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Project
On
INDUSTRIAL ANALYSIS:
ENERGY SECTOR

BY:
ABHISHEK KUMAR
SINHA
KUMARI PRIYA
SHREEL DWIVEDI
ANWESHA
CHATTERJEE

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INTRODUCTION

INDIAN ENERGY SECTOR:

Energy sector is universally recognized as one of the most significant inputs for economic
growth. The growth of a nation, encompassing all sectors of the economy and all sections
of society, is contingent on meeting its energy requirements adequately.

As a fast-growing economy, India has become one of the largest energy intensive
countries in the World. Energy is a crucial input for India's development process. The
need of the hour, therefore, is to meet the energy needs of all segments of India's
population in the most efficient and cost-effective manner while ensuring long-term
sustainability. IISL has developed Nifty Energy Index to capture the performance of the
companies in this sector.

How Economic factors affect it:

The energy industry contributes to economic growth in two ways. First, energy is an
important sector of the economy that creates jobs and value by extracting, transforming
and distributing energy goods and services throughout the economy.

Second, energy underpins the rest of the economy. Energy is an input for nearly all goods
and services. In many countries, the flow of energy is usually taken for granted. But price
shocks and supply interruptions can shake whole economies. For countries that face
chronic electricity shortages like India, continuing disruptions take a heavy, ongoing toll.

The industry directly affects the economy by using labour and capital to produce energy.
This role is particularly important when economic growth and job creation are such high
priorities around the world

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The energy sector directly employs fewer people than might be expected given its share
of GDP, especially when compared to other industries.

Energy-related industries do not have a large need for labour, but the workers they hire
are relatively highly skilled and highly paid. For example, compensation per worker in
energy-related industries is about twice the average in Germany, Norway, the United
Kingdom and the United States and four times the average in Mexico and South Korea.

As a result of their high salaries, employees of the energy industry contribute more
absolute spending per capita to the economy than the average worker. High wages in the
sector reflect the fact that energy industry workers are much more productive than
average, contributing a larger share of GDP per worker than most other workers in the
economy.

The energy industrys large investment requirements make it very sensitive to the cost of
capital. Competition from governments and businesses (including the energy industry)
creates scarcity and drives up the cost of capital. However, capital costs are currently
extremely low because of the depressed state of the global financial system.

In addition to the energy sectors economic contributions in general, relatively lower and
stable energy prices help stimulate the economy. First, lower energy prices reduce
expenses for consumers and businesses, increasing disposable income that can be spent in
other ways. Second, lower energy prices reduce input costs for nearly all goods and
services in the economy, thus making them more affordable.

The converse is also true: relatively higher energy prices place a drag on economic
growth everywhere except in economies that are dominated by energy production. Global
oil prices entered a long upward swing in 2004, and the trend accelerated sharply in 2007.
This price rise contributed to the deep recession in the developed world that began in late
2007. Rising energy prices took purchasing power away from consumers, particularly
from lower-income groups. They also brought about a deterioration in consumer
sentiment and an overall slowdown in consumer spending, according to James
Hamilton, Professor of Economics at the University of California at San Diego.

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GST IMPACT ON ENERGY SECTOR:

Any tax distortion faced by this sector on account of electricity being outside the ambit of
GST, will have a cascading effect on the rest of the economy, negating some of the very
benefits sought to be brought about by the introduction of GST. Accordingly, it is felt that
the Government has missed an opportunity by not integrating generation and distribution
of electricity with other supplies which interact with it, under the umbrella of GST.
Therefore, the viability of the energy sector, under the current GST regime, would depend
upon the exemptions and concessionary tax which may be put in place to counter the
impact of different tax regimes on the input and output side. Exemptions in renewables
will need to be grandfathered for this sub-sector to remain viable.

What are the industry dominant economic traits?

With electricity production of 1,107.8 BU in India in FY16, the country witnessed growth
of around 5.64 percent over the previous fiscal year.
Over FY10FY16, electricity production in India grew at a CAGR of 6.21 per cent.
During April-September 2016, electricity production in India reached 584.22 BU.
The 12th Five Year Plan projects that, by 201617, total domestic energy production
would reach 669.6 million tonnes of oil equivalent (MTOE) and would further increase to
844 MTOE by 202122.

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INDIA AMONG TOP FOUR POWER PRODUCERS AND CONSUMERS:

With a production of 1368 TWh, India is the third largest producer and the fourth largest
consumer of electricity in the world.

Although power generation has grown more than 100-fold since independence, growth in
demand has been even higher due to accelerating economic activity.

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Worlds leading electricity producers in 2015 (TWh)

5682
4324

2000
1000
0

China

US

1368

1062

995

India

Russia

Japan

INDUSTRY PARTICIPANT/STAKE HOLDERS:

638

632

Germany Canada

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MAJOR MARKET SEGMENTS, SIZE, AND CHARACTERISTICS:

NTPC is the largest power producer in India and is also the sixth-largest thermal power
producer in the world, with installed capacity of 47.17 GW (including JVs). By 2032,
NTPC plans to reach 128,000 MW of power capacity Coal-based power accounts for
more than 84.7 per cent of the total capacity

It has also diversified into hydro power, coal mining, power equipment manufacturing,
oil and gas exploration, power trading and distribution.

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Tata Power is Indias largest integrated power company, with significant presence in
solar, hydro, wind and geothermal energy space. The company accounts for 52 per cent of
total generation capacity in the private sector. The company has an installed capacity of
10.0 GW in FY16.

By 2022, the company plans to increase the generating capacity to 18 GW, distribution
networks by 4 GW and energy resources by 25 million tonnes per annum.

The company has more than 35,000 MW of power generation capacity, both operational
and under development. Reliance Power has an operational power generation capacity of
6 GW. FY13 saw the development of 3,960-MW Sasan UMPP in Madhya Pradesh

In FY15, the company accounted for a generation performance of 1048 billion units.

CESC Limited is a vertically integrated player engaged in coal mining, and generation
and distribution of power. It owns and operates three thermal power plants generating
1225 MW of power.

These are Budge Budge Generating Station (750 MW), Southern Generating Station (135
MW), and Titagarh Generating Station (240 MW).

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NHPC is the largest hydro power utility in India, with an installed capacity of 6.5 GW; it
has drawn up a massive capacity expansion plan of adding 6.7 GW by 2017

NHPC is constructing nine projects, aggregating an installed capacity of 4.2 GW. NHPC
added 1.9 GW and 1.1 GW during the 10th and 11th Plan periods, respectively.

Power Finance Corporation Limited (PFC) is an NBFC engaged in financing and

Major products and services include project term loans, lease financing, direct
discounting of bills, short-term loans and consultancy services.

Adani Power is one of Indias largest private thermal power producers, with total capacity
at 10.5 GW in 2016; the company aims to generate 20 GW of power by 2020.

The company is one of the worlds largest single-location thermal power plants in
Mundra, Gujarat.

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SJVN Limited is the second largest hydro power company in India.

The company plans to diversify into wind power projects so.

Damodar Valley Corporation is engaged in power generation, distribution and

Power Grid Corporation of India Limited (PGCIL) is the single largest transmission
utility in India; it is responsible for planning, co-ordination, supervision and control over
inter-state transmission systems.

Target to enhance inter-regional capacity to about 72.25 GW at the end of XII Plan. In
2016, inter-regional capacity is 47.45 GW.

DISTRIBUTION CHANNEL OF THE INDUSTRY :

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PORTER FIVE FORCES MODEL FOR THE INDUSTRY :

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