close to
NTPC LTD. 46

47. 40% of the planned capacity addition. Thus by 2017 NTPC would target about 11,000
MW of hydropower, comprising close to 20% of the projected generation portfolio.
Type of plants: To begin with, NTPC would focus on ‘run of the river’ hydel projects.
Pumped storage plants have been evaluated and have not been found to be commercially
viable in the current scenario. Policy measures such as differential pricing for peaking
power would be critical pre-requisites for NTPC to undertake PSPs. Thus, NTPC would
consider pumped storage plants during the 11th and 12th plan periods and pursue them
only subject to commercial and technical viability.
Small hydropower plants would also be considered and a wholly owned subsidiary
named “NTPC Hydro Limited” has already been formed to facilitate focus. As part of the
11,000 MW goal for hydropower development, NTPC would target adding about 1,000
MW through the small hydro subsidiary by the end of the 12th plan period.
Large reservoir-type hydropower plants typically face issues related to impact on
irrigation, environmental damage and resettlement and rehabilitation. As such, the initial
focus would exclude reservoir projects till such time NTPC has sufficient experience in
hydropower development and operation.
Organisational preparedness: NTPC would take various initiatives to prepare
itself for the increased thrust on hydropower. NTPC would work closely with the
regulator(s)/Ministry of Power to ensure an appropriate and remunerative tariff regime
for hydropower, encompassing issues such as differential tariff for peaking power. In
order to provide internal focus on hydro capacity development a separate hydropower
group headed by an Executive Director has already been formed. This group would
function similar to the regional set-up and would have the responsibility for development,
execution and operation of hydropower projects. A separate group in the Engineering
Division has been formed that would concentrate on developing skills in engineering of
hydropower plants.
NTPC LTD. 47

48. Nuclear Power
Nuclear power is expected to enjoy a growing share of the developing world’s electricity
generation during the next two decades. The overall cost of nuclear power is seen to be
favourable as compared to thermal fuels in countries that do not have access to cheap
sources of coal or gas. However, nuclear power offers other advantages including higher
environmental cleanliness, lower exposure to fuel price risk and longer plant life. In
India, as on March 31, 2002, Nuclear Power Corporation of India (NPCIL) had fourteen
reactors in operation with a combined capacity of 2,720 MW. Developmental efforts of
NPCIL have led to substantial indigenisation and presence of competent domestic
vendors of nuclear plant equipment. India is also endowed with sufficient reserves of
thorium. On account of these advantages, nuclear power has the potential to contribute
meaningfully to the future base load capacity in India.
However, the development of nuclear projects in India has been constrained by several
factors. These include high gestation periods for project execution and difficulty in
obtaining adequate funds. NTPC’s strong project management skills and balance sheet
strength could help in offsetting these roadblocks and thereby prove to be a source of
competitive advantage in establishing nuclear power generation capacities.
During the 12th plan period, NTPC would consider the option of adding about 2,000 MW
of nuclear capacities in joint venture with Nuclear Power Corporation of India. Towards
this end, NTPC would also continuously evaluate the policy environment covering the
nuclear capacity addition programme and the relative competitiveness of nuclear power.
Future Generating Options
Apart from thermal, hydro and nuclear power, NTPC would also keep track of
developments in alternate energy sources such as Wind, Fuel Cells, cogeneration, etc.
Especially with the advent of distributed generation, these technologies that offer smaller
capacity installations could become lucrative. Towards this end NTPC would target
NTPC LTD. 48

49. adding about 1000 MW by 2017 through a mix of these energy sources based on their
commercial viability, competitiveness, technology availability. The NTPC R&D division
would also be responsible for both fundamental and applied research in these areas.
Wind Energy: India is the fifth largest wind power-producing nation in the world
(after Germany, USA, Spain and Denmark) with an aggregate commercial capacity of
1444 MW. The presence of significant incentives for setting up wind power projects like
the central incentives of tax holiday, 100% accelerated depreciation, concessional custom
duty, etc. make it an attractive proposition for consideration by NTPC. However, the
entry into wind power would be contingent on addressing some critical issues such as the
need for significant investments and the need for cost effective ways to tackle variable
and unpredictable nature of wind power in order to make the venture commercially viable
Fuel Cells: Fuel cells could provide an attractive option for NTPC to consider in the
future, especially if the business environment renders distributed generation as a viable
business model. There are several types of fuel cells under development currently, in
different stages of commercial availability for e.g. Phosphoric Acid Fuel Cells (PAFC)
that are commercially available and can be used to power small buildings such as office
buildings, hospitals etc and Direct Methanol Fuel Cells (DMCF) that are still in the pre-
prototype stage. NTPC would continuously track developments in distributed generation
and fuel cell technology for adoption at a later date, when viable. NTPC’s R&D division
would track technological developments, conduct fundamental and applied research and
evaluate viability of fuel cells and distributed generation for the future.
CERC ORDER (CENTRAL ELECTRICITY REGULATORY
COUNCIL)
OPEN ACCESS REGULATIONS REVISED
NTPC LTD. 49

50. In February, the Central Electricity Regulatory Commission (CERC) has announced
streamlining of the norms for seeking open access in inter-State transmission. This is
based on the operational feedback received from stakeholders. The existing regulations
were introduced in February 1, 2004, in pursuance of the Electricity Act, 2003.
CERC has introduced a monthly timetable for advance reservation of transmission
capacity. In its amendments to the open access regime, which is applicable from April 1
2005, the regulator has also proposed part-day transmission charges to reduce the cost of
wheeling peaking power. Under the part-day charges introduced by CERC, the
transmission cost for short-terms customers is only a fourth of the daily charges, if they
use the transmission lines for six hours or less in a day. Similarly, for usage of up to 12
hours a day, only half of the per-day charges shall be applied. Under the monthly
timetable that has been introduced for the grant of transmission access to short-term
customers, there will be a provision for advance reservation of lines for three months.
Applications must be submitted by the 19th day of the month. They will be processed
together and access shall be granted by the 26th. For advance reservations for short-term
customers, congestion management will be done through electronic bidding. The CERC
has also announced an exit option to short-term customers, whereby a customer can
surrender the reserved transmission capacity by paying a minimum of seven-day charge
or the charge for the balance period of reservation, whichever is shorter. CERC has not
changed the pricing scheme for intra-regional transmission access.
In line with the original open access norms applicable from February 2004, transmission
customers have been divided into two categories — long-term and short-term. A long-
term customer will be allowed access based on the transmission planning criteria
stipulated in the Indian Electricity Grid Code. Allotment priority of long-term customers
will be higher than that of short-term customers. Short-term customers will be the first
ones to be curtailed in the event of transmission constraint, according to the norms. To
avoid pan caking, the Commission has decided that for short-term intra-regional
transactions, the short-term customer shall be charged at the rate of 25 per cent of the last
NTPC LTD. 50

51. year's effective rate for long-term customers, and average transmission losses shall be
applied.
COMPETITIVE BIDDING FOR POWER PURCHASE BY DISCOMS
In January, the government notified guidelines for tariff determination via competitive
bidding, for procurement of power by distribution licensees. As per the guidelines, a
distribution company can call for bids for supply of power through a competitive process
and identify a supplier. The regulator will not scrutinize tariff determined via this
process. The tariff structure in the notification mentions a formula for energy charges,
which will depend on the price of fuel and scheduled generation, among other things as
well as capacity charges.
APPLICATIONS FOR TRANSMISSION LICENSE
In December, Reliance Energy Ltd (REL) has applied to the CERC seeking license for
transmission of power in western India for 20 lines and 13 sub-stations in western India.
It is also reported that a Malaysian company in joint venture with an Ahmedabad-based
company has also approached the CERC seeking a similar license in Bina-Nagda sector.
CERC has said that it would consult all the parties, including Power Grid Corporation
Ltd and consumers (in this case State Governments) and after that an advertisement
would be made in newspapers. It has been reported earlier that POWERGRID, the state
owned transmission utility has approached the MoP seeking authority to decide entry of
private players into transmission.
FIXING OF TRADING MARGINS
The CERC has taken steps to regulate trading margins The trading margins has been
fixed at Re 0.04 per unit for electricity traders exclusive of transmission charges,
unscheduled charges, application fees and transmission losses.
NTPC LTD. 51

52. The commission had, for the past few months, been keeping close tabs on the trading
business. The high amount of trading margins that some companies had been making
necessitated greater scrutiny.
The CERC noted that nearly 90% of trading during 2004-05 was done at a margin of Re
0.05 per unit or less, but in the first half of 2005-06,it increased to a weighted average of
Re. 0.10 per unit. About 68 per cent of the volume traded during the period carried a
margin of Re 0.06 per unit. Significantly, the highest trading margin in a single
transaction in 2004-05 was Re 0.04 per unit, he earns revenue of Rs. 12 million.
The regulator feels that traders have taken advantage of deficit situation prevailing in
most parts of country. Therefore fixing the trading margin is necessary to avoid arbitrary
fixing of profit margins and thus leaving consumers to their whims and vagaries. The
commission states that the trading margin should not be fixed keeping in mind the
requirement of traders alone. It has to be fair to consumers as well, particularly when a
trader buys power for resale, without making any value addition.
As expected, electricity traders are not pleased with the regulation. Their view was that
fixing margins would stifle trading activity and push them out of the business. It would
also prove detrimental to the electricity sector as a whole.
It is ironical at a time when the power ministry has strongly recommended 100 percent
FDI in trading of electricity through the automatic approval rate, trading margins have
been capped. This will hinder investments as well as stifle competition in the sector.
Power trading is still at a nascent stage and there is a long way to go. As of now power
trading amounts to just 2.5% of country’s existing power consumption.
NTPC LTD. 52

53. Average Frequency UI Rate (Paise per kWh)
of time block
50. 5 Hz and above 0. 0
Below 50.5 Hz and up to 50.48 Hz 8.0
Below 49.04 Hz and up to 49.02 Hz 592.0
Below 49.02 Hz 600.0
Between 50.5 Hz and 49.02 Hz linear in 0.02 Hz step
(Each 0. 02 Hz step is equivalent to 8. 0 paise /kWh within the above range)
The following rates shall apply with effect from 1.10.2004 :
Average frequency of the UI Rate
time block(Hz)
Below Not Below (Paise per kWh)
------ 50.50 0.0
50.50 50.48 6.0
50.48 50.46 12.0
------ ------ -----
------ ------ -----
49.84 49.82 204.0
49.82 49.80 210.0
49.80 49.78 219.0
49.78 49.76 228.0
------ ------ -----
------ ------ -----
49.04 49.02 561.0
49.02 ------ 570.0
NTPC LTD. 53

54. (Each 0. 02 Hz step is equivalent to 6.0 paise /kWh in the 50.5-49.8 Hz frequency
range,and to 9.0paise/kwh in the 49.8-49.0 Hz frequency range.)
Note :-
The above average frequency range and UI rates are subject to change through a separate
notification by the Commission.
(i) Any generation up to 105% of the declared capacity in any time block of 15 minutes
and averaging up to 101% of the average declared capacity over a day shall not be
construed as gaming, and the generator shall be entitled to UI charges for such excess
generation above the scheduled generation (SG).
(ii) For any generation beyond the prescribed limits, the Regional Load Despatch Centre
shall investigate so as to ensure that there is no gaming, and if gaming is found by the
Regional
NTPC LTD. 54

55. U.I.RATES (OLD Vs. NEW)
U.I.RATE
U.I.RATE(N)
600
500
Load Despatch Centre, the corresponding UI charges due to the generating station on
400 account of such extra generation shall be reduced to zero and the amount shall be
adjusted in UI account of beneficiaries in the ratio of their capacity share in the
300
generating station.
200
100
0
50.6
50.6
50.5
50.3
50.2
50.0
49.9
49.7
49.6
49.4
49.3
49.1
49
49
50.4
50.2
50.1
49.8
49.8
49.5
49.4
49.2
48.9
NTPC LTD. 55

56. DATA ANALYSIS AND INTERPRETRATION
COMPARATIVE ANALYSIS OF TARIFF
A comparative chart of availability based tariff used in NCR since 1-12-2002 and two-
part tariff has been presented as below:
Description Two-part tariff AvailabilityBased Tariff
(GOI notified tariff) (CERC orders of Dec, 2000)
1.Components of Two parts – namely Fixed Three parts – namely Fixed
tariff Charges and Variable charges, variable charges and UI
charges. charges.
2.Components of ROE, Depreciation, Interest Same as in the case of two-part
fixed charges on loans, O&M exp, Interest tariff.
on working capital.
3.Fixed charges In proportion to the drawls. In proportion to the capacity
allocation to SEBS allocations.
4.Recovery of Fixed 62. 78 % PLF (including 80 % Availability.
charges deemed generation).
5.Buffer (dead – 62. 78 % to 68. 49 % PLF. No buffer.
band) zone between
incentive and
disincentive
6.Disincentives For PLF below 62. 78 % in a For availability below 80%, pro-
graded manner. At 0 % PLF, rata reduction in fixed charges.
50 % of charges are payable.
7.Incentives 1ps for every 1 % increase in For PLF above 77 % (calculated
PLF and applied on from schedule) incentive @ 50
incremental units over 68. 49 % fixed charges / kwh (subject
% PLF. to maximum of 21. 5 Ps. kwh) is
applied to incremental units
generated over 77 % PLF.
For PLF beyond 90 %, incentive
is reduced by 50 % of above.
8.Variable charges Based on normative operation Based on same normative
recovery norms and applicable to operation norms and applicable
NTPC LTD. 56

57. Description Two-part tariff AvailabilityBased Tariff
(GOI notified tariff) (CERC orders of Dec, 2000)
Energy Sent Out. to Scheduled Energy only.
9.UI charges Not provided Variations in actual ESO and
scheduled ESO are to be
accounted at Frequency linked
UI rates. UI charges are
inversely related to frequency.
10.FPA formula to Provided Provided as in two – part tariff
neutralize fuel price
fluctuations
11. O&M 10 % per annum 6 % per annum
escalation
12.Depreciation 7. 84 % for thermal 3. 60 % for thermal
8. 24 % for Gas. 6. 00 % for Gas
Depreciation was not linked Depreciation is linked to useful
to useful life of the assets life of the assets
13. Advance Not provided Provided to bridge the gap
Against Depreciation between depreciation and loan
repayments in a year.
Amount of depreciation plus
advance against depreciation
shall not exceed 1/12 of the loan
amount.
Once loans are repaid, balance
depreciation is to be spread on
the balance life of the assets
14. Income Tax Pass through at actual Pass through at actual
15. Income –tax Based on operating capacity Based on the estimated pre-tax
allocation to the at the beginning of the year profit of the stations
stations
16. Development Not provided 5 % of fixed charges for NTPC.
surcharge Not applicable for single-state
stations and shall be used to the
extent of 1/3 rd of equity
requirement of new stations.
To be utilized on regional basis
only and no ROE on surcharge
NTPC LTD. 57

58. Description Two-part tariff AvailabilityBased Tariff
(GOI notified tariff) (CERC orders of Dec, 2000)
funds utilized for capacity
additions
17. Rs 35170 Cr Rs 12507 Cr.
Internal resource
generation from
2001 – 2012
NTPC LTD. 58